## Measures Of Central Tendency – CS Foundation Statistics Notes

Central tendency is defined as “the statistical measure that identifies a single value as representative of an entire distribution.” It aims to provide an accurate description of the entire data. It is the single value that is the most typical representative of the collected data.

1. Average
‘An average is an attempt to find one single figure to describe the whole of figures’ this was the definition given by Clark and Sekkade for average. Simpson defined average as ‘A measure of central tendency is a typical value around which other figures congregate’. Average refers to the sum of numbers divided by n. Sums of data divided by the number of items in the data will give the mean average.
Average should have some characteristic features like

• It should be firmly defined. For the end-user, there should not be any confusion regarding the figure of average provided
• Average should take into consideration all the items of the series
• Even the layman should be able to understand the average provided.
• If the average has obtained two different sources for the same subject then it should not differ too much.

2. Types of average

1. Mathematical average
2. Positional average

1. Mathematical average
Mathematical averages cover arithmetic mean, geometric mean, and harmonic mean.
(a) Arithmetic means – The arithmetic mean of a set of data is found by taking the sum of the data, and then dividing the sum by the total number of values in the set. A mean is commonly referred to as an average. When the values are large then special methods are used so as to cut short the labor. One of these methods is called the ‘short cut method’, some middle value or if there is frequency then the largest frequency is subtracted from all the values. The values so obtained are averaged.

In case the class interval is uniform then the computation of average can be done by step deviation method. In the above three mean all the observations were equally important but there may be some situations where some observations may be more important than other observations. In such a situation, the weighted average method is used.

Example
The following frequency distribution showing the marks obtained by 50 students in statistics at a certain college.

 Marks 20-29 30-39 40-49 50-59 60-69 70-79 80-89 Frequency 1 5 12 15 9 6 2

 Direct Method Short-Cut Method Step-Deviation Method Marks f X fx D=x-A fD U=x-A/h fu 20-29 1 24.5 24.5 -30 -30 -3 -3 30-39 5 34.5 172.5 -20 -100 -2 -10 40-49 12 44.5 534.5 -10 -120 -1 -12 50-59 15 54.5 817.5 0 0 0 0 60-69 9 64.5 580.5 10 90 1 9 70-79 6 74.5 447.5 20 120 2 12 80-89 2 84.5 169.5 30 60 3 6 Total 50 274.5 20 2

Direct Method:
274.5/50 = 54.9 or 55 marks
Short-cut method:
54.5 +20/50 = 54.5 + . 4 = 54.9
Step – Deviation Method
A = 54.5
h – 10
54.5+2/50*10 = 54.9
Properties of arithmetic
The properties are explained below with suitable illustrations.
Property 1:
If x is the arithmetic mean of n observations x1, x2, x3,.. xn; then
(x1 – x) + (x2 – x) + (x3 – x) + … + (xn – x) = 0.
Property 2:
The mean of n observations x1, x2, . . ., xn is x. If each observation is increased by p, the mean of the new observations is (x + p).
Property 3:
The mean of n observations x1, x2, . . ., xn is x. If each observation is decreased by p, the mean of the new observations is (x – p).
Property 4:
The mean of n observations x1, x2, . . ,,xn is x. If each observation is multiplied by a nonzero number p, the mean of the new observations is px.
Property 5:
The mean of n observations x1, x2, . . ., xn is x. If each observation is divided by a nonzero number p, the mean of the new observations is (x/p).

3. Merits of Arithmetic Mean

• Arithmetic Mean is simple to understand.
• Arithmetic Mean can be easily calculated.
• Arithmetic Mean can be determined in most cases.
• Arithmetic Mean is based on the observations of the series.
• Arithmetic Mean is capable of further algebraic treatment.
• Arithmetic Mean is stable. It does not differ from sample to sample.

4. Demerits of Arithmetic Mean

• Arithmetic Mean is affected by extreme values.
• Arithmetic mean need not coincide with any of the observed values.
• It is not good in the case of ratios and percentages.
• Sometimes it will give us absurd answers.
For example, the mean number of children in a family is 3.2. This can never happen. The mean number of children can be either 3 or 4 but not 3.2. Hence, the result can be misleading.
• It is not suitable in the case of open-end classes. When the classes are open, we are not sure what must be the upper limit of the class.

5. Median
In statistics and probability theory, the median is the numerical value separating the higher half of a data sample, a population or a probability distribution from the lower half. If you place a set of numbers in order, the median number is the middle one. If there are two middle numbers, the median is the mean of those two numbers.

6. Determination of Median
The following steps are involved in the determination of median:
(i) The given observations are arranged in either ascending or descending order of magnitude.
(ii) Given that there are n observations, the median is given by:

• The size of n+1/2 the observations, when n is odd.
• The mean of the sizes of n/2th and n+1/2 of observations, when n is even.
Consider the observations: 13, 16, 16, 17, 17, 18, 19, 21,23. On the basis of the method given above, their median is 17.

7. Characteristic features

1. Since the variable, in a grouped frequency distribution, is assumed to be continuous we always take an exact value of N/2, including figures after decimals, when N is odd.
2. The above formula is also applicable when classes are of unequal width.
3. Median can be computed even if there are open-end classes because here we need to know only the frequencies of classes preceding or following the median class.

8. Merits of median

• Median is often used to convey the typical observation. It is primarily affected by the number of observations rather than their size.
• It is easier to calculate the median than the mean in many cases. In some cases, the median can be calculated just by inspection
• Median is very useful in the case of open-ended classes
• The Median can be measured graphically.
• Median is not affected by extreme values.
• Median serves as the most appropriate average to deal with qualitative data.
• The median value is always a certain and specific value in the series.

9. Demerits of median

• Median is incapable of further algebraic treatment.
• Though the median considers the frequency of all observations, it does so only for counting purposes and does not really consider their magnitude.
• The value of the median is affected more by sampling fluctuations than the value of the mean.
• For computing, median data needs to be arranged in ascending or descending order.
• It is not based on all the observations of the data.
• It is not accurate when the data is not large.
• In some cases, the median is determined approximately as the mid-point of two observations whereas for the mean this does not happen.

10. Mode
The mode is the value that appears most often in a set of data. For categorical or discrete variables the mode is simply the most observed value. To work out the mode, observations do not have to be placed in order, although for ease of calculation it is advisable to do so. For example in the set: 3, 3, 6, 9, 16,16,16, 27, 27, 37,52 16 is the mode since it appears more times than any other number.

A set of numbers can have more than one mode (this is known as bimodal) if there are multiple numbers that occur with equal frequency, and more times than the others in the set. 3,3,3, 9,16, 16, 16, 27, 37,48 In this example, both the number 3 and the number 16 are modes. If no number in a set of numbers occurs more than once, that set has no mode Broadly speaking, the mode is the value of the variable occurring most frequently. It is the most common value found in a series.

The mode can be calculated in three ways
(a) Just by inspection
(b) By method of grouping
(c) By interpolation formula
(a) When frequency distribution is regular then just by looking at the series we can tell which observation is maximum times in the series and that is the mode, (just by inspection)
(b) When the distribution is not regular then this method is used, (method of grouping)

Data table

 Size Frequency Size Frequency 5 48 13 52 6 52 14 41 7 56 15 57 8 60 16 63 9 63 17 52 10 57 18 48 11 55 19 40 12 50 – –

Location of mode by grouping

The frequencies in columns (1) are first added in two’s in columns (2) and (3). Then they are added in three’s in columns (4), (5), and (6). The maximum frequency in each column is indicated by thick letters. It will be observed that mode changes with the change in a grouping. Thus according to column (1) mode should be 9 or 16. To find out t4g point of maximum concentration the data can be arranged in the shape table as follows:

Analysis Table

 Columns Size of item containing maximum frequency (1) 9 16 (2) 9 10 15 16 (3) 8 9 (4) 8 9 10 (5) 9 10 11 (6) 7 8 9 No. of times a 1 3 6 3 1 1 2 Size occurs

Since the size 9 occurs the largest number of times it is the model size or mode is 9. If we look at the frequencies in the original table, we shall find that the frequency of 63, which is the maximum single frequency, is against two values, 9 and 16. The series thus appears to be bi-modal but the process of grouping leads us to the conclusion that the concentration of items round 9 is more than the concentration round 16. Even if the frequency against 16 was 64 instead of 63 probably grouping would have disclosed that the concentration of items around about 9 is more, even though the individual frequency against 9 is only 63. It is thus never safe to rely only on the inspection of a series and to locate the mode at the point of maximum frequency. Mode is affected by the frequencies of the neighboring items also, and, therefore, grouping is essential, as it reveals the true point of maximum concentration.

The exact location of the mode of grouped frequency is found by this method (Interpolation formula) Calculating mode of a grouped frequency distribution by Interpolation formula

 Class- Interval 5-10 10-15 15-20 20-25 Frequency 4 5 7 2

Step 1:
Here the frequency of class interval 15 – 20 is the maximum.
=> 15-20 = modal class Step 2:
L = Lower limit of modal class =15
fm = Frequency of modal class = 7
fl = Frequency of class preceding the modal class = 5
f2 = Frequency of class succeeding the modal class = 2
h = Size of class interval =10-5 = 5
Step 3:
Mode = L + (fm-fI )/2fm-fl -f2 *h
= 15 + (7-5)/2 *7-5-2 * 5
= 15 + 10/7
= 15 + 1.42 = 16.42
=> Mode = 16.42.
Thus by interpolation formulae, we get 16.42 as the median.

• It is useful in counting the number of times an event occurs.
• It helps in identifying whether an event has occurred more than once.
• It is not affected by extremely large or small values.
• It can be computed in an open-end frequency table.
• It can be located only by inspection in ungrouped data and discrete frequency distribution.
• Mode also is important as it helps us identify the nominal data for various situations. Take the example of the counting of votes. Here, a single-mode value would determine the victory of any particular leader and vice-versa. So, the mode has its own importance and we cannot neglect it at any cost.

• It is not well defined.
• It is not based on all the values.
• It is stable for large values and it will not be well defined if the data consists of a small number of values.
• It is not capable of further mathematical treatment.
• Sometimes, the data having one or more than one mode, and sometimes the data having no mode at all.

In conclusion, circumstances generally dictate which measure of central tendency—mean, median, or mode—is the most appropriate. If you are interested in a total, the mean tends to be the most meaningful measure of central tendency because it is the total divided by the number of data. For example, the mean income of the individuals in a family tells you how much each family member can spend on life’s necessities. The median measure is good for finding the central value and the mode is used to describe the most typical case.

12. Dispersion
Dispersion measures how the various elements behave with regards to some sort of central tendency, usually the mean. Measures of dispersion include range, inter-quartile range, variance, standard deviation, and absolute deviation. It is a group of analytical tools that describes the spread or variability of a data set.

Definitions
As per A.L. Bowley ‘dispersion is the measure of the variation of items’
As per L.R. Conner ‘dispersion is the measure of the extent to which individual items vary’

13. Importance of the measures of dispersion

• supplements an average or a measure of central tendency
• compares one group of data with another
• indicates how representative the average is.
• reliability of average can be decided with the help of dispersion

14. Methods of dispersion
Some of the methods of dispersion are

• Range- The range is the most obvious measure of dispersion and is the difference between the lowest and highest values in a dataset.
• Inter-quartile range – The inter-quartile range is a measure that indicates the extent to which the central 50% of values within the dataset are dispersed. It is based upon and related to, the median.
• Mean deviation – It is the arithmetic mean of the absolute values of deviation.
• Standard deviation
• Lorenz curve

15. Standard deviation
Since mean can not be further expressed algebraically, a method called standard deviation be used. Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of variance. A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of variance. Formula for calculating standard deviation For a data set, the mean is

S2 == $$\frac{\Sigma(\mathrm{X}-\mathrm{M}) 2}{\mathrm{n}-1}$$

Where Σ = Sum of
X = Individual score
M = Mean of all scores
N = Sample size (number of scores) Example: To find the Standard deviation of the data set: 3,2,4,1,4,4.

Step 1: Calculate the mean and deviation.
Step 2: Using the deviation, calculate the standard deviation
(0+l+l+4+l+l)/6-l = 8/5
S2 =1.6
S = 1.265
S2 (standard deviation) =1.6
Variance S= 1.265

Short cut Method
The standard deviation that we calculated above formula is correct and will work for calculations, there is another equivalent, shortcut formula that does not require us to first calculate the sample mean. This shortcut formula for the sum of squares is

Σ(xi2)-(Σ xi)2/n

Here the variable n refers to the number of data points in our sample.
An Example – Standard Formula
We take a sample that is 2, 4, 6, 8. The sample mean is (2 + 4 + 6 + 8)/4 = 20/4 = 5. Now we calculate the difference of each data point with the mean 5.
2 – 5 = -3
4 – 5 = -1
6 – 5 = 1
8 – 5 = 3
We now square each of these numbers and add them together. (-3)2 + (-1)2 + l2 + 32 = 9 + 1 + 1 + 9 = 20.

An Example – Shortcut Formula
Now we will use the same set of data: 2, 4, 6, 8, with the shortcut formula to determine the sum of squares. We first square each data point and add them together: 22 + 42 + 62 + 82 = 4 + 16 + 36 + 64 = 120.

The next step is to add together all of the data and square this sum: (2 + 4 + 6 + 8)2 = 400. We divide this by the number of data points to obtain 400/4 =100.
We now subtract this number from 120. This gives us that the sum of the squared deviations is 20. This was exactly the number that we have already found from the other formula.

The standard deviation plays a dominating role in the study of variation in the data. It is a very widely used measure of dispersion. As far as the important statistical tools are concerned, the first important tool is the mean and the second important tool is the standard deviation.

16. Coefficient of variation
In probability theory and statistics, the coefficient of variation (CV) is a normalized measure of the dispersion of a probability distribution or frequency distribution. It is also known as unitized risk or the variation coefficient. The coefficient of variation (CV) is defined as the ratio of the standard deviation σ to the mean µ:

Cv = $$\frac{\sigma}{\mu}$$

The standard deviation of data must always be understood in the context of the mean of the data therefore the coefficient of variation is useful. The coefficient of variation is a dimensionless number. So when comparing between data sets with different units or widely different means, one should use the coefficient of variation for comparison instead of the standard deviation

Merits

• is based on every item of the data
• takes care of both positive and negative deviation
• is less affected by variation in sampling
• is most popularly used in statistics

Demerits

• is somewhat not easy to understand.
• The extreme values unduly affect the standard deviation

Measures Of Central Tendency MCQ Questions

Question 1.
The sum of the mean and the median of 4, 6, 3, 2, 5 is
a. 6.0
b. 9.0
c. 8.0
d. 8.5
c. 8.0

Question 2.
The numerical value separating the higher half of a sample from a lower half is
a. Median
b. Mode
c. Mean
d. Standard deviation
a. Median

Question 3.
The most frequent value in a data set is
a. Median
b. Mode
c. Arithmetic mean
d. Geometric mean
b. Mode

Question 4.
When there is a linear relationship between two numerical variables it can be measured by
a. Mean
b. Mode
c. Scatter diagram
d. Coefficient of correlation
d. Coefficient of correlation

Question 5.
Which of the following statements about the median is NOT true?
a. It is more affected by extreme values than the mean
b. It is the middle value that separates the upper half from the lower half
c. It is equal to the mode in bell-shaped distributions.
d. Both b & c
a. It is more affected by extreme values than the mean

Question 6.
A measure of central tendency that attempts to describe a set of data by identifying the central position within the data is
a. Mean
b. Mode
c. Median
d. All the above
d. All the above

Question 7.
Average is a value that is a representation of a set of data, this definition of average was given by
a. Clark
b. Goxtor
c. Murry R. Spiegal
d. None of the above
c. Murry R. Spiegal

Question 8.
Average make it easy for
a. Completing the data
b. For making data short so it becomes manageable
c. Account relations could be formed among variables
d. All of the above
d. All of the above

Question 9.
Average can be used
a. Only in unity
b. Can be combined with other average
c. Both a & b
d. None of the above
b. Can be combined with another average

Question 10.
The harmonic mean is a part of
a. Positional average
b. Mathematical average
c. Both a & b
d. None of the above
b. Mathematical average

Question 11.
From the below mentioned about the mean which is not there in asthmatic mean
a. Assigns equal weightage to both high & small observations used for averages
b. Can not be determined by graphical location
c. It can not use fro data that is not measurable
d. All of the above
d. All of the above

Question 12.
Find the median of the below-mentioned observation 15, 20, 45, 30, 60, 36
a. 32
b. 33
c. 47.5
d. None of the above
b. 33

Question 13.
The formulae for calculating the median if individual observations are given will be
a. (N+1)/2th if n is add
b. (N+1)th/2 if n is add
c. (N/2)th if n is odd
d. (both a & c
a. (N+1)/2th if n is add

Question 14.
For calculation of median through interpolation formulae, “h” in the formulae is
a. Frequency of the median
b. The lower limit of the median class
c. width of the median class
d. Median
c. width of the median class

Question 15.
It is not uncommon in a median
a. To locale it graphically
b. To use it then data is qualitative
c. To use it when data is rigidly defined
d. All of the above
d. All of the above

Question 16.
The object of statistical averages is to
a. help in comparison
b. help in delusion making
c. helps in the collection of data
d. Both a &b
a. help in comparison

Question 17.
In the interpolation formulae used for calculation of mode “h” is
a. Mode
b. width of modal calls
c. Frequency of modal class
d. Lover limit of modal class
b. width of modal calls

Question 18.
The mode can be
a. Located graphically
b. Can be computed in an open-and frequent distribution.
c. can be located by just inspection
d. Both B & C
d. Both B & C

Question 19.
Only _______ can be used for all algebraic calculations
a. Mean
c. Median
d. All of the above
d. All of the above

Question 20.
All of the data is highly affected by extreme observation then which type of average it is
a. Mean
b. Mode
c. Median
d. All of the above
c. Median

Question 21.
When we want to find the most common data that is being displayed in the series than the best way of calculating it is
a. mean
b. mode
c. media
d. All of the above
b. mode

Question 22.
co-efficient of variation is
a. absolute variation
b. static
c. relative variation
d. mane of the above
c. relative variation

Question 23.
The following is arranged in ascending order. If the median of the data is 63, find the volume of x in a series 29, 32, 48, 50, x, x + 2, 72, 78, 84, 95,
a. 60
b. 62
c. 63
d. 64
b. 62

Question 24.
The number of Wickets taken by a team in series of 10 matches are 2, 3, 4, .5, 0, 1, 3, 3, 4, 3 find the mode of the set
a. 3
b. 2.8
c. 3.3
d. 2.9
a. 3

Question 25.
The average (arithmetic mean) of a set of seven numbers is 8. When an eighth number is added to the set, the average of the eight numbers is still 8. What number was added to the set?
a. 6
b. 7
c. 8
d. 9
c. 8

Question 26.
If x is the average (arithmetic mean) of 5 consecutive odd integers, what is the median of integers?
a. 0
b. 1
c. x-2
d. x
d. x

Question 27.
The sum of 7 consecutive even integers is 224. What integer has the least value in the list?
a. 16
b. 18
c. 26
d. 29
c. 26

Question 28.
1, 3, 5, 8, 10, 13. How many different sums can be made by adding any two different numbers from the list above?
a. 6
b. 8
c. 10
d. 12
b. 8

Question 29.
In a list of 37 consecutive integers, the median is 70. What is the largest integer in the list?
a. 96
b. 97
c. 98
d. 99
c. 98

Question 30.
The mean is a measure of
a. association
b. location
c. relative location
d. variability
b. location

Question 31.
The correlation coefficient is a measure of
a. association
b. location
c. relative location
d. variability
b. location

Question 32.
Mathematical averages include.
a. Arithmetic means
b. Median
c. Harmonic mean
d. Both a & c
d. Both a & c

Question 33.
The most frequently occurring data value in a data set is the
a. median
b. arithmetic mean
c. population parameter d. mode
d. mode

Question 34.
A measure of central location which splits the data set into two equal groups is called the
a. mean
b. mode
c. median
d. standard deviation
c. median

Question 35.
The coefficient of variation is
a. the same as the variance
b. a measure of central tendency
c. a measure of absolute variability
d. a measure of relative variability
d. a measure of relative variability

Questions 36.
The sum of the deviation of the individual data elements from their mean is always
a. equal to zero
b. equal to one
c. negative
d. positive
a. equal to zero

Question 37.
An automobile club has four different types of members: A, B, C, and D, depending on the type of membership. For each member, let X indicate his/her membership type.
a. the arithmetic mean of X is meaningful
b. the mode of X is meaningful
c. A histogram is appropriate to display the distribution of X.
d. A box plot is appropriate to display the distribution of X
b. the mode of X is meaningful

Question 38.
In general, which of the following statements is FALSE?
a. the sample mean is more sensitive to extreme values than the median.
b. The sample range (i.e. maximum minus minimum) is more sensitive to extreme values than the median.
c. the sample standard deviation is a measure of spread around the sample mean
d. the sample standard deviation is a measure of central tendency around the median
d. the sample standard deviation is a measure of central tendency around the median

Question 39.
For ‘n’ observations x<sub>1</sub>, X<sub>2</sub> x<sub>3</sub> ……….. and X<sub>4</sub> of a distribution. From the following what does X denote
x = $$\frac{X_{1}+X_{2}+\ldots-X_{n}}{n}$$
a. Arithmetic mean
b. Median
c. Mode
d. None of the above
a. Arithmetic mean
Hint
Arithmetic mean = sum of all observations/Total number of observations

Question 40.
The average friend request for a weak excluding Sunday on Facebook was 10. On Sunday, the average of all 7 days rose to 15. How. many friends visited you on Sunday.
a. 45
b. 15
c. 35
d. 20
a. 45
Hint
Mean for 6 days = 10
Mean for 7 days = 15
Total friend request in 6 days = 60
Mean for 7 days = total number of friend requests/total number of days
Mean for 7 days = total number of friend request (total friend request in 6 days + number of friend requests
on Sunday)/total number of days
15= 60 + number of a friend requests on Sunday/7
105 = 60 + number of friend request on Sunday
105-60 = number of a friend requests on Sunday
45= number of a friend requests on Sunday

Question 41.
In a normal distribution-
a. Mode» 3 Median-2 mean
b. Median=3 Mode-2 Mean
c. Mean= 3 Median-2 Mode
d. None of the above
a. Mode» 3 Median-2 mean
Hint
Mode = 3 Median – 2 Mean

Question 42.
Coefficient of variation of a distribution is 12.5% and standard deviation is 100. The value of mean will be
a. 100
b. 300
c. 500
d. 800
d. 800
Hint
mean = SD/CV × 100 = 100/12.5 × 100 = 800

Question 43.
Two distributions with 100 and 200 items have a mean of 20 and 10 respectively. The combined mean of two distributions will be:
a. 30.50
b. 10.16
c. 13.33
d. 11.12.
c. 13.33
Hint
Combined mean = n11 + n22/n1 + n2
= 100 × 20 + 200 × 10/100+200 = 4000/300 = 13.33

Question 44.
A histogram can be used to estimate graphically the value of:
a. Mean
b. Median
c. Mode
d. Upper quartile
c. Mode
Hint
The mode is the value that appears most often in a set of data. Mode can be calculated graphically using histogram.

Question 45.
A Lorenz Curve is used to measure:
a. Correlation
b. Variation
c. Arrangements of frequencies
d. Association of attributes.
b. Variation
Hint
It is a graphical method.

Question 46.
In a given distribution the value of coefficient of variation is 80%, the value of arithmetic mean is 20. The value of standard deviation would be:
a. 16
b. 20
c. 36
d. 80
a. 16
Hint
C.V. * S.D./mean × 100
S.D. = C.V. × mean/100
= 80 × 20/100 =16

Question 47.
The square, root of the arithmetic mean of the squared deviations of items taken from arithmetic mean is called:
a. Mean deviation
b. Quartile deviation
c. Standard deviation
d. Variance
c. Standard deviation
Hint
The square, root of the arithmetic mean of the squared deviations of items taken from arithmetic mean is called
For a data set, the standard deviation is S2 = $$\frac{\Sigma(X-M) 2}{n-1}$$
Where Σ = Sum of
X = Individual score
M = Mean of all scores
N = Sample size (number of scores)

Question 48.
In moderately symmetrical distribution, the mode is 49 and median is 44. The value of mean will be:
a. 43
b. 57.3
c. 46
d. 58.0
b. 57.3
Hint
Mode = 3 Median – 2 Mean
2Mean = 3 median – Mode
2 mean = 3 × 44 -40 = 132-40 =92
Mean = 92/2 =46

Question 49.
In a moderately a symmetrical distribution. Arithmetic mean = 50, and Mode = 37.5. The value of median will be—
a. 45.83
b. 42.15
c. 43.20
d. 44.00
a. 45.83
Hint
Mode = 3 Median – 2 Mean
3Median = mode+2 Mean
= 37.5 +2 × 50
Median =137.5/3 = 45.83

Question 50.
The sum of deviations of a set of observations is zero when the deviations are taken from their –
a. Mode
b. Median
c. Arithmetic mean
d. None of the above
c. Arithmetic mean
Hint
The sum of deviations of a set of observations is zero when the deviations are taken from their mean.

Question 51.
The mean and standard deviations of 10 observations are 35 and 2 respectively. If each observation is increased by 4, the changed mean and standard deviation respectively will be-
a. 35 and 2
b. 40 and 4
c. 39 and 2
d. None of the above
c. 39 and 2
Hint
If each observation is increased by 4 then mean will be old mean +4 as mean is dependent on change of origin. Thus new mean is 35+4 = 39. But S.D. is not dependent on origin so new S.D. will be same as old S.D.

Question 52.
Mean of first 10 natural numbers is:—
a. 5.5
b. 6.5
c. 8
d. 5
a. 5.5
Hint
Mean = sum of observations/No. of observations
Sum of first 10 natural numbers is 1+2+3+4+5+6+7+8+9+10=55
Thus Mean = 55/10 = 5.5

Question 53.
A series was given: – 2,3,6,9, …………………….., what will be the median of the following?
a. 3
b. 6
c. 9
d. 4.5
d. 4.5
Hint
Median = n/2th term + (n/2 +1)th term/2 = 4/2 + (4/2+ 1)/2 = 2nd term + 3rd term/2 = 3+6/2 = 4.5

Question 54.
Standard of variance (15, 20, 25), find the mean:-
a. 20
b. 30
c. 40
d. 50
a. 20
Hint
Mean = sum of observations/number of observations = 60 (15+20+25)/3 = 20

Question 55.
C.V. is 1600, then find Standard Deviation if A.M is 2.5
a. 40
b. 50
c. 60
d. 70
a. 40
Hint
C.V. = S.D./mean × 100
S.D. = C.V. × mean/100
S.D. = 1600 × 2.5/100
= 40

Question 56.
Pie – Chart is:
a. 90°
b. 180°
c. 360°
d. 60°
c. 360°
hint
Pie chart is a circle so 360 degree.

Question 57.
The average of 7 numbers is 27. If we include one more number, then average becomes 25. Find the included number.
a. 11
b. 13
c. 15
d. 14
a. 11
hint
Average = sum of observations/No. of observations
Sum of 7 numbers = 27 x 7 =189
After adding one more number say x new sum is 189+x .
Average = 189+X/8
25 = 189+X/8
X = 11

Question 58.
When mean, median & mode are equal, then it is a situation of –
a. Positive skewness
b. Negative skewness
c. Symmetrical
d. None of these
c. Symmetrical
Hint
According to symmetrical skewness principle A.M. = Median =Mode

Question 59.
The Ogive is formed by-
a. Cumulative frequency
b. Central tendency
c. Both (a) & (b)
d. None of the above
a. Cumulative frequency
Hint
Cumulative frequency curve – Cumulative histograms, also known as ogives, are graphs that can be used to determine how many data values lie above or below a particular value in a data set.

Question 60.
When does the value of mean changes-
a. Change of scale
b. Change of origin
c. Both (a) & (b)
d. None of the above
c. Both (a) & (b)
Hint
The value of mean changes by change of scale and change of origin.

Questions 61.
Graphical representation of cumulative frequency distribution is known as –
a. Mean
b. Median
c. Mode
d. None of the above
b. Median
Hint
Graphical representation of cumulative frequency distribution is known as median.

Question 62.
Find mean of 0.3,5,6,7,9,12,0.2?
a. 5.34
b. 6
c. 5.64
d. 7
c. 5.64
Hint
Mean = sum of observations/no. of observations = 39.5/7 = 5.64

Question 63.
Find SD of 10,10,10,10,16,16,16,16.
a. (8) 10
b. 16
c. 3
d. 2
c. 3
Mean = sum of observations/no. of observations = 104/8 = 13
Deviation = individual unit – mean = 10-13 =-3
Similarly deviation is -3,-3,-3, -3 ,3 ,3 ,3 ,3
S.D. = $$\sqrt{\frac{\sum \text { deviation }^{2}}{\mathrm{n}}}$$
= $$\sqrt{\frac{9+9+9+9+9+9+9+9}{8}}$$
= 3

Question 64.
Standard deviation is a measure of:
a. Central tendency
b. Symmetry
c. Probability
d. Dispersion
d. Dispersion
Hint
Standard deviation is a measure of the dispersion of a set of data from its mean.

Question 65.
Which of the following would be appropriate average for determining the average size of readymade garments:
a. Geometric Mean
b. Mode
c. Arithmetic Mean
d. Median
b. Mode
Hint
The mode is the value that appears most often in a set of data. Thus for determining the average of ready made garment this is the best method.

Question 66.
The mean of first 10 even numbers is:
a. 10
b. 9
c. 12
d. 11
d. 11
Hint
Mean = sum of observations/no. of observations = 110 (2+4+6+8+10+12+14+16+18+20)/10 = 11

Question 67.
What is the major assumption that one makes, when computing a mean from a grouped data?
a. No value shall occur more than once
b. Each class contains exactly the same number of values
c. All values are discrete
d. Every value in a class interval is equal to its midpoint.
c. All values are discrete

Question 68.
If the variance of a sample is 1600, then the value of standard deviation would be:
a. 40
b. 10
c. 1600
d. 160
a. 40
Hint
S.D. = $$\sqrt{\text { Variance }}$$
= $$\sqrt{\text { 1600 }}$$
= 40

Question 69.
The mean of first 10 even numbers is:
a. 12
b. 11
c. 10
d. 9
b. 11

## Sale of Goods Act, 1930 – CS Foundation Business Law Notes

Introduction:

1. It is one of the special types of contract.
2. Initially, it was the part of the Indian Contract Act, 1872
3. Later it was deleted and a separate sale of Goods Act was passed in 1930.
4. Basic provisions and requirements of contract equally apply to Sales of Goods Act.
5. It contains and deals with law relating to sale of goods and not with mortgage or pledge.
6. It received its-assent on 15th March, 1930.
7. It came into force on 1st July, 1930.
8. It extends to whole of India except the State of Jammu & Kashmir.

Definition of Various Terms:

2. Seller: Person who sells or agrees to sell the goods.
3. Goods: As per Sec 2(7), it means every kind of movable property Other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contact of sale.
4. Money means current money and it includes rare and old coins.
5. Actionable claim means what a person cannot make a present use of or enjoy, but can recover it by means of a suit or an action.

Relevant Case Law:
Rash Behari V. Emperor
M.B. Electric Supply Co. Ltd. V. State of Rajasthan

• Existing Goods: It means such goods which are in existence at the time of the contract of sale i.e. owned or possessed by the seller.
• Specific Goods: It means goods identified and agreed upon at the time the contract of sale has been made.
• Ascertained Goods: It means that the goods are identified in accordance with the agreement after the contract of sale has been made.
• Generic / Unascertained Goods: It means the goods which are not specifically identified but are indicated by description.
• Future Goods: As per Sec. 2(6), it means goods to be manufactured or produced or acquired by the seller after making the contract of sale.
• Contingent Goods: It means the goods the acquisition of which by the seller depends upon a contingency which may or may not happen.
• Agreement to sell can only be there in respect of future or contingent goods.
• Actual sale can take place only in respect of specific goods.
• Goods are said to be in a deliverable state, when they are in such a condition that the buyer would, under contract, be bound to take delivery of them.
• Delivery: It means voluntary transfer of possession by one person to another.
• Document of Title of Goods: It includes bill of lading, dock-warrant, warehouse keeper’s certificate, what finger’s certificate or any other document used in the ordinary course of business as proof of the possession or control of goods or authorising or purporting to authorise either by endorsement or delivery, the possessor of the document to transfer or receive goods thereby represented.
• Property: It means the general property and not merely a special property.
• Insolvent: Person is said to be insolvent when he ceases to pay his debts in the ordinary course of business.

Differences between Existing Goods and Contingent Goods:

 Existing Goods Contingent Goods Goods which are physically in existence and at the time of entering into contract, are owned by the seller. Goods, the acquisition of which depends upon the happening of an uncertain contingency. They can be a subject matter of sale as well as agreement to sell. They are always a subject matter of an agreement to sell. They can be classified as specific, ascertained or unascertained. They cannot be classified as such.

Differences between Future Goods and Contingent Goods:

 Future Goods Contingent Goods Goods which are yet to be manufactured or produced or acquired by the seller after making the contract. Goods, the acquisition of which by the seller depends upon a contingency which may or may not happen. Their procurement does not depends upon any such uncertainty. Their procurement is dependent upon uncertain event. It is always an agreement to sale. It is a contract of sale, the performance of which depends upon the contingency which may or may not happen. It does not includes contingent goods. It includes future goods.

Contract of Sale:

• In this ownership is transferred immediately to buyer even though possession of goods is with seller.
As per Section 4(1) of the Sale of Goods Act, 1930,
• “Contract of sale of Goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price”.

Essential Elements:

• There must be atleast two parties. (Bilateral Contracts)
• The subject matter of the contract must be goods.
• A price in money should be paid or promised.
• A transfer of property in goods from seller to the buyer must take place.
• It must be absolute or conditional.
• All other essentials of a valid contract must be present.

Sale:
As per Section 4(3) of the Act, “Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale”.

Agreement to Sell:
As per Section 4 (3) of the Act, “Where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell”.

Differences between Sale and Agreement of Sell:

‘Agreement’ to sell becomes sale when the time expires, or the condition, subject to the property in goods is to be transferred, is fulfilled.

Differences between Sale and Bailment:

 Sale Bailment Property in goods is transferred from seller to buyer. There is only transfer of possession of goods from bailor to bailee. Return of goods is not possible. Bailee must return the goods to bailor on accomplishment of the purpose of bailment. Consideration is the price in terms of money. Consideration may be gratuitous or non-gratuitous. Buyer may use the goods in any way he likes. Bailee can use the goods only according to the bailor’s direction. Any profit accrued in goods sold is the buyer’s property. Any profit accrued on goods bailed is the bailor’s property. This applies only if Goods are Existing Goods.

Differences Between Sale and Contract for Work and Labour:

 Sale Contract for Work and Labour Property in goods is transferred from the seller to the buyer. It is a contract for performing some work and not for transferring the property in goods. It involves the delivery of goods. It involves exercise of skill and labour in rendering some work. It involves “the uses by means of money consideration”.

Differences Between Sale and Hire Purchase Agreement:

 Sale Hire Purchase Agreement Property in goods is transferred to the buyer immediately at the time of contract. The goods passes to the hirer upon payment of the last installment. Position of buyer is that of owner of goods. Position of hirer is that of a bailee till he pays the last installment. Buyer cannot terminate the contract and is bound to pay the price of the goods. Hirer may terminate the contract by returning the goods to owner without any liability to pay the remaining installments. Seller takes the risk of any loss resulting from the buyer’s insolvency. Owner takes no such risk for if hirer fails to pay the installment, he has the right to take back the goods. Buyer can pass the goods title to a bonafide purchaser from him. Hirer cannot pass any title even to a bonafide purchaser. Tax is levied at the time of contract. Tax is not leviable until it eventually turns into sale.

Formalities of Contract of Sale:

• There may be immediate delivery of goods
• There may be immediate payment of price, but it may be agreed that the delivery is to be made at some future date.
• There nay be immediate delivery of the goods and an immediate payment of price.
• It may be agreed that the delivery or payment or both are to be made in installments.
• it may be agreed that the delivery or payment or both are to be made at some future date.

Subject Matter of Sale:
As per Sec. 6:

• Subject matter must always be goods which may be existing or future goods.
• Contract can also be made with regard to the goods, the acquisition of which by seller depends upon a contingency, which may or may not happen. Such contracts are contingent contracts.
• When the seller purports by his contract to effect a sale of future goods, the contract will operate only as an agreement to sell the goods and not as sale.

Destruction of Subject Matter of Sale [without the knowledge of seller]
Goods Perishing before Making a Contract (Sec 7):

• The contract is void ab initio.
• If seller enters into the contract even on being aware of the destruction, he is estopped from disputing the contract.
• It also includes the goods that have lost their commercial value.
• Mutual mistake of the fact essential to the contract renders the contract void.

Goods Perishing after Agreement to Sell (Sec. 8): Without any of the parties fault.

• Agreement becomes void.
• Provided the risk has not passed to the buyer.
• It applies only to sale of specific goods.
• For Uncertain good sale, the perishing of the whole quantity of such goods in the possession of seller won’t relieve him of his obligation to deliver.

Price:

• Price means monetary consideration for the sale of goods.
• It may be money actually paid or promised to be paid.
• No sale can take place without a price.
• Only money transactions are valid, no dealing in kind.

Ascertainment of Price
As per Sec. 9 –
1. Price may be:

• Fixed by a contract.
• Agreed to be fixed in a manner provided by the contract, or
• Determined by the course of dealings between the parties.

2. When it cannot be fixed in any of above ways, the buyer is bound to pay a reasonable price to the seller.

3. Generally Market Price would be the Reasonable Price:

As per Sec. 10:

• Price is to be determined by third party.
• Where there is an agreement to sell goods on the terms that the price is to be fixed by third party, and he either does not or cannot make such valuation, the agreement will be void.
• If the third party is prevented by the default of either party from fixing the price, the party at fault will be liable to the damages to the other party who is not at fault.

Stipulation:

• Before concluding a contract of sale, certain statements are made by the contracting parties.
• Statement may be stipulation – one by seller on the reliance of which the buyer makes the contract.
• Statement may not be a stipulation – if it is a mere recommendation by the seller thus, does not give rise to any action.
• “A stipulation or a representation in a contract of sale with reference to goods which are the subject thereof, may be a condition or a warranty.”

Condition:
“A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated and claim damages.”

Warranty:
“A warranty is a stipulation collateral to the main purpose of the contract, i.e. a subsidiary promise the breach of which give rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated.”

As per Sec. 11:
Stipulation as to time of payment are not the condition unless such an intention appears from the contract.

Differences between Condition and Warranty:

 Condition Warranty It is essential to the main purpose of the contract. It is collateral to the main purpose of the contract. The aggrieved party can repudiate the contract or claim damages or both in case of breach. The aggrieved party can claim only damages in case of breach. A breach of condition may be treated as breach of warranty. A breach of warranty cannot be treated as a breach of condition.

Circumstances when Condition may be Deemed as Warranty:

• Where the buyer himself opts to treat the breach of condition as a warranty.
• Where the contact is indivisible and the buyer has accepted either the whole goods or any part thereof.
• Where the fulfillment of any condition or warranty is excused by law by reason of impossibility or otherwise.

Express Condition:

• Condition is expressed when the terms of contract expressly states them.
• They are agreed upon between the parties at the time of contract and are expressly provided in the contract.
• It does not negative an implied condition.

Implied Condition:

• Condition is implied, when the terms are not expressly provided for.
• They are presumed by law to be present in the contract.
• They may be neglected or waived by an express agreement.

It Includes:

• Condition as to title.
• Condition as to sale by description.
• Condition as to sale by sample as well as description.
• Condition as to quality and fitness.
• Condition as to merchantability.
• Condition as to sale by sample.
• Condition as to wholesomeness.

Condition as to title [Sec. 14(a)]:

• It presumes that the seller has a valid title to the goods.
• Seller has a right to sell the goods in case of sale.
• In case of agreement to sell, he will have the right to sell the goods at the time when the property is to pass, unless there is a contract to the contrary.
• If seller’s title turns out to be defective, the buyer may return the goods to the true owner and recover the price from the seller.

Relevant Case Law:
Rowland V. Divall

Condition as to Sale by Description (Sec. 15):

• Here, the implied condition is that the goods must correspond with the description.
• The buyer is not bound to accept and pay for the goods which are not in accordance with the description of goods.
• The buyer relies for his information on the description of the goods given, by the seller.

Relevant Case Law:
Beale V. Taylor

Condition as to Sale by Sample as well as Description (Sec. 15):
Here, the implied condition is that the bulk of goods supplied must correspond both with the samples as well as with the description.

Relevant Case Law:
Nichol V. Godis

Facts:

• N agreed to sell oil described as “Foreign refined Rape Oil, warranted only equal to sample”.
• The goods were equal to sample, but contained a mixture of Hemp Oil.

Decision: The buyer could reject the goods

Condition as to Quality and Fitness [Sec. 16(1)]:
1. Here the implied’condition operates on the fulfillment of following conditions:

• The buyer requires the goods for a particular purpose which he has made known to the seller.
• The buyer relies on the skill and judgement of the seller.
• The seller sells such type of goods.

2. If the goods are bought under a patent or trade name, there is no such condition.

Relevant Case Law:
Priest V. Last

Facts:

• A purchased a hot water bottle from a chemist.
• The bottle burst and injufed his wife.

Decision:

• There was a breach of condition as to fitness.
• Chemist was liable for refund of price and damages.

Grant V. Australian Knitting Mills.

Condition as to Merchantability [Sec. 16 (2)]:

• It means that when the goods are bought by description from a seller who deals in such goods, it is implied that goods will be of merchantable quality.
• It is immaterial, whether the seller is manufacturer or producer or not.
• It does not operates where the buyer examines the goods prior to the sale and examination ought to have revealed the defects.

Condition as to Wholesomeness:
In case of eatables and other provisions, there is an implied condition of wholesomeness i.e. fit for consumption, other than merchantability.

Condition as to Sale by Sample (Sec. 17):
There is an implied condition that:

• The bulk shall correspond with the sample in quality,
• The buyer shall have a reasonable opportunity of comparing the bulk with the sample.
• The goods shall be free from any defect rendering them unmerchantable, which would not be apparent on reasonable examination of the sample.

Express Warranty – It is a warranty which has been expressly agreed on by the parties at the time of contract of sale.

Implied Warranty:
1. It is a warranty which the law presumes that the parties have incorporated it into their contract.

2. It may be excluded by the course of dealings between the parties.

3. It Includes:

• Warranty as to undisturbed possession.
• Warranty as to non-existence of encumbrances.
• Warranty as to dangerous nature of goods.
• Warranty as to quality or fitness by usage of trade.

Warranty as to Undisturbed Possession [Sec. 14 (b)]:

• An implied warranty is that the buyer shall have and enjoy the quiet possession of the goods.
• If buyer is later on disturbed in his possession, he is entitled to sue the seller.

Warranty as to Non-Existence of Encumbrances [Sec. 14 (c)]:

• An implied warranty is that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time of entering into contract.
• If defects are known to the buyer at the time of entering into contract, he is not entitled to ask for any compensation from the seller for discharging f the encumbrance.

Warranty Implied by the Custom or Usage of Trade: [Sec. 16(3)]:
An implied warranty or condition as to quality of fitness for a particular purpose maybe annexed by the usage of trade.

Warranty as to Dangerous Nature of goods:
If goods are dangerous, and the buyer is not aware of such danger, it is implied warranty that the seller should warn the buyer about it else he will be liable for damages caused to the buyer.

Doctrine of “Caveat Emptor”:

• It means ‘let the buyer beware’ i.e. buyer purchases the goods at his own risks.
• When the seller display the goods in open market, it is for the buyers to make a proper selection of goods.
• If the goods turn out to be defective, he cannot hold the seller liable.
• As per Sec. 16,
• “Subject to the provisions of this Act, or any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale.”

Relevant Case Law:
Ward V. Hobbs.

Facts:

• Pigs were sold ‘subject to all faults’.
• These pigs, being infected, caused typhoid to other healthy pigs of the buyer.

Decision: Seller was not bound to disclose that the pigs were unhealthy.

Exceptions to the Doctrine of Caveat Emptor:

1. Where the buyer makes known to the seller the particular purpose for which goods are required, it is the duty of the seller to supply goods reasonably fit for the purpose.
2. Where the goods are purchased under its patent name or brand name, there is no implied condition that the goods will be fit for the purpose.
3. Where the goods are sold by description, there is an implied condition that the goods shall correspond with the description.
4. Where the goods are bought by description from the seller who deals in those goods, there is an implied condition that the goods shall be of merchantable quality.
5. Where the goods are bought by same this rule does not apply if the bulk does not correspond with the sample.
6. Where the goods are bought by sample as well as description, this rule does not apply in case the goods does not corresponds with both.
7. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed from trade and if seller deviates from that, this rule doesn’t applies.
8. Where the seller has made a false representation relating to the goods and the buyer has relied upon it, this rule doesn’t applies.

Passing of Property: [Sec. (18-20)]:
It means passing/transferring of ownership.
If the property has passed to the buyer, the risk in the goods sold is that of buyer and not-of seller, though the goods may still be in the seller’s possession.

Significance of Transfer of Ownership:

• Risks passes with the ownership.
• Only owner have proprietary right over the goods. Owner can take action in case of goods being damaged by third party. When there is danger of good by the actions of third party.
• Seller’s right for price.
• If buyer/seller is declared insolvent it is necessary to know the party with whom the property in goods is there to know if it can be taken over by official assignee or not.
• Ownership and possession are two different concepts.

Passing of Property in Specific Goods:
1. It happens as and when the parties intend to pass. The intention must be gathered from the terms of contract of parties and circumstances of the case.

(i) Where there is a contract for the sale of specific goods not in a deliverable state, i.e. the seller has to do something to the goods to put them in a deliverable state, the property does not pass until that thing is done by seller and buyer has notice of it. (Sec. 21)

(ii) When there is a sale of specific goods in a deliverable state, but seller is bound to weigh, measure, test or do something with reference to the goods for the purpose of ascertaining the price, the property to the goods for the purpose of ascertaining the price does not pass until such act or thing is done and the buyer has notice of it.'(Sec. 22)

Relevant Case Law:
Rugg V. Minett

3. Deliverable state refers to that state in which the buyer would be bound to take the delivery of goods.

4. Fact that the time of delivery or the time of the payment is postponed does not present property from passing at once. (Section 20)

5. If goods are delivered to the buyer “on approval” or “on sale of return” basis:

The property passes to the buyer when:

• He signifies his approval or acceptance to the seller,
• He does any other act adopting the transaction,
• He does not signify his approval or acceptance to the sellen but retains goods beyond a reasonable time.

Rules Relating to Passing of Property in Case of Sale of Unascertained Goods:(Future Goods)

• The property does not pass until the goods are ascertained.
• The ascertainment of goods and their unconditional appropriation to the contract are the two pre -conditions for the transfer of property from seller to buyer.
• Ascertainment of goods is the process by which the goods to be delivered under the contract are identified and set apart.

Sec. 23 : Following conditions must be satisfied –

• Goods of description mentioned must be produced or obtained.
• They must be in deliverable state.
• They must be unconditionally appropriated.

Note: Unconditional Appropriation of Goods is when the seller delivers the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.

• The assent of parties may be given either before or after the appropriation.
• In case of sale of quantity of goods out of a large quantity, property will pass on the appropriation of the specified quantity by one party with assent of the other.
• The property in goods does not passes if the seller reserves the right of disposal of goods.

The above rule has following two exceptions:

• If the goods are delivered to a railway administration for carriage by railway, the goods are deliverable to the order of the seller or his agent.
• If the seller sends bill of exchange along with bill of lading to the buyer for his acceptance, the property in goods does not passes unless he accepts the bill.

Passing of Risks (Sec. 26)
1. The general rule is that “unless otherwise agreed the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not”.

2. Rule is known as Resperit Demino i.e. the loss falls on the owner.

3. But the parties may agree that risk will pass at the time different from the time when ownership is passed. example – the seller may agree to be responsible for the goods even after the ownership is passed to the buyer or vice versa.

4. Exceptions to the above general rule:

• If there is agreement between the parties.
• If the delivery of goods are delayed either due to buyer’s or seller’s default, goods are at risk of party in default.

Relevant Case Laws:
Consolidated Coffee Ltd. V. Coffee Board
Multanmal Champalal V. Shah & Co.

Transfer of Title by Non – Owner
Sec. 27:
The general rule is where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than that the seller had.”

This rule is expressed in the Latin maxim “Nemo dat quod non habet” which means that no one can give what he has not got. i.e. no one can pass a better title than he himself has-

Example : A finds ring of B sell it to C, who purchase it in good faith. So true owner B can have it from C.
Even a bonafide buyer gets no valid title.

Exceptions to the above rule:

• Effect of estoppel.
• Sale by a mercantile agent.
• Sale by joint owner.
• Sale by person in possession under a voidable contract.
• Sale by seller in possession after sale.
• Sale by buyer in possession after sale.
• Sale by an unpaid seller.
• Sale by person under other laws.

Sec. 27: Effect of Estoppel – Where the owner is estopped by the conduct from denying the seller’s authority to sell, the transferee will get a good title as against the true owner.

Sec. 27: Sale by a Mercantile Agent – Buyer will get a good title in following cases:

• If he was in possession of goods or documents with the owner’s consent.
• If the sale was made by him when acting in the ordinary course of business.
• At the time of contract, buyer had no notice of the fact that seller has no authority to sell,

Sec. 28: Sale by a Joint Owner (Co-owner) –

• If one of the several joint owners,
• Who is in the sole possession of the goods by the permission of other co-owners,
• Sell the goods,
• Buyer gets a good title to the goods,
• If done in good faith.

Sec. 29: Sale by a Person in Possession Under a Voidable Contract –
A buyer acquires a good title if goods are sold to him by seller having possession under a voidable contract, provided it has not been rescinded until the time of sale.

Sec. 30: Sale by seller in possession after sale –

• If the seller continues to be in possession of goods or document of title,
• he pay sell it to a third person,
• If such person obtains the delivery in good faith and without notice of previous sale,
• He would have good title to them.

Sec. 30: Sale by Buyer in Possession after Sale –

• Where the buyer with the seller’s consent,
• Obtains possession of goods before property in them has passed to him,
• he may sell it to the third party,
• third party obtains goods in good faith, and without notice of the lien,
• he would get a good title to them.

Sec. 54(3): Sale by an Unpaid Seller –

• When an unpaid seller,
• Who has exercised his right of lien or stoppage in transit,
• Resells the goods,

Sale by person under other laws:
1. A finder of goods has the power to sell the goods under certain circumstances also called “Quasi Contract”.

2. Sale of goods pledged by pawnee conveys goods title to buyer if:

• Pawner or pledger makes default
• Pawnee has given reasonable notice to pawnor.

Delivery: (Section 33-39)

• It means voluntary transfer of possession from one person to another.
• It is the duty of seller to deliver the goods.
• Buyer’s duty is to accept the goods and pay for them in accordance with the contract.

Rules Regarding Delivery:
1. It should have the effect of putting the buyer in possession.

2. Effect of Part Delivery: Part Delivery of goods, taking place in the course of whole delivery, has the same effect for the purpose of passing the property in such goods as whole delivery.

3. Buyer to Apply for Delivery: Seller is not bound to deliver the goods until the buyer has applied for it, unless otherwise agreed.

4. Place for Delivery: If there is no contract to the contrary –
(a) Goods must be delivered at place where they are at the time of sale.

(b) Goods agreed to be sold are required to be delivered at the spot at which they were lying at the time of entering into agreement to sell.

(c) If at the time of agreement to sell, goods are not in existence, goods are to be delivered at a place while they would be manufactured or produced.

5. Time of Delivery: When the time of delivery of goods has not been fixed by the parties, the seller must send them within a reasonable time.

6. Goods in Possession of a Third Party: When at the time of sale, the goods are in the possession of third person, the effective delivery takes place when such person acknowledges to the buyer that he has held the goods on buyer’s behalf.

7. Time for.Tender of Delivery: Demand or tender of delivery may be treated as ineffective unless made at a reasonable hour.

8. Expenses for Delivery: Expenses of putting the goods in deliverable state must be borne by seller and expenses of receiving the goods are borne by buyer.

9. Seller must deliver the goods according to contract.

10. If goods are to be delivered at a place other than they are, the risk of deterioration in transit will be borne by buyer.

Delivery of Wrong Quantity:

• Short Delivery: Buyer may either accept the goods and pay for it at a contract rate or reject it.
• Excess Delivery: Buyer may accept or reject the delivery. If he accepts the whole of it, he shall pay for them at the contract rate.
• Mixed Delivery: Buyer may accept the relevant goods and reject the rest or reject the whole.

11. Installment Deliveries: Unless otherwise agreed, buyer is not bound to accept delivery in installments.

12. Suits for Breach of Contract: Where the property in the goods has passed to the buyer, the seller may sue him for the price.

• Where the price is payable on certain day regardless of delivery. The seller may sue him for price.
• Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer, may sue him for damages for non-delivery.

Acceptance of Delivery:
Acceptance is “deemed” to take place when the buyer –

1. Intimates to the seller that he had accepted the goods.
2. Does any act to the goods, which is inconsistent with the ownership of seller.
3. Retains the goods after the lapse of reasonable time, without intimating to seller that he has rejected them.

Breach and Repudiation Anticipatory Breach:
Where either party to a contract of sale repudiates the contract before the date of delivery, the other party may either treat the contract as still subsisting and wait till the date of delivery, or he may treat the contract as rescinded and sue for damages for the breach.

The party who had originally repudiated will not be deprived of:

• his right of performance on the due date (in spite of his prior repudiation); or
• his right to set up any defense for non-performance which might have actually arisen after the date of the prior repudiation.

Measure for damages:
The act does not specifically provide for rules as regards the measure of damages except by stating that nothing in the Act shall affect the right of the seller or the buyer to recover interest or special damages in any case were by law, they are entitled to the same [Section 73 of Indian Contract Act will apply].

• The contract is for delivery of goods in stated installments, which are to be separately paid for.
• Breach of contract may be committed by either buyer or seller.
• It depends upon terms of contract and circumstances of each case, whether:
(i) Breach is a repudiation of the whole contract, or
(ii) A severable breach only giving rise to a claim for damages.

Unpaid Seller:
As per Sec. 45,
Seller is deemed to be an unpaid seller, when:
(i) Whole of the price has not been paid or tendered and seller had an immediate right of action for the price.

(ii) A bill of exchange or other negotiable instrument was given as payment, but the same has been dishonoured, unless this payment was an absolute and not a conditional payment.

Rights of Unpaid Seller Against Goods:

• Right of lien or retention.
• Right of stoppage in transit.
• Right of resale.
• Right to withhold delivery.

Right of Lien or Retention (Sec. 47 – 49 & 54)
Sec. 47:
1. It can be exercised on the goods for the price while he is in possession until the payment of price of such goods. It can be exercised in following cases:

• Where goods have been sold without any stipulation as to credit.
• Where goods have been sold on credit but the term of credit has expired.

2. This right depends upon physical possession,

3. It can only be exercised for the non-payment of price.

Sec. 49:
This right is terminated under following circumstances:

• Where he delivers goods to carrier or bailee for the purpose of transmission to buyer without reserving the disposal right.
• Where buyer or his agent lawfully obtains possession of goods.
• Where seller has waived the right of lien.
• By estoppel.

Right of Stoppage in Transit (Sec. 50 – 52)
1. Sec. 50:

2. It means right to stop the further transit of goods, to resume possession and to hold the same till the price is paid.

3. It can be exercised in following cases:

• Seller must be unpaid.
• He must have parted with the possession of goods.
• Goods are in transit.
• Right is subject to provisions of the Act.

4. Insolvent here means that a person has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due.

Sec. 51:
Goods are deemed to be in transit from the time they are delivered to carrier or other bailee for transmission, until buyer or his agent takes delivery of them.

Sec. 51:
This right is lost under following cases:

• Acknowledgment by carrier
• Delivery to ship
• Wrong denial to deliver by carrier
• Sub sale
• Goods in possession of ship’s master acting as buyer’s agent.

If buyer rejects he goods and carrier or bailee continues to be in its possession, the transit does not ends, even if seller refuses to receive them back.

Sec. 52(1): It may be exercised by:

• Taking actual possession of goods, or
• Giving notice of his claim to carrier/bailee who hold the goods.

Sec. 53: It is not effected by any sale or other disposition of goods made by buyer, unless the seller has assented to it.

Right of Resale (Sec. 54)
1. It can be exercised in following cases:

• Where the goods are of perishable nature, buyer need not be informed of the intention of resale.
• Where he gives notice to the buyer of his intention to resell the goods, the buyer does not within a reasonable time pay or tender the price.
• Where the right is expressly reserved in the contract.

2. If no notice has been given to the buyer of intention to re-sell, unpaid seller cannot claim any damages and buyer will be entitled for all profits.

3. Unpaid seller can recover from buyer the balance amount (if any) on re¬sale.

4. If notice has been given to buyer, then profits origin out of sale of goods won’t be shared with buyer. Only seller will hold the samples.

Rights to Withhold Delivery:

• It is exercised if the property in goods has not passed to the buyer.
• It is in additions to above 3 rights.
• However if the property has not been passed the unpaid seller has a right of with holding delivery similar to and co-extensive with his rights of lien and stoppage in transit.

Rights of Unpaid Seller Against Buyer:

• Suit for price.
• Suit for damages for non-acceptance.

Suit for Price (Sec. 55):
Seller may sue –

• Where the property has passed to the buyer and he wrongfully neglects or refuses to pay for goods.
• Where the property has not passed and price is payable on a certain day irrespective of delivery and buyer wrongfully neglects or refuses to pay such price.

Suit for Damages for Non-Acceptance (Sec. 56):
The seller may sue the buyer for non-acceptance, where he wrongfully neglects or refuses to accept and pay for the goods.

Auction Sales (Sec. 64):

• It is a mode of selling property by inviting bids publically and the property is sold to the highest bidder.
• It is a public sale where goods are offered to be taken by bidders.
• Auctioneer is only an agent of seller.

Following rules apply –

1. When goods are put up for sale in lots, each lot is treated to be the subject of a separate contract of sale.
Sale is complete when the auctioneer announces its completion by fall of hammer or in another customary manner.
2. Right to bid may be reserved expressly by or on behalf of seller.
3. If such right is not reserved, it is not lawful for the auctioneer knowingly to take any bid from seller.
4. Sale may be notified to be subject to a reserve or upset price.
5. If seller makes use of pretended bidding to raise the price, sale is voidable at the buyer’s option.

Trading Contracts Involving Rail or Sea Transit:

• These contracts are made when goods are to be shipped by sea.
• Under this various conditions are attached to the contract by parties, or by custom and practice of merchants.

It includes:

1. Free On Board (F. O. B.)
2. Free On Rail (F. O. R.)
3. Cost Insurance & Freight (C. I. F. or C. F. I.)
4. Ex-Ship.

Free On Board (F. O. B.):

• Under this contract, it is the seller’s duty to put the goods on board at his own expense.
• As soon as they are put on board, the ownership along with the risk, passes to the buyer.
• Seller must notify the buyer immediately when the goods are put on board.
• If seller fails to do so, goods will be at seller’s risks. Buyer must get them insured on receipt of notification.

Free on Rail (F. O. R.):
Similar to F. O. B.

Cost Insurance and Freight (C. F. I. or C. I. F.):

• It refers to a contract of insured goods.
• Seller bears both the expenses of putting the goods on board as well as the freight and insurance charges.
• Proper documents have to be transferred.
• On receiving the documents, buyer has to first pay and then, take delivery.
• Buyer can reject the goods, if they are not according to the contract.

Ex-Ship:

• Seller is required to arrange for shipment of goods till such inland destination as the buyer indicates.
Goods travel at seller’s risks.
• Seller is not bound to insure them.
• Buyer is not bound to pay for them unless they are ready for unloading from the ship and all freight charges are paid.

Multiple Choice Questions

Question 1.
The objective of the Sale of Goods Act, 1930 is to define and amend the law relating to ________.
(a) Sale of Immovable Properties
(b) Sale of Goods
(c) Agreements to Sell
(d) All of the above.
(b) Sale of Goods

Question 2.
The Sale of Goods Act, 1930 extends to the whole of India, except the state of ________.
(a) Maharashtra
(b) Jammu and Kashmir
(b) Jammu and Kashmir

Question 3.
The Sale of Goods Act, 1930 came into force in ________.
(a) 1st day of July, 1930
(b) 1st day of September, 1930
(c) 1st day of January, 1930
(d) 31st day of December, 1930.
(a) 1st day of July, 1930

Question 4.
The unrevealed provisions of the Act shall continue to apply to contracts for the sale of goods, save insofar as they are inconsistent with the express provisions of the Sale of Goods Act.
(a) Transfer of Property Act
(b) Indian Evidence Act
(c) Indian Contract Act
(d) Partnership Act.
(c) Indian Contract Act

Question 5.
The term “Goods” is defined in section of the Sale of Goods Act, 1930.
(a) 2(5)
(b) 2(6)
(c) 2(7)
(d) 2(8).
(c) 2(7)

Question 6.
Which of the following are not included in the term “Goods” under the Sale of Goods Act ________.
(a) Stock and Shares
(b) Actionable Claims
(c) Growing Crops, Gross etc.
(d) Personal Use of Property.
(b) Actionable Claims

Question 7.
Transfer of Actionable claim(s) is governed by the provisions of the Sale of Goods Act ___________.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(c) False

Question 8.
“Jubilee Coins” are goods within the meaning of Section 7 of the Sale of Goods Act ___________.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(a) True

Question 9.
Under the Sale of Goods Act, “Goods” means goods which are not in existence at the time of making the contract of Sale.
(a) Ascertained Goods
(b) Future Goods
(c) Specific Goods
(d) Perishable Goods
(b) Future Goods

Question 10.
To constitute a valid sale, there must be atleast ___________.
(a) One Party
(b) Two Parties
(c) Three Parties
(d) Four Parties.
(b) Two Parties

Question 11.
When goods are given by the buyer as consideration for the goods received from the seller it is called ________.
(a) Sale
(b) Agreement to sell
(c) Barter
(d) Bailment.
(c) Barter

Question 12.
In an Agreement to sell, the property in goods is transferred in ___________.
(a) Past
(b) Present
(c) Future
(d) There is no transfer to property at all.
(c) Future

Question 13.
“Contract of Sale” under section 4 of the Sale of Goods Act, 1930 comprises of ___________.
(a) Both executory and executed contracts of sale
(b) Executory contract of sale
(c) Executed contract of sale
(d) Concluded contract of sale.
(a) Both executory and executed contracts of sale

Question 14.
In an agreement to sell, where goods lie with the Seller, the risk of loss of goods remains with ___________.
(c) Seller only
(d) Buyer and Seller to the extent of their shares.
(c) Seller only

Question 15.
Where goods are not specific and ascertainable at the time of the making of the contract, it shall ___________.
(a) become void
(b) become voidable at the option of the buyer
(c) operate as an agreement to sell
(d) become a valid contract of sale.
(a) become void

Question 16.
Section 8 of the Sale of Goods Act, dealing with goods perishing before sale, in its application is ___________.
(a) Confined to contact of sale
(b) Confined to agreement to sell
(c) Either (a) or (b)
(d) Neither (a) nor (b).
(a) Confined to contact of sale

Question 17.
Under Sec. 8 of the sale of Goods Act, 1930 a contract of sale of goods can be avoided where the goods have perished / damaged ___________.
(a) Due to the fault neither of the Buyer nor the Seller
(b) Due to the fault of the Buyer
(c) Due to the fault of the Seller
(d) Due to the fault of either the Buyer or the Seiler.
(c) Due to the fault of the Seller

Question 18.
In a contract of sale, the price may be ___________.
(a) Fixed by the contract
(b) Agreed to be fixed in a manner thereby agreed
(c) Determined by course of dealings between the parties
(d) All of the above.
(d) All of the above.

Question 19.
The prima facie evidence of a “Reasonable Price” u/s 9 of the Sale of Goods Act, is ………………..
(a) Market Price
(b) Current price
(c) Price as determined by the court
(d) Reuse Price.
(a) Market Price

Question 20.
Under Section 11 of the Sale of Goods Act, 1930 the time of payment can be of the essence of the contract ___________.
(a) by agreement between the parties
(b) by operation of law
(c) both (a) and (b)
(d) either (a) or (b).
(a) by agreement between the parties

Question 21.
Condition or warranty in a contract of sale, constitutes stipulation with reference to ___________.
(a) Time
(b) Price
(c) Goods
(d) Delivery.
(c) Goods

Question 22.
A “Warranty” under the Sale of Goods Act, has been defined as a stipulation ___________.
(a) Collateral to the main purpose of the contract
(b) With regard to time
(c) Essential to the main purpose of the contract
(d) All of the above.
(a) Collateral to the main purpose of the contract

Question 23.
The breach of a “Condition” in a contract of sale of goods give the right to ___________.
(a) Repudiate the contract
(b) Claim for damages only
(c) Either (a) or (b)
(d) Both (a) and (b).
(d) Both (a) and (b).

Question 24.
In cases where there is a breach of condition by the seller, the buyer ___________.
(a) May retain the goods though he has the right to reject them
(b) Has no right to retain the goods but only to reject the goods
(c) Has no right to reject the goods
(d) Has no remedy at all.
(a) May retain the goods though he has the right to reject them

Question 25.
The Buyer shall have and enjoy quiet possession of the goods. This is an : u/s 14 of the Act.
(a) Implied Warranty as to Title
(b) Implied Condition as to Title
(c) Implied Warranty as to Possession
(d) Implied Condition as to Possession.
(c) Implied Warranty as to Possession

Question 26.
In case of sale by description, there is an implied ………………. that the goods shall correspond to description.
(a) Warranty
(b) Condition
(c) Stipulation
(d) Description
(b) Condition

Question 27.
In a sale of goods by description, it is sufficient that the goods are ___________.
(a) Fit for the purpose for which they were wanted though not in accordance to description.
(b) Merchantable though not in accordance to description
(c) Wholesome, even if they do not correspond to description
(d) The same as that of their description
(d) The same as that of their description

Question 28.
Implied condition as to quality or fitness does not apply if ___________.
(a) Buyer discloses to the seller, the exact purpose for which goods are required.
(b) Buyer indicates to the seller that he relies on the seller’s skill or judgement
(c) Seller’s business is to sell goods of such description
(d) Buyer reserves the right to examine the goods and check its quality
(d) Buyer reserves the right to examine the goods and check its quality

Question 29.
Implied condition as to merchantable quality applies to sale of goods ___________.
(a) Under a patent or other trade name
(b) By description only
(c) Either (a) or (b)
(d) Both (a) and (b)
(a) Under a patent or other trade name

Question 30.
The principle of “Caveat Emptor” as found in Sec 16 of the Sale of Goods Act, means that the ___________.
(a) Let the Buyer be aware
(b) Buyer must take a chance
(c) Seller must take care
(d) Seller must take a chance
(a) Let the Buyer be aware

Question 31.
In case of goods, property passes to the buyer, only when the goods are ascertained.
(a) Future
(b) Specific
(c) Contingent
(d) Unascertained
(d) Unascertained

Question 32.
The process of identifying the goods and setting apart as per the intended quality or description is called ___________.
(a) Identification
(b) Procurement
(c) Ascertainment
(d) Allocation
(c) Ascertainment

Question 33.
In a sale of specific or ascertained goods the property there in is transferred to the buyer ___________.
(a) Upon delivery of goods
(b) Upon payment of price
(c) At such time as the parties intend it to be transferred
(d) At such time as decided by the court
(c) At such time as the parties intend it to be transferred

Question 34.
For passing of property in respect of specific or ascertained goods, the interaction of the parties can be ascertained from ___________.
(a) Terms of the contract
(b) Conduct of the parties
(c) Circumstances of the case
(d) All of the above
(d) All of the above

Question 35.
For passing of property in goods, the goods should be in a ___________.
(a) Deliverable state
(b) Non-deliverable state
(c) Consumable state
(a) Deliverable state

Question 36.
Where the goods are to be delivered in future and the seller becomes insolvent before any appropriation is made, the property in goods passes to the buyer and the buyer acquires interest in the goods.
(a) True
(b) Partly true
(c) False
(d) None of the above
(c) False

Question 37.
Delivery of goods to the carrier for the purpose of transmission to the buyer automatically means that the property in goods vest in the buyer,
(a) True
(b) Partly True
(c) False
(d) None of the above
(a) True

Question 38.
In cases of goods sent on approval basis, the goods are at the if they perish in an inevitable accident.
(b) Seller’s Risk
(c) Combined Risk of Buyer and Seller
(d) Carrier’s Risk
(b) Seller’s Risk

Question 39.
Risk prime facie passes with-
(a) Property or ownership
(b) Completed agreement
(c) Verification and delivery
(d) Payment of price
(a) Property or ownership

Question 40.
The Latin Maxim “Nemo Dat Quod non Habet” means ___________.
(a) No man can pass a better title than he has
(c) No consideration – No contract
(d) Ignorance of law is no excuse
(a) No man can pass a better title than he has

Question 41.
A finder of goods has the power to sell the goods to give good title to the buyer, if the owner of goods cannot be found with-
(a) Ordinary diligence
(b) Reasonable diligence
(c) Due diligence
(d) Lack of diligence
(b) Reasonable diligence

Question 42.
In case of a company under liquidation, and sale is made by the Receiver or Liquidator of the company ___________.
(a) Company retains title in goods
(b) Buyer gets a good title to goods
(c) Receiver/ Liquidator gets a goods title to goods
(d) There is no sale at all
(b) Buyer gets a good title to goods

Question 43.
When the seller causes a change in the possession of goods without any change in their actual and visible custody, it is a case of ___________.
(a) Actual Delivery
(b) Constructive Delivery
(c) Symbolical Delivery
(d) Forward Delivery
(b) Constructive Delivery

Question 44.
Where the seller is bound to send the goods to the buyer as per the agreement, and there is no specific time limit goods shall be delivered within ___________.
(a) A suitable time
(b) A minimum time
(d) A reasonable time
(d) A reasonable time

Question 45.
In case of excess delivery, i.e. more than the contracted quantity, the Buyer can ___________.
(a) Reject in full
(b) Accept the contract quantity and reject the excess
(c) Accept the whole
(d) Either (a) or (b) or (c)
(d) Either (a) or (b) or (c)

Question 46.
Where the seller fails to give notice to the buyer u/s 39(3), the risk during sea-transit lies with the ___________.
(b) Seller
(c) Carries
(d) Insurer
(b) Seller

Question 47.
Unless otherwise agreed, where goods are delivered to buyer and he refuses to accept them (having the right to do so), the buyer is not bound to return them to the seller.
(a) True
(b) Partly True
(c) False
(d) None of the above
(a) True

Question 48.
Even if a substantial portion of the price is paid and only a small balance is pending, the seller is still regarded as an unpaid seller.
(a) True
(b) Partly True
(c) False
(d) None of the above
(a) True

Question 49.
The right of lien is available to the unpaid seller only when ___________.
(a) he is not in possession of the goods
(b) he is in possession of the goods
(c) he has delivered the goods to the carrier/transport
(d) he has delivered the goods to the buyer
(b) he is in possession of the goods

Question 50.
Once possession is lost, right of lien of the unpaid seller is also lost. This statement is ___________.
(a) True
(b) Partly True
(c) False
(d) None of the above
(a) True

Question 51.
Right of stoppage in transit can be exercised by the unpaid seller, where the buyer ___________.
(a) Is solvent
(b) Becomes insolvent
(c) Either (a) or (b)
(d) Neither (a) nor (b)
(b) Becomes insolvent

Question 52.
Goods – in – transit can be stopped for ___________.
(a) Price
(b) Any other expenses, e.g. Godown charges, Interest, etc.
(c) Both (a) and (b)
(d) Either (a) or (b)
(a) Price

Question 53.
If no notice is given to the original buyer of the intention to re-sell, the unpaid seller ___________.
(a) Cannot claim any damages
(b) Has to pay to the original buyer, the profits, if any, on re-sale
(c) Either (a) or (b)
(d) Both (a) and (b)
(a) Cannot claim any damages

Question 54.
Generally, where the buyer has paid the price and seller refuses to deliver the goods, buyer can sue the seller for ___________.
(a) Specific performance of the contract
(b) Delayed delivery of goods
(c) Refund of price already paid
(d) Non – acceptance of goods
(c) Refund of price already paid

Question 55.
In the case of ……………… the sale may be notified to be subject to a reserve or upset price.
(a) Sale by description
(b) Sale by auction
(c) Sale by sample
(d) Sale by estoppel
(b) Sale by auction

Question 56.
The main object of a contract of sale is-
(a) Transfer of possession at goods
(b) Transfer of property in goods from seller to buyer
(c) Delivery of goods
(b) Transfer of property in goods from seller to buyer

Question 57.
Following is not the right of an unpaid seller against the goods:
(a) Lien
(b) Right of resale
(c) Right of stoppage
(d) Claim damages
(d) Claim damages

Question 58.
Sales of Goods Act is a to contract act.
(a) Competent
(b) Substitute
(c) Complimentary
(d) All of these
(c) Complimentary

Question 59.
Which of the following is/are an essential elements of a valid contract that must be present in a Contract of Sale.
(a) Bilateral Contract
(b) Transfer of Property
(c) Money Consideration
(d) All of the above
(d) All of the above

Question 60.
An agreement to sale is a/an contract while a sale is a/an ………………… contract
(a) Valid; legal
(b) Executory; valid
(c) Executory; executed
(d) None of the above
(c) Executory; executed

Question 61.
Delivery is the ………………. transfer of possession from one person to another
(a) Property
(b) Voluntary
(c) Goods
(d) Involuntary
(b) Voluntary

Question 62.
If the Goods are to be delivered at a place other than where they are, the risk of deterioration in transit will unless otherwise agreed be borne by the ……………….
(b) Seller
(c) Transporter
(d) (a) & (b) both

Question 63.
In the right of lien, the possession is retained by …………………
(a) Paid seller
(c) Unpaid seller
(d) None of the above
(c) Unpaid seller

Question 64.
Unenforceable agreements and illegal agreements means one and the same thing.
(a) True
(b) False
(c) Partly True
(d) None of the above
(b) False

Question 65.
The relation between a doctor and a patient is fiduciary in nature.
(a) True
(b) False
(c) Partly True
(d) Partly False
(a) True

Question 66.
In sale by auction, goods are offered to be taken by ___________.
(b) Bidders
(c) Public
(d) Sellers
(b) Bidders

Question 67.
Acceptance of the goods by the buyer takes place when the buyer ___________.
(a) Intimates to the seller that he has accepted the goods.
(b) Retains the goods
(c) Does any act on the goods which is inconsistent
(d) All of the above
(d) All of the above

Question 68.
A document signed by a carrier and issued to consignor that provides evidence for the receipt of goods for shipment to a specified designation and purpose is known as _____________.
(a) Transporter’s receipt
(c) Carrier document
(d) None of the above

Question 69.
…………….. takes place when the person takes possession of the goods on behalf of and at the disposal of the buyer.
(a) Physical delivery
(b) Simple delivery
(c) Encumbrance delivery
(d) Constructive delivery
(d) Constructive delivery

Question 70.
………….. precludes a person from ascertaining something contrary to what is implied by his or her previous actions or statement or by a previous judicial determination concerning that person.
(a) Voluntary
(b) Estoppel
(c) Both (a) & (b)
(d) None of the above
(b) Estoppel

Question 71.
If the stipulation forms the very basis of the contract or is essential to the main purpose of contract, it is ___________.
(a) Guarantee
(b) Warrantee
(c) Encumbrance
(d) Condition
(d) Condition

Question 72.
Goods which are either owned or possessed by the seller at the time of contract—
(a) Specific Goods
(b) Contingent Goods
(c) Generic Goods
(d) Existing Goods
(d) Existing Goods

Question 73.
Goods to be manufactured or acquired by the seller after making the contract of sale ___________.
(a) Contingent Goods
(b) Future Goods
(c) Existing Goods
(d) None of the above
(b) Future Goods

Question 74.
Which of the following is not an implied condition in a contract of sale ___________.
(a) Condition as to title
(b) Condition as to description
(c) Condition as to freedom from encumbrance
(d) Condition as to sample
(c) Condition as to freedom from encumbrance

Question 75.
The condition and warranties may be in the form of ___________.
(a) Express
(b) Implied
(c) Either (a) or (b)
(d) None of the above
(c) Either (a) or (b)

Question 76.
An unpaid seller is having rights against ___________.
(a) Goods only
(d) None of the above

Question 77.
The doctrine of Caveat Emptor does not apply when ___________.
(a) The goods are bought by sample
(b) The goods are bought by sample as well as description
(c) The goods are purchased under its brand name
(d) All of the above
(d) All of the above

Question 78.
The essence of a right of lien is to ___________.
(a) Deliver the goods
(b) Retain the goods
(c) Regain the possession
(d) None of the above
(b) Retain the goods

Question 79.
Seller has right of resale where ___________.
(a) Goods are perishable
(b) Seller has reserved such right
(c) Seller gives notice
(d) All of these
(d) All of these

Question 80.
The Goods are at risk of a party who has the ___________.
(a) Ownership of goods
(b) Possession of goods
(c) Custody of goods
(d) Both (b) and (c)
(a) Ownership of goods

Question 81.
The position of the hirer is that of a ___________.
(a) Bailor
(b) Bailee
(c) Seller
(b) Bailee

Question 82.
Under this contract, it is the seller’s duty to put the goods on board at his own expenses ___________.
(a) Free on board
(b) Sales of Goods Act, 1930
(c) Contract Act 1872
(d) Free on ship
(a) Free on board

Question 83.
A finder of goods has the power to sell the goods to give good title to the buyer, if the owner of the goods cannot be found with ___________.
(a) Ordinary diligence
(b) Reasonable diligence
(c) Due diligence
(d) Lack of diligence
(b) Reasonable diligence

Question 84.
The main object of contract of sale is ___________.
(a) Payment of price
(b) Delivery of goods
(c) Transfer of possession of goods
(d) Transfer of property
(c) Transfer of possession of goods

Question 85.
A breach of warranty can be treated as a breach of condition.
(a) True
(b) False
(c) Partly True
(d) Either True or False
(b) False

Question 86.
Goods perishing after agreement to sell ___________.
(a) Agreement becomes invoidable
(b) Agreement becomes void
(c) Agreement becomes contract
(d) None of the above
(b) Agreement becomes void

Question 87.
In sale, consideration is the price in terms of ___________.
(a) Money
(b) Non-gratuitous
(c) Gratuitous
(d) None of the above
(a) Money

Question 88.
When goods are exchanged for goods, it is a ___________.
(a) Sale
(b) Agreement to sale
(c) Barter
(d) Bailment
(c) Barter

Question 89.
An agreement to sell is ___________.
(a) Executory contract
(b) Executed contract
(c) Both (a) and (b)
(d) None of the above
(a) Executory contract

Question 90.
When the contract of sale is executed, the loss of goods destroyed by fire is to be borne by ___________.
(a) The buyer only when he has the goods in his custody
(b) Seller
(c) Both by the buyer and the seller
(d) The buyer even if he does not have the custody of the goods
(d) The buyer even if he does not have the custody of the goods

Question 91.
Which one of the following statement is not true in context to a hire purchase agreement?
(a) The hirer is merely a bailee until the final payment
(b) There is an agreement to buy the goods at the end of the period
(c) The owner can take back the goods if the buyer becomes insolvent
(d) The ownership remains vested with the bailer
(b) There is an agreement to buy the goods at the end of the period

Question 92.
Where a contract states that the price is to be fixed by a third party and such party fails to do so, then ___________.
(a) The contract becomes void
(b) The price is determined by both the parties
(c) The contract is voidable at the option of the parties
(d) None of the above
(a) The contract becomes void

Question 93.
Mr. A purchased a certain pigs from Mr. B without any warranty. After sometime the pigs died due to fever, then ___________.
(a) Mr. A can claim back his money from Mr. B
(b) Mr. A can ask Mr. B to supply new pigs
(c) Mr. A can sue Mr. B on account of fraud
(d) Mr. B is not liable to Mr. A as per the principle of Caveat Emptor
(d) Mr. B is not liable to Mr. A as per the principle of Caveat Emptor

Question 94.
Mr. A finds a ring which belongs to Mr. C and sells it to Mr. B. Later on Mr. C demands the ring from B, then ___________.
(a) B is not liable to return the ring
(b) C can only sue Mr. A for damages and cannot demand the ring from Mr. B
(c) Mr. B shall return the ring to Mr. C even though he is a bona-fide purchaser
(d) None of the above
(c) Mr. B shall return the ring to Mr. C even though he is a bona-fide purchaser

Question 95.
Where the seller after selling the goods holds the goods as a bailee, then it is called as ___________.
(a) Symbolic delivery
(b) Bailed delivery
(c) Nominal delivery
(c) Constructive delivery
(c) Nominal delivery

Question 96.
Where the seller gives the buyer the bills of lading then, it is called as ___________.
(a) Symbolic delivery
(b) Constructive delivery
(c) Actual delivery
(d) None of the above
(a) Symbolic delivery

Question 97.
Which of the following rights is not a right of an unpaid seller?
(a) Right of retention
(b) Right of stoppage
(c) Right of resale
(d) Right to sell the property of the buyer
(d) Right to sell the property of the buyer

Question 98.
The term C.I.F. stands for ___________.
(a) Cartage Inwards and Freight
(b) Corporate Identity Form
(c) Cartage Insurance and Freight
(d) Cost Insurance and Freight
(d) Cost Insurance and Freight

Question 99.
The contract in which the seller is bound to arrange the shipment of goods is called as ___________.
(a) Ex-ship contract
(b) Cum-ship contract
(c) Pre-shipment contract
(d) Post shipment contract
(a) Ex-ship contract

Question 100.
In an auction sale, if the seller makes use of pretended bidding to raise the price, then the ___________.
(a) Sale is voidable at the option of the seller
(b) Sale is void
(c) Sale is voidable at the option of the buyer
(d) The buyer is not required to pay the excess amount charged by the seller
(c) Sale is voidable at the option of the buyer

Question 101.
Which of the following is an implied condition under a sale by description?
(a) Goods must correspond with the description
(b) Goods must be of merchantable quality
(c) Condition as to wholesomeness
(d) All of the above
(d) All of the above

Question 102.
Which of the following is an implied condition under a sale by sample?
(a) The bulk shall correspond with the sample
(b) Implied condition of merchantability
(c) Both (a) and (b)
(d) Neither (a) nor (b)
(c) Both (a) and (b)

Question 103.
Subject to the contract to the contrary, which of the following is NOT an implied warranty as per the Sale of Goods Act, 1930?
(a) Warranty as to resale of the goods
(b) Warranty implied by the custom as usage of trade
(c) Warranty to disclose dangerous nature of goods
(d) Warranty as to freedom from encumbrances
(a) Warranty as to resale of the goods

Question 104.
As per Sec. 45 of the Sale of Goods Act, 1930 an unpaid seller is a person, who ___________.
(a) Who has not been paid the whole price
(b) A person who received a bill of exchange which was dishonoured
(c) Both (a) and (b)
(d) Neither (a) nor (b)
(c) Both (a) and (b)

Question 105.
The right of an unpaid seller to keep the possession of the goods and refuse to deliver the goods to the buyer is called ___________.
(a) Right of refusal
(b) Right to resale
(c) Right of lien
(d) None of the above
(c) Right of lien

Question 106.
The right of lien will not be lost in which of the following cases ___________.
(a) By waiver of lien by the unpaid seller
(b) When the goods are delivered to the carrier and the seller reserves the right of disposal of goods
(c) When the buyer lav/fully obtains the possession of the goods
(d) None of the above
(b) When the goods are delivered to the carrier and the seller reserves the right of disposal of goods

Question 107.
In which of the following case, the transit will not come to an end?
(a) When the buyer obtains the delivery before they arrive at the destination
(b) Where the carrier acknowledges that he holds the goods on the behalf of buyer
(c) When the carrier wrongfully refuses to deliver the goods
(d) When the goods are rejected by the buyer and the carrier holds them
(d) When the goods are rejected by the buyer and the carrier holds them

Question 108.
The right to stop the goods in transit can be exercised by the unpaid seller by ___________.
(a) Taking actual possession of the goods
(b) Giving notice of the sellers claim to the carrier
(c) Both (a) and (b)
(d) Neither (a) nor (b)
(c) Both (a) and (b)

Question 109.
Right to lien can be exercised by the seller ___________.
(a) On non-payment of the sale price
(b) On breach of warranty
(c) On anticipatory breach
(d) All of the above Answer:
(a) On non-payment of the sale price

Question 110.
The doctrine of ‘Caveat Emptor’ does not apply when :
(a) The goods are bought by sample
(b) The goods are bought by description from a seller who deals in goods of that description
(c) The goods are purchased under its brand name
(d) All of the above.
(d) The doctrine of ‘Caveat Emptor’ means ‘let the buyer beware’.
Following are the cases when doctrine of ‘Caveat Emptor’ does not apply:

• When the seller makes a false representation.
• When the goods are purchased under its patent name or brand name.
• When the goods are bought by description from a seller who deals in goods of that description there is an implied condition that the goods shall be of merchantable quality.
• When the goods are bought by sample.
• When the goods are sold by description.

Thus, the answer is all of the above.

Question 111.
The actual sale of future goods is:
(a) Never possible
(b) Possible
(c) Illegal
(d) Only a myth.
(b) Future goods means goods to be manufactured or produced or acquired by the seller after making the contract of sale. Thus, under the sale of goods Act, a contract of sale of future goods is possible.

Question 112.
Finder of lost goods is in a position of:
(a) Bailor
(b) Owner
(c) Pawner
(d) Bailee.
(d) In contract of bailment the bailee must return the goods to the owner or bailor.

Question 113.
The goods which are either owned or possessed by the seller at the time of the contract are known as:
(a) Generic goods
(b) Future goods
(c) Existing goods
(d) Contingent goods.
(c) Such goods as are in existence at the time of the contract of sale i.e. those owned or possessed by the seller is known as Existing goods.

Question 114.
A stipulation which is collateral to the main purpose of the contract and provides the buyer only right to claim the damages is known as:
(a) Condition
(b) Guarantee
(c) Warrantee
(d) Agreement to sell.
(c) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives right to repudiate the contract and claim damages is known as warrantee.

Question 115.
In case of an agreement to sell, ownership to goods remains with:
(b) The seller
(c) Both the buyer and the seller
(d) None of the above.
(b) In the sale of goods, the property is transferred from seller to the buyer immediately. But in an agreement to sell the ownership of the goods is not transferred immediately. Thus, an agreement to sell, ownership to goods remains with the seller.

Question 116.
In case of sale of goods, the title of goods remains with:
(a) Seller
(c) Hirer
(d) None of the above.
(b) In Case of sale of goods, the property is transferred from seller to the buyer. Therefore in case of sale of goods the title of goods remains with buyer.

Question 117.
A contract of sale of goods under Section 4 of the Sale of Goods Act, 1930 comprises of:
(a) Executory contract of sale
(b) Executed contract of sale
(c) Both executory and executed contracts of sale
(d) None of the above.
(c) According to Section 4, a contract of sale of goods is a contract whereby the seller:

• transfers or agrees to transfer the property in goods.
• for a money consideration called the price.

It shows from the above that “contract of sale” includes both a sale (Executed contract of sale) and an agreement to sell (Executory contract of sale).

Question 118.
An unpaid seller of goods has a right:
(b) Against both the buyer and the goods
(c) Against the goods only
(d) None of the above.
(b) An unpaid seller of goods has a right against the buyer personally (rights in personam) as well as against the goods (rights in rem).

Question 119.
Which of the following gives a right to claim damages for its breach?
(a) Conditions
(b) Warranties
(c) Both (A) and (B) above
(d) None of the above.
(c) “A condition is a stipulation essential to the main purpose of the contract, the breach of which gives a right to treat the contract as repudiated and claim damages.” “A warranty is a stipulation collateral to the-main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated.” Thus, both condition and warranty gives a right to claim damages for breach.

Question 120.
As per the Sale of Goods Act, 1930, ‘goods include,
I Existing goods
II. Future goods
III. Contingent goods
IV. Actionable claims
Correct option is –
(a) I, II and III
(b) II, III and IV
(c) I, II and IV
(d) I, II, III and IV
(a) As per Sec. 2(7) of Sales of Goods Act, goods mean every kind of movable property other than actionable claims and money, and includes stock and shares, growing crops, grass and things attached to contract of sale.

Moreover, goods are of following types –

• Existing Goods
• Specific Goods
• Ascertained Goods
• Unascertained Goods
• Future Goods
• Contingent Goods.

Thus, goods include I, II and III point except actionable claim. So, the answer is I, II and III.

Question 121.
Which of the following maxim means ‘No one can pass a better title than he himself has’?
(a) Caveat emptor
(b) Nemo dat quod non habet
(c) Res integra
(d) Sine die.
(b) As per Section 27 of Sales of Goods Act, “ where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than that of the seller.”

This rule is expressed is Latin maxim, “Nemo dat quod non habet” which means that no one can give what he has not got.

Question 122.
The doctrine of “Caveat Emptor” implies ________.
(b) Let the seller beware
(c) Let the buyer be brave
(d) Let the seller be brave
(a) The doctrine of “caveat emptor” means ‘let the buyer beware’ i.e. buyer purchases the goods at his own risks.

Hence, the doctrine of “caveat emptor” means let the buyer beware.

Question 123.
When does a seller becomes an unpaid seller?
(a) When half of the price has not been paid.
(b) When the full amount has not been paid.
(c) When 25% amount has not been paid.
(d) When 75% amount has not been paid.
(b) As per Section 45 of Sale of Goods Act, seller is deemed to be an unpaid seller when:

• Whole of the price has not been paid or tendered and seller had an immediate right of action for the price.
• A bill of exchange or any other negotiable instrument was given as payment but the same has been dishonoured, unless this payment was absolute and not a conditional payment.

Hence, option (b) is correct.

Question 124.
Which of the following is conducted under Sales of Goods Act?
(a) Goods
(b) Contract
(c) Sales
(d) Partnership
(c) The Sale of Goods Act, 1930 deals with the ‘sale’ but not with ‘mortgage’ or ‘pledge’ Thus, it can be sold that only sales is conducted under Sales of Goods Act.

Question 125.
Which is not an implied condition?
(a) Condition as to title
(b) Condition as to wholesomeness
(c) Condition as to Encumbrances
(d) Condition as to sale by sample
(c) Implied Conditions are as follows:

• Condition as to title
• Sale by description
• Sale by sample
• Sale by sample as well as by description
• Condition as to quality or fitness
• Condition as to wholesomeness

Thus, Condition as to Encumbrance is not an implied condition.

Question 126.
Seller means a person who:
(a) Sells or agrees to sell goods
(b) Has sold goods
(c) Sells goods
(d) Agrees to sell goods.
(a) According to Sec. 4, a contract of sale of goods is a contract whereby the seller;

• transfers or agrees to transfer the property in goods.
• for a money consideration called the price.

Question 127.
The unpaid seller may exercise his right of stoppage of goods in transit:
(a) By taking actual possession of the goods .
(b) By giving notice of his claim to the carrier
(c) By giving notice of his claim to the bailee in whose possession the goods are
(d) All applicable.
(d) The right to stop in transit may be exercised by the unpaid seller by taking actual possession of the goods or by giving notice of the seller’s claim to the carrier or other person having control of the goods. So, option d is the correct answer, i.e. All applicable.

Question 128.
Right of stoppage can be exercised when:
(a) When seller has not been paid the amount of goods and service
(b) When the buyer has becomes insolvent.
(c) Both of the above
(d) None of the above
(c) The right of stoppage in transit is exercisable by the seller only if the following conditions are fulfilled –

• seller must be unpaid
• must have parted with the possession of goods
• The goods must be in transit
• The Buyer must have become insolvent
• The right is subject to provision of the Act.

Thus, it contain both (a) & (b) condition. Hence, option c is Correct.

Question 129.
Right of lien is exercised for:
(a) Retaining the possession
(b) Regaining the possession
(c) Both (a) and (b)
(d) Stoppage in transit
(a) The word ‘lien’ means a right to retain possession. An unpaid seller, who is in the possession of the goods, is entitled to retain them until payment or tender of the price.

Question 130.
A seller transfers possession of the goods already being sold in good faith:
(a) Valid
(b) Voidable
(c) Void
(d) Invalid
(a) Where a seller, after having sold the goods, continues or is in possession of the goods or of the documents of title of goods again sells them to a person who buys in good faith gets good title and makes the sale valid.

Question 131.
Which of the following is not a mercantile agent?
(a) Factor
(b) Salesman
(c) Auctioneer
(d) Brokers
(b) Salesman is not a mercantile agent as in the customary course of business as such agent authority either to sell goods or consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.

Question 132.
Under what circumstances the unpaid seller can exercise right of resale:
(a) When the goods are very expensive
(b) When the buyer has not paid in terms of the contract does not specify about resale
(c) When he gives notice to the buyer of his intention to resale and the buyer does not within reasonable time pay the price
(d) When the buyer does not pay on demand.
(c) The unpaid seller can exercise right of resale when he gives notice to the buyer of his intension to resale and the buyer does not within reasonable time pay the price. It is in case of exercise of right of lien or stoppage in transit.

Question 133.
In a hire purchase contract the hirer:
(a) Is not given the possession of goods
(c) Has an option to buy the goods
(d) Must return the goods
(c) In a hire purchase contract, it gives the hirer an option to purchase the goods at the end of the hiring period. Consequently, until the final payment, the hirer is merely a bailee of goods and ownership t remain vested in the bailor.

Question 134.
Actual sale of future good is:
(a) Illegal
(b) A myth
(c) Impossible
(d) Possible through an agreement to sell
(d) Future goods means goods to be manufactured or produced or acquired by the seller after making the contract of sale, as contract of sale covers saie and agreement to sell both, hence option (d) is correct.

Question 135.
The Sale of Goods Act, 1930 deals with:
(a) Pledge
(b) Guarantee
(c) Mortgage
(d) Sale
(d) The Sale of Goods Act, 1930 deals with Sale and Agreement to sell.

Question 136.
In an agreement to sell, the seller in case of damages to good ________.
(a) Can sue the buyer for injunction
(b) Has no recourse
(c) Can sue for price
(d) Can sue for damages
(b) In an agreement to sell, the seller in case of damage to goods has no recourse as, he is the owner who have to bear the loss and who cannot sue for damages and in this case the goods are in possession of seller and the ownership also lies with the seller.

Question 137.
Which of the following is not a mercantile agent?
(a) Brokers
(b) Salesman
(c) Auctioneers
(d) Factor
(d) The term Mercantile agent includes any person who is authorised to sell on behalf or seller. Eg: Broker, Salesman, Auctioneers.

Question 138.
Contract of sale means:
(a) A contract between one person to another for exchange of property in goods
(b) Contract between two persons only
(c) A contract between buyer and seller for exchange of property in goods
(d) A contract between buyer and seller intending to transfer property in goods for price
(d) A contract of sale of Goods means contract between buyer and seller who agree to transfer the property in goods to the buyer for a price. In this the ownership is immediately transferred to buyer even though possession of goods is with seller. Hence, option (d) is correct.

Question 139.
An auction sale is complete on the ________.
(a) Fall of hammer
(b) Delivery of goods .
(c) On the bid being made
(d) Payment of price
(a) It is a mode of selling property by inviting bids publically and the property is sold to the highest bidder. Under this sale is complete when the auctioneer announces its completion by the fall of hammer or in another customary manner.

Question 140.
Which is not true in case of a finder of goods?
(a) He can sell the goods if the goods are of perishable nature
(b) He cannot sell the goods in any condition
(c) He can retain the goods till the owner is found
(d) If the owner is found, but the owner refuses to pay lawful charges, then he can retain the goods until payment is received.
(b) The statement (b) is incorrect because the finder of cost good can sell the goods if they are of perishable nature.

Question 141.
The difference between sales and cost of goods sold is:
(a) Gross margin
(b) Principal
(c) Revenue
(d) Income
(a) Gross Margin = Sales – Cost of Goods Sold

Question 142.
Actual sale of future goods is:
(a) Possible through an agreement to sell
(b) Illegal
(c) Impossible
(d) A myth
(a) Agreement to sell a commodity in future. Thus, we can conclude that actual sale of future goods is possible through agreement to sell.

Question 143.
The unpaid seller may exercise his right to stoppage of goods in transit:
(a) By taking actual possession of the goods
(b) By giving notice of his claim to the carrier
(c) By giving notice of his claim to the bailee in whose possession the goods are
(d) All are applicable
(d) The unpaid seller may exercise right of lien on goods in transit by:

• taking Actual Possession
• giving notice of his claim to carrier
• giving notice to Bailee who is in possession of goods.

Question 144.
The Phrase Quantum meruit literally means:
(a) As much as earned or reasonable remuneration
(b) The fact in itself
(c) A contract for sale
(d) As much as is gained.
(a) Breach of Contract done in many ways and their remedies can claim also in many ways like:

• Injunction
• Quantum Meruit
• Damages
• Specific Performance

‘Quantum Meruit’ is a latin Phrase which means-‘as much as merited/ earned’ or ‘reasonable remuneration;

Question 145.
A Contract of sale of goods under Section 4 of the Sale of Goods Act, 1930. Comprises of ________.
(a) Executory contract of sale
(b) Executed contract of sale
(c) Both executory and executed contracts of sale
(d) None of the Above.
(c) A contract of Sale of Goods Act, 1930 comprise of both ‘Executed and Executory Contracts of Sale’.
Executed Contract of Sale means when both parties performed their obligations at the same time. Example. Cash Sales. Executory Contract means when one party performed and other party not or it can be possible that both parties do not perform their . obligations in present but at future date.

Question 146.
An unpaid seller of goods has a right ________.
(b) Against both the buyer and the goods
(c) Against the goods only
(d) None of the above.
(b) Unpaid Seller of Goods has right against the both the Goods and the Seller.

Question 147.
(a) Caveat Emptor
(b) Caveat Vendor
(c) Both (i) & (ii)
(d) None
(a) Selling follow the rule of Caveat Emptor which suggest let the buyer be ware.

Question 148.
Caveat Vendor is related to:
(a) Selling
(b) Marketing
(c) Both
(d) None.
(b) Caveat Vendor is related to Market, suggest let the seller be ware.

Question 149.
Which of these never treated as money?
(a) Gold Rare coins
(b) Currency coins
(c) Negotiable notes and bills
(d) Tender money
(a) Gold rare coins are never be treated as money.

Question 150.
Agreement to sell; ownership is of:
(b) Seller
(c) Buyer if agreed by both the parties
(d) None of these
(c) In agreement to sell ownership is always possessed by seller, if no agreement in contrary is made.

Question 151.
In case of agreement to sell, liability of seller in case of breach of agreement:
(a) Seller has to pay damage, if found guilty
(b) If breached by buyer, Nominal sum of goods deposited would be seize, also claim damages accordingly
(c) (a) and (b) both
(d) None of these
(c) In case of agreement to sell, breach of contract:

• breach by seller: buyer can claim damages
• breach by buyer: seize the money received for goods and claim damages (if any)

Question 152.
As per the sales of Goods Act, 1930, ‘goods’ include:
I. Existing goods
II. Future goods
III. Contingent goods
IV. Actionable claims Correct option is:
(a) I, II and III
(b) II, III and IV
(c) I, II and IV
(d) I, II, III and IV
(a) As per Section 2(7) of Sales of Goods Act, goods means every kind of movable property other than actionable claims and money and includes stock and shares, growing crops, grass and things attached to contract of sale. Moreover, goods are of following types:

• Existing goods
• Specific goods
• Ascertained goods
• Unascertained goods
• Future goods
• Contingent goods.

Thus, goods include I, II and III point except actionable claims. So the answer is option (a).

Question 153.
Which of the following maxim means “No One can pass a better title than . he himself has”?
(a) Caveat emptor
(b) Nemo dat quod non habet
(c) Res integra
(d) Sine die.
(b) “Nemo det Quod non Habet” means no one can pass a better title than he himself have.

Question 154.
Which of the following gives a right to claim damages for its breach?
(a) Conditions
(b) Warranties
(c) Both (a) and (b) above
(d) None of the above
(c) “A condition is a stipulation essential to the main purpose of contract, the breach of which given right to treat the contract as repudiated and claim damages”. “A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to claim for damages but not a right to reject the goods and treat the contract as repudiated”.

Thus, option (c) is correct.

Question 155.
As per Sales of Goods Act, 1930, a sale means:
(a) Sale and Agreement to Sale
(b) Only Cash Sale
(c) Only Credit Sale
(d) (b) and (c) both
(a) As per Section 4(1) of the Sales of Goods Act, 1930,” contract of sales of goods is a contract whereby the seller transfers or agrees 2. to transfer the property in goods to the buyer for a price”. Thus sale means sale and agreement to sell.

Question 156.
In Sales of Goods Act, what is involved?
(a) Sales
(b) Mortgage
(c) Pledge
(d) Indemnity
(a) The law relating to sale of goods is contained in Sale of Goods Act, 1930. According to section 4, a contract of sale of goods is a contract whereby, the seller transfers or agrees to transfer the property in goods to the buyer, for the money consideration called the price.

Question 157.
Unpaid a seller can exercise ________.
(a) Stop page in transit
(b) Lien
(c) Right of resale
(d) All of above.
(d) The Sales of Goods Act, 1930 provides, the unpaid seller the following rights against the goods:

• A lien or right of retention
• The right of stoppage in transit
• The right of resale.
• The right to with old delivery.

Question 158.
Type of Lien:
(a) General and Particular
(b) Particular and Specific
(c) Specific or Particular
(d) General of Specific
(a) The right of lien is exercised by the unpaid seller by keeping the goods in possession and refuse to deliver them to the buyer until the fulfillment of or tender of price. The right of lien is of two types:

• General lien
• Particular lien

Question 159.
The Sale of Goods Act, 1930 contains:
(a) Services only
(b) Manufacturing goods only
(c) All movable goods
(d) None of Above
(a) The Sales of Goods Act, 1930 provides in Section 4, a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in form of goods.to the buyer for money consideration called price. There, the goods include all kind of movable property other than actionable claims and money.

## Elements of Company Law – II – CS Foundation Business Law Notes

Authorities under the Companies Act, 2013:

1. Registrar of Company (RoC)
2. Official Liquidator
3. Regional Director
4. National Company Law Tribunal (NCLT)
5. National Company. Law Appellate Tribunal (NCLAT)

Number of Directors:

 Company Minimum Maximum Private 2 15 Public 3 15 One Person Company 1 1

Women Director – Conditions for Women Director:
Women director is described under Section 149(1) of Companies Act, 2013.

Introduction:

1. Activities of companies are carried out by persons known as directors.
2. Meetings are the set pattern of process according to which the company’s work.
3. Company Secretary is one of the officers responsible for the legal compliance of the company.
4. Company Secretary is the bridge between Board and shareholders.

Meaning of Directors:

1. Company is an artificial legal person, thus cannot act on its own.
2. Directors are the persons who are entrusted with the charge of management of company’s affairs.
3. The Directors are the brain of the company.
4. They occupy the pivotal position in the structure of the company.
5. They are collectively known as Board of Directors or Board.
6. The position of BOD is that of trust as the board is entrusted with the responsibility to act in the best interests of the company.
7. The actions and deeds of directors individually functioning cannot bind the company, unless a particular director has been specifically authorised by a Board resolution to discharge certain responsibilities on behalf of the company.
8. As per Section 2(10), “BOD” or “Board” in relation to a company, means the collective body of the directors of the company.
9. These decisions are taken by directors at the meetings known as Board Meetings.
10. Decisions at meetings are taken by majority votes.
11. In case of equal number of votes, chairman has the casting votes.

As per Companies Act, 2013:

• Every company shall hold first Board Meeting within 30 days of the date of Incorporation.
• Every company to hold a minimum number of 4 Board Meetings every year in such a way that not more than 120 days shall intervene between 2 consecutive Board meetings.

Definition of Director:

• As ppr Section 2(34) of Companies Act, 2013, states ‘director’ means a director appointed to a Board of a company.
• He is appointed to perform the duties and functions of director of a company in accordance with the provisions of the Companies Act, 2013.

Number of Directorship: (Section 165):

• Maximum no. of directorships, including any alternate directorship a person can hold is 20.
• It has come with a rider that number of directorships in public companies/ private companies that are either holding or subsidiary company of a public Company shall be limited to 10.

Residence of Director in India (Section 149 (3)) – Every company has atleast one director, who has stayed in India for a total period of not less than 182 days in the previous calendar year.

Independent Directors:

• Section 2 (47) of the Companies Act, 2013, prescribed that “Independent Director” means an independent director referred to in sub – section (5) of Section 149 of the Act.
• It means a director other than a MD or whole-time director or nominee director who does not have any material or pecuniary relationship with the company/directors.

Under Section 149(6), following criteria have been laid down:
(i) Who in the opinion of the Board, is a person of integrity and possesses relevant industrial expertise and experience.

(ii) He must not have any material or pecuniary relationship during two immediately preceding financial years or during the current financial year either with company or its promoters/directors/holding/ subsidiary/associate company.

(iii) He must possess such other qualifications prescribed in Rule 5 of Companies (Appointment and Qualification of Directors) Rules, 2014.

(iv) He should not be a promoter or related to promoter of company or its holding, subsidiary or associate company.

(v) Relatives of such person should not have had any pecuniary relationship with company or its subsidiaries, amounting to:

• 2% or more of its gross turnover or total income, or
• ₹ 50 Lakh or such higher amount as prescribed whichever is less, during immediately two preceding financial years or in current financial year.

(vi) He must not either directly or any of his relatives
1. hold or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years, immediately preceding financial year in which he is proposed to be appointed.

2. is or has been an employee or proprietor or a partner in any of the three financial years immediately preceing the financial year in which he is proposed to be appointed, of:

• a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
• any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to 10% or more of the gross turnover of such firm.

3. is a Chief Executive or Director by whatever name called of any non-profit organisation that receives 25% or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds 2% or more of the . total voting power of the company, then also he is not eligible for office of independent director.

4. holds together with his relatives two percent or more of the total voting power of the company.

5. Every listed public company shall have at least 1/3rd of total number of directors as independent directors. (Fraction is to be rounded off to one)

6. CG has prescribed that public companies with:

• paid up capital of ₹ 10 crore or more, or
• turnover of ₹ 100 crore or more or
• In aggregate outstanding loans/borrowings/debentures/deposits exceeding ? 50 crore or as on the last date at latest audited financial statements shall have at least 2 independent directors.

Any investment vacancy in the office of the independent director shall be filled by BOD

• within 3 months from date of such vacancy, or
• not later than immediate next Board meeting, whichever is later.

Independent Directors:
Conditions:

Directors Elected by Small Shareholders:

• As per Section 151, Every listed company may have one director elected by such Small Shareholders.
• “Small Shareholder” means a shareholder holding shares of nominal value of not more than ₹ 20,000 or such other sum as may be prescribed.

Amendment of Section 164 – In Section 164 of the Principal Act,:
(i) in sub-section (2), the following proviso shall be inserted, namely : Provided that where a person is appointed a director of a company which is in default of clause (a) or clause (b), he shall not incur the disqualification for a period of six months from the date of his appointment;

(ii) in sub-section (3), for the proviso, the following proviso shall be inserted, namely : Provided that the disqualifications referred to in clause (d), (e) & (g) of sub-section (1) shall continue to apply even if the appeal or petition has been filed against the order of conviction or disqualification.

Who can be Appointed as a Director:

• Only individual can be appointed as a director.
• Companies Act has not prescribed any academic or professional qualifications for directors.
• Unless company’s Articles contain a provision regarding share qualification, a director need not be a member of company even.

Who Cannot be Appointed as a Director/Disqualifications:
1. As per Section 164 of Companies Act, 2013, a person cannot be appointed as a director of a company, if:

• he has been found by a competent Tribunal to be of unsound mind.
• he is an undischarged insolvent,
• he has applied to be adjudicated as an insolvent and his application is pending.
• he has been convicted by a Tribunal of any offence involving moral turpitude and sentenced in respect
• there of to imprisonment for not less than 6 months, and a period of 5 years has not elapsed from the date of expiry of the sentence.
• he has failed to pay any call on his shares in the company for 6 months from the date fixed for the payment.
• he has been disqualified by a court which empowers the court to restrain fraudulent persons from managing companies.
• he has not got the DIN
• he is already a director of a public company, which:
• has not filed the annual accounts and annual returns for any continuous 3 financial years, commencing on and after the first day of April 1999 or
• has failed to repay its deposits or interests thereon on due date or redeem its debentures on due date or pay dividend and such failure continues for 1 year or more.
• he has been convicted of the offence dealing with related party transaction under Section 188 of Companies Act, 2013 at any time during the last five years.

2. Such director shall be disqualified to be appointed or re-appointed as director of any other public company for 5 years from the date on which such public company in which he is a director above (a) and (b) have done.

3. CG may remove the disqualification incurred by any person by virtue of (iv) or (v) above.

4. A private company, may, by its Articles provide for additional disqualifications.

5. No body corporate, association or firm can be appointed as a director.

6. Thus, only individual can be appointed as a director.

7. No company can appoint or re-appoint any individual as a director unless he has been allotted a DIN-Director’s Identification Number under section 154.

Amendment of Section 153: “Provided that CG may prescribe any identification number which shall be treated as DIN for the purpose of this Act and in case any individual hold or acquire such identification number, the requirement of this section shall not apply or apply in such as may be prescribed”.

Number of Directors: [Section 149(1)]:

• Every public company shall have at least 3 directors.
• Private company should have at least 2 directors and one director in case of one person company.
Articles may prescribe the maximum and minimum number of directors.
• Increase in number of directors beyond the maximum permitted by articles has to be approved by passing SR, in general meeting provided the number exceeds 15.
• Approval of CG is not required even if number of directors exceed 15.
• Every listed company and every other public company having paid up capital of 100 crores or more or turnover of 300 crores or more as on the last date of latest audited financial statements, shall appoint at least one woman director.
• Every company shall have atleast one director who is resident of India, i.e. who has stayed in India for a total period of not less than . 82 days in previous calendar year.

Amendment of Section 149 : “Provided that in case of newly incorporated as the requirement under this sub-section shall apply proportionally at the end of the financial year in which it is incorporated”.

 Rotational Directors Non-Rotational 1. Rule : Atleast (2/3) directors should be rotational directors. 2. They are also known as temporary directors. 3. All (2/3) directors are not retire all at once. They are retire in proportion of (1/3). 4. Those directors are retired first who are admitted first. 1. Atleast (1/3) directors should be non-rotational directors. 2. They are also known as fixed directors. example: Mukesh Ambani

Note: When the directors are retiring from the post, their retirement can be cancelled by voting of members.

Appointment of Directors:

1. Every director shall be appointed by the company in general meeting.
2. Director Identification Number is compulsory for appointment of director, of a company.
3. Every person proposed to be appointed as a director shall furnish his DIN and a declaration that he is not disqualified to become a director under the Act.
4. A person appointed as a director shall on or before the appointment give his consent to hold the office
5. of director.

Their appointment can be dealt under following points:

1. Appointment of first directors
2. Appointment at general meeting
3. Appointment by Board of Directors

Appointment of first Directors:
(i) First directors of most of companies are named in their articles.

(ii) If articles do not provide, the subscribers to memorandum, who are individuals, shali be deemed to be first directors until the directors are duly appointed.

(iii) in case of one person company, an individual being a member shall be deemed to be its first director until the director(s) are duly appointed by the member in accordance with the provisions of Section 152 of the Companies Act, 2013.

Appointment at general meeting:
(i) As per Section 152, in case of public company or a private company which is a subsidiary of a public company:

• Unless the Articles provide for the retirement of all directors at every AGM, at least 2/3rd of the total number of directors must be persons whose period of office is liable to be determined by rotation and eligible to be reappointed at AGM.
• Out of rotational directors, 1/3 of such rotational directors shall retire at each Annual General Meeting (fraction nearest to 1).

(ii) Retiring directors shall be those who have been longest in office since their last appointment.

(iii) Vacancies caused are filled by the shareholders by appointment in same AGM by means of majority vote (Section 152)

(iv) The director appointed can either be the retiring director or some other person.

(v) If any person, other than retiring director, wishes to stand for directorship, he must signify his intention to dd so by giving 14 days notice to the company before the general meeting (Section 160)

(vi) If vacancy is not filled up and meeting has not expressly resolved not to fill the vacancy, meeting shall stand adjourned till the same day in next week, at the same time and place, or if that day is a national holiday till the next succeeding day, which is not a holiday, at the same time and place.

(vii) If at the adjourned meeting also, vacancy of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re appointed, unless:

• a resolution for the re-appointment of such director has been put and lost,
• he is not qualified or is disqualified for appointment,
• retiring director has expressed his unwillingness to be re-appointed,
• appointment of directors is to be voted individually, or –
• a resolution, ordinary or special, is required for his appointment or re-appointment.

Circular Resolution:
It is a letter in which the ‘consent’ of all the members are taken. Only ‘Yes’ and ‘No’ decisions are taken through ‘Circular Resolution’.

Note : Important decisions are hot taken through circular Resolution.

Appointment by Board of Directors:
(i) They have a power to appoint directors in 3 cases:

• Filling up the Casual Vacancy
• Alternate Directors

(ii) Additional Director [Section 161 (i)]:

• Board has such power only if authorised by its Articles
• Total Number of Director including these additional shall not exceed the Maximum Number fixed by the Articles
• They hold office-only upto the date of next AGM or the last date on which AGM should have been held, whichever is earlier.

(iii) Filling up the Casual Vacancy [Section 161(4)]:

• it means vacancy caused in the office of director appointed by shareholders in the genera! meeting and caused by death, resignation, insolvency or disqualification.
• The person appointed holds office for the entire period for which the person in whose place he was appointed would have held office.

(iv) Alternate Director [Section 161(2)]:

• Board has such power if authorised by Articles or a resolution has been passed by company in general meeting.
• He is appointed to act for a director during his absence for a period of not less than 3 months form the state in which meetings of the board are ordinary held.
• He shall vacate the office when the original director returns. Amendment of Section 161

In Section 161 of the Principal Act:
(i) in sub-section (2), after the words “alternate director ship for any other director in the company”, the words “or holding directorship in the same company” shall be inserted;

(ii) in sub-section (4):

• the words “in the case of public company”, shall be omitted.
• after the words “Meeting of the Board”, the words “which shall be subsequently approved by members in the immediate next general meeting” shall be inserted.

Duties of Director (Section 166):

• Exercise his duties with due and reasonable care, skill and diligence and exercise independent judgement.
• Not to assign his office and any assignment so made shall be void.
• Act in good faith in order to promote company’s objects for benefit of its members, and best interest of company, its employees, shareholders, community and environment protection.
• Not to involve in any situation in which he has a direct or indirect interest which conflict with company’s interests.
• Act in accordance with AOA of company.
• Not to achieve or attempt to achieve any undue gain or advantage, either to himself or his relatives, partners or associate. He will be liable to pay an amount equal to that gain to the company, if he is found guilty.
• If any director contravenes any of the above provision, he shall be punishable with fine from ₹ 1,00,000 to ₹ 5,00,000.

Power of Board of Directors (Section 179):
1. The BOD of a company shall be entitled to exercise all such powers and to do all such acts and things, as the company is authorised to exercise and do.

2. Exercise of power is subjected to various provisions of Companies Act, 2013, MOA, AOA and any regulations that are not inconsistent with them, made by the company at the general meeting.

3. Shareholders cannot interfere in the exercise of board’s power.

4. However, shareholders may restrict the powers of BOD by amending the Articles that too not retrospectively.

5. Relationship of BOD with the general meeting is more of federation than of subordinate and superior.

6. There are 2 limitations on powers of BOD:

• Being agents of the company, directors cannot act ultra virus the memorandum. Such acts will be void and ineffective.
• Articles limits the powers of BOD even when acting within the power of company. Such acts needs to be ratified by shareholders at general meeting, also directors will be liable to third parties for breach of warranty of authority.

7. In following cases, in the general meeting, the shareholders is competent to intervene and act in respect of matters delegated to BOD:

• Directors acting mala fide : Directors act for their own personal interests completely disregarding the company’s interests or their personal interests clashes with their duty.
• Directors themselves wrong doers : They are the only person to conduct litigation in name of the company, and are themselves the wrong doers.
• Incompetency of the Board : Board has become incompetent to’ act as none of the directors were validly appointed.
• Deadlock in management : When the members of the Board are equally divided.

Powers to be Exercised only at Board Meetings (Section 179):
1. Following powers shall be exercised by the Board only by passing a resolution at the Board Meeting:

• to make calls on shareholders in respect of money unpaid on their shares.
• to buyback its shares U/S 68.
• to issue securities, including debentures, whether in or outside India.
• to borrow money.
• to invest funds of the company.
• to grant loans or give guarantee or provide security in respect of loans.
• to make political contributions;
• to approve financial statements and Board’s report;
• to appoint internal auditors and secretarial auditor;
• to appoint or remove KMP;
• to approve amalgamation, merger or reconstruction;
• to review or change the terms and conditions of public deposits;
• to take note of disclosure of director’s interest and shareholding;
• to take over a company or acquire a controlling or substantial stake in another company;
• to invite or accept or renew public deposits and related matter;
• to approve quarterly, half yearly and annual financial statements or financial results;
• to take note of appointment or removal of one level below KMP;

Quorum for Board Meeting – Meaning: Minimum strength required to conduct a meeting.

• One – third of total strength or two directors, which is higher, shall be the quorum for a meeting.
• Quorum shall be present not only at the time of commencement of the meeting but also while transacting a business.
• If at any time the number of interested directors exceeds or is equal to two – third of the total strength of the Board of Director, the number of directors who are not interested and presented at the meeting, being not less than two shall be the quorum during that time.
• If the quorum is not achieved during a specified time then it will be happened as written in the articles.
• The meeting shall be adjourned due to want of quorum, unless the articles provide shall be held to the same day at the same time and place in the next week or if the day is National Holiday, the next working day at the same time and place.

Appointment of KMP:

 Listed Co. Public Co. Private Co. Always 10 crore No need

Key Managerial Personnel:
1. KMP are the point of first contact between company and its stakeholders.

2. They are responsible for laying down strategies and its implementation.

3. As Per Section 2(51) “key managerial personnel” in relation to a company, means:

• the Chief Executive Officer or the Managing Director or the Manager.
• the Company Secretary.
• the Whole-Time Director.
• the Chief Financial Officer and.
• such Other Officer as may be prescribed.

As per the Amendment made by Companies (Amendment) Act, 2017 Revised Section 2(51)-
1. ‘Key Managerial Personnel” in relation to a company, means –

• the Chief Executive Officer or the Managing Director or the Manager;
• the Company Secretary;
• the Whole-time Director;
• the Chief Financial Officer;
• such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and
• such other officer as may be prescribed;”

2. Section 203 of the Companies Act, 2013 read with Rule 8 of the companies (Appointment and Remuneration of managerial personnel) Rules, 2014 mandates the appointment for –
(i) listed Company, and

(ii) every other public company having a paid up capital of ? 10 crore or more, to appoint following whole time key managerial personnel:

• Managing directors CEO or Manager, and in their absence, a whole time director.
• Company Secretary
• CFO.

3. Every whole time KMP shall be appointed by means of a Board resolution. Containing terms and conditions for the appointment including remuneration.

4. An individual cannot be appointed or re-appointed as the Chairperson of the company as well as MD or CEO of the company at the same time unless AOA so provide, or company does not carry multiple businesses.

5. Certain class of companies engaged in multiple businesses notified by CG have been exempted.

6. Whole time KMP shall not hold office in more than one company except in its subsidiary company.

7. However, he can hold such other directorship in more than one company with BOD’s permission.

8. A whole-time KMP holding office in more than one company at same time shall within a period of six months from such commencement, choose one company in which he wishes to continue to hold the office of KMP.

9. If the office of any whole – time KMP is vacated, the resulting vacancy shall be filled-up by the board at a meeting of the Board within a period of six months from the date of such vacancy.

Whole time Directors: [Section 2(94)]:

• Whole time Director is a director who is in whole time employment of the company.
• Company can have one or more whole time directors.
• Company can have either a Manager or a MD.

Managing Director:

• As per Section 2(54), of the Companies Act,2013 MD means a director who by the virtue of the articles of a company or an agreement with the company or a resolution passed in general meeting or by its BOD is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called”.
• Performs functions as assigned by BOD
• He must be an individual.

Disqualifications of MD [Section 196(3)]:
1. No company shall appoint or employ, any person as its MD or whole time director who:

• is below the age of twenty one year or has attained the age of 70 years,
• is an undischarged insolvent or has at any time adjudged an insolvent,
• suspends or has at any time suspended payment to his creditors, or makes or has at any time made a composition with them.
• is or has been convicted by a court of an offence involving moral turpitude.

2. Moral turpitude refers to anything done contrary to justice, honesty, principles or good morals.

Manager:
1. Section 2(53) defines manager as “an individual who, subject to the superintendence, control and directions of the BOD, has the management of the whole or substantially the whole of the affairs of the company, and includes a director or any other person occupying the position of a manager, by whatever name called and whether under a contract of service or not”.

2. Only individual can be appointed as a manager.

3. A departmental manager or a branch manager is not deemed to be manager.

Disqualifications of Manager [Section 196(3)]: No. company shall appoint or continue the appointment or employment of any person as its manager, who:

• is an undischarged insolvent
• has at any time within the preceding 5 years been adjudged as an insolvent.
• suspends or has suspended within the previous 5 years, payment to its creditors.
• maxes, or has at any time, within the preceding 5 years made a composition with his creditors.
• is, or has at any time within the preceding 5 years been convicted of an offence involving moral turpitude.

Tenure of MD or Manager:

• Term of office cannot exceed 5 years at a time.
• He may be re-appointed for a further period of 5 years.
• Re-appointment, however, shall not be sanctioned earlier than 1 year before the expiry of his term.

Chief Executive Officer [Section 2(18)]:
CEO means an office of a company, who has been designated as such by it.

Chief Financial Officer [Section 2(19)]:

• CFO means a person appointed as a CFO of a company.
• Company Secretary [Section 2 (24)] → Clause (c) of sub – section (1) of the Section 2 of the Company Secretaries Act, 1980 defines company secretary as one who is appointed by a company to perform the function of company secretary under this act.

Meaning of Meeting:

• Meeting means gathering or assembly of number of persons for transacting any lawful business.
A meeting to be valid must be convened and held as per the provisions of Companies Act, 2013 and the rules framed there under.
• Members and directors exercise their decision making powers through resolutions passed by them.
• One such meeting should be compulsorily convened every year.

Kinds of Meetings:
They are:
(i) Members/Shareholders:

• Annual General Meeting (AGM)
• Extra ordinary General Meeting (EGM)
• Class Meeting

(ii) BOD:

• Meeting of BOD
• Meeting of Board Committees

(iii) Creditors:

• For winding up
• For purpose other than winding up

(iv) Meeting of debenture holders

(v) Meeting of contributories in winding up

Annual General Meeting (Section 96 to 99):
1. It is required to be held by every company once in every year.(Other than OPC)

2. First AGM

• It is to be held within nine months from the date of closing of first F.Y. of company after its incorporation.
• There is no need of holding AGM in the year of its incorporation.
• ROC cannot allow extension.

3. Subsequent AGM:

• It is to be held in each calender year
• It is to be held within 15 months from the date of last AGM
• It is to be held within 6 months from the close of F.Y.
• ROC can grant extension upto 3 months

Amendment of Section 96: In Section 96 of Principal Act in sub-section (2), in the proviso for the words provided that “the following shall be substituted, namely:
the AGM of an unlisted company may be held at any place in India, if consent is given in writing or by electronic mode by all members in advance.

• It shall be held during the business hours
• It shall not be held in a national holiday.

It shall be held at:

• The registered office of the company, or
• Some other place within the city, town or village in which the registered office is situated.

AGM can be held on public holiday:

1. If the day is declared by CG as national holiday after the issue of notice.
2. If it is a Section 8 company.
3. If public or private company which is a subsidiary of a public company has fixed time by passing a resolution in GM for its subsequent AGM.
4. If it is an adjourned AGM to be held accidently.
5. If public company by its articles, fix the time for its AGM.
6. If private company by its articles and by a resolution agreed to by all the members thereof, fix the time and place for its AGM.

At least 21 days clear notice either in writing or through electronic mode should be given for calling a meeting Shorter notice is valid if consent is given in writing or by electronic mode by not less than 95% of the members entitled to vote at such meeting.

Following business are transacted at AGM.

• the consideration of the accounts, balance sneet and the reports of the BOD and auditors.
• the declaration of dividend.
• the appointment of directors in the place of those retiring and
• the appointment of and the fixing of remuneration of the auditors.

The company and every officer of the company who is in default shall be punishable with fine upto ? 1,00,000.
If default is a continuing one, an additional fine of ? 5,000 per day may be imposed

NCLT may on application of any member:

• Call a GM which shall be deemed to be the AGM of the company.
• Giving such direction as it thinks fit, like 1 member present in person or proxy shall be the quorum (Section 97)

Content of Notice:

• Place of Meeting
• Day of Meeting
• Time of Meeting
• Agenda
• Proxy clause with reasonable prominence.

Extra Ordinary General Meeting:
Provided that an EGM of the company, other than of the wholly owned subsidiary of a company iricorporated outside India, shall be held at a place within India.

• It refers to all the general meetings of a company, with the exception of the AGM
• If any matter is urgent and cannot be postponed till the next AGM, an EGM is called to discuss such  matters and to obtain the consent of members.
• An explanatory statement must be given in respect of each proposed resolution.
• It can be held anywhere in India.
• It can be even held on a public holiday and even after the business hours.

EGM may be called:

• By Board on its own
• By board on requisition of share holders.
• by requisitionists.
• by Tribunal

Calling EGM on Requisition:
(i) Members have been empowered that if any business requiring consent of members is beneficial to the company but has not been proposed by the Board, members can propose such resolution.

(ii) Company having share capital: One or more members can call an EGM only if they hold 1/10th or more of the paid up share capital of the company as on the date of the requisition.

(iii) Company not having share capital: Requisition is valid if on the date of requisition it has been made by member (s) holding 1/10 or more voting power of all the members.

(iv) Requisition must specify matters for the consideration for which EGM is called.

(v) It must be signed by requisitionists.

(vi) It shall be deposited at the registered office of the company.

(vii) On receipt of requisition Board may within 21 days, proceed to call an EGM to be held not later than 45 days from the date- of requisition.

(viii) If the Board fails to call an EGM, it may be called by the requisitionists themselves.

(ix) Meeting should be held within 3 months from date of requisition.

(x) Reasonable expenses incurred will be reimbursed by company to the requisitionists.

(xi) Company can recover such expenses from the directors in default. If the Quorum is not present with in half- an hour, the meeting shall stand cancelled.

Calling EGM by Tribunal:
(i) If it is impracticable to call a meeting of a company or to hold or conduct the meeting of the company. The tribunal may

• either suo moto or
• on the application of any director or
• member of the company who would to entitled to vote at the meeting
• order a meeting of the company to be called, held and conducted in such manner as it may thinks fit.

(ii) It may give such ancillary or consequential directions as it thinks fit.

(iii) It may give direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

• Class Meetings (Section 48) : Class Meeting of holders of particular classes of shares debenture holders, creditors are to be held if the right attaching to these classes are to be varied.

Meetings of Debenture holders:

• All matters in connection with the holding, conducting and proceeding of the meetings of Debenture holders are,given in Debenture Trust Deed.
• These are held either to vary the terms of security or to alter their rights in certain circumstances.
• Decision taken at these meetings with requisite majority, are valid and binding upon the minority.

Meeting of Creditors:

• It can be held either during the lifetime of the company or at the time of winding up of company to make certain arrangements with the creditors.
• NCLT may order holding of creditor’s meeting on application.
• NCLT may sanction the scheme if it is agreed by majority in number holding debts to the value of 3/4,h of the total value of the debts.
• Its copy has to be filed with ROC.
• It becomes binding on all the creditors.
• At the time of winding up, it has to be held to ascertain the total amount due by the company to its creditors and also appoint a liquidator to wind up the affairs of the company.
• These are not the company meetings.

Meetings of BOD – BOD have to meet in order to discuss various matters regarding the management and administration of company’s affairs in the best interests of shareholders and public interest.

It functions as an advisory board:
1. Its most important function is to provide direction to the company and set the “tone at the top”.

2. As per Section 173,

• It provides that the first Board Meeting should be held within thirty days of the date of incorporation.
• There shall be minimum of four Board meetings every year and not more than one hundred and twenty days shall intervene between two consecutive Board Meeting.

3. In case of OPC, small company and dormant company, at least one BM should be conducted in each half of calender year and the gap between two meetings should not be less than 90 days.

4. If OPC has only one director, No BM is required.

5. Not less than 7 days notice in writing shall be given to every director at the registered address available with the company.

6. Notice can be given by hand delivery or by post or by electronic means.

7. If BM is called at a shorter notice, at least one independent director shall be present at the meeting.

8. If he is not present, then decision of meeting shall be circulated to all the directors and it shall be final only if it have to be ratified by at least one independent director.

Amendment of Section 173 : In Section 173 of the Principal Act, in sub¬section (2), after the first proviso, the following proviso shall be inserted namely:

“Provided that where there is quorum in a meeting through physical presence of director, any other director may participate through video conferencing or other audio, visual means in such meeting on any matter specified under first proviso”.
1. As per Section 173,

• Notice of every BOD Meeting must be given in writing to every director for the time being in India, and at the usual address in India to every other director.
• In case of default, every officer who is at fault shall be punishable with fine upto ₹ 1,000.

2. If Articles provide that it will be held on fixed days of every month or directors are duly informed that all future meetings will be held on a fixed day of every month, it is a sufficient compliance with Section 173.

3. All proceedings of the meeting will be considered void^f the notice is not properly given.

4. Notice has to be given even to a director who has stated that he wHI be unable to attend the meeting.

5. It may be held at any time, on any day, including a public holiday, and at any place.

6. No business should be transacted at a meeting.if notice in accordance with the section has not been given.
Company Secretary (CS):
As per Section 203,

• every company having paid up share capital of ? 5 crore or more must have a whole time secretary.
• where Board comprises of only 2 directors, neither of them can act as a secretary of the company.

Definition of Company Secretary:

• As per Section 2(24) of the Companies Act, 2013 defines “Company Secretary” or “Secretary” means a company secretary as defined in clause (c) of sub-section(1) of section 2 of the Company Secretaries Act, 1980 who is appointed by a company to perform the functions of a Company Secretory under this Act.
• As per company Secretaries Act, 1980, “He is a person who is a member of the Institute of Company Secretaries of India”.
• Word ‘secretary’ is derived from word ‘secret’ meaning something confidential about the job.

Qualifications of Secretary:
CS must possess the qualification prescribed by CG. For this purpose, the Companies (Appointment and Qualification of Secretary) Rules, 1988 have been divided into 2 categories:
1. Companies having a paid-up capital of ? 5 crores or more : whole-time secretary must be a member of ICSI.

2. In case of any other company: Secretary must possess the following qualifications:

• Membership of the ICSI;
• Pass in the Intermediate Examination conducted by the ICSI;
• Degree in law granted by any university;
• Membership of the ICAI;
• Membership of the ICWAI;
• Post-graduate degree or diploma in management sciences granted by Universities or Institutes of Management, Ahmedabad, Calcutta, Bangalore and Lucknow.
• Diploma in corporate laws and management granted by Indian Law Institute, New Delhi;
• Post-graduate diploma in Company Secretaryship granted by the Institute of Commercial Practice under
• Delhi; Administration or Diploma in Corporate Laws and Management granted by Indian Law Institute, New Delhi.
• Membership of the association of See retaries and Managers, Calcutta;
• Post-graduate diploma in Company Law and Secretarial Practice granted by the University of Udaipur.

Other Qualifications that a CS should Process are:

• Sound General Education
• Proficiency in Language
• Wide Knowledge
• Knowledge of Company Law
• Knowledge of Other Laws
• Knowledge of Office Organisation and. Method
• Knowledge of Economics, Banking and Finance
• Good personality.

If paid-up capital increases to ₹ 5 crores or more, Company must appoint a whole time secretary.

Appointment of Secretary:
1. For every company not being required to employ a whole time secretary and having a paid-up capital of 10 lakh rupees or more but less than 5 crore, it is mandatory to file with ROC a certificate from a secretary in whole time practice in such form, and in such time and subject to such conditions as may be prescribed.

2. This certificate should be attached to the Board’s report made u/s 134.

3. He is generally appointed by a formal resolution of the Board.

4. If any director is interested in such appointment, he must disclose such interest and should not participate in the discussion or voting.

Powers of Secretary – He should perform:

• All acts which he is required to perform under various enactments.
• All acts which BOD specifically direct him to perform.
• All acts which enable him to discharge his duties smoothly.

Any act performed without being authorised by the company, does not bounds the company.

Duties of a Companies Secretary:
Contractual Duties:

• Has a duty to act within the scope of his authority if appointed by an agreement of service.
• Perform his duties with reasonable care and skill.
• Abstain from disclosing any confidential information relating to the company’s affairs.
• Should not make any secret profits by virtue of his position.

Statutory Duties:
(i) Under Companies Act:

• report to BOD about compliance with provisions of this Act, rules and other laws applicable.
• to ensure that the company complies with the applicable secretarial standards.
• to discharge such other duties as may be prescribed.

The Central Government has prescribed such duties of CS as follows:

• to facilitate convening of meetings and attend BM, GM committee meetings and maintain their minutes.
• to assist, the Board in the conduct of company’s affairs.
• to obtain approval from BOD, GM, government and other authorities.
• to provide guidance to directors as required, with regard to their duties, responsibilities and powers.
• to represent before various regulators, tribunals and other authorities.
• to assist and advice BOD in ensuring good corporate governance and complying with its requirements and best practices.
• to discharge such other duties as may be assigned by the Board from time to time.
• such other duties as have been prescribed under the Act and Rules.

(ii) Under IT Act: He is a principal officer of the company.

• Ensure proper tax is deducted at source.
• Ensure that tax deducted is deposited with government.
• Ensure that TDS certificate is furnished to every debenture holder/ depositor.
• Verify and submit various forms and returns.

(iii) Under Indian Stamp Act: He has to ensure that ail legal documents are affixed with stamps of requisite amount as required under the Act.

(iv) Under other Acts: He is required to perform several other duties under various other Acts.

Role of a Secretary:
1. His role is not limited only to its company but also to its shareholders, depositors, creditors, employees, consumer, society and Government

2. He has the following roles to play:

• Statutory officer/Key Managerial Personnel.
• Co-ordinator

Statutory Officer:
1. ‘Officer’ includes any director, manager, secretary or any person in accordance with whose directions or instructions the BOD is or are accustomed to act.

2. He can be assigned managerial duties in addition to his statutory duties.

3. He is responsible for strict compliance of following provisions of Companies Act:

• to sign the Annual Return filed with ROC.
• authenticate the financial statement.
• to make declaration before incorporation of a company confirming all the requirements of the Act and rules have been compiled with.
• to make declarations regarding commencement of business.
• to see share certificates, debentures, letter of allotment, mortgages are issued duly stamped.
• comply with the provisions of various statutes.

4. He is also responsible to comply with provisions of various other Acts.

Co-ordinator:

• He has to ensure that the policies managerial of BOD are effectively implemented and executed.
• He co-ordinates the work of executives at different levels.
• He acts as an important link between top management (Board) and other levels.
• He is known as ‘Mouthpiece of Board.’
• Even plays the role of a coordinator with outsiders like shareholders, society and the Government.
• This role has two aspects – Internal and External.

Internal Role:
(i) Relating to Board, Chairman and MD:

• Responsible for conveying the Boards decision to persons in charge of such functions.
• responsible to ensure that the returns and reports received from various operational executives are submitted in time complete in all respects.
• Communicates with outside agencies like government and semi-government bodies to ensure that the information given to various agencies do not conflict with each other, and are in accordance with statutory requirements and objectives of the organisation.

• on sure whether trade union officials are recognized or not.
• Ensure that good labour relations are maintained.
• During any agreement with trade union, he should make proper note of it so as to avoid any misunderstanding or deputes later on.
• Ensure strict compliance with provisions of different labour welfare laws.
• Whenever long term settlement is finalised, ensure that it is in accordance with relevant statues.
• Wherever possible, grants and subsidies should be given.
• Before employees guilty of misconduct are charge-sheeted and ‘ punished, all formalities must be completed.

External Role:
(i) Relating to Shareholders:

• Ensure that their rights are honoured in time
• Extracts of registers asked by them are supplied to them within stipulated time
• Ensure that all letters and complaints from them are promptly dealt with and their queries are answered without violating the statutory, provisions.
• Maintain proper relationship with shareholders of the company.
• He should attend the shareholders who personally come for information, to furnish documents or details as image of company depends upon relationship of CS with shareholders.

(ii) Relating to Government:

• Ensure strict compliance with provisions of Companies Act, and other laws.
• Must see that government policies are being implemented by company in true spirit.
• Ensure that information send to the government is factually correct.
• Helps in uniform reporting.

(iii) Relating to Community:

• Advise Board regarding areas where company can make useful contribution.
• Ensure that company should provide quality goods and services at reasonable policies.
• Ensure that requirement of keeping pollution within legally and socially acceptable limits are complied with.
• Ensure promotion of employment-opportunities.
• Undertake rural development.

• Ensure that company’s activities are in conformity with companies policy
• Supervise, control and coordinate the functions of different departments.
• Advise BOD on the need to develop good structure.
• Has an opportunity of knowing the strengths and weaknesses of the functional executives.
• Analytically study various financial statements.
• Devise suitable system of accounting procedure, internal control and internal audit in order to safeguard company’s funds.
• Responsible for various office services including their cost.
• Can render valuable advice to BOD regarding the recruitment, training, remuneration, etc. of staff.
• Ensure safety and proper maintenance of assets and properties of the company.
• Ensure that property and other records are properly insured.
• All records are maintained properly.
• Ensure that statutory time limits relating to meetings, dividend and interest filing of payment returns etc. are complied with.
• Has to negotiate with banks and financial institutions, the terms of finance both for working capital requirement and capital expenditure.
• Different office departments are properly staffed, organised, co-ordinated and supervised.
• Timely renewal of contracts and leases.
• Ensure that adequate system of security of personnel are available.

E-Governance:

• It refers to a highly complex process that requires provision of hardware, software, networking and re-engineering of procedures for better service delivery
• It involves application of IT to bring about SMART i.e. (Simple, Moral, Accountable, Responsive and Transparent) governance.
• MCA – 21 is an e-governance initiative of Indian Government that builds Government’s vision of National e-governance in India.
• It is executed by MCA i.e. Ministry of Corporate Affairs in partnership with TCS.
• MCA – 21 is a fine example of public/private partnership and is built on BOOT i.e. (Built, Operate, Own and Transfer) model.
• MCA-21 is an ambitious e-governance initiative of Government that builds on the Government’s vision of national e-governance in the country.
• The project was named MCA-21 as it aimed at re-positioning MCA as an organisation capable of fulfilling the aspiration of its stakeholder in the 21st Century.

Scope of MCA-21 includes services provided by:

• Regional Director (RDs)
• Offices of Registrar of Companies (ROCs)

Multiple Choice Questions

Question 1.
Which of the following statement is correct?
(a) The joint shareholders are counted as one member for the membership of a private company.
(b) The joint shareholders are counted as one member for the quorum of a meeting.
(c) The joint shareholders are always counted as different member for all the provision of the Companies Act.
(d) Both (a) and (b) are correct as there are specific provisions to that effect.
(d) Both (a) and (b) are correct as there are specific provisions to that effect.

Question 2.
The subscribers to the Memorandum of Association _________.
(a) May become members only if there is a specific provision to that effect in company’s Articles of Association.
(b) Become a member as soon as the company is registered.
(c) Are members irrespective of any formality as to registration etc.
(d) Can never be the members as their only job is to get the company registered.
(b) Become a member as soon as the company is registered.

Question 3.
A person ceases to be a member when the share warrant is issued to him in exchange of fully paid up shares.
(a) True
(b) False
(c) Partly true
(d) Partly false
(a) True

Question 4.
Every company (whether public or private) is required to hold an annual general meeting.
(a) True
(b) False
(c) Partly true
(d) Partly false
(a) True

Question 5.
Kinds of meetings are _________.
(a) Class Meeting
(b) Annual General Meeting
(c) Extraordinary General Meeting
(d) All of these
(d) All of these

Question 6.
Can the Annual General meeting (A.G.M.) be held on a day which has been declared as a public holiday by the Central Government.
(a) Yes, but only if the notice of convening the A.G.M. has been issued prior to the declaration of the holiday.
(b) No, as the A.G.M. cannot be held on a public holiday.
(c) Both (a) and (b)
(d) None of the above
(a) Yes, but only if the notice of convening the A.G.M. has been issued prior to the declaration of the holiday.

Question 7.
_________ is a bridge between BOD and shareholders.
(a) Directors
(b) Company Secretary
(c) Chartered Accountant
(d) Employees
(b) Company Secretary

Question 8.
DIN Stands for:
(a) Direct Identification Number
(b) Director’s Identity Number
(c) Direct Identity Name
(d) Director’s Identification Number
(d) Director’s Identification Number

Question 9.
_________ of the total number of directors shall be non-rotational.
(a) 1/3rd
(b) 2/3rd
(c) 1/2nd
(d) 1/5th
(a) 1/3rd

Question 10.
The managing director must be:
(a) Difector
(b) Employee
(c) Officer
(d) Debenture Holder
(a) Difector

Question 11.
EGM can be called by:
(a) BOD
(b) Requisition’s
(c) Tribunal
(d) All of the above
(d) All of the above

Question 12.
When a valid requisition is given by member for holding EGM, the BOD should call EGM:
(a) Within 14 Days
(b) Within 15 Days
(c) Within 21 Days
(d) Within 1 month
(c) Within 21 Days

Question 13.
Resolution requiring special notice is required:
(a) For appointment of a person as an auditor other than the retiring auditor at the AGM
(b) For removing a Director before the Expiry of the period of his office
(c) For both (a) and (b)
(d) For none of the above
(c) For both (a) and (b)

Question 14.
Alternate director shall hold office only upto the date of next AGM.
(a) True
(b) False
(c) Partly true
(d) Partly false
(b) False

Question 15.
Additional director is studied u/s _________.
(a) 163
(b) 160
(c) 164
(d) 161
(d) 161

Question 16.
Director can be removed before the expiry of his term by passing a _________.
(a) Special resolution
(b) Ordinary resolution
(c) Both (a) and (b)
(d) None of the above
(b) Ordinary resolution

Question 17.
Company can have both a manager and a Managing Director.
(a) True
(b) False
(c) Partly True
(d) Partly False
(b) False

Question 18.
A departmental manager or a branch manager can also be deemed as a director.
(a) True
(b) False
(c) Partly True
(d) Partly False
(b) False

Question 19.
Term of office of MD cannot exceed _________ years at a time.
(a) 2
(b) 3
(c) 4
(d) 5
(d) 5

Question 20.
If a resolution is to be decided by the way of show of hands _________.
(a) Every shareholder has one vote
(b) Every shareholder has as many votes as the shares held by him.
(c) Both (a) and (b)
(d) None of the above
(a) Every shareholder has one vote

Question 21.
(a) Special
(b) Ordinary
(c) Both (a) and (b)
(d) None
(a) Special

Question 22.
The length of the notice of GM is stated under which section of the Companies Act, 2013
(a) Sec. 101
(b) Sec. 102
(c) Sec. 108
(d) None of the above
(a) Sec. 101

Question 23.
All the proceeding of Board meetings shall be _________ if proper notice has not been served.
(a) Valid
(b) Void
(c) Partly valid
(d) Partly void
(b) Void

Question 24.
Secretary must be a member of:
(a) ICAI
(b) ICWA
(c) ICSI
(d) None
(c) ICSI

Question 25.
A whole time secretary has to be appointed by companies having paid up capital of _________ or more.
(a) 1cr
(b) 2cr
(c) 4cr
(d) 5cr
(d) 5cr

Question 26.
_________ is known as a mouthpiece of Board.
(a) Managing director
(b) Chartered Accountant
(c) Company Secretary
(d) Manager
(c) Company Secretary

Question 27.
MCA Stands for.
(a) Ministry of Corporate Affairs
(b) Minister of Corporate Affairs
(c) Minister of Corporate Accounts
(d) Ministry of Corporate Accounts
(a) Ministry of Corporate Affairs

Question 28.
Preference shareholders do not possess the following rights:
(a) Payment of dividend
(b) Rights to attend meeting .
(c) Claim on assets of the company
(d) Repayment of capital
(c) Claim on assets of the company

Question 29.
A secretary in a company, does not perform the role of:
(a) A coordinator
(b) A legal officer
(d) A director
(d) A director

Question 30.
Directors are of a company.
(b) Member
(c) Management Incharge
(d) Brain
(d) Brain

Question 31.
A meeting of the Board of Directors must be held _________ in every 3 months and at least _________ meetings must be held every year.
(a) Once, 4
(b) Twice, 8
(c) Not req, 4
(d) Not req, 8
(a) Once, 4

Question 32.
_________ has the power to exercise his casting vote for deciding the matter.
(a) CEO
(b) G.M.
(c) Directors
(d) Chairman
(d) Chairman

Question 33.
Who can be the director of the company
(a) Undischarged insolvent
(b) Unsound mind
(c) Person disqualified by the Tribunal
(d) None of these
(d) None of these

Question 34.
If a director has failed to file financial statement & annual returns for continuous _________ years, then he-will not be eligible to be appointed as a director of any other public company for a period of _________ years.
(a) 3,8
(b) 3,6
(c) 3, 5
(d) 4,5
(c) 3, 5

Question 35.
Who cannot be the director under Sec. 149(1) of the Companies Act, 2013
(a) Body corporate
(b) Associations
(c) Firm
(d) All of these
(a) Body corporate

Question 36.
The removal of director’s rests with the following authorities.
(a) Central Government
(b) NCLT
(c) The Company in G.M.
(d) Both (b) & (c)
(d) Both (b) & (c)

Question 37.
A person compulsorily needs to obtain _________ to become a director in pursuance of Sec. 154 of the Companies Act, 2013.
(a) SST
(b) PAN
(c) DIN
(d) DAN
(c) DIN

Question 38.
No. of directors need a special resolution in GM, if they are beyond _________.
(a) 6
(b) 15
(c) 18
(d) 24
(b) 15

Question 39.
A legal representative of a deceased share holder is a share holder even if his name is not entered in the register of members.
(a) False
(b) True
(c) Partly True
(d) Partly False
(b) True

Question 40.
The term member and director of a company are synonymous.
(a) False
(b) True
(c) Partly True
(d) Partly False
(a) False

Question 41.
Sec. 96(i) of the Companies Act, 2013 states that every company must, in each calender year hold an AGM, so specified in the notice calling it, provided that not more than _________ months shall elapse between two AGM’s.
(a) 12
(b) 14
(c) 18
(d) 15
(d) 15

Question 42.
A company can hold its first AGM within _________ months from date of its incorporation.
(a) 12
(b) 15
(c) 9
(d) None of these
(c) 9

Question 43.
Registrar can grant for some special reasons extension of time for holding the AGM by a period not more than _________ months.
(a) 5
(b) 3
(c) 12
(d) 18
(b) 3

Question 44.
If a company makes default in holding AGM, then fine imposed on the company & every officer of the company who is in default is upto _________.
(a) 25,000
(b) 50,000
(c) 5,000
(d) 1,00,000
(d) 1,00,000

Question 45.
A board meeting can be held anywhere _________.
(a) True
(b) False
(c) Partly True
(d) Partly False
(a) True

Question 46.
A business can be transacted at a board meeting even if it is not mentioned in the agenda _________.
(a) True
(b) False
(c) Partly True
(d) Partly False
(b) False

Question 47.
Companies having paid up capital of not less than 5 crore must have _________ secretary.
(a) Whole time
(b) Part time
(c) Not required
(d) None of these
(a) Whole time

Question 48.
The disqualification for being appointed as a director are contained in which section of Companies Act, 2013?
(a) Sec. 164
(b) Sec. 166
(c) Sec. 170
(d) None of the above
(a) Sec. 164

Question 49.
Who amongst the following cannot appoint a director in a company?
(a) Shareholders
(b) Board of Directors
(c) Articles
(d) Tribunal
(d) Tribunal

Question 50.
The directors appointed in a company on an application made under Sec. 241 are appointed by _________.
(a) Auditor
(b) Tribunal
(c) Central Government
(d) None of the above
(b) Tribunal

Question 51.
Which of the following statement is NOT true?
(a) The power to make calls can only be exercised at the Board Meeting
(b) The company can have both managing director and manager
(c) A director cannot be removed by the State Government
(d) None of the above
(b) The company can have both managing director and manager

Question 52.
A person is disqualified from being appointed as a managing director if –
(a) He is insolvent
(b) He is convicted by Tribunal
(c) Suspends payment to his creditors
(d) All of the above
(d) All of the above

Question 53.
Which of the following statement is true?
(a) A person having share warrant is a member of the company
(b) A person having share warrant is only a shareholder of the company and not a member
(c) A legal representative of a deceased shareholder is not a shareholder of a company
(d) All of the above
(b) A person having share warrant is only a shareholder of the company and not a member

Question 54.
Which of the following statement is false?
(a) Equity shares have a right to vote on every resolution of the company
(b) Preference shares cannot vote on all the resolutions of the company
(c) All the equity shareholders have equal voting rights
(d) All of the above
(c) All the equity shareholders have equal voting rights

Question 55.
Which one of the following statements is not true in respect of holding the Annual General Meeting?
(a) AGM should be held in every calender year
(b) AGM should be held within six months from the end of financial year
(c) The gap between two AGM’s should not exceed fifteen months
(d) Private company is not required to hold an AGM
(d) Private company is not required to hold an AGM

Question 56.
Which of the following business is NOT transacted at the AGM?
(a) Appointment of directors
(b) Declaration of dividend
(c) Appointment of auditors
(d) Making calls on shares
(d) Making calls on shares

Question 57.
The proportion of directors which shall retire by rotation in a public company is _________.
(a) One – Third
(b) One – Fifth
(c) Half
(d) Two – Third
(d) Two – Third

Question 58.
The meeting which is held by a particular category of shareholders is called as _________.
(a) Class Meeting
(b) Specific Meeting
(d) None of the above
(a) Class Meeting

Question 59.
Which of the following task Company Secretary?
(a) Communicating results to the interested parties
(b) Signing the annual return
(c) Sending notice of meetings to the Directors
(d) Assisting the liquidator in the winding up of the company
(a) Communicating results to the interested parties

Question 60.
It is compulsory for a company to appoint a Company Secretary if _________.
(a) The paid up share capital is 5 crore or more
(b) The paid up share capital is 10 crore or more
(c) The annual turnover of the company exceeds 100 crore
(d) If the net profit of the company is more than 2 crore
(a) The paid up share capital is 5 crore or more

Question 61.
Which one of the following is not a power of a Secretary?
(a) The acts directed to him by the Board
(b) The acts required to perform in order to discharge his duties
(c) The acts required to be performed under an Act
(d) Calling up the Board Meeting
(d) Calling up the Board Meeting

Question 62.
As per Sec. 2(35) of the Income Tax Act, 1961, a Company Secretary is _________.
(a) Manager
(b) Principle officer
(c) Coordinator
(d) None of the above
(b) Principle officer

Question 63.
MCA stands for _________.
(a) Ministry of Corporate affairs
(b) Manager of Company Accounts
(c) Ministry of Corporate
(d) None of the above
(a) Ministry of Corporate affairs

Question 64.
BOOT stands for _________.
(a) Building Optimum Operational Tools
(b) Budgetary Online Operational Technology
(c) Build, Organise, Operate and Transfer
(d) Build, Operate, Own and Transfer
(d) Build, Operate, Own and Transfer

Question 65.
Which amongst the following is NOT a role of a Company Secretary?
(a) As a statutory officer
(c) As a coordinator
(d) As a manager
(d) As a manager

Question 66.
The persons who are in charge of the management of the affairs of a company are termed as directors. They are collectively known as _________.
(a) Shareholders
(b) Employees
(c) Board of directors
(d) Either (a) or (b)
(c) Company is an artificial legal person, thus cannot act on its own. Directors are the persons who are entrusted with the charge of management of company’s affairs. In other words, Director means an appointed or elected member of a company who, with other directors, has the responsibility for determining and implementing the company’s policy. They are collectively known as Board of Directors or Board.

Question 67.
Every company having a paid-up share capital of must have a whole-time secretary.
(a) ₹ 2 Crore or more
(b) ₹ 5 Crore or more
(c) ₹ 50 Lakh
(d) ₹ 10 Lakh
(b) In term of Section 203 of the Companies Act, it is necessary to appoint a secretary in a company having a paid-up capital of ₹ 5 crores or more who is an individual possessing the prescribed qualification i.e., he should be member of the Institute of Company Secretaries of India. Normally, the appointment is done by means of a resolution of the Board as the position of company secretary is slightly different from that of other officers as he is an officer recognised under the Companies Act, 2013.

Question 68.
Dividend of a company is declared in:
(a) Statutory meeting
(b) Extra-ordinary general meeting
(c) Annual general meeting
(d) None of the above.
(c) Sec. 102 of the Companies Act lays down that all business to be transacted at an annual general meeting shall be deemed Special Business with the exception of the business, relating to:

• The consideration of the accounts, balance sheet and the reports of the board of directors and auditors,
• The declaration of dividend
• The appointment of directors in the place of those retiring; and
• The appointment of, and the fixing of remuneration of, the auditors.

Question 69.
In a company maximum time difference between two consecutive board meetings is:
(a) 120 days
(b) 180 days
(c) 140 days
(d) 90 days
(a) Section 173 of the Act deals with Meetings of the Board and Section 174 deals with quorum. The Act provides that the first Board meeting should be held within thirty days of the date of incorporation. In addition to the first meeting to be held within thirty days of the date of incorporation, there shall be minimum of four Board meetings every year and not more one hundred and twenty days shall intervene between two consecutive Board meetings.

Question 70.
If Which of the following type of business are ordinarily carried out at annual general meeting of a company?
X. To declare dividend
Y. To recommend dividend .
Z. To appoint the auditors W.
To make calls on shares Correct option is –
(a) X and Y
(b) X and Z
(c) X, Z and W
(d) X, Y, Z and W
(b) Following businesses are transacted at AGM –

• Financial Statement are presented for consideration.
• Appointment or re-appointment of auditors.
• Declaration of dividends.
• Appointment or re-appointment of auditors.

Thus, only businesses given in point X and Z are transacted at AGM of company.

Question 71.
A director of X Ltd. has given a guarantee of ₹ 500 for someone, yet he can become the director of another company _________.
(a) True
(b) False
(c) Partly true
(d) Partly false
(a) A director of a company who has given a guarantee for someone can become the director of another company as per the Companies Act, 2013. There’s no such disqualification for such a director. Hence, option (a) is correct.

Question 72.
Preferential shareholders can call meeting in which situation?
(a) Curfew
(b) Emergency
(c) Bomb blast
(d) None of the above
(d) As per section 48 of Companies Act, 2013 class meetings are held by preferential shareholders. Need for such meetings arises when it is proposed to vary the rights of a particular class of shares. Thus, none of the above given are the reasons for calling the meeting in case of preferential shareholders.

Question 74.
Who can be a director?
(a) Individual
(b) Partnership firm
(c) Company
(d) HUF
(a) Only an Individual can be a director, any corporate body cannot be a director.

Questions 75.
Which amongst the following is the expanded form of ‘DIN’?
(a) Directors Identification Number
(b) Digitalised Identification Number
(c) Director’s Identifying Number
(d) None of these
(a) No company can appoint or re-appoint any individual as a director unless he has been allotted a DIN i.e. Director’s Identification Number U/s 154 of the Companies Act, 2013.

Question 76.
Under which Section the duties of the directors are given.
(a) 166
(b) 152
(c) 160
(d) 161
(a) Duties of director are given under Section 166 of Companies act, 2013.

Question 77.
Who fills casual vacancy in the office of director?
(a) Shareholders in the General Meeting
(b) Directors in the board meeting
(c) Company law board
(d) Central Government
(b) Casual vacancy means vacancy caused in the office of director appointed by shareholders in the general meeting and caused by death, resignation, insolvency or disqualification. Any casual vacancy in the office of director is filled by directors in the board meeting.

Question 78.
Sec. 96(i) of the Companies Act, 2013 states that every company must in each calender year hold as AGM, so specified in the notice calling it, provided not more than months shall elapse between two AGM.
(a) 12
(b) 14
(c) 18
(d) 15
(d) As per Section 96 (i) of Companies Act, 2013 every subsequent AGM,

(i) It is to be held in each Calendar year
(ii) It is to be held within 15 months from the date of last AGM
(iii) It is to be held within 6 months from close of FY.

Thus, 15 months shall not elapse between two AGMs.

Question 79.
Small shareholder means a shareholder holding shares of nominal value of not more than _________ rupees or such other sum as may be prescribed.
(a) 25,000
(b) 10,000
(c) 50,000
(d) 20,000.
(d) According to Sec. 151 of the Companies Act, 2013 every listed company may have one director elected by such small shareholders. For the purpose of this section, “small shareholders means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.

Question 80.
_________ is to be held by every company every year.
(a) Annual general meeting
(b) Board meeting
(c) Statutory meeting
(d) Extraordinary meeting.
(a) As per Sec. 96 (i) of the Companies Act, 2013, states every company must, in each calender year hold an Annual General Meeting.

Question 81.
As per Companies Act, 2013 who can be appointed as a director.
(a) A company or a firm
(b) Only a natural person
(c) Any person including a company
(d) Managing agency.
(b) As per Sec. 149 (i) of the Companies Act, 2013, only individuals shall be appointed as Directors, that means no body corporate, association or firm shall be appointed as a director of the company.

Question 82.
Small shareholders are holders holding shares of nominal value of not more than
(a) ₹ 10,000
(b) ₹ 20,000
(c) ₹ 40,000
(d) ₹ 30,000
(b) Snail shareholders are holders holding shares of nominal value of no more than ₹ 20,000.

Question 83.
Which of the following companies should compulsorily appoint a Woman Director?
(a) Listed company
(b) Public company having paid-up share capital of ₹ 100 crores or more
(c) Public company having turnover of ₹ 300 crores or more
(d) All of the above.
(d) Every listed company shall appoint at least one women director and every other public company having paid up share capital of ₹ 100 crores as more as turnover of ₹ 300 crores or more as on the last date of latest audited financial statement, shall also appoint at least one women director under Section 149(1) of Companies Act, 2013.

Question 84.
Company Secretary is a _________.
(a) Key managerial personnel
(b) One of the directors’ in the board
(c) Member of a company .
(d) Officer of the Government.
(a) As per Section 2(51) of Companies Act, 2013 “key managerial personal” in relations to a company, means –

• The Chief Executive Officer of MD or Manager.
• The Company Secretary
• The Whole time-Director
• The Chief Financial Officer and other officers as may be prescribed.

Question 85.
If investors are given periodic payments based on the net profit of the company, these payments are known as:
(a) Dividends
(b) Incentive payments
(c) Rewards
(d) Deposits
(a) According to the Companies Act, 2013, the periodic payments based on the net profit earned by the company these payments are known as dividends.

Question 86.
A special resolution means a resolution passed by:
(a) 2/3rd majority
(b) Simple majority
(c) 2/5,h majority
(d) 3/4’h majority
(d) A special resolution is a resolution of company’s shareholders which requires at least 3/4th of the notes cast by shareholders in famous of it in order to pass the resolution.

Question 87.
Acts of directors which are beyond their powers but within that provided in the memorandum of association of the company _________.
(a) Cannot be ratified and are void
(b) Can be ratified in general meeting
(c) Are illegal
(d) Are voidable at the option
(b) The Board of Directors is entitled to exercise all such powers and do all such acts and things as the company is authorised to exercise and do. In the exercise of its powers the board is subjected to the provisions of the Company Act, the memorandum and the articles and any regulations, not inconsistent with them made by the company in General Meeting.

Question 88.
Board Meeting is the meeting of:
(a) Shareholders
(b) Class Meetings
(c) Employees
(d) Board of Directors
(d) Meeting of Board of the Directors is known as Board Meetings

Question 89.
should be held every year.
(a) Board Meeting
(b) AGM
(c) EGM
(d) None
(b) Annual Genera! Meeting (AGM) should be held every year.

Question 90.
If BoD’s is not appointed within 30 days then it shouid be filled within _________.
(a) 60 days
(b) 45 days
(c) 21 days
(d) 90 days
(d) Late filing is allowed upto 90 days if BoD’s are appointed within 30 days of incorporation.

Question 91.
Custodian of the Foreign Exchanqe Reserves is:
(a) SBI
(b) Ministry of Corporate Affairs
(c) RBI
(d) Finance Minister.
(c) RBI is act as custodian of the Foreign Exchange Reserves.

Question 92.
Total Managerial Remuneration should not exceed in public company?
(a) 11%
(b) 10%
(c) 12%
(d) 18%
(a) Total Managerial Remuneration should not exceed 11% in public company.

Question 93.
Company Secretary is a :
(a) KMP
(b) Auditor of company
(c) MD of company
(d) Chairman of a company
(a) Company Secretary is a Key Managerial Personnel (KMP).

Question 94.
Which of the following type of business are ordinarily carried out at annual general meeting of a company?
X. To declare dividend
Y. To recommend dividend
Z. To appoint the auditors
Z. To make calls an shares
(a) X and Y
(b) X and Z
(c) X, Z and W
(d) X,Y, Z and W
(b) Following business are transacted are at AGM –

• Financial Statement are presented for consideration.
• Appointment or re-appointment of auditors ‘
• Declaration of dividend
• Appointment or re-appointment of auditors.

Thus only businesses given in point X and Z are transacted at AGM of the company.

Question 95.
Company Secretary is a _________.
(a) Key Managerial personnel
(b) One of the directors in the board
(c) Officer of the government
(d) All of these
(a) As per Section 2(51) of Companies Act, 2013. “Key managerial personnel” in relation to a compa- means –

• The CEO / MD or Manager
• The Company Secretary
• The Whole Time Director
• The CFO and other officers as may be prescribed.

Question 96.
Small shareholders are holders holding shares of nominal value of not more than _________.
(a) ₹ 10,000
(b) ₹ 20,000
(c) ₹ 50,000
(d) ₹ 1,00,000
(b) Small shareholders are holders holding shares of nominal value of not more than ₹ 20,000.

Question 97.
Company may furnish to the Registrar verification of registered office within _________ days.
(a) 45 days
(b) 15 days
(c) 30 days
(d) 60 days
(c) Under Section 12, of the Companies Act, 2013, a company shall on the and from 15th days of incorporation and at all times there after, have registered office capable of receiving all communication and notice. The company can furnish to the registrar verification of registered office within 30 days of incorporation in the manner prescribed. The Rule 25(1) of Companies (Incorporation) Rules, 2014, verification of registered office shall be filed in Form no. INC 22.

Question 98.
Quorum for Board Meetings one-third of or two directors whichever is higher:
(a) Present strength
(b) Total strength
(c) Both ‘A’ or ‘B’
(d) None of Above
(b) The Quorum of Board should be one-third of total strength or two directors whichever is higher as per Companies Act, 2013.

## Probability – CS Foundation Statistics Notes

1. Probability
Probability or likelihood is a measure or estimation of how likely it is that something will happen or that a statement is true. Probabilities are given a value between 0 (0% chance or will not happen) and 1 (100% chance or will happen) Probability theory is a branch of mathematics concerned with the analysis of random phenomena. The outcome of a random event cannot be determined before it occurs, but it may be any one of several possible outcomes. The actual outcome is considered to be determined by chance.

The fundamental ingredient of probability theory is an experiment that can be repeated, at least hypothetically, under essentially identical conditions and that may lead to different outcomes on different trials. The set of all possible outcomes of an experiment is called a sample space. For example, individuals in a population favoring a particular candidate in an election may be identified with balls of a particular color, those favoring a different candidate may be identified with a different color, and so on. Probability theory provides the basis for learning about the contents of the urn from the sample of balls drawn from the urn; an application is to learn about the electoral preferences of a population on the basis of a sample drawn from that population.

2. Basic concepts of set theory
The word ‘set’ in mathematics was first of all used by George Cantor. According to him, ‘A set is any collection into a whole of definite and distinct objects of our intuition or thought’. However, Cantor’s definition faced controversies due to the forms like ‘definite’ and ‘collection into a whole’.

3. Set
A set is a collection of objects which are called the members or elements of that set. If we have a set we say that some objects belong (or do not belong) to this set, are (or are not) in the set. We say also that sets consist of their elements.

Examples: the set of students in this room; the English alphabet may be viewed as the set of letters of the English language; the set of natural numbers 1; etc.
For example: is the letter q the same thing as the letter Q? Well, it depends on what set we are considering. If we take the set of the 26 letters of the English alphabet, then q and Q are the same elements. If we take the set of 52 upper-case and lower-case letters of the English alphabet, then q and Q are two distinct elements. Either is possible, but we have to make it clear what set we are talking about, so that we know whether or not q = Q.
Sets are to be distinct and well defined.
Subset
Subset and Proper Subset
Set A is a subset of set B if every element of A is also an element of B.
Set A is a proper subset of B if every element of A is also an element of B, but A CANNOT be exactly the same as B.

For example:
A = {a,b,c,d,e}
B = {a,b,c,d,e,f}
A is said to be a subset and a proper subset of B.
The number of subsets of a set with n elements is 2n.
For example: If a set has 5 elements, it will have 25 or 32 subsets.
The number of proper subsets of a set with n elements is 2n – 1.
For example: If a set has 5 elements, it will have 25 – 1 or 31 proper subsets.

4. Union of Sets
The union of sets A and B, written as AUB, is the set of elements that appear in either A or B.
For example:
A ={1,2,3,4,5}
B= {2,4,6,8,10}
The union of A and B (i.e. AUB) is {1, 2, 3, 4, 5,

5. Difference of Sets
The difference between sets A and B, written as A-B, is the Set of elements belonging to set A and NOT to set B.
For example:
A ={1,2,3,4,5}
B = {2,3,5}
The difference of A and B (i.e. A-B) is {1,4}.
A-B ≠ B-A

6. The Universal Set
In some problems involving sets, it is necessary to consider one or more sets under consideration as belonging to some larger set that contains them.
For example
If we were considering the set of skilled workers (S, say) on a production line, it might be convenient to consider the universal set (U, say) as all of the workers on the line. In other words, where a universal set has been defined, all the sets under consideration must necessarily be subsets of it.

7. The complement of a set
If A is any set, with some universal set U defined, the complement of A, normally written as A’, is defined as ‘all those elements that are not contained in A but are contained in U’.
For an example of the workers on the production line (given above), S was specified as the set of skilled workers within the universal set of all workers on the line. Therefore, S’ would be all the workers that were not skilled, i.e. the set of unskilled workers.

8. Set Intersection
The intersection of two sets A and B is written as AC B and defined as that set that contains all the elements lying within both A or B.
For example, if A = (a,b,c,d,f,g,) and B = (c,f,g,h,j), then the intersection of A and B is A << B = (c,f,g), since these are the elements that lie in both sets. The intersection of three or more sets is a natural extension of the above. If P, Q, and R are any three sets then PC QC R is the set containing all the elements that lie in all three sets. Any combinations of union and intersection can be used with sets. For, example, if X and Y are the sets specified above and Z = (d,f,g,j). then: (XCy) >>Z = (c,f,g) >>(d,f,gj) =(c,d,f,gj) which can be described in words as ‘the set of elements that are in either both of X and Y or in Z’.

9. Factorial
The product of a given positive integer multiplied by all lesser positive integers: The quantity four factorial (4!) =4 • 3 • 2 • 1 = 24. Symbol: n! where n is the given integer.

10. Factorials are a recursive function
n! = n*(n-1)! Where 0! = 1
So l! = 1*1
2! =2*1*1=2
3!=3*2*1*1=6
4! =4*3*2*1*1=24
etc.
Factorials often come up in probability because of the way permutations work.

For example
If you pick a single card out of a deck, there are 52 different ways for your card drawing to turn out. Any of the 52 cards could be drawn. If you now pick a second card without putting the first back, there are 51 ways for that second card to be drawn (Any of the 51 remaining cards) So the amount of different combinations of card picks that could happen would be 52*51.

You can then see that if you were to draw every card in the deck, there would be 52*51*50*……. = 521 ways for you to draw them. This means that if you draw 52 cards, then the order that you drew them in had a 1/(52!) chance of occurring, a very small chance (Factorial is one of the fastest-growing functions that’s often used). Many situations in probability can be likened to card decks, so you might be able to imagine that factorials can come up in all sorts of applications for probability.

Recursive Sequences Formula Calculator. Find sequence types, indices, sums and progressions step-by-step.

11. Experiment
It is an operation that has two or more results and performing the experiment is called a trial.

• Probability experiment

An action through which specific results (counts, measurements, or responses) are obtained.

• Outcome

The result of a single trial in a probability experiment.

• Sample Space

The set of all possible outcomes of a probability experiment

• Event

One or more outcomes and is a subset of the sample space

• Simple event

A simple event is the number of occurrences divided by the number of possible occurrences.

• Compound event

Compound events are the combination of multiple simple events, such as rolling two dice

• Mutually Exclusive

Mutually Exclusive means you can’t get both events at the same time. It is either one or the other, but not both

Examples:
Turning left or right are Mutually Exclusive (you can’t do both at the same time)
Heads and Tails are Mutually Exclusive
Kings and Aces are Mutually Exclusive

Equally likely events
Two or more events that have an equal probability of occurrence are said to be equally likely, i.e. if on taking into account all the conditions, there should be no reason to accept any one of the events in preference over the others.

Examples
First example
A : The event of getting a “HEAD” and
B: the event of getting a “TAIL”
Events “A” and “B” are said to be equally likely events Both the events have the same chance of occurrence.
2-second example Where
A: The event of getting 1
B: the event of getting 2…….
F: the event of getting 6
Events “A”, “B”, “C”, “D”, “E”, “F” are said to be equally likely events All these events have the same chance of occurrence.

• Exhaustive events
One or more events are said to be exhaustive if all the possible elementary events under the experiment are covered by the events considered together. In other words, the events are said to be exhaustive when they are such that at least one of the events compulsorily occurs. Exhaustive events maybe elementary or compound events. They may be equally likely or not Equally likely.

12. Mathematical probability
The probability of an event consisting of n out of m possible equally likely occurrences, defined to be a mathematical probability. It is also known as classical probability.
The number of outcomes favorable to the occurrence of an event is divided by the total number of possible outcomes. In order for this ratio to be valid, each of the outcomes must be equally likely. Distributions are gained from actual occurrences in long-run experience and experimentation. An example is repeated trials under a constant-cause situation.
Probability of an event = m/m+n
Where m= number of outcomes in favor of event
m+n=total number of equally likely mutually exclusive and exhaustive events
The probability of rolling a six on a single roll of a die is 1/6 because there is only 1 way to roll six out of 6 ways it could be rolled. The probability of getting a sum of 5 when rolling two dice is 4/36 = 1/9 because there are 4 ways to get a five and there are 36 ways to roll the dice (Fundamental Counting Principle – 6 ways to roll the first times 6 ways to roll the second).

Do not make the mistake of saying that the probability of rolling a sum of 5 is 1/11 because there is one 5 out of a sample space of 11 sums (2 through 12). When the sample spaces are not equally likely, do not divide by the number in the sample space.

13. Properties of Probabilities
All probabilities are between 0 and 1 inclusive.
A probability of 0 means an event is impossible, it cannot happen.
A probability of 1 means an event is certain to happen, it must happen.
Example out of the below mentioned a) and c) cannot be a probability because A probability is always greater than or equal to 0 and less than or equal to 1
(a) -0.00001
(b) 0.5
(c) 1.001
(d) 0
(e) 1
Example A die is rolled, find the probability that an even number is obtained.

Solution
Let us first write the sample space (total number of cases) M of the experiment. M= {1,2,3,4,5,6}
Let A be the event “an even number is obtained” and write it down.
A ={2,4,6}
We now use the formula of the classical probability.
P(A) = n(A)/M
= 3/6
= 1/2

Example
Two dice are rolled, find the probability that the sum is
(a) equal to 1
(b) equal to 4
(c) less than 13 Solution

(a) The sample space S (total number of events) of two dice is shown below.
S = { (1,1),(1,2),(1,3),(1,4),(1,5),(1,6)
(2.1) ,(2,2),(2,3),(2,4),(2,5),(2,6)
(3.1) ,(3,2),(3,3),(3,4),(3,5),(3,6)
(4.1) ,(4,2),(4,3),(4,4),(4,5),(4,6)
(5.1) ,(5,2),(5,3),(5,4),(5,5),(5,6)
(6.1) ,(6,2),(6,3),(6,4),(6,5),(6,6)}
Let E be the event “sum equal to 1”. There are no outcomes which correspond to a sum equal to 1, hence P(E) = n(E)/n(S) = 0/36 = 0
(b) Three possible outcomes give a sum equal to 4: E = {(1,3),(2,2),(3,1)}, hence. P(E) = n(E)/n(S) = 3/36 = 1/12
(c) All possible outcomes, E = S, give a sum less than 13, hence. P(E) = n(E)/n(S) = 36/36 = 1

When you want to find the probability of one event OR another occurring, you add their probabilities together. To find the probability of event A or B, we must first determine whether the events are mutually exclusive or non-mutually exclusive. Then we can apply the appropriate

When two events, A and B, are mutually exclusive, the probability that A or B will occur is the sum of the probability of each event P(A or B) = P(A) + P(B)

When two events, A and B, are non-mutually exclusive, there is some overlap between these events. The probability that A or B will occur is the sum of the probability of each event, minus the probability of the overlap.
P(A or B) = P(A) + P(B) – P(A and B)
Addition Rule 1: When two events, A and B, are mutually exclusive, the probability that A or B will occur is the
the sum of the probability of each event.
P(A or B) = P(A) + P(B)
A single 6-sided die is rolled. What is the probability of rolling a 2 or a 5?
Let’s use this addition rule to find the probability

Probabilities: P(2) = $$\frac{1}{6}$$
P(5) = $$\frac{1}{6}$$
P (2 or 5) = P (2) + P (5)
= $$\frac{1}{6}$$ + $$\frac{1}{6}$$
= $$\frac{2}{6}$$
= $$\frac{1}{3}$$

Let’s look at some experiments in which the events are non-mutually exclusive.
Example: A single card is chosen at random from a standard deck of 52 playing cards. What is the probability of choosing a king or a club?
Probabilities: P(king or club) = P(king) + P(club) – P(king of clubs)
= $$\frac{4}{52}$$ + $$\frac{13}{52}$$ – $$\frac{1}{52}$$ = $$\frac{16}{52}$$ = $$\frac{16}{52}$$ = $$\frac{4}{13}$$

In Example, the events are non-mutually exclusive. The addition causes the king of clubs to be counted twice, so its probability must be subtracted. When two events are non-mutually exclusive, a different addition rule must be used.

Addition Rule 2: When two events, A and B, are non-mutually exclusive, the probability that A or B will occur is:
P(A or B) = P(A) + P(B) – P(A and B)
In the rule above, P(A and B) refers to the overlap of the two events

16. Multiplication Rules
When you want to find the probability of two events that are jointly occurring, then you need to apply the multiplication rule. This principle can be extended to probabilities.

-Independent Events
Independent Events are events where one occurring doesn’t change the probability of the other occurring. When events are independent, the probability of them both occurring is…
P(A and B) = P(A) * P(B)
We don’t have time to get into probability very deeply. If we did, we would cover conditional

17. Probability – the probability of dependent events.
Suppose we roll one die followed by another and want to find the probability of rolling a 4 on the first die and rolling an even number on the second die. Notice in this problem we are not dealing with the sum of both dice. We are only dealing with the probability of 4 on one die only and then, as a separate event, the probability of an even number on one die only.
P(4) = 1/6
P(even) = 3/6
So P(4 ∩ even) = (l/6)(3/6) = 3/36 = 1/12

18. Complementary Events
The root word in complementary is “complete”. Complementary events complete, or make whole. Complementary events are mutually exclusive, but when combined make the entire sample space. The symbol for the complement of event A is A’. Some books will put a bar over the set to indicate its complement. Since complementary events are mutually exclusive, we can use the special addition rule to find their probability. Furthermore, complementary events are all-inclusive, *so they make the sample space when combined, so their probabilities have a sum of 1.

The sum of the probabilities of complementary events is 1.
P(A) + P(A’) = 1
P(A’) = 1 – P(A)
Suppose you have a box with 3 blue marbles, 2 red marbles, and 4 yellow marbles. We are going to pull out the first marble, leave it out, and then pull out another marble. What is the probability of pulling out a red marble followed by a blue marble?

We can still use the multiplication rule which says we need to find P(red) • P(blue). But be aware that in this case when we go to pull out the second marble, there will only be 8 marbles left in the bag.
P(red) = 2/9
P(blue) = 3/8
P(red ∩ blue) = (2/9)(3/8) = 6/72= 1/12

19. Random variable
A random variable, usually written X, is a variable whose possible values are numerical outcomes of a random, phenomenon. There are two types of random variables, discrete and continuous.

20. Discrete Random Variables
A discrete random variable is one that may take on only a countable number of distinct values such as 0,1,2,3,4, Discrete random variables are usually (but not necessarily) counts. For a discrete random variable, its probability distribution is any table, graph, or formula that gives each possible value and the probability of that value. It is also called the probability distribution function.

Example
Consider an experiment where a coin is tossed three times. If X represents the number of times that the coin comes up heads, then X is a discrete random variable that can only have the values 0,1,2,3 (from no heads in three successive coin tosses to all heads). No other value is possible for X.

21. Continuous Random Variable
A continuous random variable is one that takes an infinite number of possible values. Continuous random variables are usually measurements. Examples include height, weight, the amount of sugar in an orange, the time required to run a mile. Consider an experiment where a coin is tossed three times. If X represents the number of times that the coin comes up heads, then X is a discrete random variable that can only have the values 0,1,2,3 (from no heads in three successive coin tosses to all heads). No other value is possible for X.

An example of a continuous random variable would be an experiment that involves measuring the amount of rainfall in a city over a year or the average height of a random group of 25 people.

22. Probability Distribution
The probability distribution of a random variable is a list of probabilities associated with each of its possible values. It is also sometimes called the probability function or the probability mass function, An example will make clear the relationship between random variables and probability distributions. Suppose you flip a coin two times. This simple statistical experiment can have four possible outcomes: HH, HT, TH, and TT. Now, let the variable X represent the number of Heads that result from this experiment. The variable X can take on the values 0, 1, or 2. In this example, X is a random variable; because its value is determined by the outcome of a statistical experiment.

A probability distribution is a table or an equation that links each outcome of a statistical experiment with its probability of occurrence. Consider the coin flip experiment described above. The table below, which associates each outcome with its probability, is an example if a probability distribution.

 Number of heads Probability 0 0.25 1 0.50 2 0.25

The above table represents the probability distribution of the random variable X.
Types of the probability distribution

• Discrete probability distributions- The probability distribution of a discrete random variable is a list of probabilities associated with each of its possible values. It shows the following properties. Firstly the probability of a discrete random variable is between 0 to 1 and secondly, the sum of all properties is 1.
• Continuous probability distributions- The number of possible values in a range is infinite in the case of a continuous probability distribution. The probability function is determined by the area under the graph.

23. Expected value
Expected value is a concept employed in statistical analysis. It is a weighted average approach that involves multiplying each possible outcome in a situation with its probability to arrive at the expected outcome. Thus Expected value is a measurement of the center of a probability distribution.
Example
Flip a coin three times and let X be the random variable of the number of heads. This has probability distribution of 1/8 forX= 0, 3/8 forX= 1, 3/8 for A= 2, 1/8 forX= 3. Use the expected value formula to obtain: (1/8)0 + (3/8)1 + (3/8)2 + (1/8)3 = 12/8 =1.5

Probability MCQ Questions

Question 1.
Probability is
a. the study of the randomness of happening of an event
b. the haphazard happening of an event
c. mathematical study of the randomness of happening of an event
d. the mathematical study of a haphazard happening
c. mathematical study of the randomness of happening of an event

Question 2.
If two sets are denoted as ACB it shows that
a. B is proper to set of set A
b. B is smaller and A is a set and A is a set of B
c. A is smaller than B and A is a proper sub-set of B
d. None of me above
c. A is smaller than B and A is the proper subset of B

Question 3.
If it is shown as B>A it shows that
a. B is a Subset of A
b. A is Subset B
c. B is a superset of A
d. A is a superset of B
c. B is a superset of A

Question 4.
Equal sets in probability mean
a. Element in both the sets are equal
b. Element in one set is monthly equal to the elements in other set
c. both a & b
d. None of the above
a. Element in both the sets are equal

Question 5.
We can depict the two-set union as
a. A = B
b. A + B
c. A Ω B
d. A ∪ B
d. A ∪ B

Question 6.
The intersection of sets is denoted as
a. A ∪ B
b. A Ω B
c. A > B
d. A< B
b. A Ω B

Question 7.
There are 600 electric bulbs in a box out of which 20 bulbs are defection if one bulb is chosen at random from the box. What is here probability that the chosen bulb is defective?
a. 1/19
b. 1/30
c. 1/25
d. 1/16
b. 1/30

Question 8.
The probability of a sure event is
a. 1
b. 0
c. Nil
d. unknown
a. 1

Question 9.
The most appropriate definition of Experiment is
a. where two or more outcomes are received when a trial is alone
b. depilate one outcome is received when a trial is done
c. Both a & b
d. alone of the above
a. where two or more outcomes are received when a trial is alone

Question 10.
Sample space is also called
a. universal space
b. event space
c. possibility space
d. All of the above
b. event space

Question 11.
If E be an event then P(E) + (None)=
a. 0
b. 1
c. 2
d. None of the above
b. event space

Question 12.
When a choice is a thousand then possible events are
a. 1
b. o
c. 6
d. 4
c. 6

Question 13.
A coin is tossed 60 times with the following result head -28 times Tail -32 times Find the probability of getting head if the coin is thrown once
a. 1
b. 7/15
c. 2
d. none of the above
b. 7/15

Question 14.
The probability of occurrence of any limit lies between
a. 0 and 1
b. 0 and 2
c. 0 and 3
d. 0 and infinite
a. 0 and 1

Question 15.
Each outcome of the sample space is called
a. event space
b. sample point
c. possibility point
d. universal point
b. sample point

Question 16.
If E is an event, then <P(E)< is
a. 0
b. 1
c. both a & b
d. Indefinite
c. both a & b

Question 17.
Probability can be
a. measured numerically
b. Can not be measured numerically
c. Can be measured but not necessarily nominally
d. All Of the above
a. measured numerically

Question 18.
A box contains 3 red balls 4 white balls and 7 black balls one ball is chosen at random what the probability of choosing the black ball is.
a. 2/5
b. 2/4
c. 1/3
d. 5/7
d. 5/7

Question 19.
If the events in the probability are independent then
a. The occurrence of one event does not affect the occurrence of record
b. The occurrence of one event still affects the occurrence event
c. It is innovative
d. Both a & b
a. The occurrence of one event does not affect the occurrence of record

Question 20.
How many types of random variables are there
a. 2
b. 3
c. O
d. 4
a. 2

Question 21.
Weight, lengths are examples of typing of _______ random variable
a. Concrete random variable
b. continuous random variable
c. Both a & b
d. None of the above
b. continuous random variable

Question 22.
It is given that the probability of winning a game is
0. 7 what is the probability of losing the game?
a. 3
b. 7
c. 7
d. 4
a. 3

Question 23.
Suppose you toss a coin twice what is the probability of tossing two heads?
a. 1/16
b. 1/4
c. 1/8
d. 1/5
b. 1/4

Question 24.
Suppose you toss a coin twice. What is the probability of tossing two heads given that your first toss is ahead?
a. 1/16
b. 1/8
c. 1/4
d. 1/2
d. 1/2

Question 25.
The collection of all possible events is called
a. A probability
b. A sample space
c. An event
d. Random variable
b. A sample space

Question 26.
The term ______ probability of A and B is used to denote the probability of the intersection of A and B
a. Marginal
b. Conditional
c. Subjective
d. Joint
d. Joint

Question 27.
There is a bag filled with 8 balls 3 white and 5 black. If ball is drawn from the bag without replacement the probability that the second ball drawn is black is, given that the first ball drawn is black is
a. 2/7
b. 5/7
c. 4/7
d. None of the above
c. 4/7

Question 28.
Cholesterol measurements constitute
a. Continuous random variable
b. Discrete random variable
c. Qualitative random variable
d. None of the above
a. Continuous random variable

Question 29.
Consider two events A & B. Event A has a probability of 1/2 while event B has a probability of 1/20 then
a. A is less probable to occur
b. A has more probability to occur
c. At least 20 trails are needed for B to appear
d. None of the above
b. A has more probability to occur

Question 30.
Suppose you draw one card from a standard 52 card deck. What is the probability that the card is black and a jack?
a. 1/26
b. 1/64
c. 1/52
d. 1/25
d. 1/25

Question 31.
The blood groups of 200 people are distributed as follows: 50 have type A blood, 65 have a B blood type, 70 have the O blood type and 15 have type AB blood. If a person from this group is selected at random, what is the probability that this person has an O blood type?
a. 0.35
b. 0.25
c. 0.45
d. none of the above
a. 0.35

Question 32.
A die is rolled, find the probability that the number obtained is greater than 4.
a. 1/3
b. 2/3
c. 1/4
d. 2/4
a. 1/3

Question 33.
Two coins are tossed, find the probability that one head only is obtained
a. 1/3
b. 2/3
c. 1/2
d. 2/4
c. 1/2

Question 34.
Two dice are rolled, find the probability that the sum is equal to 5.
a. 1/9
b. 2/3
c. 1/6
d. 2/4
a. 1/9

Question 35.
If all the elements of set A belong to set B and all the elements of set B belong to set A. This set is called.
a. Equal set
b. Disjoint set
c. Null Set
d. Void set
a. Equal set
Hint
Equal sets in probability mean Element in both the sets are equal.

Question 36.
Three unbiased coins are tossed. The probability of obtaining at least one head is
a. 1/8
b. 2/8
c. 6/8
d. 7/8
d. 7/8
Hint
Probability of an event = m/m+n
Where m= number of outcomes in favor of event
m+n=total number of equally likely mutually exclusive and exhaustive events finding m
total number of coins = 2 × 2 × 2=8
there is only one chance when no head appears which is tail,tail, tail
thus the number of out comes in favor of event = 8-1 =7
m=7
probability = 7/8

Question 37.
A bag contains 4 white, 5 red, and ~ blue balls. Three balls are drawn at random from the bag. The probability that all of them are red, is
a. 1/15
b. 2/91
c. 3/107
d. 15/107
b. 2/91
Hint
Probability of all three balls to be red = 5 × 4 × 3/15 × 14 × 13= 2/91 a

Question 38.
An event that corresponds to a single possible outcome of an experiment is caned:
a. Elementary event
b. Compound event
c. Dependent event
d. Exhaustive event
a. Elementary event
Hint
In probability theory, an elementary event is an event that contains only a single outcome in the sample space.

Question 39.
if a card is drawn at random from a pack of 52 cards, the chance that it will be a king of hearts is:
a. 1/13
b. 4/13
c. 1/52
d. 4/26
c. 1/52
Hint
Only one king of hearts Probability = 1/52

Question 40.
The total number of all possible outcomes of a random experiment constitutes:
a. Equally likely events
b. Exhaustive events
c. Mutually inclusive events
d. None of the above
b. Exhaustive events
Hint
One or more events are said to be exhaustive if all the possible elementary events under the experiment are covered by the events considered together. In other words, the events are said to be exhaustive when they are such that at least one of the events compulsorily occurs.

Question 41.
What is the probability of getting a sum of 9 from two throws of a dice?
a. 1/9
b. 2/9
c. 1/36
d. 1/3
a. 1/9
Hint
Probability = no. of favourable events/total no. of events = 4/36 = 1/9
No. of favourable events = (3,6), (4,5),(5,4),(6,3)

Question 42.
Mutually exclusive events mean –
a. No events can be expected to occur in preference to any other event in the same experiment
b. Events that can be decomposed further into elementary events
c. The occurrence of one event prevents the occurrence of another event in the same experiment
d. Events that are independent of one another.
c. The occurrence of one event prevents the occurrence of another event in the same experiment
Hint
Mutually Exclusive means you can’t get both events at the same time. It is either one or the other, but not both

Question 43.
A bag contains 6 black and 8 white balls. One ball is drawn at random. The probability that the ball drawn is white will be
a. 1/14
b. 1/7
c. 3/7
d. 4/7
d. 4/7
Hint
Total balls = 14 Favourable evnts = 8 P = 8/14 = 4/7

Question 44.
When 2 coins are tossed, then what is the probability of getting one head?
a. 1/2
b. 1/4
c. 1
d. 3/4
a. 1/2
Hint
No. of possible outcome = 2
Total no. of outcome =4 (HH,HT,TH,TT)
P = 2/4 =1/2

Question 45.
Which set is it in which no elements are present?
a. Sub set
b. Null set
c. Disjoint
d. Equal set
b. Null set
Hint
The null set, also called the empty set, is the set that does not contain anything.

Question 46.
If a dice is thrown once, what is the probability of getting an even number?
a. 1/2
b. 1
c. 2/6
d. None of the above
a. 1/2
Hint
Total no. of outcome = 6
No. of even favourable outcome = 3 (2,4,6)
P = 3/6 =1/2

Question 47.
What is the probability of getting a queen from a pack of cards?
a. 1/52
b. 4/52
C. 2/13
d. 13/52
b. 4/52
Hint
Total no. of outcome = 52
No. of favorable outcome of getting queen = 4
P = 4/52

Question 48.
What is the probability of getting king of heart from the pack of cards?
a. 1/52
b. 13/52
c. 2/52
d. 2/13
a. 1/52
Hint
Total no. of outcome = 52
No. of favorable outcome (rings of the heart) = 1
P = 1/52

Question 49.
Find the probability that a leap year has 53 Sundays.
a. 2/7
b. 54
C. 1/9
d. 53
a. 2/7
Hint
There are 366 days in leap year out of Which there are 52 Sundays and 2 days.
2 days may be (SU,M)(M,T)(T,W)(W,TH)(TH,F)(F,S)(S,SU)
Thus total outcome =7
No. of favourable outcome = 2 (SU,M) and (S,SU)
P= 2/7

Question 50.
Given A = (1,2,3,4.5) & B = (4,3,1,5,6). find (B-A)
a. 6
b. 2
c. 1
d. 3
a. 6
Hint
B-A means elements of B not included in A = 6

Question 51.
If set A = {1 ,2,3,4}, 8 = {1 ,2,} Then, which one is correct?
a. Set A is a subset of set 8
b. Set 8 is a subset of set A
C. 80th (a).& (b)
d. None of the above
b. Set 8 is a subset of set A
Hint
Set B is a subset of set A because both elements 1,2 are present in set A.

Question 52.
In a box, there are 8 red, 7 blue, and 6 green balls. One ball is picked up randomly. What is the probability that it is neither red nor green?
a. 10/21
b. 7/21
c. 8/21
d. 15/21
b. 7/21
Hint
Total no. of outcome = 8+7+6=21 No. of favorable outcome =7 P= 7/21

Question 53.
A town has a total population of 50,000. Out of it, 28,000 read the newspaper X and 23,000 read Y while 4,000 read both the papers. The number of persons not reading X and Y both are:
a. 3,500
b. 2,500
c. 3,000
d. 2,000
c. 3,000
Hint
= 28000+23000-4000 = 47000 n(ADB) =50000-47000 = 3000

Question 54.
If all the elements of set A belongs to set B and all the elements of set B belong to set A they can be referred to as:
a. Equal sets
b. Supersets
c. Disjoint sets
d. Subsets
a. Equal sets
Hint
Two sets are equal if they have exactly the same elements.

Question 55.
Two coins are tossed, find the probability that two heads are obtained:
a. 0.75
b. 0.25
c. 1
d. 0.50
d. 0.50
Hint
Total outcomes = 4
No. of favouable outcome =2
P = 2/4 =1/2= 5

## Essentials of Good English – Business Management Ethics and Entrepreneurship Notes

For enrichment of vocabulary, following should be kept in mind.

Choice of Words:
It should be according to them:

• Audience to whom you are communicating with
• Type of communication
• Message you intend to convey
• Certain words to be used in a particular context only
• Regional differences in language or Connotation

Note: Tips for choosing right word are:

• Use of simple language
• Use of language on the basis of field i.e. Jargon
• Avoiding the use of superfluous words/verbosity.

Homonyms:
These are the group of words which are similar in the sound but they differ in their meaning as well as spelling.
Following are the examples of Homonyms

• Elicit: Draw out
Illicit: unlawful.
• Refuge: Place of shelter from Danger
Refuse: not to accept, decline
• Root: (basics, core)
Route: (way)
Rout: (Completely defeated forced to flee)

Synonyms:
Words nearly having the same meaning are called synonyms.
Some examples of synonyms are:

Word Synonyms
Audacious bold, daring
Cogent Valid, convincing
Effete exhausted, worn-out
Morbid Morose, sickly

Antonyms:
A word opposite or contrary in meaning to another word is called antonym.
Some examples of Antonyms are:
Word Antonyms
Curiosity Indifference
Flattery Criticism
Oral Written

Single Word For Group of Words:
Explaining the group of words in a single word helps to enrich vocabulary.
For e.g.:
One who perform gymnastic feats, Acrobat
One who does not believe in the existence of god Atheist

Grammar and its Usage:
Part of grammar concerned with changes in the form of words by internal modification is known as accidence.
Syntax refers to the manner In which these words can be arranged in form of a sentence.

Parts of Speech in English:

• Noun
• Pronoun
• Verbs
• Prepositions
• Conjunctions
• Interjections

Nouns:
Part of speech which ¡s used to identify name, place, thing, quality action or animal.
Types of nouns are:

• Common Noun – e.g. – bank, shop etc.
• Proper Noun – e.g. – January, Delhi etc.
• Collective Noun – e.g. – batch, company etc.
• Abstract Noun – e.g. – Joy, Sorrow, Excitement, Ambition.

Pronouns:
Pronouns are those words which are used in place of noun.
Types of Pronoun are:

• Personal Pronouns
• Relative Pronouns
• Possessive Pronouns.

Adjective is a word which adds meaning to noun or a pronoun.
Note:
Compound Adjective: When two or more words are joined with a hyper form a Compound Adjective.
For e.g.: Government Financed project

These are words indicating action verbs comes from Latin Verbum, meaning a word; For e.g.:
Following are the functions performed by Verbs

• Stating existence.
• Commanding anyone.
• Description of activity.

There are two types of Verb:

1. Helping Verb.
2. Principal Verb.

For e.g.: The CEO is an exceptionally sharp manager.

Preposition:
Preposition is placed before noun to show its relationship with time, place, case etc.
Thumb rule of using prepositions is that the sentence should read well.
For e.g.: Some of the prepositions are:
→ above
→ below
→behind
→ beside

Conjunction:
Conjunction are the words used to join words or sentences.
For e.g.: and, but, also, both etc.
Using of conjunction in pairs is called as correlative conjunction.
For e.g.: either-or, not only-but also, both and etc.

Interjection:
These are the words used to express emotion of feeling in a sentenŒ
F04 e.g.: Hi! Alas! Oh? etc.

Types of Voices:
There are two types of voices:

1. Active Voice
2. Passive Voice

Active Voice is shorter, direct and emphatic.
Passive Voice Is suitable while drafting of legal formulations.

Articles:
Articles are called the most common determiner.
Two types of Articles are:

1. Definite Article
2. Indefinite Article.

Definite Article: It is always particular/specific thus referring to definite person, thing or entity.
For e.g.: The river Ganges.

Indefinite Articles: The indefinite articles are ‘a’ and ‘an’. These articles are not definite, general and are non-specific. For e.g.: She has planted a rose plant.

Usage:

• Usage implies the manner in which the native speakers of a language use it.
• Usage of a particular language is not governed by any grammatical rules.

Tenses:
A set of forms taken by verb to indicate the time of action.
There are twelve types of tenses:

1. Present
2. Past
3. Future
4. Present perfect progressive
5. Past perfect progressive
6. Future perfect progressive
7. Present Progressive
8. Past Progressive
9. Future Progressive
10. Present perfect
11. Past perfect
12. Future perfect

Progressive forms- used to express continuing action.
Perfect tenses – used to convey past action which is continuing up to present moment.

Sentence Construction:
Combination of words in order to form the meaningful sentences Why sentences are Formed?

• Make a statement
• Post a Question
• Give a Command
• Make an exclamation.

Sentence consists of two parts

1. Subject
2. Predicate

Subject: It is that part of sentence which contain the person or thing which performs the action.
Predicate: his that part of sentence which contains the verb. It gives information about the subject.
A phrase is a group of words which does not make sense by itself. It is not a finite verb:
It can be a:

• Noun

A clause is a grammatical unit that includes a predicate, and an explicit or implied subject and expresses a preposition.
There are two types of clause
1. Main clause (Principal statement)
2. Subordinate clause (Rest statements)

Types of sentence
Simple Sentence: It contains one finite verb and can make only one complete statement
Compound Sentence: It is made up of two or more Clauses.
Complex Sentence: It ¡s formed when its main clause is supported by a dependent clause.

Sentence Construction:
Sentence can be constructed using various pattern and structures
Sentence Construction that are based on writing are:

• Loose Sentences – simple style, closer to spoken form
• Periodic Sentences difficult to write

Sentence Construction on the basis of length are:

• Shorter Sentences – easier to write and understand
• Longer sentence – more prone to grammatical errors.

Spellings and Pronunciation:

• There is a relationship between a word’s sound and the way it expressed in writing.
• The same sound is often conveyed through different spellings.

Stress and Rhythms:
A syllable is the minimum rhythmic sound of a spoken language.
Word can have more than one syllables

• One Claim
• Two Confess
• Three Sacrifice
• Four Retribution.

Prefixes and Suffixes
Prefix:
It is the affix or addition to the base form or root word coming at the beginning of the sentence.

Group of Prefix:
Prefix falls into a number of distinct groups such as:

• Supportive
• Size
• Opposing
• Time
• Negative
• Number
• Reversative
• Status
• Derivative
• Class changing
• Pejorative
• Miscellaneous

Supporting Prefix: Pro’ is used with the word for favouring /supporting lt Cleaning
Eg- Pro-choice, Pro market, etc.
Opposing Prefixes:
→ It opposed the action denoted by the root word.
→ E.g: Anti (against): anti dote, antibiotic, etc.

Negative Prefixes:
→These are prefixes that denote the absence of distinguishing feature of the root word.
E.g: an (not, lacking) anaesthetic, anaemic, etc.

Reversative Prefixes:
→ it denotes the act of undoing the previous act that the root word denote as being done.
Dis (Reverse of) disqualify, dishonest, etc.

Derivate prefixes –
→ It means removing someone or something Eg: de (depart from) – deplanes, detrain, etc.
Pejorative Prefixes:
→ These express contempt, bad or wrong. Eg: Mis (wrongly) – Misspell, mismanage etc.

There are some other prefixes also like:
Place Prefix → indicates place or situation
Size Prefix → denotes size
Time Prefix → denotes time
Number Prefix → denotes number
Status Prefix → denotes a status
Class Changing Prefix → changes the word class

Suffix:
It is an addition to the end of a word to form a derivative of root word.
Groups of suffix:

• Noun Suffix
• Verb Suffix

Noun Suffix a city – audacity, capacity

• Verb Suffix – is, ire – modernise, terrorise.
• Adjective Suffix -. y – massy, funny sleepy.
• Advert Suffix — wise – clockwise, taxwise

Combination Word:
These are words, elements or combining forms that can be combined with other words that already exist to form new words.
Eg: Macro (large) → Macroeconomics, macro-organism, etc.

Punctuation:
The marks, such as full stop, brackets, commas used In writing to separate sentences and their elements and to darify the meaning are called punctuation.

Punctuation also serves other purposes:

• Introduction of delicate effects
• Alteration of flow of sentence
• Highlighting certain words which are necessary for the document

The various punctuations used in English language are:

• Capital letters
• Stroke
• Abbreviation
• Full stop
• Ellipsis
• Space
• Hyphen
• Comma
• Italic

Punctuations:

abbreviations:
It is a shortened form of word, phrase or text
It saves time
Eg. TV (Television), MA – Master of Arts.

Numerals:
Choice of presenting it in figure or words depends upon the purpose that one wants to achieve
Eg: ₹ 1.20,000, 50-50%, 3/4th inch, etc.

Idioms and Phrases:
Idiom:
A group of words established by the usage having meaning not deductible from the individual words. Dictionary defines idiom as, “the form of expression peculiar to a language.”
E.g: To turn over a new leaf
To turn trail
To lay waste
To make common cause

Phrase:
A phrase is a group of words, a part of a sentence which does not make a complete sentence but has an independent meaning.
E.g: To be in the doldrums
To be on the wave
To be on the carpet

Proverb:
A short petty saying in general use, stating a general truth or piece advice.
E.g:
Well begun is half done
Example is better than percept
A fool and his money are soon parted.

Foreign word and Phrases:
English has been borrowed generally Iron’ other languages more from Latin, Greek, French and German. This leads to the formation certain words and phrases.
E.g: ab initio (L) From the beginning
corrigenda (L) a thing to be corrected
Bon voyage (F) have a good journey

Abbreviations form of Latin, French and Roman Word:
shortened form of word or phrase used for simplicity in the place of whole:
Latin Abbreviation: AD, – Anno Domini
German Abbreviation: ren – Renata

Nature of Management and its Process MCQ Questions

1. Which of the following is not a German Abbreviation:
(a) S.d.
(b) WWE
(c) P.S.
(d) N.N.
(c) P.S.

2. Which of the following is not a Latin Abbreviation:
(a) vs.
(b) a.v.
(c) Bez
(d) i.a.
(c) Bez

3. Which of the following is not a French Abbreviation:
(a) Lit
(b) Ong
(c) U.S.
(d) N.B.
(d) N.B.

4. Which is not a proverb:
(a) Sweet are the uses of adversity
(b) to scatter to the winds
(c) A rose would smell as sweet by any other name
(d) A closed mouth catches no flies
(b) to scatter to the winds

5. What does the Idiom mean To scatter to the winds
(a) To waste
(b) Prove of something
(c) To prejudice another person
(a) To waste.

6. Which word explains the following sentence “To search thoroughly.
(a) Vandal
(b) Genocide
(c) Ransack
(d) Amnesty
(c) Ransack

7. Which word explains the following group of words “Coming at the right time”
(a) Opportune
(b) Benefactor
(c) Quisling
(d) Panacea
(a) Opportune.

8. Find out the antonym of the word “Meager”
(a) Empty
(b) Plentiful
(C) Both (a) or (b)
(d) None of the above
(b) Plentiful

9. A ………………………. sentence contains only one finite verb and can make only one complete statement.
(a) Simplex
(b) Compound
(c) Complex
(d) None of the above
(d) None of the above

10. To transform into a purer or idealised form means.
(a) Sublimate
(b) Ransack
(c) Vandal
(d) Revive
(a) Sublimate

11. The Latin word bonafide” means:
(a) Strange
(b) Good faith
(c) Colleague
(d) None of the above
(b) Good faith

12. BCC stands for:
(a) Blind copy carbon
(b) Before carbon copy
(C) Blind carbon copy
(d) Before copy carbon
(C) Blind carbon copy

13. VAT stands for.
(c) Value Abstract Tax

14. Alma mater means:
(a) A school or college which one has to attend
(b) A public apology
(C) Preliminary matter
(d) None of the above
(a) A school or college which one has to attend

15. The proverb “To rob peter to, pay paul” means:
(a) Things take time to complete and to mature
(b) To harm one person in order to benefit the other
(c) You judge a man’s worth by his others
(d) A man is judged by sort of friends he has.
(b) To harm one person in order to benefit the other

16. WWW stands for:
(a) World wide web
(b) Wide word web
(c) Web worldwide
(d) None of the above.
(a) World wide web

17. Agnostic means:
(a) One who perform gymnastic frets
(b) The action of attacking with provocation
(c) Science of production, transmission
(d) None of the above.
(d) None of the above.

18. There are several pairs or groups of words that are similar but are different in spelling and meaning.
(a) Antonyms
(b) Homonyms
(c) Synonyms
(d) None of the above.
(d) None of the above.

19. It is used to construct word to Darity meaning. It links words to form compound word.
(a) The Hyphen (-)
(b) Comma (,)
(c) Full stop (.)
(d) None of the above.
(a) The Hyphen (-)

20. An ostentatious and inappropriate display of learning is:
(a) Jargon
(b) Pedantry
(c) Verbosity
(d) Vocabulary.
(a) Jargon

21. Identify the correctly spelt word:-
(a) Occasion
(c) Occasion
(b) Occasion
(d) Occasion
(a) The correct spelling among the following option is occasion.

22. The abbreviation ‘E&OE’ stands for:-
(a) Errors and Omitted Errors
(b) Expected and Omitted errors
(c) Errors and Omissions excepted
(d) Exceptions and omissions encountered.
(c) The Abbreviation ‘E & OE’ stands for Errors and Omission Excepted as this abbreviation is used in Invoices or any document related to figures.

23. The proverb “apparel often proclaims the man” means –
(a) Clothes are everything
(b) You judge a man’s worth by his clothes
(c) Apparels are expensive
(d) None of the above.
(b) The proverb “ apparel often proclaims the man” means that you judge a man’s worth by his clothes. This means that man’s status can be judged by his dressing sense and his attitude.

24. Fax is the abbreviation of:-
(a) Fascimile
(b) Fascile
(c) Fascicle
(d) Fiscal
(a) Fax is the abbreviation of Fascimile.

25. What does the idiom ‘to split hairs’ mean?
(a) Argue on major points
(b) Argue on minor points
(c) Not to argue
(d) Brainstorming
(b) The idiom “to split hairs’ means to argue on minor points.

26. …………………………………. Taj Mahal is situated in Agra. Fill in the blank using
(a) One who gives friendly help
(b) One who performs gymnastic feats
(c) An expert judge in the matter of taste
(d) A member of royal family of taste
(c) The Taj Mahal is situated in Agra.

27. ‘Expired’ is a synonym of –
(a) Illegal
(b) Lapsed
(c) Dishonoured
(d) Matured
(b) The Synonym of expired is “Lapsed”.

28. Who is called a ‘Connoisseur’?
(a) One who gives friendly help
(b) One who performs gymnastic feats
(c) An expert judge in the matter of taste
(d) A member of royal family of taste
(c) Connoisseur is a person who is an expert judge in the matter of taste.

29. A word opposite to another word
(a) Antonym
(b) Synonym
(c) Homophones
(d) Idiom
(a) A word opposite to another word is called an Antonym.

30. ………………….. err is human, ……………………………. forgive is divine
(a) One
(b) To
(c) Into
(d) From
(b) To err is human To forgive is divine

31. The passive voice of the sentence ‘I killed a snake’ is –
(a) I have killed a snake
(b) A snake is killed
(c) A snake was killed by me
(d) A snake has been killed by me.
(c) The passive voice of the sentence ‘I killed a snake’ is “A snake was killed by me”.

32. Who is philanthropist?
(a) One who gives friendly help
(b) One who is master of his words.
(c) One who is dissatisfied and inclined to rebel
(d) One who seeks to promote the welfare of others especially by donating money for good causes.
(d) Philanthropist: One who seeks to promote the welfare of the others especially donating money for good cause.

33. Which one of the following is a definite article and is always specific?
(a) The
(b) A
(c) An
(d) None of the above.
(a) The is a definite article and is always specific.

34. Which one of the following is used to enclose certain contents which the writer sets out apart so that the flow of the sentence is not interrupted?
(a) Brackets
(b) Quotation marks
(c) Comma
(d) Colon
(a) Brackets are used to enclose certain contents which the writer sets out a part so that flow of the sentence is not interrupted.

35. Which of the following is an example of present indefinite tense?
(a) I went to office yesterday,
(b) I go to office every day
(c) I had been to office
(d) 1 am going to office
(b) Example of present Indefinite tense is I go to office every day.

36. Which one of the following is the antonym of the word ‘bankrupt’?
(a) Solvent
(b) Despair
(c) Expensive
(d) All of the above
(a) Antonym of word bankrupt is Solvent.

37. What is meant by ‘abinitio’?
(b) From the Origin
(c) From the beginning
(d) According to value
(c) Meaning of word ‘ab Initio is “from the beginning”.

38. The expression ‘to formally put an end to’ means –
(a) Abolish
(b) Abandon
(c) Excerpt
(d) None of the above
(a) Meaning of the sentence is ‘to formally put an end to’ is to Abolish.

39. The Latin word ‘Bona file means —
(a) Stranger
(b) In good faith
(c) Colleague
(d) None of the above
(b) Latin word ‘Bona Fide’s means “In good faith”.

40. A person chosen by disputing parties to settle their differences is called —
(a) Agent
(b) Partner
(c) Arbitrator
(d) Owner
(c) A person chosen by disputing parties to settle their differences is called an Arbitrator.

41. The apostrophe (‘) is used to – ;
(a) Denote possession and other kinds of relationship
(b) Introduce direct speech
(c) Join words and sentences
(d) Point out the reader’s attention forward.
(a) The apostrophe (‘). is used to Denote possession and other kinds of relationships.

42. The object in the sentence ‘Ram opened the door’ is –
(a) Ram
(b) Opened
(c) The
(d) Door
(d) The Object in the sentence ‘Ram opened the door’ is door. Object is described as a noun in sentence. Hence, Object is the “door”.

43. The process by which green plants prepare their own food is known as
(a) Photosynthesis
(b) Symbiosis
(c) Perspiration
(d) Biochemistry
(a) The process by which green plants prepare their own food is known as Photosynthesis.

44. One who calculates insurance and annuity premium is known as –
(a) Investor
(b) Insurer
(c) Actuary
(d) Atheist
(c) One who calculates insurance and annuity premium is known as Actuary.

45. What does the prefix ‘poly’ in the word polygon denotes?
(a) Huge
(b) Smalt
(c) Many
(d) Single
(c) Prefix ‘poly’ in the word polygon denotes Many.

46. Which one of the following prefixes express contempt, disapproved, bad or wrong?
(a) Status Prefix
(b) Derivative prefix
(c) Pejorative prefix
(d) Piarie prefix
(c) Pejorative prefix express contempt disapproved bad on wrong.

47. Which one of the following sentences is grammatically correct?
(a) I will be going to school
(b) I go to school daily
(c) I will go to school yesterday
(d) I goes to school
(b) ‘I go to school daily’ is a grammatically correct sentence.

48. Which one of the following is grammatically correct?
(a) I bought three dozen bananas
(b) I bought three dozen bananas
(c) I bought three dozens banana
(d) I bought three dozen banana.
(b) The sentence “I bought three dozen bananas” is grammatically correct.

49. Don’t worry we are prepared ……………………… anything. Which one of the following is the correct preposition to fill in the blank space?
(a) By
(b) From
(c) To
(d) For.
(d) Don’t worry we are prepared for anything is the correct preposition.

50. A remedy for all diseases or difficulties is called:
(a) Panacea
(b) Concrete
(c) Numismatics
(d) Philistine.
(a) A remedy for all diseases or difficulties is called Panacea.

51. Ram scored overall 99% marks. No other student of his class could do this. On the basis of his performance we may say:
(a) Ram is an intelligent student of his class
(b) Ram is more intelligent student in his class
(c) Ram is the most intelligent student of his class
(d) Ram is one of the more intelligent boys of his class.
(c) Ram scored overall 99% marks. No other student of his class could do this. On the basis of his performance, we can say that – Ram is the most intelligent student of his class.

52. The quality of expressing much in few words is known as:
(a) Exigency
(b) Brevity
(c) Apprises
(d) None of the above.
(b) The quality of expressing much in few words is known as Brevity. It means saying something in brief.

53. The place where an aeroplane is housed is known as:
(a) Shed
(b) Yard
(c) Cold storage
(d) Hangar.
(d) The place where an aeroplane is housed is known as Hangar.

54. A person who seeks to promote the welfare of poor by donating money is known as:
(a) Benefactor
(b) Philanthropist
(c) Collaborator
(d) Ornithologist.
(b) A person who seeks to promote the welfare of poor by donating money is known as philanthropist.

55. The Latin phrase mutatis mutandis stands for:
(a) With the necessary changes
(b) A way of doing something
(d) Privilege entails responsibility.
(a) The Latin phrase mutatis mutandis stands for-with the necessary changes.

56. The term ‘subjudice’ means:
(a) Not to be considered by judiciary
(b) Under judicial consideration
(c) Prohibited by law
(d) None of the above.
(b) The term ‘Subjudice’ means under judicial consideration.

57. WhIch one of the followings grammatically correct?
(a) I bought three dozens bananas
(b) I bought three dozen bananas
(c) boi.ight three dozens banana
(d) I bought three dozen banana.
(b) The sentence “1 bought three dozen bananas” is grammatically correct.

58. Don’t worry we are prepared anything. Which one of the following is the correct preposition to till-in the blank space?
(a) By
(b) From
(c) To
(d) For.
(d) Don’t worry we re prepared for anything is the correct preposition.

59. A remedy for all diseases or difficulties is called:
(a) Panacea
(b) Concrete
(c) Numismatics
(d) Philistine.
(a) A remedy for all diseases or difficulties is called Panacea.

60. Ram scored overall 99% marks. No other student of his class could do this. On the basis of his performance we may say:
(a) Ram is an intelligent student of his class
(b) Ram is more intelligent student In his class
(c) Ram is the most intelligent student of his class
(d) Ran, is one of the more intelligent boys of his class.
(c) Ram scored overall 99% marks. No other student of his class could do this. On the basis of his performance, we can say that – Ram is the most intelligent student of his class.

61. The quality of expressing much in few words is known as:
(a) Exigency
(b) Brevity
(c) Apprises
(d) None of the above.
(b) The quality of expressing much in few words is known as Brevity. It means saying something in brief.

62. The place where an aeroplane is housed is known as:
(a) Shed
(b) Yard
(c) Cold storage
(d) Hangar.
(d) The place where an aeroplane is housed is known as Hangar.

63. A person who seeks to promote the welfare of poor by donating money is known as:
(a) Benefactor
(b) Philanthropist
(c) Collaborator
(d) Ornithologist.
(b) A person who seeks to promote the welfare of poor by donating money is known as philanthropist,

64. The Latin phrase mutatis mutan djs stands for:
(a) With the necessary changes
(b) A way of doing something
(d) Privilege entails responsibility.
(a) The Latin phrase mutatis mutandis stands for-with the necessary changes.

65. The term ‘subjudice’ means:
(a) Not to be considered by judiciary
(b) Under judicial consideration
(c) Prohibited by law
(d) None of the above.
(b) The term ‘Subjudice’ means under Judicial Consideration.

66. Which of the following is main function of an Apostrophe (’)?
(a) To point the reader’s attention forward
(b) To separate two or more independent clauses
(c) To denote possession and other kinds of relationship
(c) The main function of an Apostrophe (‘) is

• To denote possession and other kinds of relationships.
• Contraction of words.

67. Which of the following is a definite article?
(a) A
(b) An
(c) The
(d) All of the above.
(c) ‘The’ is the definite article and is always specific referring to a definite or only thing person or entity. It is also used to indicate specificity and uniqueness.

68. Which of the following is passive voice of “Shahjahan built Taj Mahal”?
(a) Taj Mahal is built by Shahjahan.
(b) Taj Mahal was built by Shahjahan.
(c) Taj Mahal was build by Shahjahan.
(d) Taj Mahal built by Shahjahan.
(b) Passive voice of “Shahjahan built Taj Mahal” is “Taj Mahal was built by Shahjahan.”

69. Which of the following is grammatically correct?
(a) A snake was kill by me.
(b) You are request to come daily.
(c) Company Secretaries are also known as governance professionals.
(d) Mahesh is more intelligent student of the class.
(c) Grammatically correct statements are as follows –

• A snake was killed by me.
• You are requested to come daily.
• Mahesh is the most intelligent student of the class.

Thus, option C is grammatically correct.

70. ‘To play second fiddle’ means –
(a) To play the violin
(b) To meddle with something
(c) To take a subordinate part
(d) To cheat.
(c) ‘To play second fiddle means-to take a subordinate part.

71. means incapable of making mistakes.
(a) Intelligent
(b) Infallible
(c) Incongruous
(d) Indispensable.
(b) Infallible means incapable of making mistakes.

72. The meaning of Latin phrase ab initio is –
(a) From the origin
(b) From the beginning
(c) From the middle
(d) From the ages.
(b) The meaning of Latin phrase ‘ab Initio is ‘from the beginning’.

73. Opposite of word “Absolute”
(a) Complete
(b) Limited
(c) Present
(d) All of the above.
(b) The opposite of word “Absolute” is “Limited”. Hence, option (b) is correct.

74. Correct definition of noun is:
(a) It indicates some action
(b) It indicates some quality
(c) It is the name of any person, place or thing
(d) None of the above.
(c) The correct definition of noun is : “Noun is the name of any person, place or thing”. Hence, option (c) is correct.

75. ……………………. is used to denote possession and other kinds of relationships.
(a) Full stop
(b) Comma
(c) Hyphen
(d) Apostrophe
(d) An apostrophe is used to denote possession and other kinds of relationships. For e.g.: It was the Court’s order.

76. Choose the correct spelling:
(a) Occasion
(b) Occasion
(c) Occasion
(d) Occasion
(b) The correct spelling of the word is “occasion” Thus option (b) is correct.

76. Advise is a ……………… .
(a) Noun
(b) Verb
(c) Conjunction
(d) Preposition.
(b) Advise is a verb because verb indicates action. Advise offer suggestions about the best course of action to someone. For e.g.: “I advised him to go home”.

77. What are these: principal – principle, Acess – excess etc.
(a) Synonyms
(b) Antonyms
(c) Homonyms
(d) None of the above.
(c) “Principal-Principle”, “Access-Excess” etc. are Homonyms because these are several pairs or groups of words that are similar in sound but are different in spelling and meaning. Thus, option (c) is correct.

78. Write the full form of Ph. D:
(a) Philosophy Doctor
(b) Philosophie Doctor
(c) Philosophiae Doctor
(d) None of the above
(c) The full form of Ph. D. is Philosophiae Doctor which means Doctor (or Doctorate) of Philosophy.
Thus option (d) is correct.

79. A remedy for all diseases or difficulties is called:
(a) Panacea
(b) Concrete
(c) Numismatics
(d) Philistine
(a) A remedy for all diseases or difficulties is called panacea. Thus option (a) is correct.

80. Meaning of the word ‘to take a leap in the dark?
(a) not to be reckless and impulsive
(b) take an action i.e. risked in the hope that it is correct.
(c) to fall in the dark
(d) to get a ray of hope.
(b) The word, “to take a leap in the dark” means to take an action i.e., risked in the hope that it is correct.
Thus option (b) is correct.

81. Who recognised the need of first small car in India?
(a) Maruti
(b) Santro
(c) Reliance
(d) Tata Nano
(a) Maruti recognized the need of first small car in India.

82. What is the meaning of word ‘Thrive’?
(a) Prosper
(b) Bold
(c) Flourish
(d) Both (a) & (c)
(d) Thrive means to prosper and flourish. Thus answer is both (a) and (c).

83. How many syllables are there in two words:- satisfaction and satictation?
(a) One
(b) Two
(c) Three
(d) Four
(d) A syllable is a minimum rhythmic sound of spoken language thus, the words – satisfaction and satiation have four syllables.

84. ‘To flag a dead horse’ means:
(a) To make something less effective
(b) To be accepted satisfactorily
(c) Waste one’s energies on a lost cause
(d) To prejudice another person
(d) “To flog a dead horse” means “to prejudice another person”.

85. ‘Exempli Gratia is a:
(a) Latin word
(b) French word
(c) Greek word
(d) None of the above
(a) ‘Exempli Gratia’ is a Latin word.

86. The quality of expressing much in few words is known as:
(a) Exigency
(b) Brevity
(c) Apprises
(d) None of the above.
(b) The quality of expressing much in few words is known as Brevity. It means saying something in brief.

87. What is the meaning of Audacious?
(a) Bold
(b) Strong
(c) Weak
(d) None of the above
(a) Audacious means bold.

88. If a sentence contains only one finite verb, t Is called.
(a) Complex sentence
(b) Compound sentence
(c) Simple sentence
(d) Paragraph
(c) Simple sentence contains one finite verb and can make only one complete statement.

89. Which of the following is the abbrevíate of Latin abbreviation-e.g.
(a) Exempli Gratia
(b) Exam gratia
(c) Exam gratia
(d) Example granted.
(a) An abbreviation is a short way of writing a word or a phrase that could also be written out in full. The abbreviate of Latin word-e.g. stands for example gratia.

90. Which of the following is the meaning of the word Audacious.
(a) Weak
(b) Bold
(c) Scared
(d) Joy
(b) Meaning of the word: “Audacious” – Bold, daring

91. It is used to denote possession and other kinds of relationships and contractions of:
(a) Comma
(b) The Hyphen
(c) An Apostrophe
(d) Full stop.
(c) ‘Apostrophe’ (’) is used to denote possession and other kinds of relationships. Eg. This is Walters’ Book’.

92. identify the correct spelling:
(a) Occasion
(b) Occasion
(c) Occasion
(d) Occasion
(c) Correct spelling is “Occasion”.

93. “Out of the frying pan into the fire” means:
(a) It is easy
(b) From one kitchen to another
(c) From one trouble to another bigger trouble
(d) From one place to another.
(c) Proverb:
“Out of the frying pan into the fire” means from one trouble to another big trouble.

94. Which of the following is the meaning of the word “fastidious”?
(a) foolish
(b) funny
(c) fussy
(c) Fastidious = Fussy

95. A syllable is the minimum rhythmic sound of a spoken language. How many syllables are there in retribution, satisfaction & transatlantic?
(a) Four
(b) Three
(c) Two
(d) One.
(a) A syllable is the minimum rhythmic sound of spoken language. For example, there is only one syllable in name me etc., two in confess and four in satisfaction and transatlantic.

96. What is meant by ‘abinitio’?
(a) From the beginning
(b) From the end
(c) According to value
(a) “Ab initio” means from the beginning.

97. Which of the following is the meaning of the phrase ‘To mind one’s Ps and Q’s?
(a) Mind one’s own behaviour
(b) III treatment
(c) To be punctiliously careful about one’s speech or behaviour
(d) To be careful.
(a) To mind one’s P’s and Q’s (to be punctiliously careful about ones speech or behaviours): The manager suspects his chief clerk of dishonesty, and if the clerk does not mind his P’s and Q’s, he will soon find himself out of job.

98. Which of the following is the correct meaning of the word “manifestation”?
(a) Using or showing judgement
(b) Level of worthiness
(c) Outward or perceptible indication
(d) Lasting for an indefinitely long time.
(c) Manifestation = outward or perceptible indication.

99. It is used to link words to form a compound word:
(a) Slash
(b) Full stop
(c) Hyphen
(d) Comma.
(c) Hyphen is usually used to link words to form a compound word for example get-together, hand-picked.

100. Which of the following is the meaning of the word idiom:
(a) Join words or even sentences conveying related ideas
(b) The shortened form of a word, phrase or text
(c) A literal translation of two – word combination
(d) None of the above.
(c) A group of word established by the usage having meaning not deductible from the individual word. A literal transaction of two-word combination is called idiom.

102. What is the meaning of “Audacious”:
(a) Bold
(b) Strong
(c) Weak
(d) All are applicable
(a) Meaning of audaciousness is Bold.

103. It links words to form compound word:
(a) The comma
(b) Full stop
(c) Both (a) and (b)
(d) The Hyphen.
(d) Hyphen helps in forming compound words. Example: ex-partner.

104. Meaning of Idiom “to build castles in the air”:
(a) daydreaming
(b) To win favours by gifts
(c) To have to humiliate oneself
(d) To issue a challenge.
(a) Meaning of idiom ‘to build castles in the air’ is daydreaming.

105. Advice is a ………………………… .
(a) Article
(b) Verb
(c) Noun
(d) Pronoun
(c) Advice is a noun and the end-sound is ‘s’.

106. What do you understand by ‘one strikes while iron is hot:
(a) To extend
(b) To take immediate advantage of an opportunity
(c) To fall into a trap
(d) Both (a) and (b)
(b) The meaning of ‘One strikes while iron is hot is to take immediate advantage of an opportunity.

107. What do you understand by ‘esprit de corps’?
(a) Team spirit
(b) Animating spirit
(c) Group of people accompanying
(d) All are applicable.
(b) The meaning of french phrase ‘Esprit de corps’- The animating spirit of a particular group like a regiment.

108. Idioms “to make amends”:
(a) To change
(b) Make up for a wrongdoing
(c) Both (a) and (b)
(d) None of the above.
(b) The meaning of Idiom ‘to make amends’ is to compensate or make up for a wrongdoing.

109. It is used to link words to form a compound word.
(a) Hyphen
(b) Full Stop
(c) Slash
(d) Comma.
(a) Hyphen is used to link words to form a compound word. It is used between words to clarify meaning. The use of hyphens varies in different places.

110. Which of the following is the full form of Latin abbreviation i.e.?
(a) Idest
(b) Ist
(c) That is
(d) Iest.
(a) The full form of i.e. the latin abbreviations is “modest” “which means that is more precisely”. It is commonly used to refine a general statement or provide additional information.

111. Which of the following is the correct meaning of the idiom “To keep the wolf from the door”?
(a) To be silent about one’s intentions
(b) To discourage something
(c) To keep away extreme poverty and hunger
(d) To get into difficulty.
(c) The meaning of the idiom, “To keep the wolf from the door” is to keep away extreme poverty and hunger.

112. Which of the following is the opposite of the word “Bold”?
(a) Unlimited
(b) Timid
(c) Outrageous
(d) Limited.
(b) “Timid” is the opposite of the word “Bold” Antonym is a word opposite or contrary in meaning to another word.

113. The part of speech that is used to name or identify a person, place, thing, quality, or action is known as:
(a) Noun
(c) Pronoun
(a) The part of speech that is used to name or identify a person, place, thing, quality, or action is known as noun. It is one of the eight classes of part of speech in English.

114. Which of the following is not true about jargon?
(a) Jargon should be preferred in formal communication
(b) Jargon is the language special to science, technology, art trade or a profession.
(c) Jargon can be military jargon, political jargon, management jargon etc.
(d) Private jargon should be avoided in general communication.
(d) Jargon: Means a language that is unique to particular field, science or profession. There is for instance legal jargon, political jargon, military jargon. Jargon should be avoided in general communication.

115. It is used to link words to form a compound word:
(a) Comma
(b) Hyphen
(c) Slash
(d) Full stop.
(b) Hyphen: It is used between words to clarify meaning. It also links words to form a compound word.
The use of hyphen varies in different places; therefore there are no complete set of rules that can be applied to use of hyphen.

116. “A set of forms taken by a verb to indicate the time (and sometimes the continuance or completeness) of the action in relation to the time of the utterance”, is the meaning that the concise Oxford Dictionary assigns to the word:
(a) Tense
(b) Noun
(c) Pronoun
(d) Verb
(a) “A set of forms taken by a verb to indicate the time and sometimes the continuance or completeness of the action in relation to the time of the utterance” is the meaning that the concise Oxford Dictionary assigns to the word “TENSE”. The word ‘tense’ comes from latin word tempus, meaning time.

117. Which of the following is the correct meaning of the idiom “To Cry over spilt/spilled milk?
(a) Daydreaming
(b) Try to flatter
(c) To discourage something
(d) To Complain about things that cannot be changed.
(d) To cry over spilt/spilled milk: (To complain about things that cannot be changed) Eg: We have failed to build up a sizeable total against England’s first innings meagre total. It is no use crying over spilt milk now.

118. “A set of forms taken by a verb to indicate the time (and sometimes the continuance or completeness) of the action in relation to the time of the utterance” is the meaning that the Concise Oxford Dictionary assigns to the word.
(a) Tense
(b) Pronoun
(c) Verb
(d) Noun
(a) “A set of forms taken by a verb to indicate the time (and sometimes the continuance or completeness) of the action in relation to the time of the utterance”; is the meaning that the Concise Oxford Dictionary assigns to the word ‘Tense’. The word tense comes from Latin word tempus, meaning time. Hence, we may define Tense as that form of a verb which shows the time and the state of an action or event.

119. The word “Advice” is a ………………… .
(a) Noun
(b) Article
(c) Preposition
(d) Verb.
Eg:- My father advised me to work hard.

120. The french abbreviation “adj” means:

121. Which of the following is the meaning of the idiom “cut off with a shilling”?
(a) To lose respect
(b) To reject, to throw aside
(c) To give someone a mere trifle in the will
(d) To depreciate.
(c) Cut off with a shilling (to give someone a mere trifle in the will) Eg: The father was so angry with the son over his marriage that he cut him off with a shilling.

122. It is used to denote possession and other kinds of relationships and contractions of words:
(a) A full stop
(b) A comma
(c) An Apostrophe
(d) A hyphen
(c) An Apostrophe (’) is used

to denote possession and other kinds of relationships.
Eg: This is Walter’s book.

contractions of words.
Eg: It was the Court’s order.

Isn’t (is not) it a great day?
Can’t (cannot) you come today?
O’er (over) the hills.

Possession and other kinds of relationship.

123. It is a morpheme (minimal meaning language unit) added at the end of a word to form a derivative:
(a) Suffix
(b) Interjection
(c) Conjunction
(d) Prefix
(a) Any word added at the end of a word to form a derivative is called a suffix.

124. The part of speech that is used to name or identify a person, place, thing or action is known as:
(c) Pronoun
(d) Noun
(d) Noun is a name of a person, place or thing or action or animal.

125. FtSVP is the abbreviation of the French words repondez sil Vons plait and means:
(d) Invitation

126. Which of the following is the correct meaning of the Indian “To get the upper hand or to get the better of’?
(a) To become someone’s responsibility
(b) To be defeated in every contest
(c) To Prevail over
(d) To urge on
(c) ‘To get the Upper hand or to get the better off means to get into a stronger position than someone else so that you are controlling the situation.

127. Which of the following is the meaning of the word ‘Insidious’?
(a) Funny
(b) Innocent
(c) Cunning
(d) Foolish
(c) Insidious – proceeding in subtle way with harmful effects.

128. A remedy for all diseases or difficulties is called:
(a) Panacea
(b) Concrete
(c) Numismatics
(d) Philistine
(a) One word for remedy of all disease or difficulties is called Panacea.

129. Ram scored overall 99% marks. No other students of his class could do this. On the basis of his performance we may say:
(a) Ram is an intelligent student of his class
(b) Ram is more intelligent student in his class
(c) Ram is the most intelligent student of his class
(d) Ram is one of the more intelligent boys in his class.
(c) Ram is the most intelligent boy in the class because he scored overall 99% in the class and no one can do this.

130. The quality of expressing much in few words is known as:
(a) Exigency
(b) Brevity
(c) Apprises
(d) None of the above.
(b) Brevity is the most important quality of business letter which means quality of expressing much in few words.

131. The place where an aeroplane is housed is known as:
(a) Shed
(b) Yard
(c) Cold storage
(d) Hangar
(d) The place where Airplane is housed Is known as Hangar.

132. A person who seeks to promote the welfare of poor by donating money is known as:
(a) Benefactor
(b) Philanthropist
(c) Collaborator
(d) Ornithologist
(b) Person who seeks to promote the welfare of poor by donating Money is known as Philanthropist and person who don’t seeks to promote welfare of poor is Misanthropist.

133. The Latin phrase mutatis mutandis stands for:
(a) With the necessary changes
(b) A way of doing something
(d) Privilege initials responsibility
(a) Mutuatis Mutandis stands for with the necessary changes.

134. The term ‘subjudice’ means:
(a) Not to be considered by judiciary
(b) Under judicial consideration
(c) Prohibited by law
(d) None of the above.
(b) The term ‘Subjudice’ means under judIcial consideration.

135. ……………………. are those that denote the meaning of removing something or depriving something or someone.
(a) Reversative Prefix
(b) Pejorative Prefix
(c) Time Prefix
(d) Derivative Prefix
(d) Derivative Prefix are those that denote the meaning of removing something or depriving something or someone.

136. To build castle in the air means
(a) Looking backwards
(b) Daydreaming
(c) Either (a) or (b)
(d) Neither (a) nor (b)
(b) To build castle in the air means Daydreaming.

137. Which punctuation is used to separate sentences
(a) Comma
(b) Full stop
(c) Hyphen
(d) Space
(d) Space is used to separate words, sentences, etc.

138. “To Play Second Fiddle” means –
(a) To play with violin
(b) To meddle with something
(c) To take a subordinate part
(d) To cheat
(c) To Play Second Fiddle” means – To take a subordinate part

139. …………………. means incapable of making mistakes.
(a) Intelligent
(b) Infallible
(c) Incongruous
(d) Indispensable.
(b) ‘infallible’ means incapable of making mistakes.

140. The meaning of Latin phrase ab initio is –
(a) From the origin
(b) From the beginning
(c) From the middle
(d) From the ages.
(b) ab initio- from the beginning.

141. Which of the following is main function of an Apostrophe (‘)?
(a) To point the readers attention forward
(b) To separate two more independent clauses
(c) To denote possession and other kinds of relationship
(c) Apostrophe (‘) main function – To denote possession and other kinds of relationship.

142. WhIch of the following is a definite article?
(a) A
(b) An
(c) The
(d) All of the above
(c) ‘The’ is used to denote a particular noun and is a definite article.

143. Which of the following is passive voice of Shahjahan built Taj Mahal?
(a) Taj Mahal is built by Shahjahan.
(b) Taj Mahal was built by Shahjahari
(c) Taj Mahal was build by Shahjahari.
(d) Taj Mahal built by Shahiahan.
(b) ‘Taj Mahal was built by Shah Jahan is a passive statement.

144. Which of the following is grammatically correct?
(a) A Snake was kill by me.
(b) You are requested to come daily
(c) Company Secretaries are also known as governance professionals.
(d) Mahesh is more intelligent student of the class
(c) Company Secretaries are also known as governance professionals Is absolutely grammatically correct.

(a) Pronoun
(b) Article
(c) Noun
(d) None
(c) Honionyms are several pairs or groups of words have similar sound. For example –
Where; Advice is a noun the end sound is – s.
Advice is a verb and end sound is – z.

146. ‘To keep the wolf from the door’:
(a) To bring to sudden end
(b) To unite in order to achieve a shared aim
(c) To keep away extreme poverty & hunger
(d) To make a great fuss about a trifle.
(c) Keep the wolf from the door means have enough money to avert hunger or starvation (used hyperbolically).

147. What contains home truth as well as universal truth?
(a) Proverb
(c) Verb
(d) Phrases.
(a) Proverbs contains home truths as well as universal truths. Naturally, therefore, they are translatable so far as their meaning goes from one developed language to another. For eg. – Well begun is half done”.

## Indian Partnership Act, 1932 – CS Foundation Business Law Notes

Introduction:

1. Law relating to partnership in India was first contained in Chapter XI of the Indian Contract Act, 1872.
2. Indian Partnership Act, 1932, came into existence (with effect from) 1st October, 1932 except Section 69, which came into force on the 1st October, 1933.
3. It extends to the whole of India except the State of Jammu and Kashmir.
4. Later, on 1st October, 1932 Indian Partnership Act, 1932 came into force.
5. This Act deals partly with the rights and duties of partners between themselves and partly with the legal relations between partners and third persons.
6. It can be regarded as a branch of law relating to principal and agent.

Partnership:
As per Sec. 4,
“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.”

Essentials:

• It must be a result of an agreement between two or more persons to do a business.
• It is voluntary in nature.
• Agreement must be to share the profits of business.
• Business must be carried on by all or any of them acting for all.
• All the above essentials must co-exists before any partnership comes into existence.
• Relation of partnership arises from contract and not from status.
• Agreement may be express or implied.
• As per Sec. 2 (b),
• Profit means the excess of return over advances.
• Sharing of profits includes sharing of losses.
• Sharing of profits is a prima facie evidence of the existence of partnership, this is not the conclusive test of the same.

True Test of Partnership:

• The Relation of mutual agency is the conclusive test of partnership.
• Mutual agency is the basic and most essential thing for partnership.
• Sharing of profit also involves sharing of loss.
• Sharing of profits is not a conclusive test of existence of partnership.
• Every partner is a principal and agent for him self and others.
• Agency relationship is the most important test of partnership.

Exceptions to Partnership Formation:

• Minor may be admitted to benefits of partnership with the consent of all partners.
• No consideration is required to create it.

Partners, Firm and Firm’s Name:

• Persons who enter into partnership with one another are individually called partners and collectively called firm.
• Firm cannot use the words “limited” in its name.

Partnership deed:

• The Firm name and business to be carried on under that name
• Names and Address of partners
• Commencement and Duration of partnership
• The Capital and the contribution made by each partner
• Provision for further capital and loans by partners to the firm.
• Partner’s drawings
• Interest on capital, loans, drawings and current account
• Salaries, commission and remuneration to partners
• Profit (or loss) sharing ratio of partners’
• The keeping of proper books of accounts, inspection and audit, Bank accounts and their operation
• The accounting period and the date on which that accounts are to be prepared
• Rights, powers and duties of the partners
• Whether and in what circumstances, notice of retirement or dissolution can be given by a partner
• Provision that death or retirement of a partner will net
• Valuation of goodwill on retirement, death, dissolution etc
• The method of valuation of assets (and liabilities)
• Provision for expulsion of a partner
• Provision regarding the allocation of business activities to be performed by individual partners’
The arbitration clause for the settlement of disputes.
• It constitutes the mutual rights and obligations of partners in a written form.
• It is also known as partnership agreement, constitution of partnership or articles of partnership etc.
• It must be drafted and stamped as per the provisions of the Indian Stamp Act.

Classification of Partnership:
(1) Particular Partnership (Section 8): A person may become a partner with another person in a particular adventure or undertaking on for a particular period, such a partnership is called “Particular Partnership”.

(2) Partnership at Will (Section 7): ‘Where no provision is made by contract between the partners for the duration of their partnership or for the determination of their partnership, the partnership is called Partnership at Will”.

A partnership is deemed to be a partnership at Will when:

• No fixed period has been agreed upon for the duration of partnership.
• There is no provision made as to the determination of partnership in any other ways.

Co-ownership: “Co-ownership is a legal concept in a business where, there are only two ‘Co-owners’ share the legal ownership of a property”

• Co-ownership necessarily not involve community of profit and loss
• Co-owner can transfer his rights and interests to strangers without the consent of the others
• Co-owner can ask for division of property in specie
• Co-owner has no lien on the property.

Hindu Undivided Family / Hindu Joint Family Firm: A joint Hindu family firm is a business concern which operates under the provision of the Hindu Law and Hindu Succession Act, 1956.

• Head of the family is known as Karta
• Member of HUF are known as co-parceners
• Liability of each partner is limited except Karta
• A minor is also a co-parcener from the every day of his birth by virtue of his status
• No registration of a family firm is necessary
• No fixed share in business, it may be enlarged by death or reduce by birth in the family.

Company:
It is governed under Companies Act, 2013 and other previous Acts.

• Separate legal entity
• Limited liability
• Perpetual succession
• Separate property
• Separate management.

Active/Actual/Ostensible/Working/Managing Partner:

• He is not only contributing capital but also takes active part in the conduct of firm’s business.
• He shares its profits and losses.
• As per Sec. 12 (a),
• “Subject to contract between the partners, every partner is entitled to take part in the conduct of business of firm.”
• He has to give public notice of his retirement if he has to free himself from all liabilities.

Sleeping/Dormant Partner:

• He only contributes capital and share profit/loss without taking active part in the firm’s business.
• He has unlimited liability.
• He can retire from the firm without giving any public notice.
• He is entitled to access books and accounts of the firm, even though he performs no duty.

Sub Partner:

• He is third person with whom a partner shares his profit.
• He has no rights and duties towards the firm.

Nominal/Quasi Partner:

• He only lends his name and reputation for the firm’s benefit without sharing any profit/loss.
• He is known to outsiders as partners but actually he is not.
• He is liable to third party for all his acts.
• He is required to give public notice on retirement.

From duration point of view partnership may be:

• Particular Partnership – i.e. for a particular purpose or for particular undertaking or single venture.
• Partnership at will – No fixed duration or time period of partnership. It is dissolved by partner by giving notice in writing.

Partner in profits only:

• He gets a share in profits but does not share any losses of the firm.
• He has to bear all the liabilities to third party.

Partner by estoppel:

• He is not a partner of the firm but conducts himself in such a way which leads third party to believe that he is a partner.
• He is liable for all the debts to such third party.

Partner by holding out:

• He is declared by others as a partner of the firm but does not contradict it immediately and remains silent.
• He is liable to third party who is entering into contracts with firm on belief of he being the partner.
• Holding out means ‘to represent’
• It is based on the doctrine of Estoppel of Indian Evidence Act.

Exceptions:

• It does not apply to cases of torts committed by partners.
• It does not extends to bind the estate of a deceased partner.
• It does not apply if such partner is declared as an insolvent.

Minor’s Position in Partnership:

• Minor is a person who has not completed 18 years of age, thus cannot become a partner as he is not competent to contract.
• As per Sec. 30,
• He can however, be admitted to the benefits of partnership with the mutual consent of all partners.
• No partnership firm can be formed only with minors.
• A minor’s agreement is altogether void.
• If a minor has to be admitted into the benefits of partnership, there must be atleast 2 major partners.

Rights of Minor:

• Sec. 30(2): share profits of the firm.
• Sec. 30(2): Inspect and copy the book of accounts of the firm.
• Sec. 30(4): Can file a suit for accounts and his share in the firm but only when severing his connection with the firm.
• Sec. 30(5): Admitted to the benefits to during his minority within six months of attaining the age of majority or when he comes to know of his being so admitted.

Liabilities of Minor:
1. Sec. 30(3): His liability is limited to the extent of his share in the firm.

2. Sec. 30(3): He is liable for all acts of the firm but he is not personally liable.
(i) Within 6 months of his attaining majority or

(ii) On his obtaining the knowledge of he been admitted to the benefits of partnership, whichever is later he may give a public notice of not electing to become a partner.

Relation of Partners to one another:

• It arises through an agreement which provides for the rights and duties of partners.
• If articles are silent, rights and duties are governed by the Act.

Rights of Partners:

• To take part in management. [Section (2) (a)]
• To Express Opinion.
• To Inspect and to take out copies of Books of Accounts.
• To Share Profits equally.
• To have Interest on capital.
• To have Interest on Advances.
• Right to be indemnified.
• To have a joint share in the partnership property.
• To enforce the proper use of property.
• Right of Retirement.
• To prevent the introduction of new partner.
• Implied Authority.
• Right to Dissolve.
• Profits after retirement or death.

Duties and Liabilities of Partner:

• To carry on the business of the firm to the Greatest Common Advantage.
• Being diligent and honest.
• Being just and faithful.
• To render accounts and information.
• To indemnify the firm.
• Not to make any secret profits.
• Not to hold and use property of the firm.
• Not to start business in competition with the firm.
• Not to receive any remuneration.
• Not to transfer his interest.
• To act within the scope of his authority.
• To share losses.

Partnership Property (Sec. 14):

• It is also known as “property of the firm”, “partnership assets”, “joint stock”, “common stock”, “joint estate:”
• It represents the property to which all partners are entitled collectively.
• Every partner is a joint owner of partnership property.
• Every partner is entitled to hold and apply the same exclusively for business purpose.

It includes:

• All property, rights and interests which partners may have brought into the common stock as their contribution.
• All property, rights and interests which are acquired or purchased by the firm in the course of business.

Relevant Case Law:

A partner’s property being used for firm’s business, does not automatically makes it a firm’s property.
Relevant Case Law:
Lachhman Dass V. Mrs. Gulab Devi

Goodwill:

• Goodwill is defined as the value of the reputation of a business house in respect of profits expected in future over and above the normal profits.
• It is a partnership property.
• In case of dissolution of firm, every partner has a right according to the deed in the absence of any agreement, to have a share in the goodwill on it being sold.
• It can be sold separately, or along with other properties of the firm.

• Representing himself in business continuation.
• Maintaining his exclusive rights of business continuation.
• Soliciting former customers and restraining the seller from it.

Changes in a Firm:

• Sec. 31: when a new partner comes in i.e. when some partner or partners go out
• Sec. 32: by retirement
• Sec. 33: by expulsion
• Sec. 34: by adjudication as an insolvent
• Sec. 35: by death
• Where partnership firm carries on the business other than the business for which it was originally formed.
• Where partnership business is carried on after the expiry of the term fixed.

Rights and Duties of Partners after change in the Firm’s Constitution (Sec. 17):

• If change occurs in any of the 3 ways mentioned above-rights and duties remains same.
• If firm continues its business after the expiry of fixed term – rights and duties remains same so long they are consistent with the incidents of partnership at will.
• If firm carries out ventures or undertakings other than for which it was formed, rights and duties for partners remain same as those in respect of original ventures.

Relation of Partners to Third Parties – As Agents of the firm (Sec. 18):

• Every partner is the agent of the firm for the purpose of business of the firm.
• Every partner is both the principal and agent.
• The law of partnership is regarded as the branch of law of agency.

Act of Every Partner binds the firm and Other Partners unless:

• Acting partner has no authority to act for the firm in such matter.
• Person with whom he is dealing knows that he has no authority.
• Believes such person to be a partner.

Authority of a Partner:
If refers to the capacity of a partner to bind the firm by his act.

Conditions for Implied Authority:

• Act must relate to normal business of the firm.
• Act must be done in the usual way of carrying on the firm’s business.
• Act must be done in the firm’s name.

Acts within Implied Authority (Expenses authority):

• To buy, sell and pledge goods on behalf of the firm.
• To raise loans on Security of such assets.
• To receive payments of debts due to the firm.
• To accept, make and issue bill of exchange etc. on firm’s behalf.
• To engage servants for the firm’s business.
• To take on lease a premises on firm’s behalf.

Acts Beyond Implied Authority [Sec. 19(2)]:

• Submission of dispute relating to business of firm to arbitration.
• Opening a bank account on firm’s behalf in his own name.
• Comprising or relinquishing any claim or portion of claim against third party by firm.
• Withdrawing a suit or proceedings filed on behalf of firm.
• Admitting any liability in a suit or proceedings against the firm
• Transferring immovable property of the firm.
• Entering into partnership on firm’s behalf.

Extension and Restriction of Partner’s Implied Authority (Sec. 20):

• The partners may either extend or restrictive the implied authority of any partner by contract between them.
• Third party is not effected by a secret limitation of a partner’s implied authority unless he had actual notice of it.
• All partner’s consent is required for it.

Acts in Emergency (Sec. 21):
Subject to provisions of Sec 20, each partner binds the firm by all acts done in the case of emergency, with a view to protect the firm from any loss provided. As he has acted as a man of ordinary prudence.

Notice to an Acting Partner (Sec. 24):

• Notice to a partner, who acts in a firm’s business, on matters relating to firm’s affairs, operates as a notice to the firm except in case of a fraud.
• Notice must be actual and not constructive.

Liabilities to Third Parties (Sec. 25 to 27):

• Sec. 25: Contractual Liability : Every partner is liable jointly and severally for all acts or omissions binding the firm while he is a partner.
• Sec. 26: Liability for tort or wrongful act:(generally other partners are not liable for one partners torts but where tort is committed by authority of other partners then partners are liable)

The firm is liable to the same extent as the partner for any loss or injury caused to the third party by wrongful acts of partner, if they are done by partner acting –

• in ordinary course of business
• with partner’s authority.

Sec. 27: Liability for misappropriation by a partner:

• When a partner, acting within his apparent authority, receives money or other property from a third person and misapplies it, or
• Where a firm, in business course, received money or property from third party and is misapplied by a partner, while it is in firm’s custody is liable to make good the loss.

Liability of Incoming Partner [Sec. 31(2)]:

• Liability of new partner ordinarily commences from the date of this admission.
• He can also agree to be liable for obligations incurred prior to that date by the firm.
• New firm constituted, may agree to assume liability for existing debts of old firm.
• Creditors may agree to accept the new firm as their debtor and discharge the old partners.
• Creditors consent is necessary.

Novation refers to a tripartite agreement between:

1. Firm’s creditor
2. Partners is existing at the time when debt was incurred.
3. Incoming partner.

Liabilities of outgoing or Retiring Partner (Sec. 32):

• Liability of such partner continues until a public notice of his retirement has been given.
• He remains liable for the firm’s acts done before his retirement, unless there is any agreement made.
• He may be discharged by novation.

Insolvency of a Partner (Sec. 34):

• Such a partner ceases to be a partner on the date of the order of adjudication.
• His estate ceases to be liable for any act of the firm done after that date of order.
• Firm is also not liable for any act of such a partner after such date.

Death of a Partner (Sec. 35):
1. If the firm is not dissolved, the estate of deceased partner is not liable for act of the firm after his death.

2. Modes of Effecting Registration:

• By Sending post, or
• By delivering a statement in prescribed form to the Registrar of the area, in which any place of business of firm is situated or proposed to be situated.

Statement must include:

• Firm’s name,
• Date of joining of each partner,
• Partner’s full name and addresses
• Firm’s duration.

3. Statement should be signed by all the partners.

4. Registrar on being satisfied, shall record this entry in his register of firms and shall file the statement.

5. Registrar then issues a certificate of Registration.

6. An unregistered firm is not an illegal association.

Effects of non-registration:
1. Indian Partnership Act does not make registration of partnership compulsory nor does it impose any penalty.

2. However, non-registration give rise to certain disabilities U/S 69:

• Firm or any person on its behalf cannot bring action against third party for breach of contract, unless firm is registered and persons suing are shown in register of firms.
• Neither firm nor any partner can claim set off if any suit is brought by the third party against the firm.
• Partner of unregistered firm cannot bring any action against the firm or any partner of such firm.
• Unregistered firm however can bring a suit for enforcing the right arising otherwise than out of contract.

Suits allowed by Act:

1. Dissolution of a firm.
2. Rendering accounts of a dissolved firm.
3. Realisation of property of a dissolved firm.
4. Set off of values not exceeding ? 100.
5. Proceeding arising incidentally of value not exceeding ? 100.
6. Firm not having business place in territories to which Indian Partnership Act extends.
7. Realisation of property of insolvent partner.
8. Firm having business place in areas exempted from the application of chapter VII of the Indian Partnership Act, 1932.

Relevant Case Laws:

• Prithvi Singh V. Hasan Ali
• Kashav Lai V. Chuni Lai

Dissolution of Partnership Firm (Sec. 39):

• It takes place when the relationship between all the partners of the firm is so broken so as to close the business of the firm.
• As a result, firm’s assets are sold and its liabilities are paid off.

Dissolution of Partnership:
It takes place when there is an extinction of relationship between same partners only.

Modes of Dissolution of Partnership:

• Sec. 42 (a): By expiry of fixed term for which the partnership was formed.
• Sec. 42 (b): By completion of venture.
• Sec. 42 (c): By death of a partner.
• Sec. 42 (d): By insolvency of a partner.
• Sec. 42 (e): By retirement of a partner.

Modes of Dissolution of Firm:

• Sec. 40: Result of an agreement between all partners.
• Sec. 41 (a): By adjudication of all partners, or declaration of all partners 5 as insolvent except one.
• Sec. 41 (b): By firm’s business becoming unlawful. Subject to agreement between parties, on happening of certain , contingent events.
• Sec. 43: In case of partnership at will, by a partner giving notice of his intention to dissolve the firm. Firm dissolves from the date mentioned in the notice. If no date is mentioned, then from date of communication of notice.

Sec. 44: By court intervention in case of:

1. A partner becoming unsound mind.
2. Permanent incapacity of partners to perform his duties.
3. Misconduct of partners effecting the business.
4. Willful or persistent breaches of agreement by a partner.
5. Transfer or sale of whole interest of a partner.
6. Improbability of business being carried on except at a loss.
7. Court being satisfied on other just and equitable grounds.

Consequences of Dissolution:
1. Continuing liability until public notice:
Partners continue to be liable for any act done by them, done on behalf of firm until public notice of dissolution is given.

2. Sec. 46: Rights to enforce winding up:
Partner or his representative have a right against others, on dissolution.

• Apply firm’s property in payment of firm’s debt.
• Distribute surplus amongst all partners.

3. Sec. 47: Continuing authority of partners:
Authority of partners continue:

• So for as necessary to wind up the firm,
• To complete the pending transactions till the dissolution date.

4. Sec. 48: Settlement of partnership accounts:
(i) Losses including capital deficiencies:

• Are first paid out of profits
• Then out of capital.
• Lastly by partners in their profit sharing ratio.

(ii) Assets including partner’s contribution are applied in following order:

• In paying debts of third parties
• In paying advances of each partner
• In paying capital of each partner
• The residue is distributed among partners in their profit sharing ratio.

If the assets are not sufficient, the partners have to bear the loss in equal shares.

Note: This rule is known as Garner V. Murray

5. Sec. 50: Personal profits earned after dissolution:
If surviving partners along with the representatives of deceased partner carry on firm’s business and earn some personal profits, it must be accounted for by them to other partners.

6. Sec. 51: Return on premium of partnership’s premature dissolution: On dissolution of partnership earlier than fixed period in all cases except:

• death of a partner.
• misconduct of partner paying premium.
• subject to agreement containing no provision for return of premium, the partner paying premium is entitled for the return of a reasonable part of premium.

Specific Performance of Partnership Agreement:
This is not allowed, as the working of a partnership depends upon the personal inclination of the partners.

Relevant Case Law:
Scott V. Raymont

Suit for Libel or Slander:

• It means a libel or slander of its partners.
• Such partners themselves file such suit.
• A firm cannot bring such suit.

Relevant Case Law:
PK Oswal Hosiery Mills V. Tilak Chand

Limited Liability Partnership:
Nature of LLP:

• Hybrid of Companies & Partnerships: Benefit of limited liability of company and flexibility of partnership.
• Separate Legal Entity: Continue its existence irrespective of changes in partners.
• LLP itself can enter into contracts and hold properties.
• Partner’s liability limited to the agreed contribution.
• LLP concept exist in UK, US, Australia, Singapore & various Gulf Countries.
• Based on Indian LLP Act based on UK LLP Act, 2000 and Singapore LLP Act, 2005.
• Professional & non-professional (Businessman) both can set up LLP.

• Separate legal entity
• Easy to establish
• Flexibility without imposing detailed legal and procedural requirements.
• Perpetual existence irrespective of changes in partners.
• Internationally renowned form of business in comparison to company.
• No requirement of minimum capital contribution.
• No restriction as to maximum number of partners.
• LLP & its partners are distinct from each other.
• Partner are not liable for Act of other partners.
• Personal assets of the partners are not expect in case of fraud.
• Easy to dissolve or wind-up.
• No requirement to maintain statutory records except Books of Accounts.
• Less Cost of Formation (Compared to company).

• LLP cannot raise funds from public.
• Any act of partner without the knowledge of other partners may bind the up.
• Under some cases, liability may extend to personal assets of partners.
• No separation of Management from owners.

Liability of Partners:

• There shall be personal liability of a partner for his own wrongful act or omission.
• A partner shall not be personally liable for wrongful act or omission of any other partner of the limited liability partnership.

Partner as Agent:

• Every partner of LLP is agent of the limited liability partnership for the purpose of the business of the limited liability partnership.
• A partner is not agent of other partners of LLP.

Contribution:

• A contribution of a partner may consist of tangible, movable or immovable or intangible property or other benefit to the limited liability partnership.
• Money, promissory notes, other agreements to contribute cash or property, contracts for services performed, contract of services to be performed are valid contribution.

Designated Partner:

• Designated partners are the partners who manages day to day affairs of LLP.
• Every LLP shall have at least two Designated Partners.
• Designated partners shall be individual.
• At least one of these designated partners shall be resident of India.

Partner:

• Any individual or body corporate may be a partner in a limited liability partnership.
• A person may be admitted as partner in the LLP in accordance with LLP agreement of that LLP.
• Usually name of partner is mentioned in LLP agreement.

Eligibility to be a Partner:

• On the incorporation of a limited liability partnership, the person who subscribed their names to the incorporation document shall be its partners.
• Any other person may become a partner of the limited liability partnership by and in accordance with the limited liability agreement.

Disqualification :

1. he has been found to be of unsound mind by a court of competent jurisdiction and finding is in force.
2. he is undischarged insolvent or
3. he has applied to be adjudicated as an insolvent and his application is pending.

Number of Partners:
Every LLP shall have at least two partners.

Name of LLP:
Every limited liability partnership shall have either the words “Limited liability partnership” or acronym “LLP” as the last words of its name.

Contents of Incorporation Documents:

• Be in a form as may be prescribed.
• State the name of LLP.
• State the proposed business of the LLP.
• State the address of the registered office of LLP.
• State the name and address of each partner.
• State the name and address of the designated partner.
• Contain such other information concerning the proposed LLP.

Registration of LLP/Incorporation by Registration/ Certificate of Incorporation:

• An LLP when registered becomes incorporated.
• The Certificate given by registrar in which the name of the LLP is specified is known as Incorporation Certificate.
• The Incorporation Certificate shall be conclusive evidence that the limited liability partnership is incorporated by the name specified therein.

Effect of Registration:

• Suing and being sued
• acquiring, owning, holding and developing or disposing of property, whether movable or immovable tangible or intangible.
• having a common seal, if it decides to have one.
• doing and suffering such other acts and things as bodies corporate may lawfully do and suffer.

Registered Office:
Every LLP shall have a registered office to which all communications and notices may be addressed and where they shall be received.

Holding Out:
Meaning : to represent

• Any person holding off as partner is liable to any person who has on the faith of any such representation given credit to the limited liability partnership.
• The liability of LLP shall be without prejudice to the liability of the person so representing himself or represented to be a partner.

Legal Representative of a Partner shall not be Liable:

• Where after a partners death the business is continued in the same limited liability partnership name.
• The continued use of that name or of the deceased partner’s name as a part thereof shall not of itself make his legal representative or his estate liable for any act of the LLP done after his death.

Unlimited Liability in case of Fraud:
Liability of LLP and its fraudulent partner shall be unlimited, if any out carried out by a limited liability partnership or any of its partners,

• with in ent to defraud creditor or any ether person.
• for any fraudulent purpose.

Partner’s Transferable Interest:
The right of a partner:

• to a share of the profits and losses is of the LLP.
• to receive distribution in accordance with the LLP agreement.

In a same manner, a Partner may transfer all or any of these rights wholly or in part.

No transfer of Management or Control:
The transfer of transferable right does not the transferee or assignee :

• to participate in the management or conduct of the activities of the limited liability partnership.
• Access information concerning the transactions of the limited liability partnership.

Winding up and Dissolution:

• The winding up of a limited liability partnership may be either voluntary or by tribunal.
• The LLP, so wound up may be dissolved.

Winding up by Tribunal:
A limited liability partnership may be wound up by the Tribunal if;

• Decides that limited liability partnership would wound up by tribunal.
• For a period of more than six months, the number of partners reduced below two.
• Unable to pay its debts.
• Has acted against the interests of the sovereignty & integrity of India.
• Has made a default in filling with the Register of Statement of Account and solvency or annual return for any five consecutive financial year.
• If the Tribunal is of that is just and equitable that the LLP be would up.

Multiple Choice Questions

Question 1.
The objective of the Partnership Act, 1932 is to define and amend the law relating to:
(a) Partnership
(b) Joint Ventures
(d) All of the above.
(a) Partnership

Question 2.
The Partnership Act, 1932 came into force on ___________.
(a) 1st day of April 1932
(b) 1st day of October 1932
(c) 1st day of January 1932
(d) 31st day of December 1932.
(b) 1st day of October 1932

Question 3.
According to the Partnership Act, “Business” includes ___________.
(b) Occupation
(c) Profession
(d) All of the above.
(d) All of the above.

Question 4.
The relationship of Partnership arises out of ___________.
(a) Contract
(b) Status
(c) Operation of law
(d) Contract and status.
(a) Contract

Question 5.
The name under which the partnership business is carried on, is called ___________.
(b) Partnership firm
(c) Firm Name
(d) Registered Name
(c) Firm Name

Question 6.
Which of these are not necessary for constituting a partnership ?
(b) Mutual agency
(c) Two or more persons
(d) Written contract.
(d) Written contract.

Question 7.
Liability of a partner is ___________.
(a) Limited to the extent of his share of the business profits.
(b) Unlimited
(c) Limited to the extent of capital
(d) Limited to the extent of loan given to the firm.
(b) Unlimited

Question 8.
The true test of partnership is ___________.
(a) Mutual agency
(b) Profit sharing
(c) Agreement
(d) All of the above
(a) Mutual agency

Question 9.
Partnership agreements may be ___________.
(a) Expressed
(b) Implied
(c) Neither (a) nor (b)
(d) Either (a) or (b)
(d) Either (a) or (b)

Question 10.
Sharing of profits implies sharing otherwise.
(a) True
(b) Partly True
(c) False
(d) None of these
(a) True

Question 11.
A partner who has not entered into a partnership agreement and conducts or represents himself as a partner in a firm is called ___________.
(a) Sleeping partner
(b) Partner by estoppel
(c) Working partner
(d) Sub-partner
(b) Partner by estoppel

Question 12.
Partners are bound to render true accounts & full information of all things affecting the firm to ___________.
(a) Any partner
(b) Legal Representative of any partner
(c) Either (a) or (b)
(d) To the Government.
(c) Either (a) or (b)

Question 13.
Every partner is bound to perform to his duties, in the conduct of the business.
(a) Systematically
(b) Diligently
(c) Sincerely
(d) Effectively.
(b) Diligently

Question 14.
If there is a contract that the partner shall not carry on the business other than that of the firm while he is a partner, such contract is ___________.
(a) Valid
(b) Void
(c) Voidable at the option of the partner
(d) Voidable at the option of the firm.
(a) Valid

Question 15.
Subject to contract between the partners, the ratio of profits or loss sharing will be ___________.
(a) Equal
(b) In the ratio of capital contribution
(c) In the ratio of loans given, if any
(d) In the ratio given by the Income Tax Act.
(a) Equal

Question 16.
Partnership property vests hands of ___________.
(a) In the partner of the firm
(b) In the firm
(c) In the continuing partners of the firm
(d) In the retiring partners of the firm.
(b) In the firm

Question 17.
Which of the following conditions is not necessary for the exercise of implied authority ___________.
(a) The act must relate to the business of the firm
(b) The act must be done in the firm’s business name
(c) The act must be done in the usual way of carrying on the firm’s business
(d) The act must be done in an emergency.
(d) The act must be done in an emergency.

Question 18.
To bind the firm under-Implied Authority, the act must be done in the of carrying on the firm’s business.
(a) Regular way
(b) Usual way
(c) Routine way
(d) Extraordinary way.
(b) Usual way

Question 19.
Which of these acts are within the implied authority of a partner?
(a) Acquire immovable property on behalf of the firm.
(b) Borrowing money on behalf of the firm.
(c) Enter into partnership on behalf of the firm.
(d) Transfer immovable property belonging to the firm.
(b) Borrowing money on behalf of the firm.

Question 20.
A third party is not affected by the limitation of implied authority unless he has actual notice of it.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(a) True

Question 21.
Acts done by a partner in an emergency do not bind the firm if they do not form part of the partner’s implied authority.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(c) False

Question 22.
“Notice to acting partner is notice to firm.” This statement is based on the principle of ___________.
(a) Convenience
(b) Convention
(c) Mutual agency among partners
(d) All of the above.
(c) Mutual agency among partners

Question 23.
For all acts of the firm done while he is a partner, every partner is ___________.
(a) Jointly liable
(b) Severally liable
(c) Jointly and severally liable
(d) Not liable at all.
(c) Jointly and severally liable

Question 24.
Which of the following partners are not liable in relation to the firm?
(a) Partner by holding out
(b) Working partner
(c) Sub – partner
(d) Partner by estoppel.
(c) Sub – partner

Question 25.
When a partner retires from a’firm but does not give a public notice to this effect, he shall be liable as a partner by holding out until he issues a public notice.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(a) True

Question 26.
For the acts of the firm ___________.
(a) Minor is personally liable
(b) Minor’s share is liable
(c) Guardian is personally liable
(d) There is no liability at all for or on behalf of the minor.
(b) Minor’s share is liable

Question 27.
When the minor elects not to become a partner he is entitled to sue the partners for his share in the profits and property.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(a) True

Question 28.
A person can be admitted into an already existing firm. Only with the v consent of all the existing partners.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(a) True

Question 29.
In case of partnership at will, a retiring partner has to give a written notice.
(a) To the firm
(b) To the working partners
(c) To ail the partners
(d) To all partners other than working partners.
(c) To ail the partners

Question 30.
Where a partner in a firm is adjudicated as insolvent ___________.
(a) The firm is automatically dissolved
(b) The firm is not automatically dissolved
(c) The firm is also deemed insolvent
(d) The firm becomes an illegal association.
(b) The firm is not automatically dissolved

Question 31.
The firm is generally dissolved on the death of a partner.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(a) True

Question 32.
No public notice is required on the death of a partner.
(a) True
(b) Partly True
(c) False
(d) None Of the above.
(a) True

Question 33.
Dissolution of partnership between all the partners of a firm is called ___________.
(a) Dissolution of partnership
(b) Dissolution of firm
(c) Dissolution of firm name
(d) Reconstitution of firm.
(b) Dissolution of firm

Question 34.
Which of the following do not constitute ground for dissolution by court?
(a) Insanity of the partner
(b) Incapacitation of partner
(c) Admission of minor to the benefits of partnership
(d) Heavy losses of the firm.
(c) Admission of minor to the benefits of partnership

Question 35.
Upon dissolution of firm, losses, including deficiencies of capital, shall be paid first out of profits and then ___________.
(a) Out of pro its
(b) Out of capital
(c) By the partners individually in their profit sharing ratio.
(d) By the
(b) Out of capital

Question 36.
The accounting rule in respect of loss arising due to insolvency of a partner is dealt within ___________.
(a) Derry vs Peek
(b) Carlill vs carbolic Smoke Ball Co.
(c) Garner vs Murray
(d) Chinnaiah vs Ramaiya.
(c) Garner vs Murray

Question 37.
A partner is entitled to return of premium even when the dissolution is mainly due to his own misconduct.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(c) False

Question 38.
Upon dissolution, the goodwill of the firm ___________.
(a) Must be sold separately
(b) Must be sold along with the assets to the firm only
(c) May be sold either separately or along with the assets of the firm
(d) Cannot be sold at all.
(c) May be sold either separately or along with the assets of the firm

Question 39.
A partnership firm has to be compulsorily registered in order to commerce its business.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(c) False

Question 40.
Application for Registration of firms should be signed by ___________.
(a) All the partners or their agents
(b) Majority of the partners or their agents
(c) All working partners or their agents
(d) All minor partners.
(a) All the partners or their agents

Question 41.
An unregistered firm cannot file a suit against to enforce any right arising from a contract.
(a) Partner
(b) Minor admitted to benefits of partnership
(c) Third party
(d) Out going partner.
(c) Third party

Question 42.
Non – registration of the firm does not affect the right of the firm to institute a suit or claim of set – off not exceeding ___________.
(a) ₹ 100
(b) ₹ 1,000
(c) ₹ 10,000
(d) ₹ 50,000
(a) ₹ 100

Question 43.
Provisions relating to partnership contracts are laid down in ___________.
(a) Indian Partnership Act, 1932
(b) Indian Partnership Act, 1962
(c) Indian Contract Act, 1872
(d) Indian Partnership Act, 1942
(a) Indian Partnership Act, 1932

Question 44.
The least number of persons required to form partnership are ___________.
(a) 2
(b) 1
(c) 10
(d) 4
(a) 2

Question 45.
Persons who have entered into partnership with one another are called ___________.
(a) Partners
(b) Co-partners
(c) Co-owners
(d) Members
(a) Partners

Question 46.
The ‘firm name’ should not be such which ___________.
(a) Violates the rules regarding trade name/goodwill
(b) A name implying the sanction of patronage of Government
(c) Which uses ‘limited’ as part of its name
(d) All of the above
(d) All of the above

Question 47.
Which of the following association cannot form a partnership ___________.
(a) Two natural persons
(b) A natural and a artificial person
(c) Two corporation
(d) Two minors
(d) Two minors

Question 48.
The term ‘business’ includes every ___________.
(b) Occupation
(c) Profession
(d) All of the above
(d) All of the above

Question 49.
___________ means the excess of returns over advance
(a) Losses
(b) Profit
(c) Sales
(d) Goodwill
(b) Profit

Question 50.
The Prima facie evidence of the existence of partnership is ___________
(a) Existence of an agreement
(b) Association of two or more partners
(d) Sharing of profits
(a) Existence of an agreement

Question 51.
The conclusive test for partnership is ___________.
(a) Sharing of Profits
(b) Mutual Agency
(c) Association of Persons
(d) Agreement
(b) Mutual Agency

Question 52.
Exceptions to the definition of partnership are
(a) A minor may be admitted to the benefits of partnership
(b) No consideration is required to create partnership
(c) Both (a) and (b)
(d) None
(c) Both (a) and (b)

Question 53.
A written agreement (properly drafted and stamped) of partnership to avoid future disputes is called:
(a) Partnership deed
(b) Partnership Agreement
(c) Articles of Partnership
(d) All of above
(d) All of above

Question 54.
Which of the following must give a public notice of his retirement from the firm in order to absolve (free) himself from liability of the firm
(a) Sleeping partner
(b) Partner in profit only
(c) Active partner
(d) Sub-partner
(c) Active partner

Question 55.
Every partner has an implied authority to bind the firm by following acts
(a) Open a bank account on behalf of the firm in his own name
(b) By purchasing goods for the firm
(c) Enter into a partnership on behalf of the firm
(d) Acquire immovable property on behalf of the firm
(b) By purchasing goods for the firm

Question 56.
The estate of a partner who dies or became insolvent is not liable for partnership debts contracted after the date of death or insolvency ___________.
(a) True
(b) False
(c) Not stated in the Partnership Act
(d) Executors of the deceased partner are liable
(a) True

Question 57.
Which of the following statement is not true?
(a) The dissolution of partnership between all the partners of a firm is called the dissolution of the firm
(b) All the partners are jointly and severally liable for the acts of the firm
(c) The dissolution of firm leads to discontinuation of the partnership business
(d) The dissolution of partnership means the dissolution of firm as well.
(c) The dissolution of firm leads to discontinuation of the partnership business

Question 58.
A partnership cannot be for the following:
(a) For a fixed period
(b) For a particular venture
(c) Where no provision is made by contract between the partners for duration
(d) For carrying on a business for charity purpose
(d) For carrying on a business for charity purpose

Question 59.
A partnership is deemed to be a ‘partnership at will’ ___________.
(a) When no fixed period has been agreed upon
(b) When there is provision made as to the determination of partnership in any other way
(c) When death or retirement does not affect the existence of such partnership
(d) All of the above
(d) All of the above

Question 60.
The Indian Partnership Act, 1932 contemplates the following changes in constitution of firm ___________.
(a) Change in the duration of a firm
(b) A new partner retires
(c) A partner dies
(d) A new partner is admitted
(a) Change in the duration of a firm

Question 61.
A change in constitution of a firm takes place when ___________.
(a) A partner is adjudicated as an insolvent
(b) A partner retires from a firm
(c) A partner dies
(d) All of the above
(d) All of the above

Question 62.
Property of the firm includes:
(a) Assets acquired in the course of business with money belonging to the firm
(b) Assets jointly owned by partners which are used for purpose of partnership business
(c) Goodwill
(d) Both (a) and (c)
(d) Both (a) and (c)

Question 63.
How can a dissolution of the firm come into existence?
(a) By mutual agreement
(b) By insolvency of all partners
(d) All of the above
(d) All of the above

Question 64.
Following are not the effect of non-registration of firm ___________.
(a) Each partner can sue each other or the firm
(b) No third party can be sued by a non-registered firm
(c) A firm can bring a suit to enforce a right arising otherwise out of contract
(d) A partner filing a suit to compel other partner to join in the registration of firm
(c) A firm can bring a suit to enforce a right arising otherwise out of contract

Question 65.
Sharing of profits is a conclusive test of partnership ___________.
(a) True
(b) Partly true
(c) False
(d) Partly false
(c) False

Question 66.
There can be no specific performance of a partnership agreement ___________.
(a) True
(b) False
(c) Can’t say
(d) Allowed in certain conditions
(a) True

Question 67.
By the expiry of the fixed term for which the partnership was joined is known as ___________.
(a) Partnership at will
(b) Particulars partnership
(c) None of the above
(d) Both (a) and (b)
(b) Particulars partnership

Question 68.
From the following which of these are the kinds of a partner:
(a) Working partner
(b) Sleeping or dormant partner
(c) Nominal partner
(d) Both (b) and (c)
(d) Both (b) and (c)

Question 69.
He is only entitled to his agreed share and can inspect books of account of the firm are related with ___________.
(a) Rights of unsound mind person
(b) Rights of nominal partner
(c) Rights of minor
(d) Rights of sleeping partner
(c) Rights of minor

Question 70.
From the following what are the contents of partnership deed:
(a) The firm name and business to be carried on under that name
(b) Name and address of partners
(c) Both (a) and (b)
(d) None of the above
(c) Both (a) and (b)

Question 71.
The partnership deed must be properly drafted and stamped according to the provision of:
(a) Indian Partnership Act
(b) Indian Stamp Act
(c) Income Tax Act
(d) The Companies Act
(b) Indian Stamp Act

Question 72.
Minorcan be a partner in a newly formed firm. This statement is ___________.
(a) True
(b) False
(c) Partly true
(d) Partly false
(b) False

Question 73.
Partners agree to share ___________ of business.
(a) Liabilities of a firm
(b) Assets of the firm
(c) Profits and losses
(d) None of these
(c) Profits and losses

Question 74.
___________ is the essential feature for formation of partnership.
(a) Agreement
(b) Memorandum
(c) Relation
(d) All of above
(a) Agreement

Question 75.
Which of the following partners are not liable in ‘relation to the firm’?
(a) Partner by holding out
(b) Working partner
(c) Sub partner
(d) partner by estoppel
(c) Sub partner

Question 76.
A partner of an unregistered firm can sue for ___________ of the firm.
(a) Goodwill
(b) Share in property
(c) Dissolution
(d) None of these
(c) Dissolution

Question 77.
Partnership is classified in ___________ categories.
(a) One
(b) Two
(c) Three
(d) None of these
(b) Two

Question 78.
At the time of retirement, contentment is important in ___________.
(a) Partnership at will
(b) Hindu Joint Family
(c) Particular Partnership
(d) Both (b) & (c)
(b) Hindu Joint Family

Question 79.
A partnership is deemed to be partnership at will when there is ___________.
(a) No fixed period & no provision
(b) Fixed time period & purpose
(c) Fixed purpose & no fixed period
(d) Fixed time period & no provision
(a) No fixed period & no provision

Question 80.
‘Holding Out’ means ___________.
(a) Honour of firm
(b) To represent
(c) To sacrifice
(d) None of these
(b) To represent

Question 81.
The general law of agency is incorporated in ___________.
(a) Law of property
(b) Law of co-ownership
(c) Law of partnership
(d) None of these
(c) Law of partnership

Question 82.
Which type of firm arises as a result of status ___________.
(a) Co-ownership
(b) Articles of partnership
(c) Hindu Joint Family Firm
(d) None of these
(c) Hindu Joint Family Firm

Question 83.
Number of partners in Hindu Joint Family Firm ___________.
(a) 10
(b) 20
(c) No limit
(d) Depends on Karta
(c) No limit

Question 84.
A partnership firm cannot be formed if the partners are ___________.
(a) Only major
(b) Oniy minors
(c) Two major one minor
(d) None
(b) Oniy minors

Question 85.
Which type of partner is not personally liable..
(a) Active
(b) Dormant
(c) Nominal
(d) Minor
(d) Minor

Question 86.
The implied authority of a partner is termed as ___________.
(a) Ostensible Authority
(b) Tangible Authority
(c) Non-apparent Authority
(d) None of these
(a) Ostensible Authority

Question 87.
Which type of partner must give public notice of his retirement ___________.
(a) Active
(b) Sleeping
(c) Nominal
(d) All of the above
(a) Active

Question 88.
A change in constitution of a firm takes place when ___________.
(a) A partner is adjudicated as an insolvent
(b) A partner transfer his interest
(c) Both (a) & (b) true
(d) None of these
(a) A partner is adjudicated as an insolvent

Question 89.
Registration is not required in which type of firm ___________.
(a) Company
(b) Partnership
(c) H J.F.
(d) both (b) and (c)
(d) both (b) and (c)

Question 90.
Which type of partner do not participate in functioning of business ___________.
(a) Ostensible Partner
(b) Active Partner
(c) Sub-Partner
(d) None of these
(d) None of these

Question 91.
Value of reputation of a business is ___________.
(a) Capital
(b) Interest
(c) Goodwill
(d) Debt
(c) Goodwill

Question 92.
A partner who only give their name to business is ___________.
(a) Partner by Estoppel
(b) Dormant
(c) Nominal
(d) Ostensible
(c) Nominal

Question 93.
When a partner agrees to share his profit in firm with a third person, that person is called ___________.
(a) Dormant
(b) Sub partner
(c) Nominal
(d) Partner in profit only
(b) Sub partner

Question 94.
In a firm every partner is a/an ___________ of the rest of partner.
(a) Manager
(b) Friend
(c) Agent
(d) Unknown
(c) Agent

Question 95.
Goodwill is a/an ___________.
(a) Tangible Asset
(b) Intangible Asset
(c) Liquid Asset
(d) vesting Asset
(b) Intangible Asset

Question 96.
Who is personally liable in HUF firm ___________.
(a) Co-parcener
(b) Karta
(c) Both (a) & (b)
(d) Minor
(b) Karta

Question 97.
Valuation of Goodwill in firm may arise ___________.
(a) When a firm is amalgamated
(b) When a partner retires or dies
(c) When the business is sold
(d) All of these
(d) All of these

Question 98.
On dissolution, if the assets are not sufficient the partner have to bear ___________.
(a) Investment of Capital
(b) Outside Creditor
(c) Loss in equal shares
(d) Both (b) and (c)
(d) Both (b) and (c)

Question 99.
When the partner becomes of unsound mind then ___________.
(a) There will be no effect in firm
(b) There can be dissolution of firm
(c) No dissolution of firm
(d) All of these
(c) No dissolution of firm

Question 100.
In dissolution of firm, partnership among all partners ___________.
(a) Exists
(b) No Longer exists
(c) Both (a) & (b) true
(d) None of these
(b) No Longer exists

Question 101.
Court will dismiss the case if ___________.
(a) Registration is not done before the suit
(b) Registration is done before the suit
(c) Partner become insolvent
(d) None of these
(a) Registration is not done before the suit

Question 102.
The implied authority is subject to which condition ___________.
(a) The act must be done in unusual way
(b) The act must be done in name of partner
(c) Third party does not believe him to be a partner
(d) The act must be done in the name of firm
(d) The act must be done in the name of firm

Question 103.
According to section 72 of Act, a partner should give express notice before his ___________ to protect himself from liability.
(b) Retirement
(c) Death
(d) Insolvency
(b) Retirement

Question 104.
The right of buyer in Goodwill is ___________
(a) Not to represent himself in continuing the business
(b) To give details of his personal property.
(c) Solicit former customers of the business.
(d) None of these.
(c) Solicit former customers of the business.

Question 105.
According to rule, Garner v/s Murray deficiency of ;nsolvent partner will be allocated in ___________.
(a) Profit sharing ratio
(b) Loss sharing ratio
(c) Capital ratio agreed before dissolution
(d) Equal loss sharing ratio
(c) Capital ratio agreed before dissolution

Question 106.
Where there is an extinction of relationship between some of partners, it is only ___________.
(a) Dissolution of firm
(b) Dissolution of partnership
(c) Partnership Deed
(d) Dissolution of firm and partnership both
(b) Dissolution of partnership

Question 107.
In Hindu Joint Family firm, share of co-parcener is ___________.
(a) Equal to Karta
(b) According to profit sharing ratio
(c) Not fixed
(d) In ratio of capital invested
(c) Not fixed

Question 108.
The maximum number of members for a private company is ___________.
(a) 55
(b) 200
(c) 45
(d) 60
(b) 200

Question 109.
A Hindu joint family business is governed by which law ___________.
(a) Hindu Law
(b) Indian Partnership Act
(c) Company Law
(d) Family Law
(a) Hindu Law

Question 110.
The capacity of a partner to bind the firm by his act is known as ___________.
(a) Duties of Partner’s
(b) Rights of Partner’s
(c) Authority of Partner
(d) None of these
(c) Authority of Partner

Question 111.
A partnership which is entered for a single adventure or undertaking is called a ___________.
(a) Specific partnership
(b) Particular partnership
(c) Partnership at will
(d) Partnership by estoppel
(b) Particular partnership

Question 112.
Which one of the following statement is not true regarding a partnership at will ___________.
(a) It is affected by the death o’retirement of the partners
(b) There is no fixed period regarding its duration
(e) It can be dissolved by any of the partners
(d) No provision is made for determination of partnership in any other way
(a) It is affected by the death o’retirement of the partners

Question 113.
Which of the following statement is not true regarding a minor?
(a) He can inspect the books of accounts of the firm
(b) He is not personally liable to the third parties
(c) On attaining majority, he has to choose that he wants to become a partner within the period of one year
(d) None of the above
(c) On attaining majority, he has to choose that he wants to become a partner within the period of one year

Question 114.
The law of partnership is also called as the branch of ___________.
(a) Law of agency
(b) Law of contract
(c) Law of Association
(d) All of the above
(a) Law of agency

Question 115.
The implied authority of a partner is also called as ___________.
(a) Ostensible Authority
(b) Apparent Authority
(c) Both (a) and (b)
(d) None of the above
(a) Ostensible Authority

Question 116.
What are the condition, the implied authority of partnership is subject to ___________.
(a) The act must be done in the normal course of business
(b) Consent of all the partners must be obtained before performing the act
(c) Both (a) & (b)
(d) None of the above
(a) The act must be done in the normal course of business

Question 117.
Which one of the following acts of a partner does not come under his implied authority?
(a) Engaging and discharging employees
(b) Selling the fixed assets of the firm
(c) Purchasing goods of the firm
(d) All of the above
(b) Selling the fixed assets of the firm

Question 118.
Which of the following statement is NOT true?
(a) The estate of the deceased partner is not liable for debts contracted after his death
(b) An incoming partner is not liable for debts incurred before his joining
(c) The other partners are not liable for fraud committed by a partner in the course of management of the business
(d) None of the above
(c) The other partners are not liable for fraud committed by a partner in the course of management of the business

Question 119.
The partnership will not be dissolved under which of the following circumstances.
(a) By the death of the partner
(b) By retirement of partner
(c) When the business is in heavy loss
(d) By the completion of venture
(c) When the business is in heavy loss

Question 120.
Which of the following statement is False?
(a) A partnership can be dissolved by mutual agreement
(b) A partnership firm will be dissolved if only one partner is solvent
(c) A partnership at will can be dissolved by any partner at any time
(d) None of the above
(d) None of the above

Question 121.
As per Garner V/s Murray Rule, the deficiency attributable to the insolvency of a partner must be borne by other partner in ___________.
(a) In the ratio of profit
(b) In the ratio of capital
(c) It should be borne equally
(d) None of the above
(b) In the ratio of capital

Question 122.
Which of the following statement is not true in context to an unregistered firm?
(a) The partner of the firm cannot sue each other
(b) The partnership firm cannot sue the third party
(c) The third party cannot sue the firm
(d) The partner of the firm cannot sue the firm
(c) The third party cannot sue the firm

Question 123.
Which of the following statement is False?
(a) There can be no specific performance of a partnership agreement
(b) The registration of partnership is compulsory as per the Partnership Act, 1932
(c) The proceeds of sale of goodwill is to be divided in the profit sharing ratio
(d) All of the above
(b) The registration of partnership is compulsory as per the Partnership Act, 1932

Question 124.
Which of the following is NOT an essential of a partnership?
(a) Association of two or more persons .
(b) Agreement
(c) Sharing of profits
(d) Registration of partnership
(d) Registration of partnership

Question 125.
When a person behaves in a manner that he is a partner of the firm but actually he is not a partner, then it is called as
(a) Nominal partnership
(b) Partnership by estoppel
(c) Dormant partner
(d) None of the above
(b) Partnership by estoppel

Question 126.
Where a partner does not participate into the affairs of a company and only shares the profit then, he is called ___________.
(a) Ostensible partner
(b) Dormant partner
(c) Sleeping partner
(d) Both (b) & (c)
(d) Both (b) & (c)

Question 127.
If a partner only gives his name to the firm and does not participate in the management of the firm, then he is called as ___________.
(a) Dormant oartner
(b) Holding cut partner
(c) Nominal partner
(d) Sub partner
(c) Nominal partner

Question 128.
When a partner agrees to share his profits with a third person, then such person is called as ___________.
(a) Sub partner
(b) Dormant partner
(c) Nominal partner
(d) None of the above
(a) Sub partner

Question 129.
Every limited liability partnership shall have at least ___________ partners.
(a) 1
(b) 2
(c) 3
(d) 5
(b) 2

Question 130.
At least ___________ of the designated partners of LLP shall be resident of India.
(a) 1
(b) 2
(c) 3
(d) 5
(a) 1

Question 131.
Foreign limited liability partnership means a limited liability partnership formed, incorporated or registered outside India which establishes a place of business ___________.
(a) within India
(b) outside India
(c) both a & b
(d) none of these
(a) within India

Question 132.
In which of the following cases a partnership firm is re-constituted:
(b) Retirement
(c) Death
(d) All of the above.
(d) Partners who have entered into partnership with one another are called individually ‘partners’ and collectively a ‘firm’.

Thus, when any partner entered into partnership or retired from partnership or died, in all three cases partnership firm will be re-constituted.

Question 133.
A partner may apply to the court for dissolution of the firm on:
(a) Insanity of a partner
(b) Misconduct of a partner
(d) All of the above.
(d) A partner can apply to the court for dissolution of the firm on:

• Insanity of a partner.
• Business of the firm becoming unlawful.
• Insolvency of all partner except a partner.
• Misconduct of a partner.

Thus, correct option is all of the above.

Question 134.
A partner who is entitled to share in the profits of a partnership firm without being liable to the losses, is called:
(a) Partner in Profits only
(b) Sleeping Partner
(c) Active Partner
(d) Dummy Partner.
(a) A partner who is entitled to share in the profits of a partnership firm without being liable to share the losses is called a partner in profit only. Thus, a person who has sufficient capital but is not prepared to take risk may be admitted to the partnership by the other partners.

Question 135.
Death of a partner has the effect of:
(a) Dissolution of the firm
(b) Continuance of the business of the firm
(c) His legal heir joining the firm
(d) Shutting down the business for 15 days.
(b) After the death of a partner, partnership firm continues to operate business as per provision laid down in partnership deed. In fact, death of a partner dissolves the partnership but it results in reconstitution of the partnership firm.

Question 136.
A person whose behaviour arouses misunderstanding that he is a partner in the firm but actually he is not, is called:
(a) Nominal partner
(b) Dormant partner
(c) Ostensible partner
(d) Partner by estoppel.
(d) If the behaviour of a person arouses misunderstanding that he is a partner in a firm (when actually he is not) such a person is estopped from later on denying the liabilities for the acts of the firm. Such a partner is called partner by estoppel and is liable to all third parties.

Question 137.
Which one of the following cannot be claimed as a matter of right by a partner?
(b) To take part in the conduct of the business
(c) To share the profits
(d) (a) Every partner has a right to take part in the conduct and management of the business.

(c) Every partner in entitled to share in the profits.
Thus, all the above can be claimed by a partner as a matter of right.

(d) Every partner is bound to attend diligently to the business of the firm and in the absence of any agreement to the contrary, he is not entitled to receive any remuneration.
Thus, it cannot be claimed by a partner as a matter of right.

Question 138.
According to Section 25 of the Indian Partnership Act, 1932, the liability of a partner is:
(a) Joint
(b) Several
(c) Joint and several
(d) None of the above.
(c) According to Section 25 of the Indian Partnership Act, 1932, all partners are liable jointly and severally for all acts omissions binding on the firm including liabilities arising from contracts as well as torts.

Question 139.
The relationship of partnership arises out of:
(a) An agreement
(b) Statute
(c) Operation of law
(d) Both an agreement and statute.
(a) According to Section 4 “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.”

Thus, we may say that the relationship of partnership arises from an agreement and not by any statute or operation of law.

Question 140.
Which of the following are the rights of a partner in a partnership firm?
X. To take part in the conduct and management of the business
Y. To receive remuneration for active working in the firm
Z. To receive interest on the capital invested in the firm
W. To receive share in the profit
Correct option is:
(A) X and Y
(b) X and Z
(c) X and W
(d) X, Z and W.
(d) A partner has the following rights –

• to take part in the conduct and management of business.
• to access all records, books and accounts of business.
• to share in the profits of the firm.
• to receive interest on capital at a rate agreed upon.
• to indemnify firm for all expenses incurred by him.
• to apply partnership property for exclusive purpose of partnership.
• to act in emergency for Protecting firm from loss.
• to present introduction of new partner without his consent.
• right to retire by giving notice in case of partnership at will.

Thus, to receive remunerations for actual working in the firm is not a right of a partner. Thus, X, Z and W is the correct answer.

Question 141.
In which of the following cases, a partnership firm may be dissolved?
X. On the death of a partner
Y. On the insolvency of a partner
Z. On the retirement of a partner Correct option is:
(a) X and Y
(b) X and Z
(c) Y and Z
(d) X, Y and Z
(d) Dissolution of partnership takes place in the following cases –

• by expiry of fixed term for which the partnership was formed.
• by completion of the adventure
• by death of a partner.
• by insolvency of a partner.
• by retirement of a partner.

Thus, X, Y, Z is the correct answer.

Question 142.
Which type of partner is not personally liable?
(a) Active
(b) Nominal
(c) Dormant
(d) Minor
(d) Minor can be in partnership only for profit but not liable for losses. Any Josses can be recovered from Minor’s estate. Minor is not personally liable. ‘

Question 143.
Person doing business solely is known as:
(a) Single person
(b) Sole proprietor
(c) Company
(d) Partner
(b) Sole proprietor refers to the person doing business solely.

Question 144.
Minor may be admitted in the firm for:
(a) Sharing of profits
(b) Mutual benefit
(c) Both (a) and (b)
(d) None of these
(a) Minor cannot become a partner as he is not competent to contract. As per Section 30, he can however be admitted to the benefits of partnership with the mutual consent of all partners.

Thus, minor may be admitted in the firm only for sharing profits.

Question 145.
Voluntary registration is related with?
(a) HUF
(b) Partnership
(c) Sole – proprietorship
(d) Company
(b) Partnership is as a result of an agreement between two or more persons, but this agreement is voluntary in nature.
Thus, voluntary registration is related with Partnership.

Question 146.
Agreement to share profits in a partnership firm ___________.
(a) Must be coupled with an agreement to share losses
(b) Is same as agreement to share losses
(c) Implies an agreement to share losses
(d) Does not necessarily mean an agreement to share losses.
(c) The partners in a partnership firm share their profit and loss in any ratio as agreed in the partnership deed. In absence of an agreement, they share it equally.

Therefore, agreement to share profits in a partnership firm must be implied with an agreement to share losses.

Question 147.
B a partner in AB & Sons has transferred his interest in the firm to D. Is the transfer correct?
(a) No
(b) Yes
(c) D will decide
(d) Court will decide.
(a) As per Sec. 29, No partner can assign or transfer his partnership interest to any other person, so as to make him a partner in the business. So, B as a partner cannot transfer his interest to D.

Question 148.
The court may not dissolve the firm in case of ___________.
(a) Insanity of a partner
(b) Permanent in capability of a partner
(c) Retirement of a partner
(d) Misconduct of a partner.
(c) As per Sec. 44, the court may dissolve the firm in the case of:

• When a partner becomes of unsound mind.
• Permanent incapacity of a partner. .
• Misconduct of a partner affecting the business.
• Transfer of interest or share by a partner.
• Business working at a loss.

So, the court may not dissolve the firm in case of retirement of a partner.

Question 149.
When a minor attains majority, he is liable for ___________.
(a) from the date of attaining majority
(b) all the liabilities
(c) only for liabilities which are dealt by him
(d) for all liabilities since the date of admission to the firm as a minor
(d) When a minor attains majority. He will be personally liable for all the acts of the firm, done since he was first admitted to the benefits of the partnership.

Question 150.
True Test of existence of partnership is ___________.
(a) Mutual agency
(b) Sharing of profits
(c) Sharing of losses
(d) All of the above
(a) Mutual Agency the True Test:
Mutual agency is the foundation of partner’s liability. Each partner is both an agent and principal for himself and others.

Question 151.
A partner who does not get actively involved in business is a ___________ partner.
(a) Active
(b) Sleeping or Dormant
(c) Nominal
(d) Sub partner.
(b) Sleeping or Dormant partner does not involve in business actively, such partners has no duties to perform but is entitled to have access to books and accounts of the firm and he can have a copy of them.

Question 152.
The Court may not dissolve the firm in case of ___________.
(a) Permanent in capability of a partner
(b) Insanity of a partner
(c) Misconduct of a partner
(d) Retirement of a partner.
(d) In the following cases the firm is dissolved by the court.

• Partners become of unsound mind
• Permanent in capability of a partner
• Misconduct of a partner
• Transfer of interest or share by a partner etc.

The court does not dissolves a firm in case a partner retires from the firm.

Question 153.
Which of the following conditions are true against an unregistered firm?
(a) Paying outside creditors
(b) Represent himself in continuing the business
(c) A suit or claim of set off, the value of which does not exceed one hundred rupees
(d) Equitable
(c) Suits allowed by Act for unregistered firm

• Dissolution of a firm
• Rendering accounts of a dissolved firm
• Realisation of property of a dissolved firm
• Set off of values not exceeding ₹ 100
• Proceeding arising incidentally of value not exceeding ₹ 100
• Firm not having business place in territories to which Indian partnership extends.

Thus, only option (c) is correct.

Question 154.
The circumstances of dissolution of firm does not include:
(a) Dissolution on the happening of certain contingency
(b) Dissolution by agreement
(c) Losses in the firm
(d) Compulsory dissolution.
(d) The circumstances of dissolution of firm does not include compulsory dissolution. It can be by mutual agreement, insolvency of all the partners, business becoming illegal or by notice of dissolution for closing up of the business.

Question 155.
Each of the partner in a partnership firm is:
(a) Only agent of the firm
(b) Principal as well as agent
(c) Only co-partner of the firm
(d) Only representative of the firm.
(b) Each partner is both an agent and principal for himself and others that is the significance of the phrase “carried on by all or any one of them acting for all”. Each partner is an agent binding the other partners who are his principal and each partner is again a principal, who in turn is bound by the acts of the other partners.

Question 156.
In setting the accounts of a firm during dissolution:
(a) The goodwill must not be included in the assets.
(b) The goodwill should be distributed among all the partners.
(c) The goodwill must be included in the assets.
(d) The goodwill should be separated before settlement.
(c) In setting the accounts of the firm during dissolution the goodwill must be included in the asset as it is a partnership asset and means the benefits arising from a firm’s business connections and reputation.

Question 157.
The essential element of a partnership at will is that:
(a) Each partner at his will can choose a business.
(b) The partnership deed does not specify the ratio in which profits would be shared
(c) No period has been fixed by the partners for its duration
(d) Each partner at his will can fix his remuneration.
(c) When no provision is made by contract between the partners for the duration of their partnership or for the determination of partnership, the partnership is called partnership at will. In other words, when no duration is fixed by partners it is called partnership at will.

Question 158.
Which of the following is not included in the implied authority of a partner?
(a) To borrow money for the purposes of firm
(b) To engage a lawyer to defend actions against firm
(c) To buy or sell goods on account
(d) To enter into partnership on behalf of firm.
(d) The Acts falling within the implied authority are:

• Purchasing goods on behalf of the firm
• Selling goods on behalf of the firm
• Receiving payment of a debt due
• Settling account with the person dealing with the firm
• Engaging Servants for the partnership business
• Borrowing money on the credit of the firm
• Drawing, accepting and endorsing bills and other negotiable, instrument in the name of the firm.
• Pledging the goods
• Employ a solicitor to defend an action against the firm.

Question 159.
In case partnership deed is silent with regard to profit sharing ratio, profits would be shared:
(a) Equally
(b) Depends on the number of hours worked
(c) In ratio of capital contributions
(d) In ratio of business done by each partner.
(a) If the partnership deed is silent:

• profit would be shared equally
• Interest on capital would not be given
• Interest on drawing would not be charged
• Salary will not be provided
• Interest on loan is given @ 6%.

Question 160.
On dissolution of partnership firm the partner? remain liable unless:
(a) Partners dues are paid off
(b) The registrar strikes off the name
(c) Public notice is given of the dissolution
(d) Accounts are settled.
(c) The partners continue to be liable to outsiders for any act done by any of them which would have been an act of the firm if done before the dissolution, unless a public notice is given of the dissolution.

Question 161.
The Court may not dissolve the firm in case of ___________.
(a) Misconduct of a partner
(b) Insanity of a partner
(c) Retirement of a partner
(d) Permanent incapability of a partner
(c) The court may order dissolution of the firm in the below grounds:

• Insanity of Partner
• Incapacity of Partner
• Misconduct of Partner
• Constant breach of agreement by partner
• Transfer of Interest
• Continuous L.osses
• Just and Equitable

Hence, the court will not dissolve the firm in the case of retirement of partner, as this can be a mode of dissolution of the partnership.

Question 162.
Who among the following can be a partner:
(a) A co-operative society ‘
(c) A sole proprietor
(d) A hindu undivided family
(c) An individual, who is competent to ccntract, can become a partner in the partnership firm. If there are more than two partners in a firm, an individual can be a partner in his individual capacity as well as in a representative capacity as Karta of the Hindu Undivided Family. Hence, a sole proprietor can become a partner in the partnership firm apart from the Co-operative Society, HUF or business firm.

Question 163.
Every partner in a partnership firm has ___________.
(a) A right to inspect the books with the consent of the Registrar
(b) No right to inspect the books of the firm
(c) A right to inspect the books of the firm
(d) A right with the consent of other partners to inspect the books of the firm
(c) Every partner in the partnership firm has right to inspect and to take out the copies of the books of accounts. The relation of the partners to one another arises through an agreement and if not then rights and duties are governed by the act. Thus, Option (c) is correct.

Question 164.
In case of Partnership, Registration of partnership is:
(a) Statutory
(b) Necessary
(c) Mandatory
(d) The registration of partnership is not compulsory under the Partnership Act. But it is advisable to do so because of various advantages available.

Question 165.
Who among the following can be a partner?
(a) A sole proprietor
(b) A Hindu Undivided Family
(c) A co-operative society
(a) A sole proprietor can be a partner in a firm as he is a person and any person can be a partner in a firm.

Question 166.
In partnership the liability of the partner is:
(a) Decided by other partners
(b) Unlimited
(c) Limited to share in partnership firm
(d) Decided by Court
(b) One of the Disadvantages of the partnership is that its liability is unlimited. The partners are liable to full amount of liability jointly and severally.

Question 167.
In a partnership firm, if claim of interest on capital is made, it is payable only out of:
(a) Turnover
(b) Capital
(c) Assets
(d) Profit
(d) Claim of interest on capital is made then it, paid only out of profit because it is an appropriation of profit, not a charge against profit.

Question 168.
A Person whose behaviour arouses misunderstanding that he is a partner in the firm but actually he is not, is called:
(a) Nominal Partner
(b) Dormant Partner
(c) Ostensible Partner
(d) Partner by Estoppel
(d) When any person due to his behaviour shows to a third party that he is partner in the firm but he is not partner in real then such person is known as ‘Partner by Estoppel’ or ‘Partner by holding out’

Question 169.
Which one of the following cannot be claimed as a matter of right by a partner?
(b) To take part in the Conduct of the business
(c) To Share the Profits
(d) Partnership deed is a deed in which rights and duties and other contents are mentioned related to partners of firm. In absence of Partnership deed, Partner does not right to receive remuneration unless otherwise agreed.

Question 170.
According to Section 25 of the Indian Partnership Act, 1932, the liability of a Partner is:
(a) Joint
(b) Several
(c) Joint and Several
(d) None of the above
(c) According to Section 25 of the Indian Partnership Act, 1932, all partners are liable jointly and severally for all acts omissions binding on the firm including liabilities arising from contracts as well as torts.

Question 171.
The relationship of partnership arises out of:
(a) An Agreement
(b) Status
(c) Operation of law
(d) None of the above
(d) Unlike Co-owners, the relationship of partnership arises out of an agreement and law (statute) only. It does not arise from status.

Question 172.
If the behaviour of a person shows that he is a partner in a firm. (When actually he is not). Such a person is known as:
(a) Nominal partner
(b) Sleeping partner
(c) Sub-partner
(d) Partner by estoppel
(d) If the behaviour of a person arouses misunderstanding that he is a partner in a firm (when actually he is not) such a person is estoppel from later on denying the liabilities for the acts of the firm. Such a partner is called partner by estoppel and is liable to all third parties.

Question 173.
Which of the following are the rights of a partner in a partnership firm?
X. To take part in the conduct and management of the business
Y. To receive remuneration for active working in the firm
Z. To receive interest on the capital invested in the firm
W. To receive share in the profit Correct option is:
(a) X and Y
(b) X and Z
(c) X and W
(d) X, Z and W
(d) A partner has the following rights:

• to take part in the conduct and management of business.
• to access all records, books and accounts of business.
• to share in the profits of the firm.
• to receive interest on capital at a rate agreed upon.
• to indemnity firm for all expenses incurred by him.
• to apply partnership property for exclusive purpose of partnership.
• to act in emergency for protecting firm from loss.
• to present introduction of a new partner without his consent
• right to retire by giving notice in case of partnership at will.

Thus to receive remunerations for actual working in the firms is not a right of a partner. Hence X, Z and W is the correct answer.

Question 174.
In which of the following cases, a partnership firm may be dissolved?
X. On the death of a partner
Y. On the insolvency of a partner
Z. On the retirement of a partner Correct option is:
(a) X and Y
(b) X and Z
(c) Y and Z
(d) X, Y and Z.
(d) Dissolution of partnership takes place in the following cases:

• by expiry of fixed term for which the partnership was formed.
• by completion of the adventure.
• by death of the partner
• by insolvency of a partner
• by retirement of a partner:

Thus, X, Y, Z is the correct answer.

## CS Foundation Auditing Notes | CS Foundation Fundamentals of Accounting and Auditing Notes MCQ Study Material

CS Foundation Fundamentals of Accounting Notes

CS Foundation Fundamentals of Auditing Notes

## Collection And Presentation Of Statistical Data – CS Foundation Statistics Notes

The collection of data is a major step in statistics. Before collecting data analyst has to decide for what objective the data is required, statistical units to be used, the degree of accuracy of data required. Data collection is an important aspect of any type of research study. Inaccurate data collection can impact the results of a study and ultimately lead to invalid results. There are 2 types of data

• Primary data
• Secondary data

1. Primary data
The data which is collected for the first time from the source is Primary data. Primary data is the data collected by the investigator himself by some of the below-mentioned methods

• Interview
• Observation
• action research
• case studies
• life histories
• questionnaires etc.

Some of the major sources of primary data in India are the Central Statistical organization, Census of India, National sample survey, and Reserve Bank of India.

2. Secondary data
Secondary data is any information collected by someone else other than its user. It is data that has already been collected and is readily available for use. It is used to gain initial insight into the research problem. It is classified in terms of its source – either internal or external. These are available from

• Already published data eg publications of government department and agencies
• Previous research
• Official statistics
• Mass media products
• Diaries :
• Letters
• Government reports
• Web information
• Historical data and information
• Publications of international bodies like UNO, WTO

3. Precautions before using secondary data
The investigator should consider precautions before using the secondary data. In this connection, the following precautions should be taken into account:
1. Suitable Purpose of Investigation: The investigator must ensure that the data are suitable for the purpose of the inquiry.
2. Inadequate Data: Adequacy of the data is to be judged in the light of the requirements of the survey as well as the geographical area covered by the available data.
3. Definition of Units: The investigator must ensure that the definitions of units that are used by him are the same as in the earlier investigation.
4. Degree of Accuracy: The investigator should keep in mind the degree of accuracy maintained by each investigator.
5. Time and Condition of Collection of Facts: It should be ascertained before making use of available data as to which period the data belong and conditions, under which the data is collected.
6. Comparison: Investigators should keep in mind whether the secondary data is reasonable, consistent, and comparable.
7. Test Checking: The use of the secondary data must do test checking and see that totals and rates have been correctly calculated.
8. Homogeneous Conditions: It is not safe to take published statistics at their face value without knowing their means, values, and limitations.
Weather data is collected from primary sources or secondary sources the standard of data depends on the financial availability, accuracy expected, etc. These days generally secondary data is used as reliable government publications are available.

4. Primary data collection methods
(a) Personal interview
Advantage -permits detailed & in-depth questions & responses,

• interviewer bias -investigator bias
• the interviewer may not give true and correct answers

(b) Telephone Interview

• saves time
• relatively inexpensive

Disadvantage -limited length & depth of questions and responses

(d) Information received from local agencies
Advantages – good when information required on a continuous basis

• Cost-effective

Disadvantages – not useful for comprehensive and extensive study

• Agencies from which data is collected could be biased

5. Census and Sample
A census measures absolutely everyone in the whole country. A representative sample measures a small number of people who fit a particular category of people eg 5000 females are there out of which only the one who is working is to be surveyed regarding smoking habits. Thus this example depicts a sample measuring a small number of people who fit a particular category.

6. Pros of census

• provides a true measure of the population (no sampling error)
• benchmark data may be obtained for future studies
• detailed information about small sub-groups within the population is more likely to be available
• can be used for various research purposes
• reliable data

7. Cons of census

• maybe difficult to enumerate all units of the population within the available time
• higher costs, both in staff and monetary terms, than for a sample
• generally takes longer to collect, process, and release data than from a sample

8. Pros of sample

• costs would generally be lower than for a census
• results may be available in less time
• detailed information can always be done cause it is less costly and less time consuming
• if good sampling techniques are used, the results can be very representative of the actual population
• greater scope of flexibility

9. Cons of sample

• data may not be representative of the total population, particularly where the sample size is small.
• often not suitable for producing benchmark data
• as data are collected from a subset of units and inferences made about the whole population, the data are subject to ‘sampling’ error
• decreased number of units will reduce the detailed information available about sub-groups within a population

10. Presentation of data.
Once the data has been assembled, a systematic procedure is to be followed to make the data presentable so that the purpose for which data was collected is achieved. The procedure to be followed is

1. Classification of data
A data is classified to give it a meaningful shape. Data classification highlights the salient features of the data.
Once the data has been collected it is to be classified into various groups on the basis of common factors present in them. Like a data can be classified on the basis of literacy – literate or illiterate, on the basis of working – working or non-working, on the basis of income – wages below Rs. 5000 and wages between Rs. 5000 to Rs. 7000. Thus we can classify data oil on various grounds. There are 4 bases of classification of data

(a) Chronological – In this type of classification the data is classified on the basis of time. Thus we can say that in the year 2001 GDP was ‘A’ in the year 2002 GDP is ‘B’ Classification is done between related data and in chronological manner data for 2001 than data for 2002 and so on.

(b) Quantitative – Quantitative data is data that can be measured numerically. Things that can be measured precisely rather than through interpretation such as the number of attendees at an event, the temperature in a given location, or a person’s height in inches can be considered quantitative data.

(c) Qualitative – Qualitative data are forms of information gathered in a non-numeric form. In qualitative classification, data are classified on the basis of some attributes or quality such as sex, literacy, religion, etc. In this type of classification, the attribute can not be measured rather it is classified on the basis of whether the attribute is present or absent.

(d) Geographical classification – This type of classification is based on the basis of data available for various regions. Data is classified on the basis of geographical divisions.

2. Tabulation of data
It is the process of condensation of the data for convenience, in statistical processing, presentation, and interpretation of the information. As per Secrist ‘Tables are means of recording in permanent form the analysis that is made through classification and by placing in just opposition things that are similar and should be compared’.
Significance of tabulation of data
Tabulation of data is helpful in many ways. Some of the benefits drawn from the tabulation of data are

• Data gets categorized in such a manner that it can be considered homogenous for further analysis.
• A categorized data is useful when made comparisons
• It discloses trends and patterns of data
• A tabularized data can be considered a sorted data which helps in easy identification
• Helpful in statistical analysis Essential Parts of A Table

Different parts into which a table should be divided would depend on the nature of the data and the purpose for which they have been collected. However, in general, a statistical table is divided into 7 parts which are given below:

1. Table Number:
2. Title of the table:
3. Captions
4. Stubs
5. Body:
7. Footnote Classification of tables

A table can be classified as a data table whenever you need to specify a row or column with header information about that row/column. Broadly it can be classified in the following ways.

1 Simple Table and Complex Tables,
Simple Table
A simple table here means that there is a maximum of one header row and one header column where a header column specifies the type of information in the column. In addition, there are no merged cells within a simple table. Simple tabulation is when the data are tabulated to one characteristic. For example, the class survey conducted on November 11, 2011, determined the frequency or number of students owning different brands of mobile phones like Blackberry, Nokia, iPhone, etc.

Complex Table
Complex tabulation of data that includes more than two characteristics. For example, the frequency or number of girls, boys, and the total class owning the different brands of mobile phones like Blackberry, Nokia, I phone, etc.

Cross Table
Cross tabulations are also a sub-type of complex tabulation that includes cross-classifying factors to build a contingency table of counts or frequencies at each combination of factor levels.

Contingency Table
A contingency table is a display format used to analyze and record the possible relationship between two or more categorical variables. For example, the class survey conducted on November 11, 2011, determined the frequency or number of students owning different brands of mobile phones across boys and girls of ages 17, 18, and 19 (Please Refer to slides no. 9 and 10. in the session 2 presentations). The purpose of this cross-tabulation could be an assumption that boys and girls own certain mobile brands due to a particular age group they represent.

General-purpose table
General-purpose tables are also called reference tables or repository tables, and they provide information for general use and reference. Croxton and Crowden have identified the purpose of such tables in the following words: “Primarily and usually the sole purpose of a reference table is to present data in such a manner that individual items may be found readily by a reader”. Important rules of tabulation.
There are no hard and fast rules for preparing a statistical table. Prof. Bowley has rightly pointed out “In collection and tabulation, common sense is the chief requisite and experience is the chief teacher.” However, the following points should be borne in mind while preparing a table.

1. A good table must contain all the essential parts, such as Table number, Title, Headnote, Caption, Stub, Body, Footnote, and source note.
2. A good table should be simple to understand. It should also be compact, complete, and self-explanatory.
3. A good table should be of the proper size. There should be proper space for rows and columns. One table should not be overloaded with details. Sometimes it is difficult to present entire data in a single table. In that case, data are to be divided into more tables.
4. A good table must be prepared in *a clear manner for its purpose so that a scholar can understand the problem without any strain.
5. The rows and columns of a table must be numbered.
6. In all tables, the captions and stubs should be arranged in some systematic manner. The manner of presentation maybe alphabetically, or chronologically depending upon the requirement.
7. The unit of measurement should be mentioned in the headnote.
8. The figures should be rounded off to the nearest hundred, or thousand or lakh. It helps in avoiding unnecessary details.
9. In case of non-availability of information, one should write N.A. or indicate it by dash (-).

3. Frequency distribution of data
The frequency (f) of a particular observation is the number of times the observation occurs in the data. The distribution of a variable is the pattern of frequencies of the observation. A frequency distribution is a tool for organizing data. We use it to group data into categories and show the number of observations in each category. Frequency distributions are portrayed as frequency tables, histograms, or polygons.
Guidelines for constructing a frequency distribution.

• Each value should fit into a category. The classes should be mutually exhaustive.
• No value should fit into more than 1 category. The classes should be mutually exclusive, there should be no overlapping of classes.
• Make the classes of equal size if possible. This makes it easier to compare the frequency in one class to another.
• Avoid open-ended classes if possible such as “75 and over”.
• Try to use between 5 and 20 classes if possible. If you have fewer than 5 classes, you’re not really breaking up the data, and if you use more than 20 classes, this will probably be information overflow.
• It is usually convenient to use class sizes of 5 or 10, in other words, to have each class containing 5 or 10 possible values.
• It is usually convenient to make the lower limit of the first category a multiple of the class size.

After the first two rules above, the rest are merely suggestions.
Example 1 — Constructing a frequency distribution table
A survey was taken in an area. In each of 20 homes, people were asked how many cars were registered to their households. The results were recorded as follows:
. 1,2, 1,0, 3,4, 0, 1, 1, 1,2,2, 3,2, 3,2, 1,4, 0,0
Frequency distribution table.
Table 1. Frequency table for the number of cars registered in each household

 Number of cars (x) Tally Frequency (f) 0 IIII 4 1 IIIIII 6 2 IIIII 5 3 III 3 4 II 2

Let us understand the construction of the frequency distribution table
Use the following steps to present this data in a frequency distribution table.

• Divide the results (x) into intervals and then count the number of results in each interval.
• In this case, the intervals would be the number of households with no car (0), one car (1), two cars (2), and so forth.
• Make a table with separate columns for the interval numbers (the number of cars per household), the tallied results, and the frequency of results in each interval.
• Label these columns Number of cars, Tally, and Frequency.
• Read the list of data from left to right and place a tally mark in the appropriate row.
• For example, the first result is a 1, so place a tally mark in the row beside where 1 appears in the interval column (Number of cars). The next result is a 2, so place a tally mark in the row beside the 2, and so on. When you reach your fifth tally mark, draw a tally line through the preceding four marks to make your final frequency calculations easier to read.
• Add up the number of tally marks in each row and record them in the final column entitled Frequency.

By looking at this frequency distribution table quickly, we can see that out of 20 households surveyed, 4 households had no cars, 6 households had 1 car, etc.

Example 2 — Constructing a cumulative frequency distribution table
A cumulative frequency distribution table is a more detailed table. It looks almost the same as a frequency distribution table but it has added columns that give the cumulative frequency and the cumulative percentage of the results, as well.
At a recent chess tournament, all 10 of the participants had to fill out a form that gave their names, address, and age. The ages of the participants were recorded as follows:
36, 48, 54, 92, 57, 63, 66, 76, 66, 80
Cumulative frequency table

 Table 2. Ages of participants at a chess tournament Lower Value Upper Value Frequency(f) CumulativeFrequency Percentage Cumulative percentage 35 44 1 1 10.0 10.0 45 54 2 3 20.0 30.0 55 64 2 5 20.0 50.0 65 74 2 7 20.0 70.0 75 84 2 9 20.0 90.0 85 94 1 10 10.0 100.0

Let us understand the construction of this table
Use the following steps to present these data in a cumulative frequency distribution table.

• Divide the results into intervals, and then count the number of results in each interval. In this case, intervals of 10 are appropriate. Since 36 is the lowest age and 92 is the highest age, start the intervals at 35 to 44 and end the intervals with 85 to 94.

• Create a table similar to the frequency distribution table but with three extra columns.

• In the first column or the Lower value column, list the lower value of the result intervals. For example, in the first row, you would put the number 35.

• The next column is the Upper-value column. Place the upper value of the result intervals. For example, you would put the number 44 in the first row.

• The third column is the Frequency column. Record the number of times a result appears between the lower and upper values. In the first row, place the number 1.

• The fourth column is the Cumulative frequency column. Here we add the cumulative frequency of the previous row to the frequency of the current row. Since this is the first row, the cumulative frequency is the same as the frequency. However, in the second row, the frequency for the 35—44 interval (i.e., 1) is added to the frequency for the 45-54 interval (i.e., 2). Thus, the cumulative frequency is 3, meaning we have 3 participants in the 34 to 54 age group. 1+2=3

• The next column is the Percentage column. In this column, list the percentage of the frequency. To do this, divide the frequency by the total number of results and multiply by 100. In this case, the frequency of the first row is 1 and the total number of results is 10. The percentage would then be 10.0.  10.0. (1-10) x 100= 10.0

• The final column is Cumulative percentage. In this column, divide the cumulative frequency by the total number of results and then to make a percentage, multiply by 100. Note that the last number in this column should always equal 100.0. In this example, the cumulative frequency is 1 and the total number of results is 10, therefore the cumulative percentage of the first row is 10.0.
10.0. (1 – 10) x 100 = 10.0

• Class Limit – Separate one class in a grouped frequency distribution from another. The limits could actually appear in the data and have gaps between the upper limit of one class and the lower limit of the next.

• Class intervals – While arranging a large amount of data (in statistics), they are grouped into different classes to get an idea of the distribution, and the range of such class of data is called the Class Interval.

• Class Midpoint -it is the midpoint of the class interval i.e. lower limit + upper limit/2 is the class midpoint.

• Frequency of a class interval – is the number of observations that occur in a particular predefined interval. So, for example, if 20 people aged 5 to 9 appear in our study’s data, the frequency for the 5-9 interval is 20. Classification is of two types according to the class intervals –

• Exclusive Method
• Inclusive Method.

(i) Exclusive Method: In this method, the upper limit of a class becomes the lower limit of the next class. It is called ‘ Exclusive ‘ as we do not put any item that is equal to the upper limit of a class in the same class; we put it in the next class, i.e. the upper limits of classes are excluded from them. For example, a person of age 20 years will not be included in the class-interval (10 – 20) but taken in the next class (20 – 30), since in the class interval (10 – 20) only units ranging from 10 – 19 are included.

(ii) Inclusive Method: In this method, the upper limit of any class interval is kept in the same class interval. In this method, the upper limit of a previous class is less by 1 from the lower limit of the next class interval. In short, this method allows a class interval to include both its lower and upper limits within it.

• The endpoints of a class interval – are the lowest and highest values that a variable can take. Example So, if the intervals are 0 to 4 years, 5 to 9 years, 10 to 14 years, 15 to 19 years, 20 to 24 years, and 25 years and over. The endpoints of the first interval are 0 and 4 if the variable is discrete, and 0 and 4.999 if the variable is continuous. The endpoints of the other class intervals would be determined in the same way.

• Class interval width – is the difference between the lower endpoint of an interval and the lower endpoint of the next interval. For example, if continuous intervals are 0 to 4, 5 to 9, etc., the width of the first five intervals is 5, and the last interval is open since no higher endpoint is assigned to it. The intervals could also be written as 0 to less than 5, 5 to less than 10, 10 to less than 15, 15 to less than 20, 20 to less than 25, and 25 and over.

• Class boundaries – Separate one class in a grouped frequency distribution from another. The boundaries have one more decimal place than the raw data and therefore do not appear in the data. There is no gap between the upper boundary of one class and the lower boundary of the next class. The lower class boundary is found by subtracting 0.5 units from the lower class limit and the upper-class boundary is found by adding 0.5 units to the upper-class limit.

4. Diagrammatic presentations
Although tabulation is a very good technique to present the data, diagrams are an advanced technique to represent data. As a layman, one cannot understand the tabulated data easily but with only a single glance at the diagram, one gets a complete picture of the data presented. According to M.J. Moroney, “diagrams register a meaningful impression almost before we think.

The following are a few advantages of the diagrammatic presentation of data.

• Simple and Easy to understand: The data presented in the form of diagrams is the simplest and the easiest to understand. The entire data can be easily understood even by having a single glance at the diagram.
• Attractive and Impressive: Diagrammatic presentation makes the data more attractive and interesting. Diagrams tend to leave along a lasting impact on the mind.
• Helpful in Making Comparisons: The presentation of data in the form of diagrams helps in making comparisons between two or more groups or two or more periods.

Limitations of Diagrammatic Presentation

1. Diagrams do not present the small differences properly.
2. These can easily be misused.
3. Only artists can draw multi-dimensional diagrams.
4. In statistical analysis, diagrams are of no use. ,
5. Diagrams are just supplemented to tabulation.
6. Only a limited set of data can be presented in the form of a diagram.
7. Diagrammatic presentation of data is a more time-consuming process.
8. Diagrams present preliminary conclusions.
9. Diagrammatic presentation of data shows only an estimate of the actual behavior of the variables.

Guidelines for Diagrammatic presentation

• The diagram should be properly drawn at the outset.
• The pith and substance of the subject matter must be made clear under a broad heading that properly conveys the purpose of a diagram.
• The size of the scale should neither be too big nor too small.
• If it is too big, it may look ugly. If it is too small, it may not convey the meaning.
• In each diagram, the size of the paper must be taken note of. It will help to determine the size of the diagram.
• For clarifying certain ambiguities some notes should be added at the foot of the diagram. This shall provide the visual insight of the diagram.
• Diagrams should be absolutely neat and clean. There should be no vagueness or overwriting on the diagram.
• Simplicity refers to love at first sight. It means that the diagram should convey the meaning clearly and easily.
• The scale must be presented along with the diagram.

Types of Diagrams

A. Line Diagrams
In these diagrams, only a line is drawn to represent one variable. These lines may be vertical or horizontal. The line graphs are usually drawn to represent the time series data related to the temperature, rainfall, population growth, birth rates, and death rates.

B. Simple Bar Diagram
It is also called a columnar diagram. Like line diagrams, these figures are also used where only a single dimension i.e. length can present the data. The procedure is almost the same, only one thickness of lines is measured.

C. Multiple Bar Diagrams
The diagram is used, when we have to make a comparison between more than two variables. The number of variables may be 2, 3, or 4 or more. In the case of 2 variables, pair of bars is drawn. Similarly, in the case of 3 variables, we draw triple bars.

D. Sub-divided Bar Diagram
When different components are grouped in one set of variables or different variables of one component are put together, their representation is made by a sub-divided bar diagram. In this method, different variables are shown in a single bar with different rectangles.

E. Pie chart
A pie diagram is a circle of radius neither too larger nor too small whose area is divided into as many different sectors as there are components of the whole data. This is done by drawing straight lines from the center to the circumference of the circle. The area of the circular lamina represents the whole data and it is equivalent to 360 degrees at the center. The area of each sector is proportional to the value of the corresponding components of the data. The area of a sector is proportional to the angle at the centre. A pie diagram is very useful in drawing comparisons among the various components or between a part and the whole.

Construction

• Select a suitable radius for the circle to be drawn. A radius of 3, 4, or 5 cm may be chosen for the given data set.
• Draw a line from the centre of the circle to the arc as a radius.
• Measure the angles from the arc of the circle for each category of vehicles in an ascending order clock-wise, starting with a smaller angle.
• Complete the diagram by adding the title, sub-title, and legend. The legend mark be chosen for each
variable/category and highlighted by distinct shades/colors.

5. Graphic Presentation
A graph is a visual representation of data by a continuous curve on a squared (graph) paper. Like diagrams, graphs are also attractive, and eye-catching, giving a bird’s eye view of data and revealing their inner pattern. Graphic presentation enjoys numerous forms of expression ranging from the written word to the most abstract of drawings or statistical graphs.

Graphs are actually two perpendicular lines that intersect each other at a point that is called the origin. The horizontal line is called X-axis and the vertical line is called Y-axis. The four parts of the plane are called quadrants. It may be noted that X and Y are positive in the first quadrant, X is negative and Y is positive in the second quadrant, X and Y both are negative in the third quadrant and X is positive and Y is negative in the fourth quadrant. Graphs are commonly used in the presentation of time series and frequency distribution.

Rules to be followed while making graphs are

• It should have a suitable title.
• A suitable unit of measurement should be used. A suitable scale is used to present data. Scale selection should be appropriate so that graph is considerably small and visible in one vision.
• Various sources of data are to be mentioned at the bottom.

• It is an efficient method of showing large numbers of observations in a simple manner
• A visual impression is more permanent than sets of figures of words. ,
• Complex relationships can be demonstrated easily and quickly so that the whole situation is presented simultaneously.
• By the use of color and other devices, one can emphasize certain places. For example, an alarming increase in pollution rate might be pictured in red to bring out the aspect of danger involved.
• Technical qualification is not required to understand the details presented in graphs as they can be easily understood.
• Time-saving for the analyst as data is more understandable
• Helps to locate mean, median, mode „
• Helps in forecasting, extrapolation, and interpolation of data.

• A graph can be used only to show large or crude variations in the date.
• Lack of flexibility in the event a new combination of the data seems appropriate. This follows as a result of the first disadvantage and is one of the reasons why it may be advisable to present the original data in a table or text accompanying the graph.
• Shows only a few characteristics of data
• Distortion of the situation may result from the desire to oversimplify the material.
• Cannot be used in support of some statement
• The construction of a graph or chart may be difficult or costly. This should only apply, however, to large-scale drawings which are employed as posters to educate the lay public or similar groups.

13. Types of Graphs
Basically, they can be divided into two categories

• Graphs of time series
• Graphs of frequency distribution 1. Graphs of time series

Time-series graphs are also known as histograms. In this case, the variable value is dependent on time such as hour, minute, seconds. Such graphs are mostly used by economists, businessmen, and statisticians. Time is represented on X-axis and variable value on Y-axis. Starting value of Y is zero. Various types of graphs are

• Line graph – This graph makes possible the presentation of data with a high degree of accuracy. In fact, careful work and use of the proper coordinate paper make possible the exact reproduction of numerical data, a quality not given to all forms of graphic presentation. Since different types of lines may be used in tracing the data, two or more illustrations may be presented on the same graph. Time is represented on X-axis and variable value on Y-axis. Sometimes the values of data are too large but the variation between the values is too small in such conditions plotting of the graph does not begin from zero instead we make a zigzag horizontal line above the zero for convenience.

• Net balance graph – We use a net balance graph when we have to show data related to income and expenditure or import and exports etc. Here we draw two lines individually like one line showing data related to imports and the other showing data related to export on the same graph. The difference between the two lines (shaded portion) shows the scenario.

Constructing a Time Series Graph
To construct a time-series graph, we must look at both pieces of our paired data set. We start with a standard Cartesian coordinate system. The horizontal axis is used to plot the date or time increments, and the vertical axis is used to plot the values variable that we are measuring. By doing this each point on the graph corresponds to a date and a measured variable. The points on the graph are typically connected by lines in the order in which they occur.

• Histograms and bar charts are both visual displays of frequencies using columns plotted on a graph. The Y-axis (vertical axis) generally represents the frequency count, while the X-axis (horizontal axis) generally represents the variable being measured. A histogram is a type of graph in which each column represents a numeric variable, in particular, that which is continuous and/or grouped. A histogram shows the distribution of all observations in a quantitative dataset. It is useful for describing the shape, centre, and spread to better understand the distribution of the dataset. It is defined as a pictorial representation of a grouped frequency distribution by means of adjacent rectangles, whose areas are proportional to the frequencies. Generally, the data sets are more than 100.

Features of a histogram:

• The height of the column shows the frequency for a specific range of values.
• Columns are usually of equal width, however, a histogram may show data using unequal ranges (intervals) and therefore have columns of unequal width.
• The values represented by each column must be mutually exclusive and exhaustive. Therefore, there are no spaces between columns and each observation can only ever belong in one column.
• It is important that there is no ambiguity in the labeling of the intervals on the x-axis for continuous or grouped data.

• Frequency polygon – Frequency polygons are a graphical device for understanding the shapes of distributions. They serve the same purpose as histograms but are especially helpful for comparing sets of data. To create a frequency polygon, start just as for histograms, by choosing a class interval. Then draw an X-axis representing the values of the scores in your data. Mark the middle of each class interval with a tick mark, and label it with the middle value represented by the class. Draw the Y-axis to indicate the frequency of each class. Place a point in the middle of each class interval at the height corresponding to its frequency. Finally, connect the points. You should include one class interval below the lowest value in your data and one above the highest value. The graph will then touch the X-axis on both sides. When several distributions are to be compared on the same graph paper, frequency polygons are better than Histograms.

• Frequency Curve is obtained by joining the points of frequency polygon by a freehand smoothed curve. It is used to remove the ruggedness of polygon and to present it in a good form or shape. This curve is used for a frequency distribution of a continuous distribution when the number of data points becomes very large. In order to plot the points on either the frequency polygon or curve, the mid values of the class intervals of the distribution are calculated. Then the frequencies with respect to the midpoints are plotted. However, in a frequency curve, the points are joined by a smooth curve, whereas in a frequency polygon the points are joined by straight lines. Apart from this major difference, a frequency polygon is a closed figure whereas the frequency curve is not.

• Cumulative frequency curve – Cumulative histograms, also known as ogives, are graphs that can be used to determine how many data values lie above or below a particular value in a data set. The cumulative frequency is calculated from a frequency table, by adding each frequency to the total of the frequencies of all data values before it in the data set. The last value for the cumulative frequency will always be equal to the total number of data values since all frequencies will already have been added to the previous total. The cumulative frequency is plotted on the y-axis against the data which is on the x-axis for un-grouped data. When dealing with grouped data, the Ogive is formed by plotting the cumulative frequency against the upper boundary of the class.

An Ogive is used to study the growth rate of data as it shows the accumulation of frequency and hence its growth rate. An ogive is drawn by plotting the beginning of the first interval at a V -value of zero; Plotting the end of every interval at the V -value equal to the cumulative count for that interval; and connecting the points on the plot with straight lines. In this way, the end of the final interval will always be at the total number of data since we will have added up across all intervals

14. The Survey Technique
In this section, we use several words that are commonly found in surveying. Let us describe and define their meanings before we start.
• A survey is a technique in which a sample of prospective respondents is selected from a population. The sample is then studied with a view to drawing inferences from their responses to the statements in a questionnaire, or the questions in a series of interviews.

• Population is the term we use to describe the main group of people from which a sample is drawn. A population, therefore, may be an organization’s workforce, a management group, or a group of customers.

• A sample is a representative cross-section of people drawn from a population so that their responses may be studied. The sizes of the samples and the structures of the surveys are determined by the kind of data that needs to be collected and from whom.

Collection And Presentation Of Statistical Data MCQ Questions

Question 1.
Some of the sources of published data are
a. ILO
b. IBRD
c. WFCO
d. All of the above
d. All of the above

Question 2.
When data is classified on the basis of attribute it is termed as
a. Geographical
b. Qualitative
c. Chronological
d. Both a & c
b. Qualitative

Question 3.
In order to save time and money, psychologists collect their data by:
a. Door-to-door survey
b. The use of censuses.
c. Using the earlier research papers.
d. The use of samples
d. The use of samples

Question 4.
A precise point that separates one class from another is
a. Class boundary
b. Class limit
c. Class interval.
d. Nothing to do with statistics.
a. Class boundary

Question 5.
Continuous series of statistical data can be
a. Divided.
b. Can be calculated in fractions
c. Both a & b
d. Cannot be divided
c. Both a & b

Question 6.
Collected data should be
a. Quantitative
b. Subjective
c. Objective
d. None of the above
a. Quantitative

Question 7.
The total expenditure made by industry under different heads is presented by
a. Histogram
b. Line graph.
c. Bar graph.
d. None of the above.
a. Histogram

Question 8.
Whenever we group data into classes it is recommended that we have
a. Less than 5 classes
b. Between 5 and 20 classes
c. At least 2 classes
d. Between 2 and 3 classes
b. Between 5 and 20 classes

Question 9.
When a line connects points that are the cumulative percent of observation below the upper limit of each interval in a cumulative frequency distribution is known as
a. Mode
b. Histogram
c. Frequency polygon
d. Ogive
d. Ogive

Question 10.
Measures of central tendency are
a. Inferential statistics that identify the best single value for representing a set of data
b. Descriptive statistics that identify the best single value for representing a set of data
c. Inferential statistics that identify the spread of the scores in a data set
d. Descriptive statistics that identify the spread of the scores in a data set.
b. Descriptive statistics that identify the best single value for representing a set of data

Question 11.
The mean is
a. The statistical or arithmetic average.
b. The middlemost score.
c. The most frequently occurring scored
d. The best representation for every set of data.
a. The statistical or arithmetic average.

Question 12.
Given the following data set, what is the value of the median (2 4361 8925 7)
a. 2
b. 4.7
c. 4.5
d. 10
c. 4.5

Question 13.
Which of the following is not a characteristic of the mean?
a. It is affected by extreme scores.
b. It minimizes the sum of squared deviations.
c. The sum of the deviations about the mean is 0
d. It is best used with ordinal data
d. It is best used with ordinal data

Question 14.
For making any date useful it is required that it should be
a. Classified
b. Presented properly
c. Appropriate collection
d. All of the above
d. All of the above

Question 15.
Sources of Semi-Government publication is
a. RBI
b. WHO
c. WTO
d. None of the above
a. RBI

Question 16.
Data collected by research institutions is
a. Primary data
b. Secondary unpublished data
c. Secondary published data
d. All of the above
b. Secondary unpublished data

Question 17.
Secondary data should not be
a. Accurate
b. Reliable
c. Suitable
d. None of the above
d. None of the above

Question 18.
Given the following set of data, what is the range 12 23 34 54 21 8 9 67
a. 55
b. 59
c. 8
d. 56
b. 59

Question 19.
Which of the following statements is true for frequency distribution?
a. The smaller the sample size, the closer the sample mean will be to the population mean, b: The smaller the population size. The smaller the relationship will be between the sample mean and the population means.
c. The larger the population size, the closer the population mean will be to the sample mean.
d. The larger the sample size, the closer the sample mean will be to the population mean.
d. The larger the sample size, the closer the sample mean will be to the population mean.

Question 20.
Classification of data is compulsory as
a. It tells the features of data at a glance
b. It helps in meaningful comparison of data
c. Arranges the huge data
d. All of the above
d. All of the above

Question 21.
When data is classified on the basis of time it is termed as
a. Quantitative
b. Chronological
c. Qualitative
d. All of the above
b. Chronological

Question 22.
Trend and Pattern of data can only be understood if data is in
a. Descriptive manner
b. Tabular form
c. Both a & b
d. None of the above
b. Tabular form

Question 23.
A core distribution data is given for an inventory measuring physical fitness. The type of graph that will be used to display the information will be
a. Histogram
b. Line graph
c. Pie chart
d. Bar graph
a. Histogram

Question 24.
Whenever we use mean, as a measure of central tendency, the precaution to be taken is
a. Skewed up data is there
b. Random data is there
c. Unorganized data is there
d. None of the above
d. None of the above

Question 25.
A population is
a. Same as a sample
b. The selection of a random sample
c. The collection of all items of interest a particular study
d. None of the above
c. The collection of all items of interest a particular study

Question 26.
The entities on which data are collected are
a. Variables
b. Data sets
c. Elements
d. None of the above
c. Elements

Question 27.
Labels or names used to identify attributes of elements are
a. Quantitative data
b. Qualitative data
c. Simple data
d. None of the above
b. Qualitative data

Question 28.
A characteristic of interest for the elements is
a. A variable
b. An element
c. A data set
d. None of the above
a. A variable

Question 29.
Tabulation of data makes the presentation of facts and figures
a. More simplified
b. More understandable
c. Both a & b
d. It is lengthy and occupies space
c. Both a & b

Question 30.
Stubs are
a. Heading for the vertical column
b. Heading of the horizontal column
d. None of the above
b. Heading of the horizontal column

Question 31.
Some of the primary sources of primary data in India are
a. CSO
b. Census of India
c. Central Bank of India
d. Both a & b
d. Both a & b

Question 32.
CSO is
a. Census of India
b. Central Statistical organization
c. Central Survey of India
d. Central statistics of India
b. Central Statistical organization

Question 33.
For checking the reliability of data it should be seen that
a. The degree of accuracy required
b. The procedure of collection of data by the primary source
d. Both a & b
d. Both a & b

Question 34.
It is Not an Uncommon way of collecting primary data
a. Indirect praline view
b. Telephone survey
c. Mailed questions
d. All of the above
d. All of the above

Question 35.
Footnotes are used
a. to point at any specific data which was not expressed in the heading
b. table numbers
c. source note
d. a note at the foot of the document
a. to point at any specific data which was not expressed in the heading

Question 36.
In frequency magnitude,
a. zero should be used to indicate the information that is not available
b. the abbreviation should be avoided
c. magnitude of values& the number of times the value has been repeated
c. magnitude of values& the number of times the value has been repeated

Question 37.
For checking how many students scored above 80 % marks in a class what should be the source of data
a. Secondary data
b. Mailed questions
c. Direct investigation
d. Sample investigation
c. Direct investigation

Question 38.
Indirect oral investigation method of collection of data is to be used when
a. The source is reluctant to give the information
b. When there is less time
c. When the finances are less
d. All of the above
a. The source is reluctant to give the information

Question 39.
For getting periodical information, the best way to seek data is to collect it
a. Indirectly by oral investigation
b. Mailed questionnaire
c. Information received from local agencies
d. All of the above
c. Information received from local agencies

Question 40.
Which amongst these is the most expensive way of collecting data?
a. Questionnaire through enumerator
b. Telephonic survey
c. Direct personal interview
d. Indirect oral investigation
a. Questionnaire through the enumerator

Question 41.
The types of error in sample investigation way of a collection of data are
a. Actual error
b. Random error
c. Sampling error
d. Both b & c
d. Both b & c

Question 42.
Arithmetic operations are appropriate for
a. Qualitative data
b. Quantitative data
c. Both quantitative and qualitative data
d. Neither quantitative nor qualitative data
b. Quantitative data

Question 43.
Zipcodes are an example of
a. Qualitative data
b. Quantitative data
c. Neither quantitative nor qualitative data
d. None of the choices are correct
a. Qualitative data

Question 44.
A tabular summary of a set of data, which shows
the appearance of data elements in several nonoverlapping classes, is termed
a. The class width
b. a frequency polygon
c. a frequency distribution
d. a histogram
c. a frequency distribution

Question 45.
A tabular summary of a set of data showing classes of the data and the fraction of the items belonging to each class is called.
a. the class width
b. a relative frequency distribution
c. a cumulative relative frequency distribution.
d. an ogive
b. a relative frequency distribution

Question 46.
Each percentage of data in pie chart should be multiplied by
a. 3.6%
b. 3.7%
c. 3.5%
d. No need of any multiplication
a. 3.6%

Question 47.
From the below mentioned what, if missed makes the graphic presentation incomplete
a. Unit of measurement
b. Suitable scale
c. Suitable title
d. All of the above
d. All of the above

Question 48.
A graph is a useful tool as
a. Only limited information can be achieved
b. Information provided is not useful for an expert
c. Not precisely correct
d. It does not require that the person who is using graphs should know mathematics
d. It does not require that the person who is using graphs should know mathematics

Question 49.
International tourist is randomly selected on a beach in Singapore to ask how many days they spend in Singapore.
a. This method will give reliable results if many tourists are asked.
b. This method will overestimate the time tourists stay in Singapore
c. This method will underestimate the time tourists stay in Singapore
d. This method will work only in sunny weather.
b. This method will overestimate the time tourists stay in Singapore

Question 50.
A graphical method of presenting qualitative data by frequency distribution is termed.
a. A frequency polygon
b. An ogive
c. A bar graph
d. None of the above
c. A bar graph

Question 51.
The sum of frequencies for all classes will always equal
a. 1
b. the number of elements in a data set
c. the number of classes
d. a value between 0 to 1
b. the number of elements in a data set

Question 52.
The information invariably required to be put in a good statistical table is/are
a. Descriptive thinking
b. Table Number
d. Both b & c
d. Both b & c

Question 53.
If the upper limit of one class coincides with the lower limit of another class. It is
a. Exclusive class intervals
b. Inclusive class intervals
c. Interval
d. nominal
a. Exclusive class intervals

Question 54.
A numerical description of the outcome of an experiment is a random
a. description
b. outcome
C. number
d. variable
d. variable

Question 55.
What ¡s distinctive about quantitative content analysis in comparison to quantitative data analysis?
a. They enable easy calculation for those of us who are not too good with figures.
b. It allows for the constant re-assessment of categories and themes
c. It is easy for researchers to use
d. None of the above
b. It allows for the constant reassessment of categories and themes

Question 56.
A pie chart is:
a. A chart demonstrating the increasing incidence of obesity in society.
b. Only used in catering management research
c. Any form of pictorial representation of data
d. All illustrations where the data are divided into proportional segments according to the share each has of the total value of the data
d. All illustrations where the data are divided into proportional segments according to the share each has of the total value of the data

Question 57.
The general process of gathering, organizing, summarizing, analyzing, and interpreting data is called
a. Statistics
b. Descriptive statistics
c. Qualitative statistics
d. Measurement of statistics
a. Statistics

Question 58.
Frequency distribution is
a. Tabular arrangement of data with corresponding frequency
b. Graphical arrangement of data with corresponding frequency
c. Tabular arrangement of data without corresponding frequency
d. Graphical arrangement of data without corresponding frequency
a. Tabular arrangement of data with corresponding frequency

Question 59.
Diagrammatic representation of data is
a. Determination of a number of classes
b. Determining the magnitude of classes
c. To show data in geometrical figures
d. None of the above
c. To show data in geometrical figures

Question 60.
A complex table represents
a. Only one factor or variable
b. Always two factors or variables
c. Two or more factors or variables
d. All of the above
c. two or more factors or variables
Hint
Complex tabulation of data that includes more than two characteristics. For example, frequency or number of girls, boys and the total class owning the different brands of
mobile phones like Blackberry, Nokia, I phone, etc.

Question 61.
One of the following statements of primary data is wrongly stated
a. These constitute first-hand information
b. These are original in nature
c. These are relatively less costly to collect
d. These are more reliable, accurate, and adequate
c. These are relatively less costly to collect
Hint
Primary data
The data which is collected for the first time from the source is Primary data. Primary data is the data collected by the investigator himself.

Question 62.
Among the following sources of collecting primary data, one is not correctly placed-
a. Annual report of the Reserve Bank of India
b. Indirect oral investigation
c. Telephonic survey
d. A questionnaire sent through the enumerator
a. Annual report of the Reserve Bank of India
Hint
Primary data is the data collected by the investigator himself by some of the below-mentioned methods

• Interview
• Observation
• action research
• case studies
• life histories
• questionnaires etc

Question 63.
The basic demerit of sample investigation is that it
a. is less costly
b. is less time consuming
c. is less reliable because it creates many sources or unanticipated errors
d. Possesses the merit of flexibility
c. is less reliable because it creates many sources or unanticipated errors
Hint
Cons of sample

• data may not be representative of the total population, particularly where the sample size is small.
• often not suitable for producing benchmark data
• as data are collected from a subset of units and inferences made about the whole population, the data are subject to ‘sampling’ error hence less reliable.
• decreased number of units will reduce the detailed information available about sub-groups within a population.

Question 64.
The expression : $$\underline{\text { Class Frequency }} Width of class$$ is Known as:-
a. Frequency density
b. Mid-value of a class interval.
c. Class interval
d. None of the above
a. Frequency density
Hint
Frequency density =$$\underline{\text { Class Frequency }} Width of class$$

Question 65.
A pie chart is having the shape of-
a. A rectangle
b. A circle
c. A square
d. A bar
b. A circle

Question 66.
The qualitative classification includes-
a. Analysis of time series
b. Analysis of date
c. Analysis of series
d. Analysis of attributes
d. Analysis of attributes
Hint
Qualitative classification – Qualitative data are forms of information gathered in a non-numeric form. In qualitative classification, data are classified on the basis of some attributes or quality such as sex, literacy, religion, etc. In this type of classification, the attribute can not be measured rather it is classified on the basis of whether the attribute is present or absent.

Question 67.
Find the odd one out:
a. Data collected from Internet
b. Data collected from RBI Annual Report
c. Data collected by an investigator
d. Data collected from the IMF Fact-sheet.
c. Data collected by an investigator
Hint
A, b, d are examples of secondary data.

Question 68.
Match the following:

 1. Simple Bar Diagram (I) One single bar is drawn 2. Multiple Bar Chart (ii) More than one bar is used to represent two or more variables 3. Pie Chart (iii)Circle Diagram 4. Components Bar Chart (iv)Sub-divided Bar Chart

The correct option is:
a. 1 (i); 2 (ii); 3 (iii); 4 (iv)
b. 1 (iv); 2 (i); 3 (ii); 4(iii)
c. 1 (ii); 2 (iii); 3 (iv); 4 (i)
d. 1 (iii); 2 (iv); 3 (i); 4(ii)
a. 1 (i); 2 (ii); 3 (iii); 4 (iv)

Question 69.
Given are the Country-X’s exports (in Rs/crores) to different regions between April, 20*12 and February 2013:

 Region Europe Asia America Africa Exports 31,516 42,516 23,495 5,133

Which of the following region has 18° in the Pie Chart –
a. Europe
b. Asia
c. America
d. Africa
a. Europe

Question 70.
One of the following is a secondary source of data –
a. Collection of demographic data from, your neighborhood
b. Data collected by an investigator from the shops selling coffee seeds
c. Output data related to the production of wheat from the World Bank Reports
d. Counting the number of persons visiting a shrine on a particular day.
d. Counting the number of persons visiting a shrine on a particular day.
Hint
Regions in degree of pie chart will be
Europe = 31516/102660 × 360° = 110.52°
Asia = 42516/102660 × 360 °= 149.09°
America =23495/102660 × 360° = 82.39°
Africa = 5133/102660 × 360°= 18°

Question 71.
An ‘ogive’ can be used to estimate the value of –
a. Mean
b. Mode
c. Quartiles
d. Harmonic mean.
c. Quartiles
Hint
A secondary source of data is

• Already published data eg publications of government department and agencies
• Previous research
• Official statistics
• Mass media products
• Diaries
• Letters
• Government reports
• Web information
• Historical data and information
• Publications of international bodies like UNO, WTO

Question 72.
Secondary data is collected by-
a. Government
b. Public
c. Online
d. All of the above
c. Online
Hint
Cumulative histograms, also known as ogives, are graphs that can be used to determine how many data values lie above or below a particular value in a data set. They are used to determine median, quartiles, percentiles, etc.

Question 73.
Which is the correct sequence
(i) Collection
(ii) Presentation
(iii) Organisation
(iv) Interpretation
(v) Analysis
a. (a) (i), (ii), (iii), (v), (iv)
b. (i), (ii), (iii), (iv), (v)
c. (c) (i), (iii), (ii), (v), (iv)
d. (ii), (i), (iii), (v), (iv)
a. (a) (i), (ii), (iii), (v), (iv)
Hint
Secondary data is any information collected by someone else other than its the user. It is data that has already been collected and is readily available for use. it’s used to gain initial insight into the research problem. It is classified in terms of its source – either internal or external.

Question 74.
By finding the mid-value of upper widths of adjacent rectangles of the histogram we can make: –
a. Line Graph
b. Histograph
c. Ogive
d. Pie – chart
c. Ogive
Hint
The sequence of data collection is
Collection
Organization
Presentation
Analysis
Interpretation

Question 75.
In which of the following method of data collection more time is required?
a. Census & Sample both
b. Data collection through secondary sources
c. Census investigation
d. Sample investigation
b. Data collection through secondary sources
Secondary data is any information collected by someone else other than its the user.

Question 76.
The total angle contained in a pie chart is:
a. 360°
b. 180°
c. 90°
d. 120°
a. 360°

Question 77.
If the middle point of a class interval is 60 and the lower limit is 45, then the upper limit would be:
a. 75
b. 55
c. 60
d. 70
a. 75

Question 79.
Graph constructed on the basis of Cumulative frequencies arranged in ascending order is:
a. More than Ogive
b. Simple Ogive
c. Less than Ogive
d. Any Ogive
c. Less than Ogive
Hint
Cumulative frequency curve – Cumulative histograms, also known as ogives, are graphs that can be used to determine how many data values lie above or below a particular value in a data set. The cumulative frequency is calculated from a frequency table, by adding each frequency to the total of the frequencies of all data values before it in the data set.

Question 80.
Which of the methods of collecting primary data is more expensive?
a. Online Surveys
b. Observation Methods
c. Mailed Questionnaire
d. Telephonic Interview.
b. Observation Methods
Hint
Observation is a way of gathering data by watching behavior, events, or noting physical characteristics in their natural setting

## Mathematics Of Finance – CS Foundation Statistics Notes

1. Interest
The amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets. It involves two persons
Borrower – When you borrow money, you pay interest Moneylender- When you lend money, you earn interest.
Some of the terms used in interest calculation are

• Principal or Capital – sum borrowed
• Interest – Extra money charged by the lender for use of his money
• Moneylender – a person who gives money to the borrower
• Conversion period – the period of time for which interest is calculated
• Simple interest – Simple interest is just the amount of money paid on a loan.
• Compound interest – over here Interest is charged on interest too.

2. Simple interest
Simple interest is called simple because it ignores the effects of compounding. The interest charge is always based on the original principal, so interest on interest is not included.
The formula for this is very simple:
I=PRT,
where I am interested,
P is Principal,
R is the percentage rate expressed as decimal and
T is time, which is generally expressed in years, assuming your rate is an annual rate.
Steps to calculate simple interest

Find the Principal. This is the amount of money borrowed or lent at the start of the year for which the interest will be calculated for.

Find the Rate as a decimal. This is the percentage of the Principal you will pay back each year. Divide the percentage by 100 to give the decimal value.

Specify the Time in years over which you want the interest calculating

Multiply Principle × Rate × Time to calculate the simple interest. This is the money you will pay/be paid on top of what was lent or borrowed.

Example
A sum of money at simple interest amounts to Rs. 815 in 3 years and to Rs. 854 in 4 years. The Principal sum is Rs.
Explanation:
S.I. for 1 year = Rs. (854 – 815) = Rs. 39.
S.I. for 3 years = Rs. (39 × 3) = Rs. 117.
Principal = Rs. (815 – 117) = Rs. 698.
Example
A sum fetched a total simple interest of Rs. 4016.25 at the rate of 9 p.c. per annum, in 5 years. The principal sum is Rs. 8925
Principal = Rs. $$\left(\frac{100 \times 4016.25}{9 \times 5}\right)$$
= Rs. $$\left(\frac{401625}{45}\right)$$
= Rs. 8925.

3. Compound interest
Compound interest is where interest is paid on the amount already earned leading to greater and greater amounts of interest.
Formula
Total Amount = Principal + Cl (Compound Interest)
(a) Formula for Interest Compounded Annually Total Amount = P (1+(R/100))n
(b) Formula for Interest Compounded Half Yearly Total Amount = P(1+(R/200))2n
(c) Formulae for Interest Compounded Quarterly Total Amount = P( 1 +(R/400))4n
(d) Formulae for Interest Compounded Annually with fractional years (e.g. 2.5 years)
Total Amount = P(1+(R/100))a ×(1+(bR/100))
here if year is 2.5 then a =2 and b=0.5
(e) With different interest rates for different years Say x% for year 1, y% for year2, z% for year3
Total Amount = P(1+(x/100))*(1+(y/100))*(1+(z/100))
where,
CI = Compound Interest,
P = Principal or Sum of amount,
R = % Rate per annum,
” n = Time Span in years
Example
An amount of Rs 1,500.00 is deposited in a bank paying an annual interest rate of 4.3%, compounded quarterly. Find the balance after 6.years.
Solution
Use the regular compound interest formula,
A = P (1 + r/n) with P = 1500, r = 4.3/100 = 0.043,
n = 4 (not 1/4), t = 6. Therefore,
A = 1500 $$\left(1+\frac{0.043}{4}\right)^{4(6)}$$ = $1,938.84 So, the balance after 6 years is approximately Rs. 1,938.84. 4. Annuities An annuity is a type of investment in which regular payments are made over the course of multiple periods. Annuities help both the creditor and debtor have predictable cash flows, and it spreads payments of the investment out over time. 5. Various types of annuity 1. Contingent annuity – An annuity arrangement in which the beneficiary does not begin receiving payments until a specified event occurs. A contingent annuity may be set up to begin sending payments to a beneficiary upon the death of another individual who wishes to ensure financial stability for the beneficiary or upon retirement or disablement of the beneficiary. ” 2. Ordinary annuity – Payments are required at the end of each period. For example, straight bonds usually pay coupon payments at the end of every six months until the bond’s maturity date. 3. Annuity due – Payments are required at the beginning of each period. Rent is an example of an annuity due. You are usually required to pay rent when you first move in at the beginning of the month, and then on the first of each month thereafter. 4. Deferred Annuity- An annuity in which the annuitant does not begin to receive payments until some future date. A deferred annuity has two phases: a savings phase and an income phase. During the savings phase, the annuitant places money into the annuity, which invests it on behalf of the annuitant. In the income phase, the annuitant receives payments. It is important to note that a deferred annuity is not taxed until the income phase begins. It also pays a death benefit to the survivor(s) of the annuitant. Nearly all retirement plans are deferred annuities 5. Immediate annuity – If at the end of the period the periodic payments are made. 6. Forborne annuity – The annuity that is left unpaid for years is called a forborne annuity. 6. Amount of annuity or future value of the annuity The value of a group of payments at a specified date in the future. These payments are known as an annuity or a set of cash flows. The future value of annuity measures how much you would have in the future given a specified rate of return or discount rate. The total amount of Annuity = sum of all periodic payments+ sum of all interest on periodic payments. 1. Ordinary annuity – Here the payments are made when the period ends. It is also called an immediate annuity. Most installment loans can be classified as ordinary annuities. Mortgages with the first payment due a month after the initial loan date are one of the most common examples of an ordinary annuity. 2. Annuity due – The payments are made at the beginning of each period. Any fixed payment for a service or property that occurs before a service period begins is an example of an annuity payment. Common applications include rent payments Present Value – Present Value (PV) is a formula used that calculates the present-day value of an amount that is received at a future date. The premise of the equation is that there is a “time value of money”. Time value of money is the concept that receiving something today is worth more than receiving the same item at a future date. 7. Present value of the annuity The present value of the annuity formula determines the value of a series of future periodic payments at a given time. The present value of the annuity formula relies on the concept of the time value of money, in that one Rupee present day is worth more than that same Rupee at a future date. It is helpful for calculating the series of retirement payments etc. 8. Present value of ordinary annuity The Present Value of an Ordinary Annuity is the value of a stream of expected or promised future payments that have been discounted to a single equivalent value today. It is extremely useful for comparing two separate cash flows that differ in some way. 9. Present value of an annuity due The Present Value of an Annuity Due is identical to an ordinary annuity except that each payment occurs at the beginning of a period rather than at the end. Since each payment occurs one period earlier, we can calculate the present value of an ordinary annuity and then multiply the result by (1 + i). PV Ordinary Annuity = C * $$\left[\frac{1-(1+\mathrm{i})^{-\mathrm{n}}}{\mathrm{i}}\right]$$ C = Cash flow per period i = Interest rate n = Number of payments This calculates the present value of an ordinary annuity. To calculate the present value of an annuity due, multiply the result by (1+i). (The payments start at time zero instead of one period into the future.) Mathematics Of Finance MCQ Questions Question 1. Interest is a. Money Loaded b. Money borrowed c. Extra money paid on borrowed money d. Borrowed run and above Answer: c. Extra money paid on borrowed money Question 2. The conversion period is a. The time for which loan is given b. The time for which interest is calculated c. Period of conversion of simple interest into compound interest d. None of the above Answer: b. The time for which interest is calculated 3. It is correct for annuity a. It is the run paid b. Fixed run paid at regular intervals c. Fixed sum paid at regular interest under stared condition d. All of the above Answer: c. Fixed sum paid at regular interest under the stared condition Question 4. Annuity due is the periodic payment made a. At the end of each period b. At the beginning of each period c. Start only after a specified period d. After a fixed number of interest Answer: b. At the beginning of each period Question 5. The time between two successive payment dates of an annuity is called a. Annuity certain b. For borne annuity c. Payment Period d. Terms of an annuity Answer: c. Payment Period 6. Amount of an annuity is a. Total amount of all provide payment and total interest on the payments b. Total time from the beginning of the first payment to the last payment c. The total amount paid from the time loan taken till loan and d. None of the above Answer: a. Total amount of all provide payments and total interest on the payments Question 7. If the principal amount is 99 and the amount payable is 199 at the end of the year then the rate of interest is a. 100% b. 99% c. 100.5% d. 200% Answer: c. 100.5% Question 8. There are __________types of annuity a. 7 b. 8 c. 9 d. 6 Answer: b. 8 Question 9. An insurance company designed to pay a certain amount at a specified intervals is a. Annuity b. Simple interest c. Compound interest d. none of the center Answer: a. Annuity Question 10. The rate of interest is decided by a. Borrower b. Lender c. Bank d. Both a & b Answer: d. Both a & b Question 11. Compound interest is a. The interest on principal amount b. The interest on previously accumulated interest as well as interest on principal amount c. The interest on principle for a number of years d. All of the above Answer: b. The interest on previously accumulated interest as well as interest on the principal amount Question 12. If an investment yields an interest rate of 10% annually compounded quarterly. What is the effective interest rate? a. 10.4% b. 4% c. 10% d. 10.2% Answer: a. 10.4% Question 13. Calculate the total amount received after 5 years if yearly Rs. 200 is being invested and the rate of interest is 6% annually compounded a. Rs. 1000 b. Rs. 1200 c. Rs. 1500 d. Rs. 1127.42 Answer: d. Rs. 1127.42 Question 14. If after 10 years the desired balance is Rs. 5000 then how much should be invested if the rate of interest is 5% compounded quarterly a. Rs. 3042 b. Rs. 3042.07 c. Rs. 3042.70 d. Rs. 3040 Answer: b. Rs. 3042.07 Question 15. Historically which type of annuity did all the companies possessed? a. Fixed annuity b. Annuity due c. Deferred annuity d. None of the above Answer: a. Fixed annuity Question 16. Raj borrowed Rs. 8000 for 180 days at 5% interest. On the 90th day he makes a partial payment of Rs. 2500. What will be the adjusted principal on the maturity date? a. Rs. 2500 b. Rs. 8000 c. Rs. 5600 d. None of the above Answer: c. Rs. 5600 Question 17. Ajay has purchased a second-hand car by taking a loan of Rs. 5000 from the bank at a rate of interest of 8% for 4 years. Calculate the total amount he will be paying to the bank on a loan of Rs. 5000 at the end of 4 years a. Rs. 6820 b. Rs. 6820.44 c. Rs. 6800.44 d. Rs. 6802.44 Answer: d. Rs. 6802.44 Question 18. If it is written, “interest is compounded semi-annually”. It means. a. In 2 years there is one conversion period b. The conversion period is 2 per year c. Every year interest is halved d. None of the above Answer: b. Conversion period is 2 per year Question 19. If the final amount received is 1938.84 for a deposit made for 6 years. What will be the principal amount? The annual interest rate is 4.3% compounded quarterly a. Rs. 1200 b. Rs. 1000 c. Rs. 1600 d. Rs. 1500 Answer: d. Rs. 1500 Question 20. Interest rate per conversion period is calculated by. a. Rate of interest b. Conversion period/annual interest rate c. Annual interest rate/conversion period d. None of the above Answer: c. Annual interest rate/conversion period Question 21. Suppose you purchase a share of a company at a price of Rs. 77 a share and sold it after a month for Rs. 82 a share. You have received a dividend of Rs. 1 at the end of the month. Calculate your annual rate of return, assuming monthly compounding a. 146% b. 140% c. 100% d. 200% Answer: a. 146% Question 22. If the question arises that how much the company should pay lump sum today so that a future pension plan could be purchased then it is. a. Future value of annuity b. Present value of annuity c. Both a & b d. None of the above Answer: b. Present value of the annuity Question 23. What will be the total amount of interest (rounded off) received .by Ajay if he invests Rs. 10000 for 5 years at an interest rate of 7.5 % compounded quarterly. a. Rs. 4499 b. Rs. 4490 c. Rs. 4500 d. Rs. 4994 Answer: a. Rs. 4499 Question 24. If a firm’s debt ratio is 45% this means ________ of the firm’s assets are financed by equity financing provided debt ratio = debt/Total Assets a. 50% b. 55% c. 45% d. Cannot be terminated without more information Answer: b. 55% Question 25. A firm has paid out Rs. 150,000 as dividends from its net income of Rs. 250,000 what is the retention ratio for the firm? (Retention ratio = net income – dividend/Net income) a. 12% b. 25% c. 40% d. 60% Answer: c. 40% Question 26. When the market’s required rate of return for a particular bond is much less than its coupon rate, the bond is selling at: a. Premium b. Discount c. Par d. Cannot be determined without more information Answer: a. Premium Question 27. If you plan to save Rs. 5,000 with a bank at an interest rate of 8% what will be the worth of your amount after 4 years if interest is compounded annually? a. Rs. 5,400 b. Rs. 5,900 c. Rs. 6,600 d. Rs. 6,802 Answer: d. Rs. 6,802 Question 28. Which of the following measure reveals how much profit a company generates with the money shareholders have invested ? a. Profit margin b. Return on Assets c. Return on equity d. Debt-Equity Ratio Answer: c. Return on equity Question 29. If you have Rs. 850 and you plan to save it for 4 years with an interest rate of 10%, what will be the future value of your savings? a. Rs. 1,000 b. Rs. 1,244 c. Rs. 1,331 d. Rs. 1,464 Answer: b. Rs. 1,244 Question 30. You need Rs. 10,000 to buy a new television. If you have Rs. 6, 000 to invest at 5 percent compounded annually, how long will you have to wait to buy the televisions? a. 8.42 years b. 10.51 years c. 15.75 years d. 18.78 years Answer: b. 10.51 years Question 31. How many years will it take to pay a Rs. 11,000 loan with an Rs. 1241.08 annual payment and a 5% interest rate? a. 6 years b. 12 years c. 24 years d. 48 years Answer: b. 12 years Question 32. Which one of the following terms refers to the risk that arises for bond owners from fluctuating interest rates? a. Fluctuations Risk b. Interest rate Risk c. Real-Time Risk d. Inflation Risk Answer: b. Interest rate Risk Question 33. A sum of Rs.1,200 becomes Rs.1,323 in two years at compound interest compounded annually. Find the rate percent? a. 5% b. 6% c. 7% d. 8% Answer: a. 5% Hint Amount=P(1+r)n 1323 = 1200(1 + r)2 r=0 .05 r = 5% Question 34. The difference between simple interest and compound interest compounded annually on X sum of money for 2 years at 4% per annum is Rs.1. The value of ‘X’ is a. Rs. 100 b. Rs. 300 c. Rs. 500 d. Rs. 625 Answer: d. Rs. 625 Hint S.I. = PRT where I am interested, P is Principal, R is the percentage rate expressed as decimal and T is time x is principal S.I. =x 2.4/100 = ,08x Total Amount = Principal + Cl (Compound Interest) Cl = Total amount – Principal Amount =P(1+r)n = X (1+.04)2 Cl = X(1+.04)2 – X = x({1 +.04}2 – 1) = 0816x According to question C.l. – S.l. = 1 X (.0816- .08) = 1 X = 170016 = 625 Question 35. The time between two successive dates of an annuity is called a. Payment interval b. Future value of annuity c. Contingent annuity d. Annuity certain Answer: a. Payment interval Hint The time period between two successive dates of an annuity is called payment interval. Question 36. Compound interest for Rs. 1 ,000 for 4 years at 5% per annum when it is compounded quarterly- a. Rs. 215 b. Rs. 218 c. Rs. 220 d. Rs. 225 Answer: c. Rs. 220 Hint Total amount when Interest compounded quarterly = P(1+(R/400))4n A = 1000(1+(5/400)4×4 A = 1220 C.l. = A-P = 1220-1000 = 220 Question 37. Amjad invested a sum of money at 8% per annum at simple interest for’t’ years. At the end of’t’ year, Amjad got back 4 times his original investment.’ The value of ‘t; 3 a. 5 Years b. 10.5 Years c. 25.5 Years d. 37.5 Years Answer: d. 37.5 Years Hint r = 8% , Let Principal = P S.I. = Prt A = S.I. + P As per question amount = 4 P Thus putting these value we get A = S.I. + P 4P = S.I. + P S.I. = 3P Prt = 3 P P x ,08 x t = 3P t = 3P/Px .08 = 3/.08 =37.5 yrs Question 38. An annuity is a fixed sum paid at regular intervals. An annuity that continues for a number of years is called: a. Deferred annuity b. Immediate annuity c. Uniform annuity d. Perpetual annuity Answer: d. Perpetual annuity Hint A perpetual annuity is an annuity in which the periodic payments begin on a fixed date and continue indefinitely. Question 39. In what period, the compound interest on ~ 30,000 at 7% per annum amounts to Rs.4,347 a. 2 years b. 1.5 years c. 3 years d. 4 years Answer: a. 2 years Hint C.I.= 4347 r = 7% P= 30000 A = P + C.I. A = 34347 A = P(1+(R/100))n 34347 = 30000 (1+(7/100)n 34347= 30000 (1+ .07)n 1.1449 = 1.07n n = 2 yrs Question 40. What is the present value of Annuity on t1 for 2 years @ 10% p.a.? a. 0.18 b. 2 c. 3 d. 0.67 Answer: b. 2 Hint PVOrdinary Annuity = C *  C=cash flow per period i = interest rate n=number of payments i= 10%/12 = .1/12 = .00833 n= 1 × 2 = 2 c = 1 PV = 1(1 – $$\frac{.00833)^{-2}}{(.00833)}$$ PV = 1 × 1.975 PV =2 Question 41. Cl = Rs. 30,000, @7% rate is Rs. 4347. Find the number of years. a. 4 years b. 2 years c. 2.5 years d. 3 years Answer: b. 2 years Hint P =A – C.l. = 30000-4347 = 25653 A =P (1+r/100)n 30000 = 25653 (1+.07)n 1.1695 = (1.07)n (1.07)2 = (1.07)n 2 = n Question 42. When the loan amount is given @ 9% then what will be the outstanding amount after 3 months? a. 1014 b. 1000 c. 1012.5 d. 1013.6 Answer: c. 1012.5 Hint t= 3 months = 1/4 yrs r =9% p.a.= 2.25 per quarter A = 1000(1+ 2.25/100)1/4×4 A = 1000 x 1.0225 = 1022.5 Question 43. The difference, between 81 & Cl is 1, the time period is 2 years, rate 4% p.a., find the principal amount? a. 629 b. 625 c. 700 d. 600 Answer: b. 625 Hint S.I. = PRT where I am interested, P is Principal, R is the percentage rate expressed as decimal and T is time x is principal 5.1. = × 2 .4/100 = .08x Total Amount = Principal + Cl (Compound Interest) CI = Total amount – Principal Amount =P(1+r)n = x (1+.04)2 CI = x (1+.04)2 – X = X({1+.04}2 – 1) = 0816x According to question C.I. – S.l. = 1 x(.0816 – .08) = 1 x= 1/.0016 = 625 Question 44. On what sum will the compound compounded interest at 5% p.a. for 2 yeas annually be Rs. 1,640? a. 10,000 b. 12,000 c. 15,525 d. 16,000 Answer: d. 16,000 Hint Amount = P(1+r)n 1640 = P{(1 +5/100)2 -1} 1640 = P{1.1025-1} 1640 = 1025 P P = 16000 Question 45. A man took a loan from a bank at the rate of 12% р.a. on simple interest. After 3 years he had to pay Rs.5,400 interest only for the period. The principal amount borrowed by him was: a. Rs. 10,000 b. Rs. 20,000 с. Rs. 15,000 d. Rs. 18,000 Answer: с. Rs. 15,000 Hint S.l. =PRT P = S.I./RT = 5400 × 100/12 × 3 =15000 Question 46. With an interest rate of 5 percent, the present value of ~ 100 received one year from now is approximate: a. Rs. 95.238 b. Rs. 105 c. Rs. 100 d. Rs. 95 Answer: b. Rs. 105 Hint A =P(1+R/100)t = 100(1+5/100)t = 105 Question 47. Vidhya Signed a contract in which she will receive ~ 3 million immediately and 1 million will be paid to her every year for the next 5 years. If the interest rate is 10%, the present value of the contract is approximate: a. Rs. 7 million b. Rs. 6.79 million c. Rs. 8 million d. Rs. 8.79 million Answer: b. Rs. 6.79 million Hint PV = 3 + 1 × $$\frac{1}{(1+0.01)^{1}}$$ + 1 × $$\frac{1}{(1+0.01)^{2}}$$ + 1 × $$\frac{1}{(1+0.01)^{3}}$$ + 1 × $$\frac{1}{(1+0.01)^{4}}$$ + 1 × $$\frac{1}{(1+0.01)^{5}}$$ = 3 + 3.79 = 6.79 million Question 48. A sum fetched a total Simple Interest of Rs 4016.25 at the rate of 9% p.a. in 5 years. Find the sum? a. Rs. 8900 b. Rs. 4462.50 c. Rs. 8032.50 d. Rs. 8925 Answer: d. Rs. 8925 Hint S.l. = PRT P = S.I./RT = 4016.25 × 100/5 x 9 = 8925 #### CS Foundation Business Economics Notes ## Index Numbers And Time Series Analysis – CS Foundation Statistics Notes ## Index Numbers And Time Series Analysis – CS Foundation Statistics Notes A time series is a collection of observations of well-defined data items obtained through repeated measurements over time. For example, measuring the value of retail sales each month of the year would comprise a time series. This is because sales revenue is well defined, and consistently measured at equally spaced intervals. Data collected irregularly or only once are not time series. Time series are best displayed in a scatter plot. The series value X is plotted on the vertical axis and time t on the horizontal axis. 1. Time series analysis Time series analysis accounts for the fact that data points taken over time may have an internal structure The purpose of time series analysis is to • to study the past behavior of records • to forecast for future 2. Components of time series Any time series can contain some or all of the following components: • Trend (T) • Cyclical (C) • Seasonal (S) • Irregular (I) 3. Trend component The trend is the long-term pattern of a time series. A trend can be positive or negative depending on whether the time series exhibits an increasing long-term pattern or a decreasing long term pattern. If a time series does not show an increasing or decreasing pattern then the series is stationary in the mean. 4. Periodic Variations (a) Cyclical component Any pattern showing an up and down movement around a given trend is identified as a cyclical pattern. The duration of a cycle depends on the type of business or industry being analyzed. (b) Seasonal component Seasonality occurs when the time series exhibits regular fluctuations during the same month (or months) every year, or during the same quarter every year Regardless of the trend, we can observe that in each year more ice creams are sold in summer and very little in Winter season. The sales in the departmental stores are more during festive seasons than in the normal days. Retail sales peak during the month of December. 5. Irregular component This component is unpredictable. Every time series has some unpredictable component that makes it a random variable. In prediction, the objective is to model all the components to the point that the only component that remains unexplained is the random component. Irregular fluctuations results due to the occurrence of unforeseen events like floods, earthquakes, wars, famines, etc. 6. Purpose of Time Series The purpose of time series analysis is to decompose data of time series Methods used for decomposition are 1 Additive models For this method Data = Seasonal effect + Trend + Cyclical + Residual For monthly data, an additive model assumes that the difference between the January and July values is approximately the same each year. In other words, the amplitude of the seasonal effect is the same each year. 2 Multiplicative models In many time series involving quantities (e.g. money, wheat production, …), the absolute differences in the values are of less interest and importance than the percentage changes Data = Seasonal effect x Trend * Cyclical x Residual 7. Measurement of Trend To measure the trend, the short-term variations should be removed and irregularities should be smoothed out. The following are the methods of measuring trends. 1. Graphic (or freehand curve) method 2. Semi-average method 3. Moving average method 4. Least squares method 1. Freehand method or graphic method It is the simplest method to determine a trend. Simply, the freehand method is to create a trend line in accordance with what we see. First of all the data is plotted on a graph paper and the trend line is fitted by a line or a freehand curve by just inspecting and following the graph of the series. The curve needs to be smooth and with an almost equal number of points above and below it. By eye estimate, the sum of the vertical deviations of the given points above the trend line should approximately equal the sum of the vertical deviations of the given points below the trend line. Also, the sum of the squares of the vertical deviations of the given points from the trend line should be the minimum possible. 2. Semi average This method is also simple and relatively objective than the freehand method. The data is divided into two equal halves and the arithmetic mean of the two sets of values of Y is plotted against the center of the relative time span. If the numbers of observations are even the division into halves will be straightforward, however, if the number of observations is odd, then the middlemost i.e., $$\left(\frac{n+1}{2}\right)$$th , item is dropped. The two points so obtained are joined through a straight line which shows the trend. 3 Moving Average Method: This method comprises of taking arithmetic means of the data/values for a certain span and then placing the value so calculated against the middle of the time span. The time span should be equal to the average fluctuation period. If this span is of period k, then the moving averages obtained by averaging k at a time are called Moving Averages of period or extent k. If k is even, the successive values of moving averages are placed in the center/middle of the period/span of time. 4. Least Squares Method Polynomials are one of the most commonly used types of curves in regression. The least-squares method is used to find the best linear relationship between two variables. The least-squares line uses a straight-line method to approximate the given set of data y = a + bx The unknown coefficients aandb can therefore be obtained: Here y=production/sales etc X=time Please note that aandb are unknown coefficients while all xiandyi are given. B Least square parabola The least-squares parabola method uses a second degree curve y = a + bx + ax2 to approximate the given set of data, (x1, y1), (x2, y2), ….,(xn yn), where n ≥ 3 The least-squares parabola uses a second degree curve y- a + bx + cx2 8. Forecasting Forecasting is a strategy used in different fields to predict the future based upon the past. This strategy is pulled from different data sources to provide a financial expert or entrepreneur with the needed information to run a business or invest more effectively and successfully. It is used by companies to determine how to allocate their budgets for an upcoming period of time. Survey – Surveys provide a means of measuring characteristics, self-reported and observed behavior, attitudes or opinions, etc. of society. These methods are often used for forecasting sales or demand of a product Various methods of surveys are – Complete enumeration method – in this method data is collected from all the individuals. This method is costly particularly when the survey population is large. A complete enumeration-based survey is often preferred for certain types of data, solely because it is expected that it will provide complete statistical coverage over space and time. Complete enumeration may be required as a statutory obligation, often for regulatory purposes. – Sample survey method – this type of survey method is used when the population is large, a well-designed sample-based survey can often provide good estimates of important parameters at a fraction of the cost. Sample surveys operate on selected subsets of the target population and, using a number of assumptions regarding the distribution of the population, provide estimates of the parameters under study. Sample-based surveys involve uncertainties as to the correctness of the various assumptions used. Some of the sample survey methods are 1. Test Marketing – it is done for the launch of a new product or if any existing product is being introduced in a new market. This technique is used during the product development or market introduction phase to determine how people respond to a product. It can be used at many different phases of development to see whether or not the public will buy the product, how the product may need to be adjusted to make it appealing to the public, and how members of the public interact with the product. 2. Expert opinion – Expert Opinion is a relatively informal technique that can be used to serve a variety of purposes, and may be used to assist in problem identification, in clarifying the issues relevant to a particular topic, and in the evaluation of products. In this, a group of experts sit together and form an opinion about the viability and success of the product 3. Delphi Technique – The Delphi technique is a group process used to survey and collect the opinions of experts on a particular subject. It is especially appropriate when it is not possible to convene experts in one meeting In this method the opinion of experts is generally taken by post. Trend projection methods – As in most other analyses, in time series analysis it is assumed that the data consist of a systematic pattern. These methods are cheaper than survey methods cause they take data from past records as a basis of analysis. 4. Time series data – we can fit mathematical trends in data for making forecasts. This analysis is more reliable for short-term forecasts. 5. Smoothing method – trend is calculated by smoothing out the fluctuation due to other components. Two main smoothing methods are a method of moving average and the method of exponential smoothing. 6. Lag technique or lead technique or Barometric technique- the forecast is done on the basis of already occurring events or currently occurring events. It is generally used for predicting business cycles situation. 9. Index numbers In simple terms, an index (or index number) is a number showing the level of a variable relative to its level in a given base period. Edgeworth defined Index number as ‘ Index number shows by its variations the changes in a magnitude which is not susceptible either of accurate measurement in itself or of direct valuation in practice’ Further, Spiegel defined ‘index number as a statistical measure designed to show changes in variable or a group of related variables with respect of time, geographical locations or another characteristic’ Index numbers – are time series that focuses on the relative change in a count or measurement over time. – express the count or measurement as a percentage of the comparable count or measurement in a base period Important characteristic features of index number are • These are expressed in percentages • These are specialized averages • They measure the relative change in the value of a variable or a group of related variables over a period of time 10. Uses of Index numbers • Index number is used for measuring changes in the price level. • Economists frequently use index numbers when making comparisons over time. • Using an index makes quick comparisons easy. • Index numbers are helpful in judging the changes in investment. • They measure the level of business and economic activities and are therefore helpful in finding the economic status of the country. • Throws Light on Economic Condition • Importance For The Government • Analysis of Industry • Comparison of Developed and Under Developed Countries 11. Types of Index Numbers 1. Price Index Numbers – It indicates the relative price of a specific item. It is mostly used by statisticians, policymakers, etc. Usually, the index is assigned a value of 100 in some selected base period, and the values of the index for other periods are intended to indicate the average percentage change in prices compared with the base period. Price index numbers can be divided into Wholesale Price Index numbers and retail price index numbers. The wholesale price index number reflects the general price level in-country while the retail price index number shows the change in the retail price of various commodities. 2. Quantity index numbers – As the name suggests, these indices pertain to measuring changes in volumes of commodities like goods produced or goods consumed, etc. A quantity index is built up from information on quantities such as the number of the total weight of goods or the number of services etc. 3. Value index numbers – These pertain to compare changes in the monetary value of imports, exports, production, or consumption of commodities. Changes in the price of an item are far easier to measure than changes in quantity (or value). The quantities (or values) of items sold in different outlets may vary enormously, depending on many factors including the size and location of the outlets. Prices, by comparison, will not vary so much from outlet to outlet. It is also much easier to find out the price of an item than the quantity that may have been sold during a month. Knowing price movements in a few outlets will be a good guide to the average movement overall. There will be a tendency for the price of similar items to change in a similar way. On the other hand, with some exceptions, quantities may vary widely and may be difficult to define. 12. Precautions in construction of Index Numbers l • Be clear about the purpose for which the index number is used • While selecting the base period it should be kept in mind that it is normal as well as relatively current. • For construction arithmetic mean and geometric mean is used. • Due importance should be given to different variables. 13. Method of construction of price index numbers • Select one period as the base and separately calculate the movement between that period and each required period by either calculating the difference of the prices of two periods (base period and required period) or by “ calculating the ratio of the two prices of the period (base period and required period) • Calculate the period-to-period movements and chain these 14. Calculation of the index number can be done in the following ways Average of price relative methods- by taking suitable averages of the price of different item In this method, the price relatives for all commodities is calculated and then their average is taken to calculate the index number. Simple average of price relatives – One of the simplest types of index numbers is a price relative. It is the ratio of the price of a single commodity in a given period or point of time to its price in another period or point of time called the reference period or base period. Price relative in percentage (of period 1 with respect to 0) = $$\frac{p_{1}}{p_{0}}$$ × 100 ………………….. (14.1) Price index number = Sum price relative in percentage for all item/number of items We denote price relative in percentage or without percentage Example If the retail price of fine quality rice in the year 1980 was Rs.3.75 and that for the year 1983 was Rs.4.50, then find the price relative. Solution: Here the base period is 1980. The price of rice in the base period was Rs. 3.75. Also in the given period 1983, the price of rice was Rs.4.50. Using the formula (19.1), the required price relative is P1980/1983 = $$\frac{\text { Rs. } 4.50}{\text { Rs. } 3.75}$$ × 100 = 120% 2 Weighted average of price relative method An average in which each quantity to be averaged is assigned a weight. These weightings determine the relative importance of each quantity on average. Example the value of a commodity is as follows Value: 10 8 5 432 1 0 weights: 2 2 1 10 8 7 68 2 Steps to calculate price index by Weighted average Multiply each value by its weight. 20,16, 5,40,24,14, 68, and 0 2. Add up the products of value times weight to get the total value. Sum=187 3. Add the weight themselves to get the total weight. Sum=100 4. Divide the total value by the total weight. 187/100 = 1.87 Aggregate methods – by taking ratios of averages of prices of different items. This is a simple method for constructing index numbers. In this, the total of current year prices for various commodities is divided by the corresponding base year price total and multiplying the result by 100. A simple aggregate index shows the change in the prices, quantities, or values of a group of related items. Each item in the group is treated as having equal weight for purposes of comparing group measurements over time. Example If the price of rice is Rs. 4 per kg in the year 1980 and Rs. 6 in the year 1983 and Rs. 8 in the year 1994 thus price relative is P1980/1983 = $$\frac{\text { Rs. } 6}{\text { Rs. } 4}$$ × 100 P1980/1984 = $$\frac{\text { Rs. } 8}{\text { Rs. } 4}$$ × 100 In weighted agreegate method the index number is calculated by the ratio of weighted arithmetic mean of current year prices to base price 15. Nature of weights 1. Laspeyres price index – This index concentrates on measuring price changes from a base year 2. Paasche’s price index -this uses the end year quantities as weights 3. Fisher Ideal Index – It is the geometric mean of Laspeyres price index and Paasche’s price index. 16. Tests of the adequacy of Index numbers formulae 1. Unit test- It requires that the formula should be independent of the units in which or for which prices and quantities are quoted. This test is satisfied by all index number methods except the simple (unweighted) aggregative index method. 2. Time reversal test – is a test of determining whether a given method will work both ways in time forwards and backward. In the words of fisher, The test is that the formula for calculating the index number should be such that it will give the same ratio between one point of comparison and the other, no matter which of the two is taken as a base. In other words, when the data for any two years are treated by the same method, but with the bases reversed the two index numbers secured should be reciprocals of each other so that their product is unity 3. Factor Reversal Test- The factor reversal test requires that multiplying a price index and a volume index of the same type should be equal to the proportionate change in the current values. Symbolically, P01 × Q01 = = Value Index. The factor reversal test is satisfied only by the Fisher’s Ideal Index number. 4. Circular Test- It is concerned with the measurement of price changes over a period of years, when it is desirable to shift the base. If P01 represents the price change of the current year on the base year and P12, the price change of the base year on some other base and P20, the price change of the current year on this first base, then the following equation should be satisfied: P01 × P12 × P20 =1. 5. Chain base index number – this type of index number is used when the base period is too far from the current year. In such situations it may happen that the product which is in current year was of no or little importance in base year thus in such conditions a chain base index number is constructed. Index Numbers And Time Series Analysis MCQ Questions Question 1. Which of the following is a measure of dispersion? a. Mean b. Percentiles c. Quartiles d. Mean absolute deviation Answer: d. Mean absolute deviation Question 2. Which of the following is Not one of the uses of an index number? a. To measure the economic well being of a country b. Basis for comparing related series for administrative purpose c. To measure the direction of movement of economic variables d. To deflate series Answer: c. To measure the direction of movement of economic variables 3. An index no. ¡s used a. To measure changes in a variable over time b. To measure changes in demand c. To measure changes in price d. To measure changes in quantity Answer: a. To measure changes in a variable over time Question 4. The ratio of a new price to the base year price is called the a. Price increase b. Price relative c. Price decrease d. Price absolute Answer: b. Price relative Question 5. Which of the following component is not included in a time series? a. Regular b. Trend c. Seasonal d. vinegar Answer: a. Regular Question 6. A simple aggregate quantity index Is used to a, Measure the change in the price of a product b. Measures the overall change in the quantity of a range of products c. Measures the overall change in the price of a range of products d. None of the above Answer: c. Measures the overall change in the price of a range of products Question 7. The price relative is a price index that is determined by a. Price ¡n period t/base period price *00 b. Base period price/price in period *100 c Price in period t+base period price *100 d. None of the above Answer: a. Price in period t/base period price *00 Question 8. A simple aggregate price index a. Compare relative quantities to relative prices b. Compares absolute prices to absolute quantities c. Ignores relative quantities d. Considers reLative quantities Answer: c. Ignores relative quantities Question 9. Out of the following, which is a reason for computing an index? a. To project future sales b. To estimates the trend in a time series c. To check the base period d. None of the above Answer: d. None of the above Question 10. A composite price index based on the prices of a group of items is known as the a. Laspeyres index b. Paasche index c. Aggregate price index d. Consumer price index Answer: c. Aggregate price index Question 11. This index measures the change from month to month in the cost of a representative basket of goods and services of the type bought by a typical household a. Financial times index b. Paasche price index c. Laspeyres price index d. Retail price index Answer: d. Retail price index Question 12. Forecasts are referred to as naive if they a. Are based only on past values of the variable b. Are short-term forecasts c. Are long-term forecasts d. None of the above Answer: a. Are based only on past values of the variable Question 13. A monthly price index that uses the price changes in consumer goods and services for measuring the change in consumer prices over time is known as the a. Paasche index b. Consumer price index c. Producer price index d. Laspeyres index Answer: b. Consumer price index Question 14. Time series analysis is based on the assumption that a. Random error terms are normally distributed b. There are dependable correlations between the variable to be forecast and other independent variables c. Past patterns in the variable to be forecast will continue unchanged into the future d. The data do not exhibit a trend Answer: c. Past patterns in the variable to be forecast will continue unchanged into the future Question 15. Though no longer the case, historically, the Dow Jones averages were aggregate price indexes showing the prices of stocks listed a. On the American stock exchange b. Over-the-counter c. On the New York Stock Exchange d. None of the above Answer: c. On the New York Stock Exchange Question 16. Which of the following is Not a characteristic of a simple moving average? a. It smoothes random variations in the data b. It has minimal data storage requirements c. It weights each historical value equally d. It smoothes real variations in the data. Answer: b. It has minimal data storage requirement Question 17. Which is not a characteristic of exponential smoothing? a. Smoothes random variations in the data b. Easily altered weighting scheme c. Weights each historical value equally d. None of the above Answer: c. Weights each historical value equally Question 18. A composite price index where the prices of items in the composite are weighted by their relative importance is known as the a. Price relative b. Weighted aggregate price index c. Consumer price index d. None of the above Answer: b. Weighted aggregate price index Question 19. A weighted aggregate price index where the weight for each item is its current period quality is called a. Aggregate index b. Consumer price index c. Index of industrial production d. Paasche index Answer: d. Paasche index Question 20. A quantity index that is designed to measure changes in physical volume or production levels of industrial goods over time is known as a. Index of industrial production and capacity utilization b. Time index c. Physical volume index d. None of the above Answer: a. Index of industrial production and capacity utilization Question 21. Forecasts a. Become more accurate with longer time horizons b. Are rarely perfect c. Are more accurate for individual items than for groups of items d. All of the above Answer: b. Are rarely perfect Question 22. The three major types of forecasts used by business organizations are a. Strategic, tactical and operational b. Economic, technological, and demand c. Exponential, tactical, seasonal d. None of the above Answer: b. Economic, technological, and demand Question 23. Which of the following is not a step in the forecasting process? a. Determine the use of the forecast b. Eliminate any assumptions c. Determine the time horizons d. All of the above Answer: b. Eliminate any assumptions Question 24. The tendency of the trend to increase or decrease or stagnate over a long period of time is called a. Periodic Variation b. Cyclic Variation c. Secular Trend d. Random Variation Answer: c. Secular Trend Hint The tendency of the trend to increase or decrease or stagnate over a long period of time is called a secular trend. It is a market trend with some characteristic phenomenon that is not cyclical but exists over a long period. Question 25. The equation Y= a+bx is used to get the value of a. Parabolic Trend b. Exponential Trend c. Linear Trend d. None of the above Answer: c. Linear Trend Hint Linear trends show steady, straight-line increases or decreases where the trend-line can go up or down. Equation Y = a+bx is used to get the value of the linear trend. Question 26. The price index that uses current year quantities as weights is known as a. Fisher ideal index b. Paasche price index c. Lasparey’s price index d. Raman price index Answer: b. Paasche price index Hint Paasche’s price index -this uses the end-year quantities as weights. Question 27. The test that requires that the product of Price Index & the corresponding quantity index number should be equal to the value index number is known as a. Unit Test b. Time Reversal Test c. Factor Reversal Test d. Circular Test Answer: c. Factor Reversal Test Hint Factor Reversal Test- The factor reversal test requires that multiplying a price index and a volume index of the same type should be equal to the proportionate change in the current values. Question 28. The total sum of values of a given year divided by the sum of the values of the base year is a. Price index b. Quantity index c. Value index d. None of the above Answer: c. Value index Question 29. The trend equation for the annual sale of a product is Y= 120+36x with the Year 1990 as the origin. The annual sales for the year 1992 will be a. 156 b. 192 C. 120 d. None of the above Answer: b. 192 Hint Origin-1990 Annual sales of year 1992 Thus x =2 Y = 120 + 36 x Y = 120+ 36 x 2 =192 Question 30. The technique of estimating the probable value of phenomenon at a future date is called: a. Interpolation b. Extrapolation c. Forecasting d. Probability. Answer: c. Forecasting Hint Forecasting is the process of making predictions of the future based on past and present data and analysis of trends. Question 31. This test of the adequacy of index number requires that the formulae for calculating an index number should give consistent results in both directions. This test is known as: a. Time reversal test b. Factor reversal test c. Circular test d. Unit test. Answer: a. Time reversal test Hint Time reversal test – is a test of determining whether a given method will work both ways in time forwards and backward. In the words of fisher, The test is that the formula for calculating the index number should. be such that it will give the same ratio between one point of comparison and the other, no matter which of the two is taken as a base.In other words, when the data for any two years are treated by the same method, but with the bases reversed the two index numbers secured should be reciprocals of each other so that their product is unity Question 32. An index number is a a. The measure of dispersion b. The measure of correlation c. The measure of regression d. A special type of average is expressed in percentage or rate over a period of time. Answer: d. Special type of average expressed in percentage or rate over a period of time. Hint Important characteristic features of index number are These are expressed in percentages • These are specialized averages • They measure the relative change in the value of a variable or a group of related variables over a period of time Question 33. Test of adequacy requires that the formulae for calculating an index number should give consistent results in both the directions. This test is satisfied by a. Fisher Ideal Index b. Kellys Index c. Bowley Index d. Walche Index. Answer: a. Fisher Ideal Index Hint Time reversal test – is a test of determining whether a given method will work both ways in time forwards and backward. In the words of fisher, The test is that the formula for calculating the index number should, be such that it will give the same ratio between one point of comparison and the other, no matter which of the two is taken as a base.In other words, when the data for any two years are treated by the same method, but with the bases reversed the two index numbers secured should be reciprocals of each other so that their product is unity Question 34. Which of the following is/are weighted aggregative index numbers? a. Laspeyre b. Paasche c. Simple Aggregative Method d. Both (a) and (b) Answer: d. Both (a) and (b) Hint Laspeyres price index – This index concentrates on measuring price changes from a base year. It is a weighted aggregative index method. In the weighted aggregate method, the index number is calculated by the ratio of weighted arithmetic mean of current year prices to base price Question 35. Which of the following options best suits the Laspeyres and Paasche Index? a. Both are ideal index numbers. b. Both are simple aggregative c. Both are the same d. Both are weighted aggregate indexes only Answer: d. Both are weighted aggregate index only Question 36. A Limitation of Index Numbers is: a. Tough to calculate b. Requires software for computational purposes c. They are Mathematical values d. Index Number is based on a sample that may or may not be representative of the population. Answer: d. Index Number is based on a sample that may or may not be representative of the population. Hint Limitations of index number – Index Number is based on a sample that may or may not be representative t of the population. Question 37. Which of the following is a general form of Exponential trend? a. y = a + bt b. Yt = a × bt c. y = a – b d. Yt = a + bt + ct2 Answer: b. Yt = a × bt Question 38. Test that requires the product of Price Index Number and Corresponding Quantity Index Number should be equal to the Value Index Number is: a. Circular Test b. Time reversal Test c. Unit Test d. Factor reversal Test Answer: d. Factor reversal Test Hint Factor Reversal Test- The factor reversal test requires that multiplying a price index and a volume index of the same type should be equal to the proportionate change in the current values. Question 39. Which of the following is forecasting on the basis of past data? a. Trend projection b. Index number c. Both trend and Index number d. Correlation Answer: b. Index number Important characteristic features of index number are • These are expressed in percentages • These are specialized averages • They measure the relative change in the value of a variable or a group of related variables over a period of time Thus forecasting on the basis of past data is index number. Question 40. A weighted aggregate Price Index, where the weight for each item is its base period quantity, is known as: a. Laspeyres Index b. Producer Price Index c. Consumer price Index d. Paasche Index Answer: a. Laspeyres Index Hint Laspeyres price index – This index concentrates on measuring price changes from a base year. It is a weighted aggregative index method. In the weighted aggregate method, the index number is calculated by the ratio of weighted arithmetic mean of current year prices to base price #### CS Foundation Business Economics Notes ## Indian Contract Act, 1872 – CS Foundation Business Law Notes ## Indian Contract Act, 1872 – CS Foundation Business Law Notes Introduction: 1. It is the most important branch of the mercantile law or commercial law. 2. It is not possible to carry on trade or commerce without contract. 3. It deals with general principles relating to formation of contracts. 4. It extends to whole of India, except the state of Jammu & Kashmir. 5. It came into force w.e.f. 1/9/1872. 6. It is not a complete law for all types of contracts. 7. It determine the circumstances in which promise made by the parties to contract shall be legally binding on them. Meaning of Contract: 1. “An agreement creating and defining obligation between the parties.” 2. “Every agreement and promise enforceable at law is a contract ” 3. Sec. 2(h) of Indian Contract Act defines contract as: “ An agreement enforceable by law.” Contract = Agreement + enforceability by law 4. Contract is made by acceptance of one party of an offer made to him by the other party, to do or abstain from doing some act. Contract = Agreement + Obligation Meaning of Agreement & Promise: 1. Sec. 2(e) of Indian Contract Act defines it as, “Every’ promise or every set of promise, forming the consideration for each other.” 2. It has two characteristics: • Two or more persons are required to make an agreement. • Both parties must agree to same thing in same sense at the same time. (Consensus – ad- idem), (consent to the matter). 3. Sec. 2(b) of Indian Contract defines promise as, – “A proposal (offer) when accepted becomes a promise”. Agreement = Promise = Accepted Proposal = Offer + Acceptance Meaning of Obligation: It refers to the legal duty to do or to abstain from doing something to obtain the assent what one has promised to do or abstain from doing. Rights & Obligations: • They are created between the parties as a result of a binding contract. • They are correlative. Agreements which are not contracts: • Agreements relating to social matters. • Domestic arrangements between husband and wife. • Agreements between family members. Relevant Case Law: Balfour v Balfour Facts: Mr A promised to pay his wife ₹ 30 every month as house hold allowance. Later, the husband failed to pay the amount. Decision: Held, the wife could not claim as there was no intention to create legal obligation and thus, it is not enforceable by law. All contracts are necessarily agreements but all agreements need not necessarily be contracts. Essential elements of a valid contract: Sec. 10 of Indian Contract Act says, “All, agreements are contracts if they are made: • by free consent of parties , competent to contract, • for a lawful consideration, • with a lawful object, and . • not hereby expressly declared to be “void”. It includes: • Offer and Acceptance • Intention to create legal relationship • Lawful consideration and object • Capacity to contractual • Free consent • Lawful object • Agreement not expressly declared void. • Consensus -ad-idem i.e. meeting of minds • Certainty of meaning • Possibility to perform • Legal formalities 1. Offer or Proposal: • It refers to a “proposal” by one party to another to enter into a legally binding agreement with him. • Sec. 2(a) of the Act defines it as – “When one person signifies to another his willingness to do or abstain from doing something, with a view to obtain the assent of that other to such act or abstinence, he is said to make a proposal.” • Offeror or Promisor: The party making an offer. • Offeree or Promisee: The party to whom offer is made. Rules relating to offer: • It must be capable of creating legal relations • It must be certain, definite and not vague • It may be expressed or implied • It must be distinguished from an invitation to offer • It may be specific or general • It must be communicated to the offeree • It must be made with a view to obtain the consent of the offeree • It may be conditional • It should not contain such terms, the non compliance of which would’ amount to acceptance • Types of offer: General; Specific, Cross, Counter, Open etc. General & Specific offer: • Offer made to public at large with or without any time limit is general offer. • Offer made to a particular and specified person/ persons and that can be accepted by that specific person/ persons only is specific offer. Relevant Case Law: Carlill V. Carbolic Smoke Ball Co. Facts: • A co. advertised that it would give a reward of £100 to anyone who contracted influenza after using its smoke balls for a certain period according to printed directions. • Mrs Carlill purchased and used smoke balls as per the printed instructions, even then contracted influenza. • She claimed the reward of £100. • Co. resisted the claim on the ground that offer was not made to her and she had also not communicated her acceptance to the offer. Decision: She could recover the reward as she had accepted the co’s offer by complying with terms. Similar case Harbhajan Lai V Harcharan Lai Cross offer: • It occurs when two persons make identical offers to each other, in ignorance of each other’s offer. • It leads to termination of the original offer. Counter offer: • Upon receipt of an offer from an offeror, if the offeree instead of accepting it, straightaway modifies or varies the offer, he is said to make a counter offer. • It leads to rejection of original offer. Standing/Continuing/Open Offer: • Offer which is made to public at large and kept open for public acceptance for a certain time period. • It refers to a tender to supply goods as and when required. • Each successive order given creates a separate contract. • It does not binds either party unless and until such orders are given. Relevant Case Law: Percival Ltd v. L.C.C. • Offer and Invitation to offer: • Offer is made to get the consent of other party. • Invitation to offer is made to initiate the offer according to the invitation. • Offer is made with an object to make a contract. • Invitation to offer does not results in any contract formation. • Example: of invitation to offer: (i) display of goods in a shop window with prices marked upon them, (ii) price catalogues, etc. • Offer is different from a mere statement of intention. • Example : announcement of a coming auction sales. Relevant Case Law: Harris V. Nickerson – When particular goods are advertised, for sale by auction, the auctioneer does not contract with anyone who attends the sale and is intending to purchase those goods when they are actually put up for sale. Offer is different from a mere communication of information in the course of negotiation. E.g. price statement considering negotiation. Relevant Case Law: Harvey V. Facey – Only a statement of lowest price at which the vendor would sell, contains no implied contract.to sell at that price to the person making the inquiry. Acceptance: • It means giving consent to the offer. • Sec. 2(b) of the Contract Act , defines it as- “A proposal is said to be accepted, when the person to whom the proposal (offer) is made signifies his assent thereto.” Essentials of a valid acceptance: • It must be absolute and unconditional. • It must be communicated to offeror. • It must be in the mode prescribed. • It must be given within reasonable time. • Mere silence is not acceptance, offeror can prescribe the mode of acceptance but not the mode of rejection. Relevant Case Law: Felthouse V Bindley Facts- • F offered by letter to buy his nephew’s horse for £ 30 stating “If I hear no more about it, I shall consider it mine at £ 30.” • Nephew did not reply, but told the auctioneer not to sell it as he has already sold it to his uncle. • Auctioneer sold it by mistake. • F sued the auctioneer. Decision: F could not succeed as his nephew has not communicated his. acceptance. • It must be given before the offer lapses or is revoked. • It must emanate from offer. • If the offer is one which is to be accepted by being acted upon, no communication of acceptance to the offeror is necessary, unless communication is stipulated for in the offer itself. Relevant Case Law: Lalnrtan Shukla V Gouri Dutt Facts- • S sent his servant L, to trace his missing nephew. • Later, S offered a reward for finding out his nephew. • L traced him ignorant of the reward. • L claimed his reward later. Decision – L was not entitled to the reward. Communication of offer: • It is complete when it comes to the knowledge of the person to whom it is made. • It may be communicated either by words spoken or written or may be inferred from conduct of parties. • If made by post, it will be completed, when the letter containing offer reached the intended person. Communication of acceptance: 1. It is complete – • As against the proposer: When it is put in the course of transmission to him so as to be out of power of the acceptor to withdraw the same. • As against the acceptor: When it comes to the knowledge of the proposer. 2. If sent by post, it is complete: As against the proposer: when the letter of acceptance is posted. As against the acceptor: when the letter reaches the proposer. Revocation of offer: • It means withdrawal or taking back of an offer. • It can be revoked anytime before its acceptance. Revocation of acceptance: • It means withdrawal or taking back of acceptance by the acceptor. • It may be revoked at any time before its communication is completed as against the acceptor, but not afterwards. Communication of revocation: It is complete – As against the person who makes it: When it is put into a course of transmission to the person to whom it is made so as to be out of power of the person who makes it. By Post- • Communication of offer when complete: When offer comes into the knowledge of offeree. • Communication of acceptance when complete: When offeree or acceptor post the letter of acceptance and it becomes out of power of acceptor to withdraw it. As against the person to whom it i$ made: When it comes to his knowledge.

Lapse of offer:

• It means end of an offer.
• Offer should be accepted before it lapses.

Offer may lapse in following ways:

1. By Communication of notice of revocation
2. By lapse of time
3. By failure to accept condition precedent
4. By death or insanity of the offeror
5. By counter – offer by the offeree
6. By not accepting the offer, according to prescribed mode
7. By rejection of offer by the offeree
8. By change in law or circumstances.

Note:
If a passenger receives a railway ticket with the words printed, “this ticket is issued subject to the notices, regulations and conditions contained in the current time tables of the railway.” He is bound to accept the terms and conditions whether he has read them or not.

Standing Offer:

• It is an offer made to supply specific goods upto a stated quantity or any quantity be required at a certain rate, during a fixed period. E.g. Government Tenders.
• It is a nature of continuing offer.

Modes of Contract:
Generally contracts are in written form agreed upon by the parties face to face. But when it is not possible for the parties to meet they can enter into the following.
1. Contracts By Post: When the parties are located in different cities or states and its not possible for them to meet then contract is made by sending the documents through post. This is called contract by post. It is subject to same rules as others along with certain exceptions as already stated.

2. Contracts over telephone:

• There is a contract as soon as the offer is accepted by the offeree.
• Offeree has to be sure that his acceptance has reached the offeror because phone lines may go dead or generate noise during conversations.
• Thus, offeree should dial again and communicate his acceptance in such doubt.

Relevant case Law:
Kanhaiyalal V. Dineshwar Chandra

Intention to create legal relationship:

• Both the parties must have an intention to go to court, if the other party does not fulfill his promise.
Normally, in social and domestic agreements, there is no intention to go to the court.
• In commercial agreements, this intention is always present.
• The test of intention is objective i.e. it depends upon the facts of the case.
• Court may also look into the conduct of parties, wherever necessary.

Lawful Consideration:

• The consideration should be something that is lawful.
• A mere promise is not enforceable at law.
• It means “Quid Pro quo” i.e. “something in return”.

Relevant Case Law:
Currie V Misa

As per Section 2(d):
“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 abstains from doing, such act or abstinence or promise is called as consideration for the promise.”

As per Section 2(e),

• “Every promise and every set of promises, forming the consideration for each other, is an agreement.”
• General rule is-
• “No consideration, No contract.”
• Consideration must be at the desire of the promisor.
• Consideration may move from the promisee or any other person.
• “As an act or forbearance of one party, or the promise thereof is the price for which the promise of the other is bought.”
• Consideration may move at the desire of the promisor and not at the desire of the third party.
• There may be stranger to consideration but not stranger to a contract
• Under English Law, it must move from the promisee or any other person. Thus, stranger cannot sue on the contract.
• Under Indian law, however a stranger to consideration can file a suit.

Relevant Case Law:
Chinnayya V. Ramayya

Facts-

• A by a gift deed transferred certain property to her daughter, giving her the direction to pay annuity to A’s brother.
On the same day, daughter executed a writing in favour of A’s brother, agreeing to pay annuity.
• She declined afterwards stating that no consideration had moved from her uncle.

Decision: Court held that consideration may move from any person. Thus, A’s brother was entitled to file a suit.

Rules of a valid consideration:

• It must move at the desire of the promisor.
• It may be done by promisee himself or by any other person.
• It may be past, present or future.
• It must be real and not vague.
• It must be legal.
• It need not be adequate. (But if not adequate then consent must be free)
• It must be something more than the promisee is already bound to do for the promisor.
• It may not be an illusory.

Relevant Case Law:
Stilk v Myrick

Kinds of Consideration:
1. Past Consideration: It refers to something wholly done, forgone or suffered before making of agreement.

• Under English law, “Past consideration is no consideration.”
• The consideration which is completed or performed at the time of contract is called present consideration.
• But past consideration is a consideration as per the Indian Law.

2. Present or Executed Consideration: It moves simultaneously with promise. The consideration which is completed or performed at the time of contract is called present consideration.

3. Future or Executory Consideration: It is to be moved at a future date i.e promise is to be performed in future.

Exceptions to the rules, “No consideratign, no contract”:
An agreement made is valid if:

• expressed in writing and registered under law,
• made on account of natural love and affection,
• between parties standing in a near relation to each other.

A promise is valid if-

• It is a promise to compensate a person wholly or in part, a person who has already done something voluntarily for the promisor.
• Something which the promisor was legally compellable to do.

A promise to pay, wholly or in part, a debt, which is barred by law of limitation can be enforced if:

• it is in writing,
• it is signed by the debtor or his authorised agent.

Note:
A debt barred by limitation cannot be recovered, a promise to pay such debt is without any consideration.

• It does not applies to completed gifts i.e. gift given and accepted.
• Consideration is not required to effect a valid bailment of goods i.e. gratuitous bailment.
• Not required to create an agency.

Relevant Case Laws:
Poonam Bibi V. Fyaz Buksh

Facts: A husband, by a registered agreement promised to pay his earnings to his wife.

Decision: The agreement, though without consideration, was valid.
Raj Lakshmi V. Bhootnath

Facts: Where a husband by a registered document, after referring to quarrels and disagreements between himself and his wife, promised to pay his wife a sum of money for her maintenance and separate residence.

Decision: Promise was unenforceable as natural love and affection was missing.

If a person promised to contribute anything to a charity and on his faith, the promisee undertakes a liability to that extent, the contract shall be valid.

Relevant Case Law:

Gratuitous Promise:

• A gratuitous contract is a contract without any consideration.
• A gratuitous promise cannot be enforced.
• However, where a promisor makes a promise for which some other person will be benefitted, then the promisor will be liable to the promisee.
• Example – If X gives a loan to Y and Z gives the guarantee to X on behalf of Y, then Z will be liable to X if Y does not repay the loan even though Z was not benefitted by giving the guarantee.

Doctrine of Privity of Contract:

• It means that only those persons, who are parties to a contract, can sue and be sued upon the contract.
• It refers to the relationship between parties who have entered into the contracts.
• The third party cannot sue upon it, even though the contract may be for his benefit.
• Thus, “a stranger to the contract” cannot bring a valid suit under the contract.
• It is different from “stranger to consideration”.

Relevant Case Laws:
Dunlop Pneumatic Tyre Co.V. Selfridge Ltd.
Tweddle v Atkinson

Relevant Case Law:

Facts:

• H sued her father in law K to recover ₹ 15,000 on account of arrears of allowance being payable to her by K.
• This was under an agreement between K and H’s father consideration being H’s marriage to K”s son D.
• Both H and D were minors at the time of marriage.

Decision- Promise can be made enforceable by H.

• Marriage settlement, partition and other family arrangements, and other such agreements when they are reduced to writing.
• Acknowledgment of liability or by past performance thereof.
• Assignment of a contract.
• Contracts entered into through an agent.
• Covenants running with the land – The purchaser of immovable property is bound by several conditions created by an agreement affecting the land, even though he is not a party to the original agreement.
• Where the promisor by his own conduct is estopped from denying his liability to perform the promise, the person who is not a party to the contract can sue upon to make the promisor liable.

Note : Nominee is not a assignee

Terms must be certain:

• The meaning of an agreement must be certain and capable of being certain.
• Terms must not be vague.
• If it is not so, then the agreement will not be enforceable by law.
• “A Contract to contract is not a contract”.

Relevant Case Law:
Loftus V Roberts.

Difference between an Agreement and Contract:

 Agreement Contract (1) Its elements are offer and acceptance. Its element is an agreement and its enforceability. (2) It may or may not create legal obligation. Creation of legal obligation is must in contracts. (3) It may not be binding, hence may not be enforceable. It is binding on both the parties, hence enforceable. (4) It may not result in a contract. It necessarily constitutes an agreement.

Legal Agreement: An agreement which can be enforced legally.

Illegal Agreements:

• It goes beyond the basic public policy, thus are not enforceable by law.
• It is not only void as between immediate parties but the collateral transactions also become illegal.

Its Consequences:

• Entirely void
• No action can be brought by or against any party.
• Money paid or property transferred under it cannot be recovered
• If its two parts legal and illegal are separable, only legal part can be enforced by the courts
• Agreement collateral to it are also illegal.

Relevant Case Law:
Firm Pratapchand v Firm Kotri

• As a Contract: It means any agreement enforceable by law.
• Void Agreement:
• Agreements not enforceable by law are void.
• They are not always illegal and its collateral transactions are legal.
• It cannot give rise to any legal consequence
• It is void -ab- initio (i.e – void from very beginning)
• Example – minor’s contract
• No damages for non-performance
• It does not exist in the eyes of law.

Difference between Void and Illegal Agreements

 Void Agreements illegal Agreements (i) All void agreements are not illegal. (i) All illegal agreements are void. (ii) They are not punishable. (ii) They may be punishable with fine, imprisonment or both. (iii) Collateral agreements are legal. (iii) Collateral agreements are void. (iv) Valid contracts sometimes subsequently becomes void, example – agreement entered with a minor (iv) They are void from very beginning. example – agreement to murder a person.

Classification of Contracts:

Void Contracts:

1. It is not a contract at all as it is without any legal effect.
2. Section 2(j) of Indian Contract Act, 1872, defines it as:
3. “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.”

Voidable Contracts:

1. It is an agreement which is binding and enforceable but due to lack of one or more of the essentials of a valid contract, it may be repudiated.
2. Section 2(i) of the Indian Contract Act, 1872 defines it as:
3. “All agreements which are enforceable by law at the option of any one of the parties, and other party has no such option, are known as voidable contracts.”

Difference between void and voidable contracts:

 Void Contracts Voidable Contracts 1. Section 2 (j): Contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. Section 2(i): It may be repudiated at the will of one or more parties but not at the will of other or others. 2. Not enforceable by any party. Enforceable at the desire of the effected party. 3. It is void from beginning to end. It is valid in the beginning but is subsequently declared void. 4. Agreement is void only if it is made with the person having no contractual capacity, without consideration etc. Agreement is voidable, when its consent is based on coercion , fraud etc. 5. Here the contract cannot be executed due to change in circumstances or in law the agreement is void. The contract can be executed if it is declared valid by the affected party.

Competency/Capacity of Parties to Contract

1. It means that parties to the agreement must have capacity to enter into a valid contract.
2. Person’s may be either natural or artificial.
3. Natural persons means human beings.
4. Artificial persons means corporations.

According to Section 11:

1. “Every person is competent to contract, who, according to the law to which he is subject to:
2. is of the age of majority,
3. is of sound mind.
4. is not disqualified by any other law to which he is subject to”

A person is disqualified to enter into contracts if he is-

1. a minor
2. a person of unsound mind
3. otherwise disqualified by the law of land to enter into contracts
4. an alien enemy
5. an insolvent
6. a convict undergoing imprisonment.
7. In India the age of majority is regulated by the Indian Majority Act, 1875.
8. According to it, every person domiciled in India attains Majority on the completion of 18 years of age.
9. If any guardian has been appointed for the minors or minor is under guardianship of Court of wards, he attains majority on the completion of 21 years of age.

Relevant Case Law:
Mohiri Bibi v Dharmo Das Ghose

Facts:

1. Dharmo das Ghose, a minor, entered into a contract for borrowing a sum of ₹ 20,000 out of which lender paid him ₹ 8,000.
2. Minor executed mortgage of property in favour of lender.
3. Minor sued for setting aside mortgage.
4. Privacy Council had to ascertain the validity of mortgage.
5. u/s 7 of Transfer of Property Act, every person competent to contract is competent to mortgage.

Decision : Any money advanced to a minor cannot be recovered as Sec. 10 and 11 makes the minor’s contract absolutely void.

As per the Transfer of Property Act, a minor cannot transfer a property but he can be a transferee.

Position of minor’s agreement:

1. An agreement entered into by a minor is altogether void i.e. void ab initio
2. Minor can be a promisee or a beneficiary
3. Minor can always plead minority
4. Minor’s agreement cannot be ratified by him
5. Contract by guardian, is enforceable if-
6. It is within his competence and authority,
7. For the benefit of the minor.
8. Minor’s property is liable for necessaries.
9. Court can never direct specific performance of the contract.
10. Minor cannot be a partner in partnership firm. He can however be admitted to benefits of partnership firm.
11. Minor can act as an agent and bind his principal without incurring any personal liability.
12. Minor can never be adjudicated as insolvent.

Relevant Case Laws:
Rose Ferenanaez v. Joseph Gonsalves

Necessaries:
“Goods suitable to the condition in life of such an infant or other person, and to his actual requirement at the time of sale and delivery.”

It Includes:

• Necessary goods
• Services rendered
• Loan incurred to obtain necessaries.

Lunatics Agreement:

• As per Section 12 of the Indian Contract Act,
• “A person is said to be of sound mind for the purpose of making a contract, if at the time when he makes it, he is capable of undertaking it and of forming a rational judgement as to its effects upon his interests.”
• A person of unsound mind includes:
(i) Lunatics (ii) idiots, (iii) drunkards
• Such agreement is void.
• Lunatics estate will be liable for any necessaries supplied to him or his family.
• A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind and he will be bound by it.
• A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.

Relevant Case Law:
Jugal Kishore v Cheddu

Persons disqualified by law from entering into contract:
1. Alien Enemy: Alien enemy is a foreigner whose state is at peace with India.

• Alien is a person who is not an Indian citizen.
• He becomes alien enemy on declaration of war between India and his country.
• He cannot enter into a contract with an Indian subject.

• They enjoy certain special privileges due to which they cannot be legally proceeded against in Indian courts.
• if contracts are entered into through agents, then agents becomes personally responsible for the performance of the contracts.

3. Convicts:

• Cannot enter into a valid contract while undergoing sentence, nor he can sue.

Note : All of the above points are known as flaws in capacity.

Free Consent:
1. As per the Indian Contract Act,
“ Two or more persons are said to consent when they agree upon the same thing in the same sense.” (Consensus-ad-idem)

2. Free consent means consent given by parties out of their free will, on their own, without any fear, without any force, without any compulsion or threat from the other party.
As per Section 14, consent is said to be free when it is not caused by:

• Coercion
• Under influence
• Fraud
• Misrepresentation
• Mistake

3. In the absence of free consent, contract is usually voidable at the option of the party whose consent is not free.
(i) Coercion:
“It is the committing, or threatening to commit, any act forbidden by the Indian Penal code (IPC), or the unlawful detaining, or threatening to detain any property, to the prejudice of any person, whatever, with the intention of causing any person to enter into an agreement:”

Exceptions of coercion:

• The following threats are not coercion-
• Threat to file a sun,
• Consent given on the basis of legal obligations,
• Threat by workers,
• Threat to detain property by mortgager.
• It may proceed from any person and may be directed against any person or goods.

Relevant Case Law:
Ram Chandra v Bank of Kolhapur

(ii) Undue Influence
A contract is said to be induced by ‘undue influence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

It has following two elements:

• a dominant position,
• the use of it to obtain an unfair advantage.

A person is deemed to dominate the will of another if-

• he holds a real or apparent authority over the other ,or
• he stands in a fiduciary relation to the other; or
• he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness or mental or bodily distress.

Relationships that are presumed to have undue influence includes:

• Parent and Child
• Guardian and ward
• Religious/ Spiritual Guru and Discipline
• Doctor and Patient
• Solicitor and Client
• Trustee and Beneficiary
• Fiance and Fiancee

Relationship where dominant position is not presumed but has (iii) to be proved by the aggrieved party:

• Creditor and Debtor
• Landlord and Tenant
• Husband and wife.

This presumption can be rebutted by showing that:

• full disclosure of all material facts was made,
• adequate consideration was there, and
• weaker party was in receipt of independent legal advice.

Relevant Case Law:
Marim Bibi v. Cassim Abrahim

Differences between coercion and undue influence:

 Coercion Undue Influence 1. It involves the physical force or threat. It involves moral or mental pressure. 2. It involves committing or threatening to commit any act forbidden by IPC. No such illegal act is committed or a threat is given. 3. Relationship between the parties is not necessary. Some sort of relationship between the parties is absolutely necessary. 4. It need not be proceeded from the promisor or directed against the promisor. It is always exercised between the parties. 5. If the contract is avoided, any benefit received has to be restored or refunded. If the contract is avoided, it is at the discretion of the court to direct the aggrieved party to restore or refund the benefit received.

(iii) Fraud [Innocent]:
1. Also known as wilful (innocent) misrepresentation.

2. Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance or by his agent with intent to deceive another party thereto or his party, or to induce him to enter into the contract

• The suggestion, as to fact, of that which is not true by one who does not believe it be true,
• The active concealment of a fact by one having knowledge or belief of the fact,
• A promise made without any intention of performing it,
• Any other act fitted to deceive,
• Any such act or omission as to law specially declared to be fraudulent.

3. Mere silence as to facts likely to affect the willingness of a person to enter into a contract is no fraud.

But silence amounts to fraud in following cases:

• Where it is the duty of a person to speak
• Where his silence is equivalent to speech
• When a person discloses only the half truth

Following are certain contracts upon which law imposes a special duty to act with the utmost good faith. (Contracts of Uberrimae fidei):

• Insurance contracts
• Prospectus of a company
• Contract for sale of land
• Contracts of family arrangements

In all of the above stated contracts, a person has to disclose all the material information.

(iv) Misrepresentation:
1. Where a person asserts something which is not true, though he . believes it to be true, his assertion amounts to misrepresentation.

2. The aggrieved party can avoid the contract, but cannot sue for damages in normal circumstances.

3. Misrepresentation made by a person may be either –

• innocent, or
• without any reasonable ground.

4. Its damages can be obtained in following cases:

• from a director or promoter making innocent misrepresentation in company’s prospectus.
• from an agent committing breach of warranty of authority
• from a person who has made a certain statement in the court , relying upon which a party has suffered damages, is stopped by the court from denying it.
• negligent representation made by one person to another between whom there exits a confidential relationship.

Differences between fraud and misrepresentation:

 Fraud Misrepresentation 1. It is made intentionally with a view to deceive. It is made innocently. 2. The person making the wrong statement does not believe it to be true. The person making the wrong statement believes it to be true. 3. The aggrieved party can rescind the contract and can also claim damages. The aggrieved party can rescind the contract but cannot claim damages. 4. Where the consent is caused by active fraud, the contract is voidable even though the party defrauded had the means of discovering the truth. The fact that the other party had the means of discovering the truth is a good plea.

When the consent is caused by coercion, undue influence, fraud and misrepresentation, though the agreement amounts to as contract such a contract is voidable at the option of the party whose consent was so obtained.

(v) Mistake:

• It refers to miscalculation or judgmental error by both or either of the parties.
• It must be a “vital operative mistake.”

Relevant Case Law:
Leaf v. International Galleries

• When both the parties to an agreement are under a mistake to a matter of fact essential to the agreement, the agreement is altogether void.
• Unilateral mistake means mistake on part of only one party.
• Unilateral Mistake is not void.

Cases when the contract is void if there is a unilateral mistake:

• Where the mistake is done as regards the nature of the contract.
• Where the mistake is done as regards the identity of the person contracted with.

It can be avoided, if it was either due to:

• blindness, illiteracy, or senility of a person signing, or
• a trick or fraudulent misrepresentation as to nature of document.

Relevant Case Law:
Foster V. MacKinnon

Facts – An old illiterate man was made to sign a bit! of exchange, by means of false representation that it was guarantee.

Decision – The contract was void.

Mistake as to identity of person operates if:

• Identity is for material importance to the contracts, and
• Mistake is known to the other person.

Relevant Case Law:
Candy V. Lindsays Co.

Facts:

• One Blankarn placed an order with Lindsay & Co. by imitating signatures of Blenkiron, knowing that Blentiron & Co. was a reputed customers of Lindsay & Co.
• Goods were there after sold to Candy (an innocent buyer)
• Lindsay & Co. filed a suit against candy for recovery of goods.

Decision: Candy must return the goods or make the payment of those goods as there was no contract. Thus, candy did not got a good title.

Following conditions need to be fulfilled, for mistake to be void;

• The fact is material to the agreement.
• There is mistake of fact.
• Both the parties are at mistake.

If mistake of Indian Law is caused due to inducement by the other party, it has the same effect as that of fraud and therefore, contract may be avoided, by the party who has induced to enter into the contract.

Mutual mistake may relate to the existence, identity, quantity or quality of the subject – matter:

• Existence: At the time of making contract both parties believe that subject matter is in existence, but it is actually not.
• Identity: There is no consensus ad idem.
• Quantity: Parties were at mistake as to the quantity or extent o subject matter even if it was caused by negligence of third party.
• Quality: It is void only if mistake was on pan of both the parties. It follows the general rule:
• “A party to a contract does not owes any duty to disclose all the facts in his possession to other party during negotiations.”

Relevant Case Law:
Raffles V. Wichelhaus

Facts:

• Contract was made for purchase of bales of cotton which were to arrive by a ship named Peerless’ from Bombay.
• Two ships of same name had to sail from Bombay.
• Buyer intended to buy cargo of one ship but seller intended to sell that of another.

Decision: Contract was held tc be void.

Relevant Case Law:
Henkel V. Pape
Facts:

• P wrote a letter to H enquiring about price of rifles also stating that he might buy 50 rifles.
• On receiving the reply, P telegraphed, “Send three rifles”
• Message was send as “Send the rifles” due to telegraphic mistakes.
• H send 50 rifles.

Decision: There was no contract but P could be held liable to pay for three rifles.

Transaction with pardanashin women:
1. It means complete seclusion.

2. Women fixing and collecting rents from tenants and communicating business matters with men other than own family members is not a pardanashin women.
Relevant Case Law:
Ismail Musafer V. Hafiz Boo

3. It is founded on equity and good conscience.

4. Person entering into a contract with pardanashin women has to prove that:

• no undue influence was used
• she fully understood the contents of the contract.
• she exercised her free will

5. She has been given a special cloak of protection by law
Relevant Case Law:
Kali Baksh V. Ram Gopal

Legality of objects:
1. As per Section 23, of the Indian Contract Act,

2. “An agreement whose object or consideration is unlawful is void.”

3. “Consideration or object is unlawful:

• If it is forbidden by law, or
• It would, if permitted defeat the provisions of any law or,
• is fraudulent or
• involves injury to the person or property of another, or
• is immoral, or
• opposed to public property.”

4. Circumstances which makes the consideration or object unlawful:
(i) Forbidden by Law : It includes the acts which are punishable under any statute as well as prohibited by regulation or orders made in the exercise of the authority conferred by the legislature.

(ii) Defeat of the provision of law:

• Agreement defeating the provisions of any statutory law, is void
• Law includes any legislative enactment or Rule of Hindu and Muslim law or any other rule for the time being in force in India.

(iii) Fraudulent : Agreement with an object to defraud others is void.

(iv) Injury to the person or the property of another : An agreement having such an object is void.

(v) Immoral:
1. Object of any agreement being immoral is illegal

2. It is also illegal if its consideration is an act of sexual immorality.
Relevant Case Law:
Pearce V. Brookes

3. It covers a wide range of topics.

4. It is a branch of common law and governed by the precedents.
Relevant Case law:
Gheru lal Parakh V. Mahadeodas Maiya

5. No new Lead can be invented and added by any Court.
Relevant Case Law:
Lord Hulsbury, Janson V. Driefontien Consolidated Mines

It includes the following type of agreement:

• Restraint of parental duties
• Restraint of marriage
• Marriage brocage or brokerage agreements
• Restraint of personal liberty

Negative stipulation in service agreement: An agreement of service by which a person bind himself during the term of the agreement not to take services with else is not in restraint of lawful profession and it is valid.

Restraint of personal duties:

• Parents are natural guardians
• Any agreement against such right or which a party deprives himself of the custody of his child is void.

Restraint of Marriage : Any agreement restraining any person, other than minor not to marry at all or not to marry any particular person is void.

Marriage Brokerage or Brocage contract:

• An agreement to negotiate marriage for reward is void.
• If marriage is performed but the money is not paid, it cannot be recovered in the Court.

Restriction of personal liberty : Agreement unduly restricting the personal freedom of a person are void and illegal.

1. Agreement restraining anyone from exercising a lawful profession, trade or business of any kind, is void.

2. Both total or partial restraint are covered.

3. Restraint must be reasonable
Relevant Case Law:
Nordenfelt V. Maxim Nordenfelt Guns Co.

4. Indian Courts are not consistent that whether the reasonable restraints are permitted or not.
Relevant Case Law:
Mackenzie V. Sitarmiah

5. In an agreement having two parts which can be separated, only those covenants which are in restraint of trade would be void.
Relevant Case Law:
Brahmputra Tea Co Ltd. V. Carth

6. Restriction imposed is reasonable depending upon the facts and circumstances of the case.
Relevant Case Law:
Superintendence Company of India Ltd. V. Krishna Nurgai

Following agreements are not in restraint of trade:
1. Service agreement by which an employee binds himself, during the term of his agreement, not to compete with his employer.
Relevant Case Law:
Niranjan Shanker Golikari V. The Century Spinning and Manufacturing Co. Ltd.

2. Agreement by a manufacturer to sell during a certain period his entire production to a wholesale merchant.

3. Agreement among the sellers of a particular commodity not to sell the commodity for less than a fixed price.
Relevant Case Law:
Fraster Co V. Laxmi Narain

This rule is subject to following exceptions:
1. If a person sells the goodwill of a business and agree with the buyer to refrain from carrying any similar business, within specific reasonable local limits, it is a valid agreement.

2. If an outgoing partner makes an agreement with the continuing partners for not to carry on any similar business within a specified period or within specific local limits, is a valid agreement provided reasonable restrictions are imposed.

3. Contracts between partners not requiring any partner to carry on any business other than that of the firm while he is a partner.
Trade – combinations: An agreement, the object of which is to regulate business and not to restrain it is valid. Thus, an agreement is the nature of business combination between trader or manufacturers like not to sell their goods below as certain price is perfectly valid.

Negative stipulations in service agreement: It refers to an agreement of service by which a person binds himself during the term of the agreement not to take service with anyone else such an agreement is valid.

Agreement Expressly Declared Void:
1. Certain agreements have been expressly declared as void by Contract Act.

2. They are void ab initio.

3. It includes:

• Consideration unlawful in part
• Agreement – meaning of which is uncertain
• Wagering Agreement

(i) Consideration unlawful in part (Sec. 24)

• “If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.”
• Where the legal part of an contract can be severed from the illegal part, the bad part may be rejected and the good one can be retained”
• Where the illegal part cannot be severed, the contract is altogether void.

(ii) Agreement the meaning of which is uncertain (Sec. 29): An agreement, the meaning of which is not certain, is void but where the meaning thereof is capable of being made certain, the agreement is valid.

(iii) Wagering Agreement (Sec. 30):
1. Wager means ‘bet’.

2. They are ordinary betting agreements.

3. It refers to 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.
Relevant Case law:
Thacker V. Hardy

4. Such an agreement is void.

5. If one of the parties has control over the event, agreement is not a wager.

6. Though wagering contracts are void, transactions incidental to wagering transactions are not void.

7. “Where delivery of the goods sold is intended to be given and taken, it is a valid contract but where only the differences are intended to be paid, it will be a wagering contract and unenforceable.”

Note : Lottery, being a game of chance, is a Wagering Agreement. It is void and illegal thus, collateral transactions are also tainted with illegality.

Speculative transactions: It appears to be similar to that of wagering agreement, but has essentially two main features:

• Mutual intention of the contracting parties to acquire or deliver the commodities, and
• Undertaking of risk arising from movement in prices.
• They are generally valid.

Restitution (Sec. 65)

• Under a void contract, if any party has received any benefit from the other party, he must restore it or make compensation for it to the other party.
• There is no restitution where the parties are incompetent to contract example minor.

Relevant Case Law:
Mohiri Bibi V. Dharmodas Ghosh

Contingent Contract (Sec. 31)

• It refers a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
• Example : Contracts of insurance, indemnity and guarantee etc.

Rules regarding its enforcement:

 Rules Enforcement Happening of future uncertain event. Cannot be enforced by law unless and until that event happens. Contract becomes void if event becomes impossible. Non – happening of an uncertain future event. Can be enforced when the happening of that event becomes impossible and not before. Behaviour of a person at an unspecified time in future Event is considered impossible when that person does any thing, which renders it impossible that he should so act within any definite time or otherwise than under further contingencies. Happening of a specified uncertain event within a fixed time. Becomes void if- 1. at the expiration of the time, such event has not happen, or 2. before the time fixed, such event becomes impossible. Non- happening of a specified uncertain event within a fixed time. Can be enforced by law – 1. when the time fixed has expired and such event has not happened, or. 2. Before the time fixed has expired, it becomes certain that such event will not happen. Impossible Event Are void, whether the impossibility of the event is known or not known to the parties at the time of making the agreement.

Differences between wagering agreements and contingent contracts

 Wagering Agreements Contingent Contracts It is void. It is valid and enforceable until becomes void. It is a game of chance. It is not a game, but contingent upon the happening or non happening of uncertain future event. Future event is the primary factor. Future event is only collateral. Consists of reciprocal promises. Do not contain reciprocal promises. Every wager is essentially contingent in nature. Every contingent contract is not necessarily a wager.

Quasi Contract

• An obligation is imposed by law upon a person for the benefit of another even in the absence of a contract. They are known as quasi contracts.
• They are based on principles of equity, justice and good conscience.
• They are termed as certain relations resembling those created by contracts.
• It is also known as Law of Restitution.

It has following features:

• It does not arises from any agreement between the parties but is imposed by law.
• It is a right only available against a particular person or persons and not against the entire world.

They are of following types:

• Supply of necessaries
• Reimbursement of money due
• Obligation to pay for benefit out of non-gratuitous act
• Responsibility of finder of goods
• Persons receiving goods or money by mistake.
• Quantum merit (as much as earned or reasonable remuneration)

Supply of necessaries (Sec. 68):
1. “If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person, with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.”

2. If necessaries are supplied to a minor or person of unsound mind, the supplier is entitled to claim their price from the property of such a person.

3. If there is no property, nothing will be realizable.

Reimbursement of money due (Sec. 69):

• “A person, who is interested in the payment of money and pays such money, which another is bound by law to pay, is entitled to be reimbursed by the other.”
• A person who has paid a sum of money which another is obliged to pay, is entitled to be reimbursed by that other person provided the payment has been made by him protect this own interest.
• Payment must be bonafide.

Obligation to pay for benefit out of non gratuitous act (Sec. 70):
“Where a person lawfully does something for another person or delivers anything to him; not intending to do so gratuitously and the other person accepts and enjoy the benefits thereof, then he is bound to make compensation to the other in respect of or to restore the thing so done or delivered.”

Responsibility of finder of goods (Sec. 71):
1. “A person who finds goods belonging to another and takes them into custody, is subject to the same responsibility as a bailee”.

2. He should act like a man of ordinary prudence i.e.

• he shall take proper care of goods
• he must take reasonable steps to trace the owner
• he should sell the goods, that they are in deteriorating condition and remit the proceeds to the owner.

3. He is entitled for the reward that may have been, offered by the owner.

4. He is also entitled for the refund of any expenses he may have incurred in protecting and preserving the property.

Person receiving goods or money by mistake (Sec. 72):

• “A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return if –
• Mistake need not be unintentional. It may be even intentional.

Performance of Contracts (Sec. 37):
1. It is one of the modes of discharging the contract. It is the completion or fulfilment of obligations by the respective parties to a contract.

2. As per Sec. 37 of the Indian Contract Act, the parties to the contract must either –

• Perform their respective promises, or
• Offer to perform the same unless such performance is dispensed with or excused under the provision of any other law.

Contracts to be performed by whom.
1. Promisor himself: Sec. 40 states that “if it appears from the nature of the case that it was the intention of the parties to a contract that any promise contained in it needs to be performed by the promisor himself, such promise must be performed by the promisor himself. “Contracts involving the exercise of personal skill or diiigencb, or which are founded on the personal confidence between the parties need to be performed by promisor himself.

2. Agent: If the contract is not found on the personal consideration, the promisor or his representative may employ a competent person to perform it.

3. Representatives: Contract involving the use of personal skill or found to be on personal consideration comes to an end on the promisor’s death. In other cases, the legal representatives of the deceased partner are bound to perform it unless the contrary intention appears from the contract; but their liability is limited to the value of the property they inherit from the deceased.

4. Third persons: As per Sec. 41, “if the promisee accepts the performance of the promise by a third person, he cannot afterwards enforce if against the promisor.”

5. Joint promisors: In case of joint promise, promisee may compel or one more of the joint promisors in the absence of contract to the contrary. If any of them dies, his legal representatives must perform the promise jointly with the surviving promisors.

6. Who Can Demand Performance?
Promisee: Only promisee can demand the performance of the promise irrespective of the fact that it is for the benefit the promisee or any other person.

7. Third party: In some cases, like trust, marriage settlements etc. third party can enforce the promise against the promisor even though he is not a party to the contract.

8. Representatives: In case of death of the promisee his representative may ask for the performance of the promise under a contract.

Types of Performance – It is of following two types:
Actual Performance:
The promisor makes all offer of the performance of the promise and the offer to perform is accepted by the promisee. Thus, when both the parties perform their respective obligations, the contract comes to an end.

Attempted Performance (Tender) (Sec. 38) – The promisor makes an offer of performance to the promisee, but the offer to perform is not accepted by the promisee.

Types of Tender:

• Tender of goods: attempted performance of promise to do something.
• Tender of money: attempted performance of promise to pay something.

Essentials of a Valid Tender:

• Must be unconditional
• Must be for the whole obligation
• Must be given at a proper time
• Must be given at a proper place
• Must give a reasonable opportunity of inspection
• Party giving tender must be willing to perform his obligation
• Must be made to the proper person
• Must be made for the exact amount of money

Effect of Refusal of party to perform promise (Sec. – 39):
The aggrieved party can –
(i) terminate the contract

(ii) indicate by words or by conduct that he is interested in its continuance. If promisee decides to continue the contract, he would not be entitled to put an end to the contract on this ground immediately. In both cases, promisee would be entitled to claim damages that he suffered as a result of breach.

Joint Promise – When, two or more person enter into a joint agreement with one or more persons, it is known as joint promise.

Joint Promisors – Joint Promisors are promisors where liabilities are joint or several.

Hold ‘D’ they will jointly pay his liabilities.

• “D” can compile any one.
• If releases one, then other partners are required to pay whole amount.
• If one pays – Contribution.
• Loss among joint promisors: Even if A becomes insolvent, then B & C will have to pay whole amount of ₹ 30,000 to D.
• In case of Death of joint promisors: Life, if A dies, then his legal representative will contribute the amount. If all the joint promisors dies then the legal representative of all the partners will become liable to pay the amount.

Rights of Joint Promisee:

1. Clean rest with all.
2. On death his representative.
3. Death of all their representative.

Devolution:
It means to pass over from one.person to another – In case of joint promise, two problems arises:

• who is liable to perform the promise,
• who can demand such performance.

This problem is solved by devolution.

Liability of Joint Promisors:
Sec. 42: If two or more persons have made a joint promise, ordinarily all of them during their life time must jointly fulfil the promise. * After the death of any of them, his legal representative jointly with the survivor or survivors should do so.

Sec. 43:

• All the joint promisor are jointly and severally liable. However, the contract between the joint promisor may provide otherwise.
• A joint promisor may claim contribution from other joint promisors, if he is compelled to perform the whole promise.
• A joint promisor may claim contribution from other joint promisors, if any other joint promisor makes a default in performance of his promise.

Sec. 44: Where one of .the joint promisors is released, other joint promisors shall continue to be liable.

Differences between Succession and Assignment:

 Succession Assignment Transfer of rights and liabilities of a deceased person to his legal representative is called succession. Transfer of rights by a person to another person is called assignment. It takes place on death of a person. It takes places during the lifetime of a person. It is not a voluntary act. It is a voluntary act It may take place even without a written document. It requires execution of assignment deed. All rights and liabilities of a person are transferred. Only rights of a person are transferred. No notice is required to be given to any person. Notice must be given to the creditor. No consideration is required. Consideration is required.

Contracts which need not to be performed
Sec. 62:
If the parties to the contract agrees to –

• Substitute a new contract for it, or
• rescind it, or
• alter it.

Sec. 63:
If the promisee-

• dispenses with or remits, wholly or in part the performance of the promise made to him.
• extends the time for such performance
• accepts any satisfaction for it.

Sec. 64: If the person at whose option it is voidable rescinds the contract.

Sec. 64: If the promisee neglects or refuses to afford the promisor reasonable facilities for the performance of the promise.

Discharge of Contracts – It means termination of contractual relations between the parties to a contract.

Modes of Discharge of Contract
1. By performance: It occurs when the parties to the contract fulfil their obligations arising under the contract within the time and in prescribed manner. It may be:

• Actual performance
• Attempted performance.

2. By Mutual Agreement: The parties may enter into a fresh agreement which provides for the extinguishment of their rights and liabilities of original contract. Important methods of discharge by a fresh contract:

• Novation: It occurs when an existing contract is substituted by a new one, either between same parties or between the new ones.
• Rescission: It occurs when only the old contract is cancelled and no new contract comes to exist in its place.
• Alteration: It occurs when the terms of contract are so changed by mutual agreement that have the effect of substituting a new contract for the old one.
• Remission: It refers to acceptance of lesser fulfillment of the terms of promise.
• Waiver: It refers to the abandonment of the rights by the party who is entitled to claim performance of the contract.
• Acceptance of any other satisfaction: it occurs when the party entitled to claim performance accepts any other satisfaction instead of the performance of the contract.

3. By Lapse of time: It occurs if a contract is not performed within a specified period as prescribed by the Limitation Act, 1963.

4. By operation of law – It occurs when the contract is discharged by operation of law which includes:

• Material alteration: Where it is done without the knowledge and consent of the other, contract can be avoided by othe, party.
• Insolvency: It can be done under certain particular circumstances.
• Death of a promisor: Contracts involving personal skill or expertise of promisor. When promisor dies, it cannot be performed by anyone else and hence comes to an end.
• Merger of rights: If an inferior right in a contract is merged into a superior right by the party.

5. (i) By Impossibility of performance / frustration (Sec. 53)

Relevant Case Law:
Satyabarta Ghose v Mugmiram

(ii) Discharge by supervening impossibility is done in following ways –

• Death or personal incapacity
• Destruction of subject-matter
• Non – existence or non- occurrence of certain essential things
• Change of Law
• Declaration of war

(iii) Discharge by supervening illegality – If after making the contract, its performance becomes impossible due to alteration of law or act of any person, it is discharged.

(iv) Cases not covered by subsequent impossibility

• Partial impossibility
• Commercial impossibility
• Difficulty of performance
• Default of a third party.
• Strikes, lockouts, etc.

(v) It is also known as frustration under English law.

6. By Breach of contractlt may be –

• Actual Breach: If one party defaults in performing his part of the contract on due date.
• Anticipatory Breach: When a person repudiates the contract before the stipulated time for its performance has arrived.

Let us study breach of contract in detail

Breach of Contract:
1. It means failure of a party to perform his obligations.

2. Consequences of Breach

• It discharges the aggrieved party from performing his obligations.
• The aggrieved party is entitled to proceed against the party at fault.

3. Types of Breach

Anticipatory Breach of Contract:
It occurs when the promisor refuses altogether to perform his promise and signifies his unwillingness even before the time for performance has arrived.

It may be by:

• Express repudiation, or
• Party disables himself.

The aggrieved party may exercise either of following two options:

• May wait till the due date i.e. it may treat the contract as operative.
• May decide not to wait till the due date, but may immediately rescind the contract and bring an action for damages.

Relevant Case Laws:
Hochester v. De La Tour
Avery V. Bowden

Facts:

• B chartered A’s ship
• B agreed to load it with a cargo in Odessa within 45 days.
• B was unable to supply the cargo, but A continued to demand it
• Meanwhile a war brokeout, rendering the performance impossible.

Decision: Contract was discharged and A cannot sue for damages.
Frost v. Knight

Facts –

• Defendant promised to marry the plaintiff on the death of his father.
• Defendant broke off the engagement during lifetime of his father. Decision: Plaintiff could bring an action for damages without waiting for death of defendant’s father.

Remedies available to aggrieved party:

• Rescission of contract
• Claim for specific performance of the contract
• Claim for injunction
• Claim for quantum meruit
• Claim for damages.

(i) Rescission of contract: It means right available to aggrieved party to terminate the contract In this case, the aggrieved party is not required to perform his part of obligation and is entitled to claim compensation for any loss caused to him.

(ii) Claim for specific performances of the contract:
1. In certain cases, when the damages are not adequate remedy, the court may direct the party in breach for specific performance of the contract and the promise is carried out as per the terms of the contract.

2. Usually granted in contracts connected with land.

3. It cannot be granted where –

• Monetary compensation is an adequate relief
• Contract is of personal nature
• It is not possible for court to supervise performance of contract
• Contract is ultra virus.
• One of the parties is a minor.

(iii) Claim for injunction: Injunction refers to an order passed by a competent court restraining a person from doing a particular act. Negative term of contract means doing something, which party has promised not to do or reasonable remuneration.

Thus, where a party to a contract is negativating the terms of a contract, the court may in its discretion issuing an order to the defendant restrain him from doing what he promised not to do.

Relevant Case Laws
Lumley V.Wagner

(iv) Claims for Quantum Meruit
Quantum Meruit” means “as much as is earned” or ‘according to the quantity of work done’ or reasonable remuneration.
1. Claim by party not at fault – In following cases, party not at fault may claim payment:

• One party preventing the other from completion of contract.
• Contract becoming void before its completion.
• Agreement is discovered to be void.

2. Claim by party at fault: In following cases, party at fault may claim payment:

• Divisible contract partly performed
• Indivisible contract performed completely but badly

(v) Claim for damages:

• Damages are a monetary compensation awarded, by the court to the injured party, for the loss or injury suffered by him.
• As per Sec. 73, when a contract is broken, the party at loss or damage from the breach is entitled to receive from the party at fault, compensation for the loss suffered by him.

The loss or damage should have –

• arose naturally in the usual course of things from such breach or
• which the parties knew to be the likely result of such breach.

No compensation for any remote or indirect loss.

Relevant Case Law:

Facts:

• X’s mill was stopped due to break down of shaft.
• He delivered the shaft to Y, a common carrier, to be taken to a manufacturer to copy it and make a new one.
• X did not inform Y that delay would result in loss of profits.
• Due to Y’s neglect, delivery was delayed beyond a reasonable time. Decision: Y was not liable for loss of profits during the delayed period.

Types of damages:

(i) General/ Ordinary Damages:

• It helps putting the injured party in the position that he would have been if the contract was performed.
• It refers to the estimated amount of loss actually incurred.
• It applies only to proximate consequences of the breach of contract.

(ii) Special Damages:

• It includes those damages other than that arising directly from breach
• It must be known to parties at the time of entering into contract.

(iii) Exemplary / Punitive Damages:
1. These are awarded not to compensate the aggrieved party, but as a means of punishment to the defaulting party.

2. It is awarded in 2 cases:

• Breach of contract to marry or promise to marry.
• Wrong dishonour of a customers cheque by a banker.

(iv) Nominal Damages:
These are awarded where the plaintiff has proved that there has been a breach of contract but he has not suffered any loss or damage.

(v) Liquidated Damages & Penalty:
When parties to a contract, specify a certain sum in the contract which will becomes payable as a result of breach, such specified sum is known as liquidated damages or penalty.

Under the English law:

• If the amount fixed is a genuine pre-estimate of the loss in case of breach – it is liquidated damages and is allowed.
• If the amount is fixed without any regard to probable loss, but is only to frighten the party and prevent it from committing any breach, it is a penalty and is not allowed.

In Indian law, there is no difference between the two.

Relevant Case Law:
Union of India v. Raman Iron Foundry

Differences between ordinary and special damages:

 Ordinary Damages Special Damages Damage which was naturally in the usual course of things. Damages which result from the breach of contract under special circumstances. Include damages which are due to natural and probable consequences. Includes damages which the aggrieved party suffers due to indirect loss.

Differences between liquidated damages and penalty

 Liquidated Damages Penalty Damages If the sum payable by the defaulting party represents a fair and genuine pre-estimate of damages such specified sum is known as liquidated damages, Thus, they are based on probable loss. If the sum payable by the defaulting party is not based on probable loss, but are disproportionate to the damages, such specified sum is known as penalty. They are imposed by way of compensation to the aggrieved party. It is imposed by way of punishment, so as to prevent the aggrieved party from committing a breach. In England, they are awarded in full. In England, no amount is awarded to any party.

Contracts of Indemnity:
1. As per Sec. 124, A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or the conduct of any person is called a contract of indemnity.

2. Contract of Indemnity are a part of general class of contingent contracts, thus are conditional.

3. Parties of Indemnity Contract

• indemnifier: The person who promises to make good the loss.
• Indemnified or indemnity Holder: The person whose loss is to be made good.

4. It does not includes events or accidents, which do not depend upon the conduct of any person.
Example : Contract of insurance etc. (except life insurance)

5. Modes

• Expressed
• Implied

6. Essential Elements of Contracts of Indemnity

• Ail essential elements of a valid contract must be present.
• A loss should be incurred or loss has become certain.
• Its purpose is to protect the indemnity holder against any loss.
• It must specify that the indemnity holder is protected from loss, caused due to;
• action of the promisor himself
• action of any other person
• any act, event or accident which is not in the control of parties.

Rights of indemnity Holder (Sec. 125):

• Right to recover damages
• Right to recover costs
• Right to recover sums paid

Contracts of Guarantee (Sec. 126):
1. It is a contract to perform the promise or discharge the liability incurred by a third person in case of his default.

2. Parties to the contract

• Surety – The person who gives the guarantee.
• Principle Debtor – The person in respect of whose default the guarantee is given.
• Creditor – The person to whom the guarantee is given.

3. Essential Elements of Contracts of Guarantee.

• Must have all essentials of a valid contract

Exceptions:
(a) Consideration received by the Principal Debtor is a sufficient consideration to the surety for giving the guarantee.

(b) Contract is valid even if the principal debtor is incompetent to contract.

• The principal debtor is primarily liable.
• Debt must be legally enforceable
• Debt must not be a time barred debt.
• Liability of surety is secondary and conditional
• The creditor should disclose all the facts which are likely to affect the surety’s liability.
• Contract may be either oral or written.

Nature and extent of Surety’s Liability (Sec. 128):

• Liability of surety is same as that of principal debtor.
• Where a debtor cannot be held liable on account of any defect in the document, the liability of the surety also ceases.
• Surety liability continues even if the principal debtor has not been sued or committed to be sued. Thus surety’s liability is separate on the guarantee.

Relevant Case law:
Kashiba V. Shripat

Kinds of Guarantee:

(i) Specific Guarantee

• It is given for a single debt
• It comes to an end when the debt guarantee has been paid.

(ii) Continuing Guarantee (Sec. 129)

• It extends to a series of transactions.
• Surety’s liability extends to all the transactions contemplated until the guarantee’s is revoked.

Differences between Specific and Continuing Guarantee:

 Specific Guarantee Continuing Guarantee It is given in relation to a specific transaction. It is provided in relation to a series of transactions. It is limited upto a special transaction. It extends to a series of transaction. It is abolished on the completion of special transaction. It is abolished only when all the transactions are completed. It cannot be revoked by surety. It can be revoked by the surety in relation to future transaction.

Revocation of Continuing Guarantee:
(i) It may be revoked at any time by the surety as to the future transactions by giving notice to creditors (Sec. 130)
Relevant Case Law:
Offord v. Davies

(ii) Upon the death of surety, it is revoked for all the future transactions in the absence of the contract to the contrary. (Sec. 131)
Relevant Case Law:
Lloyds V. Harper

Rights of Surety – Against the principal debtor:
(a) Right of indemnity (Sec. 145): Surety is entitled to recover from principal debtor all payment properly made.

(b) Right of Subrogation (Sec. 140): It means substitution of one person for another. On payment of a debt, surety shall be entitled to all the rights which the creditor can claim against the principal debtor.
Relevant Case Law:
Mamta Ghose V. United Industrial Bank

Against the creditor
(a) Right to claim securities (Sec. 141): Surety is entitled to benefit of every security, which creditor has against the principal debtor, whether surety knows of it or not.
If creditor loses or parts with security without surety’s consent, surety is discharged to the extent of security’s value.

(b) Right to set off: Surety can ask the creditor to set off or adjust any claim which the debtor has against creditor.

(c) Right to share reduction: If the principal debtor becomes insolvent , surety may claim proportionate reduction in his liability.

Against Co-Sureties:
(a) Right to contribution (Sec. 146): All the co- sureties contribute equally except in following cases:

• Co- sureties may fix limits on their respective liabilities.
• Contract may provide co-sureties to contribute in some other proportion.

(b) Right to share benefit of securities – Discharge of a surety:

• Sec. 130: By giving notice to creditor for future transactions in case ot continuing guarantee.
• Sec. 131: In absence of any contract to the contrary , continuing guarantee is revoked on death cf surety.
• Sec. 133: Whore there is any variance in the term of contract between the principal debtor and creditor without surety’s consent, it would discharge the surety in respect of all the transactions taking place subsequent to such variance
• Sec. 134: The surety is discharged, if the principal debtor is discharged by – (i) a contract, (ii) any act or (iii) any omission, the result of which is the discharge of principal debtor.
• Sec. 135: If the creditor makes an arrangement with the principal debtor for composition, for giving time or for not suing him without surety’s consent.
• Sec. 139: If creditor does any act or omission , there by impairing sureties eventual remedy.
• Sec. 141: If the creditor loses or parts with security without surety’s consent, surety is discharged to the extent of security’s value.

Difference between Contracts of Indemnity and Contracts of Guarantee:

 Contract of indemnity Contract of Guarantee There are two parties-indemnifier and indemnified There are 3 parties-creditor, principal debtor and surety. Indemnifier’ liability is primary and independent Surety’s liability is secondary. Indemnifier’ liability arises only on happening of a contingency. Liability of surety is already in existence but crystalizes when the principal debtor fails. Indemnifier need not necessarily act at the request of indemnified. Surety must act by extending guarantee at the debtors request. There is only one contract between the indemnified and Indemnifier. There are three contracts- 1. between principal debtor and creditor, 2. between creditor and surety, 3. between Surety and principal debtor. Indemnifier cannot sue a third party for the loss in his own name as there is no privity of contract. Surety can proceed against the principal debtor in his own name.

Contracts of Bailment:

• As per Sec. 148, Bailment is an act whereby the goods are delivered by one person to another for some purpose, on a contract, that the goods shall, when the purpose is accomplished be returned or otherwise disposed off according to the directions of the persons delivering them.
• It is a voluntary delivery of goods for a temporary purpose.
• Ownership of goods remains with the bailor.
• Goods should be movable goods.

Parties

• Bailor: The person delivering the goods.
• Bailee: The person to whom the goods are delivered.

Essential Elements of Contracts of Bailment

• There must be an expressed or implied contract between the parties.
• It can be made of goods only.
• There must be delivery of goods from one person to another.
• Goods must be delivered for some purpose express or implied.
• The delivery of goods must be conditional.
• The return of the goods may be in the original form or i.e. in an improved form as agreed between the bailor and bailee.

Modes

• Actual Delivery
• Symbolic Delivery
• Constructive Delivery.

Bailment may be gratuitous (without any remuneration or reward) or for reward, (for consideration)

Classification:
Duties of Bailor – Sec. 150: Bailor must disclose all known defects / faults in the goods bailed. He is responsible for defects in the gocds hired to bailee whether bailor was aware of such defects or not.

Sec. 158:
(a) Where the bailment is gratuitous, he must reimburse the bailee for any expenditure incurred in keeping the goods.

(b) He should reimburse any expense which bailee may incur by the way of loss in the process of returning the goods or complying with other directions for returning the goods.

(c) He must compensate the bailee for any loss or damage suffered by bailee in excess of benefit received.

(d) He is bound’to accept the goods after the purpose is accomplished.

Rights of Bailor:

• Right to enforce the duties of the bailee.
• Right to terminate the contract if bailee does any thing which is inconsistent with the conditions of bailment.
• In gratuitous bailment, he has a right to demand back goods even before expiry of bailment period.
• Right to claim the increase or profit from the goods bailed which may have occurred from value of goods.

Duties of Bailee:

• Sec. 151: Duty to take reasonable care of goods.
• Sec. 152: If he takes care of goods as a man of ordinary prudence, he will not be liable for any loss or damage of goods bailed.
• Sec. 153: Duty not to make authorised use of goods.
• Sec. 154: If he makes any unauthorized use of goods , he will be liable to make good the loss.

Sec. 155-157:
(a) Duty not to mix the goods bailed with his own goods without the bailor’s consent. If he does so, he has to make good the loss.
(b) Duty not to set up an adverse title

Sec. 160: Duty to return the goods on expiration of the bailment period. Sec. 161: If he fails to return, he will be responsible to the bailor for any loss, destruction or deterioration of goods there after.

Sec. 163:

• Duty to return any extra profit occurring from goods bailed.
• Duty not to do any thing inconsistent with the bailment conditions.

Rights of Bailee:

• Right to claim compensation for any loss arising from non-disclosure of known/unknown defects in goods.
• Right to claim indemnification for any loss or damage as a result of defective title.
• Right to deliver back the goods to joint bailors as per the agreement.
• Right to deliver goods back to bailor whether has the right to the goods.
• Right to exercise his right of lien.
• Right to take action against third parties.

Termination of Bailment:

Sec. 153: Where bailee makes unauthorized use of the goods bailment becomes voidable at bailors’ option.

Sec. 159: At bailor’s will –
(a) In non-gratuitous bailment, bailor has a right to take back the goods , after the purpose is over.

(b) In gratuitous bailment, he can take back the goods any time, provided in case of loss in excess of benefit, bailee must be compensated.

Sec. 160:
(a) When the period or purpose of bailment is over.

(b) Where the subject matter is destroyed or becomes illegal.

Sec. 162: A gratuitous bailment is terminated by the death of the bailor or bailee.
Lien It refers to right of one person to retain the possession of some goods, belonging to other person, until some debt or liability is discharged.

(a) Particular Lien:

• It is available only against those goods in respect of which bailee has exercised skill and labour.
• Bailees lien is a particular lien.
• It is available to all.

Conditions for exercising Particular Lien:

• If bailee has exercised his labour and skill on goods bailed.
• When work has been completed on time.
• If the payment is due.

(b) General Lien:

• It refers to the right of one person to retain the possession of any goods, belonging to another person , until some debt or liability is discharged.
• It is available to bankers, factors, warfingers, attorneys of High Court and policy brokers.

Differences between General Lien and Particular Lien:

 General Lien Particular Lien Right to detain / retain any goods of the bailor for balance of amount outstanding. It is exercisable only on such goods in respect of which charges are due. It is recognized through an agreement. It is automatic. It can be exercised against goods even without involvement of labour or skill. It comes into play only when some labour or skill is involved.

Finder of Goods:
1. Refers to a person who finds the goods belonging to another person i.e. the goods lost by the true owner – he enjoys all the rights and carries all the responsibilities of a bailee.

2. Though the finder has no right to sell the goods found in the normal course , he may sell the goods if the real owner cannot be found with reasonable efforts or if the owner refuses to pay the lawful changes subject to the following conditions –

• article is in danger of perishing and losing the greater part of the value,
• lawful charges of the finder amounts to two-third of the value of the article found.

Carrier as Bailee – Carrier undertakes to carry goods of all persons safely to its destination He undertakes to make good all losses unless caused by an act of God or public enemies.

Innkeepers:
Their liability is like that of a bailee with regard to the property of the guests.

Relevant Case Law:
Jan & Sar V. Caneron

Pledge/ Pawn
1. As per Sec. 172,
It refers “to the bailment of goods as security for payment of debt or performance of a promise.”

2. It refers to a contract where by an article is deposited with a money lender as a security for the loan repayment or for the performance of promise.

3. Parties
Pawnor: The person who pledges i.e. bailor incase of pledge
Pawnee: The bailee incase of pledge.

4. Essential Elements of Pledge

• There must be expressed implied contract between the parties.
• It can be of goods only
• There must be delivery of goods from one person to another.
• It must be for some purpose.

Duties of Pawner

• Repay the loan or perform the promise
• Pay expenses in cases of default
• Pay the deficit on sale.
• Pay extraordinary expenses incurred for preserving the goods.
• Disclose faults in goods which are material for the use of goods or may put pawnee to extra-ordinary risks.
• Indemnify pawnee if he suffers any loss due to defective title of the pawner.

Rights of Pawner

• Sec. 177: Redeem the goods pledged.
• Right to sue in the event of pawnee refusing to return the goods even after payment of debt etc.
• Receive any increase in goods.

Duties of Pawnee:

• Not to use the goods unless authorised by pawner
• Return the goods to pawnor on payment of debt etc.
• Take reasonable care of the goods
• Not to mix the goods with his own goods
• Return any increase in goods pledged with him
• Return any surplus on sale.

Rights of Pawnee:
Sec. 173: Retain the goods pledged only for
(a) the performance of promise, (b) payment of debt, or (c) interest on debt.

Sec. 174: Right of particular lien.

Sec. 175: Seek reimbursement of extra ordinary expenses.

Sec. 176: Right to sue the pawner in the event of pawner failing to redeem the debt or perform the promise. He can sell the goods after giving a notice of sale.

Pledge by non- owners:
A valid pledge can be created by following non- owners:
(a) Pledge by Estoppel.

(b) Pledge by a mercantile agent. (Sec. 178)
Mercantile Agent means an agent of the seller who has been appointed to sell the goods belonging to the seller.

Conditions for pledging:

• Goods came into his possession with the consent of seller/owner of goods.
• Pledge is made by him in the ordinary course of business
• Pawnee acts in good faith.

(c) Pledge by a person in possession under a voidable contract. (Sec. 178 A)

Conditions:

• Person acquires goods under voidable contract
• Person who acquires the goods pledges such goods
• At the time of creation of pledge, voidable contract should not have rescinded
• Pledge is made in good faith.

(d) Sec. 179: Pledge by a person having limited interest in the goods. If a person has a limited interest, he can make a valid pledge to the extent of that interest.

(e) Pledge by a co-owner in possession:
Consent of all joint owners is required, if the goods owned jointly are to be sold or pledged. Conditions for exception –

• Goods are in the sole possession of one joint owners.
• Goods came into his possession with consent of other joint owners.
• Pledge is made in good faith.

(f) Pledge by a seller in possession of goods after their sale.

Conditions:

• Ownership of goods has been passed to the buyer
• Seller continues to be in their possession, even after their sale
• Seller pledges the goods to some other person
• Pledge is made in good faith without any notice of the prior sale
• Pledge by a buyer who has obtained possession of goods under an agreement to sell.

Conditions:

• Ownership has not been passed
• Buyer has obtained possession with the seller’s consent
• Buyer pledges the goods to some other person
• Pledge is made in good faith.

Differences between Bailment and Pledge

 Bailment Pledge Goods are bailed for purpose other than those referred under pledge. Under it, goods are bailed as a security for loan or performance of promise. Bailee generally cannot sell the goods. Pawnee enjoys the right to sell the goods on pawnor’s default. He can either retain or sue. Bailee can use the goods only if the terms provide so. Pawnee has a right to use the goods.

Law of Agency
1. As per Sec. 182,
“ An agent is a person employed –

• to do any act for another, or
• to represent in dealing with third persons.”

2. Principal is a person for whom such act is done , or who is so represented.

3. Agent acts as a mere connecting link between the principal and third party.

4. It is based on two rules:

• A person can do through an agent, whatever he can do himself.
• The acts of the agent are the acts of the principal.

Essential elements:

• Two parties are required
• Agreement between parties is necessary.
• No consideration is required.

True test of Agency:
If a person has the capacity to bind the principal for the acts done by him, then agency exists and such person is called an agent.

Modes of creation of Agency:

Sec 187: Express Agency – It is created either by words spoken or in writing Eg- Power of Attorney (it may be general or special)

Implied Agency: Agency created by conduct of parties. It can be in the following terms:

(a) Sec 237: Agency by Estoppel
It a person by his conduct, words spoken or written leads another to believe that a certain person is acting as his agent, he is estopped later on from denying such facts.
Example : Wife as an agent, where a married women lives with her husband, there is a presumption that she has the authority to pledge his credit for necessaries.

This Presumption is not held where husband shows that –

• he had expressly warned the tradesman not to supply goods to his wife on his credit,
• he had expressly forbidden the wife to pledge his goods,
• his wife was already supplied with sufficient articles,
• she was supplied with sufficient allowance.

(b) Agency by Holding out

• Under this the principal plays a positive role.
• It occurs when any one holds himself out as an agent of another
• It happens through a wilful conduct
• Example : In case of partnerships.

Sec. 189:
Agency by necessity – In case of emergency, the agents can exceed their powers and can take all the steps to minimise his principal’s loss.

Agency by ratification
(a) The principal is not bound by the act of agent if the agent acts:

• On behalf of another without his consent or knowledge
• exceeding his authority.

(b) Principal can create it by subsequent ratification.

(c) Also known as ex post facto agency i.e. agency arising after the event.

(d) Principal becomes bound.

Agency by ratification is possible if following conditions are satisfied:

• The act must have been done on behalf of the named or identifiable principal.
• The principal must be in existence at the time of contract.
• The principal must be competent to contract at the time of making the contract.
• Principal must have full knowledge of the facts.
• Contract can be ratified only as a whole.
• It can be done of a lawful contract.
• It must be done within a reasonable time.
• It should not cause any damages to a third party.

Extent of Agent’s Authority It is governed by two principles:
Sec. 188: Agents authority in normal circumstances. Agent has the power and authority to do all the acts lawful and necessary in the normal circumstances in discharge of his functions.

Agent’s authority in emergency. Agent has the authority in an emergency to do all such acts as a man of ordinary prudence for protecting his principal from losses under similar circumstances. It includes:
(a) Actual / Real Authority.
(b) Ostensible / Apparent Authority.

Note:
As per Sec. 190,
Sub – agent’s appointment is not lawful as the agent is a delegate and a delegatee cannot further delegate.

As per Sec. 191,
A sub – agent is a person –
(i) employed by, and
(ii) acting under the control of the original agent in the business of agency.

Relationship between principal, agent and sub – agent

• Agent and Sub-Agent have the relation like that of agent and principal.
• Sub- agent is not directly responsible to the principal.
• Agent is responsible for the acts of sub- agent to the principal.
• Principal is responsible to third party for acts of both agent and subagent

Substituted Agent
As per Sec. 194,
Where-
the principal appoints an agent, and if that agent identifies another person to carry out the acts ordered by the principal, then the second person is not to be treated as a sub- agent but only as an agent of the original principal.

Mercantile Agent
As per Sec. 2 (9) of the Sales of Goods Act, 1930 “Mercantile Agent is an agent having in the ordinary course of business as such an authority either –

• to sell goods, or
• consign goods for the purpose of sale, or
• to raise money on the security of goods.

It includes:

• Factors
• Brokers
• Del credere agent
• Auctioneers
• Partners
• Bankers

1. Factors:

• Employed to sell goods placed in his possession.
• Contract to buy goods for his principal.
• Can sell and receive payment for the goods.
• Has an insurable interest in the goods.
• Have general lien in respect of any claim arising out of agency.

2. Brokers:

• Contracts with other for the sale and purchase of goods and securities.
• Goods and securities are not in his possession.
• Gets commission in return called brokerage.
• Acts in principal’s name.
• Has no lien over the goods.

3. Del Credere Agent:

• Gives guarantee to the principal that credit purchasers pay for the goods.
• Gets an extra remuneration in return.
• If third party fails to pay , he is bound to pay the principal , the balance amount.

4. Auctioneers

• Sells goods by auction.
• Cannot warrant his principal’s title to the goods.
• Until sale he is an agent for seller.
• After sale he is an agent for buyer.

5. Partners:
Agent of the firm and his co- partners.

6. Bankers.

• Relationship of debtor and creditor with their customers.
• Agent of customer when he buys or sell securities, collects bills etc on customer’s behalf.
• Has general lien on all goods and securities in his possession.

Duties of Agent:

• Sec. 211: To conduct principal’s business according to his directions.
• Sec. 212: He must always act as a person with skill and diligence.
• Sec. 213: He has to maintain and render proper accounts to the principal whenever demanded. .
• Sec. 214: To communicate and obtain instructions in case of difficulty.
• Sec. 215: He must not deal on his own account.
• Sec. 216: Must not make any secret profit.
• Sec. 217 & 218: To account for money received for the principal.

Not to use the information obtained in the course of agency against the principal. Agent cannot delegate his authority to sub agent generally. The general rule for this is. Delegates non-protest delegare-a delegate cannot further delegate.

Rights of an Agent:

• Sec. 217: Rights of Retention.
• Sec. 219: Right to receive agreed remuneration.
• Sec. 221: Right of lien on principal’s property.
• Sec. 222: Right of indemnification for lawful acts.
• Sec. 223: Right of indemnification against acts done in good faith.

Note:
Sec. 224:
Agent cannot be indemnified for any loss caused by criminal act.

(f) Sec 225: Right to be compensated for any injury caused due to principal’s negligence.
Principle’s liability for agent’s act to Third Parties

There are 3 circumstances in which an agent may contract namely –
(i) The agent acts for named principal (disclosed principal)

(ii) The agent acts for an undisclosed principal

(iii) The agent acts for a concealed principal

• Sec. 226: Acts within the scope of actual apparent authority., it bounds the principal.
• Sec. 227: Acts in excess of agent’s authority is separable, it bounds the principal.
• Sec. 228: Acts in excess of agent’s authority is not separable, principal is not bound by it.
• Sec. 229: Principal is bound by notice given to the principal.
• Sec 238: Principal is bound for any fraud or misrepresentation committed by agent: (i) During the business hours and (ii) Within his authority.
• Unnamed principal, principal becomes liable on being discovered.

Personal liability of the Agent:
(a) It is also known as Doctrine of implied warranty of authority.

(b) It happens under following circumstances:

• where the agent signs the negotiable instrument without indicating that he is signing for the Principal.
• where the contract expressly provides so.
• where the agent works for foreign principal.
• where the agent acts for a Principal who cannot be used.
• where a Government servant enters into a contract on behalf of Union of India.
• where according to usage in trade in certain kinds of business, agents are personally liable.
• where the agency is coupled with interest
• If the agent is working for undisclosed principal
• If the amount is received or paid by agent under mistake or coercion.

Note: Agency coupled with interest (Sec. 202)
It occurs when the agent has an interest in the authority granted to him, or he has an interest in the subject, matter with which he has to deal. It cannot be terminated to the prejudice of interest in the absence of contract to the contrary.

It applies on fulfillment of following conditions:

• agent’s interest should exist at the time of agency’s creation.
• authority given to agent must be intended for protecting the agent’s interest.
• agent’s interest must be substantial
• agent’s interest should be over and above his remuneration.

Termination of Agency:

• Agreement between principal and agent – Performance of contract
• Revocation of authority by principal – Expiration of period
• Revocation of authority by agent
• Death/insanity of principal or agent
• Insolvency of principal
• Dissolution of company
• Destruction of the subject-matter

When Termination of Agency Takes Effect:
(i) Sec 208: As regards agent, when it becomes known to him.

(ii) As regard third parties, when it comes to their knowledge

• Sec. 210: Termination of, the agent’s authority terminates the sub- agents authority
• Sec. 209: Agent has a duty to protect his principal’s interest where the principal dies or becomes of unsound mind.

Irrevocable Agency.
Revocation of agency is not possible in following cases:

• Sec. 202: where agency is coupled with interest.
• Sec. 204: where the authority has been partly exercised.
• where the agency has incurred personal liability.

E-Contract:

• Electronic contracts are not paper based but rather in electronic form are born out of the need for speed convenience and efficiency.
• The conventional law relating to contract is not sufficient to address all the issues that arise in electronic contracts.
• The Information Technology Act, 2000 solves some of the peculiar issues that arise in the formation and authentication of electronic contracts.

As in every other contract, an electronic contract also requires the following necessary ingredients:

• An offer needs to be made
• The offer needs to be accepted.
• There has to be lawful consideration.
• There has to be an intention to create legal relations.
• The parties must be competent to contract.
• There must be free and genuine consent.
• The object of the contract must be lawful.
• There must be certainty and possibility of performance.

Multiple Choice Questions

Question 1.
Which one of the following is correct?
(a) Indian Contract Act, 1882
(b) Indian Contract Act, 1972
(c) Indian Contract Act, 1872
(d) Indian Contract Act, 1888.
(c) Indian Contract Act, 1872

Question 2.
The Law of Contract is nothing but
(a) A Child of Commercial dealing
(b) A Child of Religion
(c) A Child of day to day Politics
(d) A Child of Economics.
(a) A Child of Commercial dealing

Question 3.
The Indian Contract Act, 1872 extends to-
(a) Whole of India
(b) Whole of India excluding Jammu and Kashmir.
(c) North India Only.
(d) South India Only.
(b) Whole of India excluding Jammu and Kashmir.

Question 4.
To form a valid contract, there should be atleast-
(a) Two parties
(b) Three parties
(c) Four parties
(d) Five parties.
(a) Two parties

Question 5.
Contractual rights and duties are created by-
(a) State
(b) Statute
(c) Parties
(d) Custom or Usage.
(c) Parties

Question 6.
Every Contract is an agreement but every agreement is not a contract. This statement is-
(a) Wrong
(b) Correct
(c) Correct Subject to certain exceptions
(d) Partially correct.
(b) Correct

Question 7.
Agreement is defined in section of the Indian Contract Act, 1872.
(a) 2(c)
(b) 2(e)
(c) 2(g)
(d) 2(i)
(b) 2(e)

Question 8.
As per section 2(e) of the Indian Contract Act, “Every Promise and every set of promise forming the consideration for each other is a/an
(a) Contract
(b) Agreement
(c) Offer
(d) Acceptance
(b) Agreement

Question 9.
A promises to deliver his watch to B and, in return, B Promise to pay a sum of ₹ 2,000. There is said to be a an-
(a) Agreement
(b) Proposal
(c) Acceptance
(d) Offer
(a) Agreement

Question 10.
An Agreement is
(a) Offer
(b) Offer+ Acceptance
(c) Offer+ Acceptance + Consideration
(d) Contract
(b) Offer+ Acceptance

Question 11.
A Contract is-
(a) A promise to do something or abstain from doing something.
(b) A communication of intention to do something or abstain from doing something
(c) A set of promises.
(d) An agreement enforceable by law
(d) An agreement enforceable by law

Question 12.
Contract is defined as an agreement enforceable by Law, vide section of the Indian Contract Act.
(a) 2(e)
(b) 2(f)
(c) 2(h)
(d) 2(i)
(c) 2(h)

Question 13.
Which of the following is false? An offer to be Valid must:
(a) Contain a term the non- compliance of which would amount to acceptance.
(b) Intend to create legal relations.
(c) Have certain and unambiguous terms.
(d) Be communicated to the person to whom it is made.
(a) Contain a term the non- compliance of which would amount to acceptance.

Question 14.
Over a cup of coffee in a restaurant, X Invites Y to dinner at his house
on a Sunday. Y hires a taxi and reaches X’s house at the appointed time, but x fails to perform his promise. Can Y recover any damages from X? .
(a) Yes, as y has suffered
(b) No, as the intention was not to create legal relation.
(c) Either (a) or (b)
(d) None of these.
(b) No, as the intention was not to create legal relation.

Question 15.
Which one of the following is the best statement about the Indian Contract Act?
(a) It is an exhaustive code containing the entire law of contract.
(b) It is an Act to amend certain parts of the law relating to contracts.
(c) It is an Act to define certain parts of the law relating to contracts and contains only the general principles of contract.
(d) It is not an exhaustive code containing the entire law of contracts being an Act to define and amend certain parts of law relating to contract
(c) It is an Act to define certain parts of the law relating to contracts and contains only the general principles of contract.

Question 16.
Which of following is a contract?
(a) A engages B for a certain work and promises to pay such remuneration as shall be fixed. B cjoes the work.
(b) A and B promise to marry each Other.
(c) A takes a Seat in a public vehicle
(d) A invites B to a card party. B accepts the invitation.
(a) A engages B for a certain work and promises to pay such remuneration as shall be fixed. B cjoes the work.

Question 17.
For binding contract both the parties to the contract must:
(a) Agree upon the same thing in the same sense.
(b) Put the offer and counter offers.
(c) Stipulate their individual offer
(d) Agree with each other.
(a) Agree upon the same thing in the same sense.

Question 18.
Which one of the following has the correct sequence.
(a) Offer, acceptance, consideration, offer.
(b) Offer, acceptance, consideration, contract
(c) Contract, acceptance, consideration, offer.
(d) Offer, consideration, acceptance, contract.
(b) Offer, acceptance, consideration, contract

Question 19.
Goods displayed in a Shop window with a price label will amount to:
(a) Offer
(b) Acceptance of offer
(c) Invitation to offer
(d) Counteroffer
(c) Invitation to offer

Question 20.
What can a catalogue of books, listing price of each book and specifying the place where the listed books are available be termed as?
(a) An offer
(b) An obligation
(c) An invitation to offer
(d) A promise to make available the books at the listed place.
(c) An invitation to offer

Question 21.
Which one of the following statement about a valid acceptance of an offer is incorrect?
(a) Acceptance should be absolute and unqualified.
(b) Acceptance should be in the prescribed manner
(c) Acceptance should be made while the offer is subsisting
(d) Acceptance should be communicated
(c) Acceptance should be made while the offer is subsisting

Question 22.
A Counter offer is:
(a) A rejection of the original offer
(b) An acceptance of the offer.
(c) A bargain
(d) An invitation to treat
(a) A rejection of the original offer

Question 23.
A person making a proposal is called:
(a) Promisor
(b) Vendor
(c) Contractor
(d) Promise
(a) Promisor

Question 24.
Which one of the following will constitute a valid acceptance?
(a) An enquiry as to fitness of the subject matter of contract.
(b) A provisional acceptance
(c) Addition of a superfluous term, while accepting an offer.
(d) A conditional acceptance.
(a) An enquiry as to fitness of the subject matter of contract.

Question 25.
X Offers by a Letter to sell his car to Y for Rs. 95,000. Y at the some time, offers by a letter to buy X’s car for Rs. 15,000. The two letters cross each other in the post. Is there a concluded contract between X and Y ?
(a) Yes. there is a concluded contract between X and Y.
(b) No, only crossing of offers.
(c) Can’t say
(d) None of these.
(b) No, only crossing of offers.

Question 26.
S offers to sell B his car for Rs 50,000. T, standing nearby, says,” I will take it if B does not take it. B is not interested in the car. What will be the position if T says to S“ Here is the money, I take the car.”
(a) There is a contract between S and T
(b) There is no contract between S and T
(c) S may or may not accept the offer.
(d) Both (b) and (c).
(d) Both (b) and (c).

Question 27.
Which one of Ihe following statement is true?
(a) Offer and acceptance are revocable
(b) Offer and acceptance are irrevocable
(c) An offer can be revoked but acceptance cannot
(d) An offer cannot be revoked but acceptance can be revoked.
(a) Offer and acceptance are revocable

Question 28.
P advertises in a daily newspaper that he will give a prize of Rs 1,000 to the first person to swim the English channel and back during the month of August. F, who has read the advertisement, sets off from Dower on 1st August and reaches the coast of France on 2nd August. On that day, a further advertisement appears in the same newspaper stating that the offer of the prize has been with drawn. On 3rd August F completes the return swim to England. Can F recover the prize?
(a) Yes, as the second advertisement is ineffective so far as F is concerned.
(b) No, as the offer was revocated.
(c) F can only claim for damages.
(d) None of the above.
(a) Yes, as the second advertisement is ineffective so far as F is concerned.

Question 29.
The Communication of acceptance through telephone is regarded as complete when:
(a) Acceptance is spoken on phone.
(b) Acceptance comes to the knowledge of party proposing.
(c) Acceptance is put in course of transmission.
(d) Acceptance has done whatever is required to be done by him.
(b) Acceptance comes to the knowledge of party proposing.

Question 30.
An auctioneer advertised in a newspaper that a sale of office furniture would be held at Delhi. A broker of Bombay, reached Delhi on the appointed date and time.
But the auctioneer withdrew all the furniture from the auction sale. The broker sues him for his loss of time and expenses. Will he succeed?
(a) Yes, he will succeed.
(b) No, he will not succeed.
(c) Can’t say
(d) None of these.
(b) No, he will not succeed.

Question 31.
Which one of the following falls into the category of offer?
(b) Display of goods by a shopkeeper in his window with prices marked on them
(d) Announcement of reward to the public.
(d) Announcement of reward to the public.

Question 32.
A sees an article marked “Price Rupees Twenty” in B’s shop .He offers. B Rs 20 for the article. B. refuses to sell saying the article is not for sale. Advise A.
(a) A cannot force B to sell the article at Rs 20
(b) A can force B to sell the article at Rs 20
(c) A can claim damages
(d) A can sue B in the Court.
(a) A cannot force B to sell the article at Rs 20

Question 33.
Which one of the following statement is incorrect?
(a) Oral acceptance is a valid acceptance.
(b) Mere silence is not acceptance
(c) Acceptance must be communicated
(d) Acceptance may not be in the prescribed manner
(d) Acceptance may not be in the prescribed manner

Question 34.
‘A’ Offered a reward of Rs 1,000. for recovery of some valuable missing article ‘B’ who did not know of this Offer, found the articles and gave the same to ‘A’.
(a) As there is no acceptance of an offer due to want of knowledge, B is not entitled to get the reward of Rs 1,000.
(b) Giving delivery of articles to ‘A’ amounts to an acceptance and hence ‘B’ is entitled to get the reward of Rs 1,000.
(c) Giving delivery of articles to ‘A’ amounts to performance of condition precedent to an offer and hence there is valid acceptances. ‘B’ must get the reward of Rs 1,000.
(d) In the absence of any Legal obligation on ‘A’ no claim for reward of Rs 1,000 is maintainable by ‘B’.
(a) As there is no acceptance of an offer due to want of knowledge, B is not entitled to get the reward of Rs 1,000.

Question 35.
Consider the following statement:
1. There is no difference between the English Law and Indian Law with regard to acceptance through post.
2. Both Under the English Law and the Indian Law a contract is concluded when the letter of acceptance is posted.
3.Under the Indian Law when the Letter of acceptance is posted it is completed only as against the proposer.
Which of the above statement is/are correct?
(a) 1 and 2
(b) 2 alone
(c) 3 alone
(d) None
(c) 3 alone

Question 36.
In Commercial and business agreements, the intention of the parties to create legal relationship is-
(a) Presumed to exist
(b) To be specifically expressed in writing
(c) Not relevant at all
(d) Not applicable.
(a) Presumed to exist

Question 37.
An agreement is a Voidable Contract when it is-
(a) Enforceable
(b) Enforceable by Law at the option of the aggrieved party
(c) Enforceable by both the parties
(d) Not enforceable at all.
(b) Enforceable by Law at the option of the aggrieved party

Question 38.
A Contract creates-
(a) Rights in personam
(b) Rights in rem
(c) Only rights and no obligations
(d) Only Obligations and no rights.
(a) Rights in personam

Question 39.
An agreement not enforceable by Law is said to be void under section of the Indian Contract Act.
(a) 2(a)
(b) 2(b)
(c) 2(f)
(d) 2(g)
(d) 2(g)

Question 40.
Agreements that do not give rise to contractual obligations are not contracts.
(a) True
(b) Partly True
(c) False
(d) None of the above
(a) True

Question 41.
Agreements of a social nature or domestic nature do not contemplate legal relationship and as such are not contracts, which can be enforced.
(a) True
(b) Partly True
(c) False
(d) None of the above
(a) True

Question 42.
When the contract is perfectly valid in its substance but cannot be enforced because of certain technical defects. This is called a/ an-
(a) Unilateral Contract
(b) Bilateral Contract
(c) Unenforceable Contract
(d) Void Contract
(c) Unenforceable Contract

Question 43.
The term” Proposal or offer” has been defined in – of the Indian contract Act.
(a) Section 2(a)
(b) Section 2(b)
(c) Section 2(c)
(d) Section 2(d)
(a) Section 2(a)

Question 44.
The term” Promise” has been defined in of the Indian Contract Act.
(a) Section 2(a)
(b) Section 2(b)
(c) Section 2(c)
(d) Section 2(d)
(b) Section 2(b)

Question 45.
The person making the proposal is called
(a) Promisor
(b) Promisee
(c) Participator
(d) Principal
(a) Promisor

Question 46.
Offer implied from conduct of parties or from circumstances of the case is called-
(a) Implied offer
(b) Express offer
(c) General offer
(d) Specific offer.
(a) Implied offer

Question 47.
An offer made to a – (i) Specific person, or (ii) a group of persons is known as-
(a) Standing offer
(b) Specific offer
(c) Special offer
(d) Separate offer
(b) Specific offer

Question 48.
Communication of proposal is complete when it comes to the knowledge of
(a) The person to whom it is made
(b) The proposer
(c) Either (a) or (b)
(d) The Court.
(a) The person to whom it is made

Question 49.
Terms of an offer must be-
(a) Ambiguous
(b) Uncertain
(c) Definite
(d) Vague
(c) Definite

Question 50.
Offer should not contain a term, the non- Compliance of which would amount to acceptance.
(a) True
(b) Partly True
(c) False
(d) None of the above
(a) True

Question 51.
When two persons make identical offers to each other, in ignorance of each other’s offer, it is called
(a) Cross offers
(b) Implied offers
(c) Direct offers
(d) Express offers.
(a) Cross offers

Question 52.
When there is a Cross offer, the original offer terminates.
(a) True
(b) Partly True
(c) False
(d) None of the above
(a) True

Question 53.
An offer is revoked-
(a) By the death or insanity of the proposer
(b) By Lapse of time
(c) By Communication of notice of revocation
(d) All of these
(d) All of these

Question 54.
A Change in law or Circumstance rendering the original offer unlawful or impossible, will lead to termination of the offer.
(a) True
(b) Partly True
(c) False
(d) None of the above
(a) True

Question 55.
Acceptance can precede an offer
(a) True
(b) Partly True
(c) False
(d) None of the above.
(c) False

Question 56.
Acceptance in ignorance of the offer is-
(a) Valid
(b) Invalid
(c) Void
(d) Voidable
(b) Invalid

Question 57.
Acceptance should be given within-
(a) The time specified by the Offerer
(b) A reasonable time
(c) Such time as the offer lapses
(d) All of the above
(d) All of the above

Question 58.
An acceptance on telephone should be-
(a) Heard by the offeror
(b) Audible to the offeror
(c) Understood by the offeror
(d) All of the above.
(d) All of the above.

Question 59.
Section of the Indian Contract Act defines “Consideration”.
(a) Section 2(a)
(b). Section 2(b)
(c) Section 2(c).
(d) Section 2(d)
(d) Section 2(d)

Question 60.
Consideration must move at the desire of-
(a) The promisor
(b) The promisee
(c) The promisor or any third party
(d) Both the promisor and the promisee
(a) The promisor

Question 61.
Consideration in a contract:
(a) May be past, present or future
(b) May be present or future only
(c) Must be present only
(d) Must be future only.
(a) May be past, present or future

Question 62.
Past Consideration is valid in-
(a) England Only
(b) India Only
(c) Neither in England nor in India
(d) both in England and India
(b) India Only

Question 63.
Agreement without consideration is valid, when made
(a) Out of love and affection due to near relationship
(b) To pay a time barred debt
(c) To compensate a person who has already done something voluntarily
(d) All of the above
(d) All of the above

Question 64.
A debt barred by limitation cannot be recovered. Hence, a promise to pay such a debt is without any consideration and hence invalid.
(a) True
(b) Partly True
(c) False
(d) None of the above
(c) False

Question 65.
Inadequacy of consideration does not render a contract invalid.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(a) True

Question 66.
If only a part of the consideration or object is unlawful, the Contract is –
(a) ’Valid to the extent the same are lawful
(b) Void to the extent the same are unlawful
(c) Valid as a whole
(d) Void as a whole.
(d) Void as a whole.

Question 67.
The expression “Privity of contract” means-
(a) A Contract is Contract between the parties only
(b) A Contract is a private document
(c) Only private documents can be contracts
(d) The contacts may be expressed in some usual and reasonable manner
(a) A Contract is Contract between the parties only

Question 68.
Under the Indian Contract Act, a third person –
(a) Who is the beneficiary under the Contract can sue
(b) From whom the consideration has proceeded can sue
(c) Can not sue even if the consideration has proceeded from him.
(d) Can not sue at all for want of privity of contract.
(a) Who is the beneficiary under the Contract can sue

Question 69.
In India, a person who is stranger to the Consideration.
(a) Can sue based on the Contract
(b) Can not sue based on the Contract
(c) Can sue depending on the Conditions
(d) Can sue if permitted by the court.
(a) Can sue based on the Contract

Question 70.
The Beneficiary of a Trust or other interest in specific immovable property, can enforce it even if he is not a party named in the Trust Deed.
(a) True
(b) Partly True
(c) False
(d) None of the above.
(a) True

Question 71.
Capacity to Contract has been defined in –
(a) Section 10
(b) Section 11
(c) Section 12
(d) Section 25.
(b) Section 11

Question 72.
Competency to Contract means
(a) Age of the parties
(b) Soundness of mind of the parties
(c) Both (a) and (b)
(d) Intelligence of the parties.
(c) Both (a) and (b)

Question 73.
Which of the following is not Competent to Contract?
(a) A minor
(b) A person of unsound mind
(c) A person who has been disqualified from contracting by some Law
(d) All of these
(d) All of these

Question 74.
A minor’s agreement is void .This was held in the case of-
(a) Mohiri Bibee V. Dharmadas Ghosh
(b) Nihal Chand V. Jan Mohamed khan
(c) Suraj Narain V. Sukhu Aheer
(d) Chinnaiya V. Ramaiya.
(a) Mohiri Bibee V. Dharmadas Ghosh

Question 75.
The age of majority for the purpose of the Indian Contract Act is –
(a) 16 years for girls & 18 years for boys
(b) 18 years for girls & 21 years for boys
(c) 18 years
(d) 21 years.
(c) 18 years

Question 76.
A minor’s agreement can be ratified or attaining majority.
(a) True
(b) Partly True
(c) False
(d) None of these
(c) False

Question 77.
……………… are goods suitable to the condition in the life of the minor and to nis actual requirements at the time of sale and delivery.
(a) Necessaries
(b) Goods
(c) Life Style Products
(d) Luxuries.
(a) Necessaries

Question 78.
“Consensus – ad – idem” means
(a) General Consensus Luxuries.
(b) Meeting of minds upon the same thing in the same sense
(c) Reaching an agreement
(d) Reaching of contract
(b) Meeting of minds upon the same thing in the same sense

Question 79.
A Contract which is formed without the free consent of parties, is –
(a) Valid
(b) Illegal
(c) Voidable
(d) Void ab- initio
(c) Voidable

Question 80.
Contracts under unilateral mjstake are if such mistake is caused by the fraud or misrepresentation of the other party.
(a) Valid
(b) Void
(c) Illegal
(d) Unenforceable
(b) Void

Question 81.
Mistake as to foreign law is treated in the same manner as –
(a) Mistake of India Law
(b) Mistake of Fact
(c) Misrepresentation
(d) Fraud
(b) Mistake of Fact

Question 82.
If an agreement suffers from any uncertainty. It is-
(a) Voidable
(b) Void
(c) Unenforceable
(d) Illegal.
(b) Void

Question 83.
All illegal agreements are-
(a) Void- ab- initio
(b) Valid
(c) Contingent
(d) Enforceable
(a) Void- ab- initio

Question 84.
A promise to give money or money’s worth upon the determination or ascertainment of an uncertain event is called-
(a) Wagering Agreement
(b) Unlawful Agreement
(c) Illegal Agreement
(d) Voidable Agreement
(a) Wagering Agreement

Question 85.
In the States of Gujarat and Maharashtra, collateral transactions to a wagering agreement are-
(a) Voidable
(b) Illegal and Void
(c) Valid and Enforceable
(d) Contingent
(b) Illegal and Void

Question 86.
A Contingent Contract is a contract to do, or not to do something if some event, collateral to such contract –
(a) happens
(b) does not happen
(c) Neither (a) nor (b)
(d) Either (a) or (b)
(d) Either (a) or (b)

Question 87.
Which of these parties cannot demand performance of promise?
(a) Promisee ’
(b) Any of the Joint Promisees.
(c) On the death of a Promisee, his Legal Representative.
(d) Stranger to the Contract
(d) Stranger to the Contract

Question 88.
If a new contract is substituted in place of an existing contract it is called-
(a) Alteration
(b) Rescission
(c) Novation
(d) Waiver.
(c) Novation

Question 89.
The phrase “Quantum Meruit” literally means –
(a) As much as is earned
(b) The fact in itself
(c) A Contract for the sale
(d) As much as is gained.
(a) As much as is earned

Question 90.
Damages awarded to compensate the injured party for the actual amount of loss suffered by him for breach of contract are called –
(a) General / Ordinary Damages
(b) Special Damages
(c) Vindictive Damages
(d) Nominal Damages
(c) Vindictive Damages

Question 91.
A finder of lost goods is a-
(a) Bailor
(b) Bailee
(c) True Owner
(d) Thief.
(b) Bailee

Question 92.
Which of the following is the essential ingredient of contract of indemnity:
(a) Contract to make good the loss
(b) Loss must be caused to the indemnity holder.
(c) Loss may be caused by promiser or any other person
(d) All of the above.
(d) All of the above.

Question 93.
When the goods are delivered by one to another by way of security for the money borrowed, then it is technically known as:
(a) Hire
(b) Pawnee
(c) Pledge
(d) None of the above.
(b) Pawnee

Question 94.
Which of the following is not a charge on the property:
(a) Pledge
(b) Bailment
(c) Mortgage
(d) Hypothecation.
(b) Bailment

Question 95.
How agency is created:
(a) By Direct appointment
(b) By implication
(c) By necessity
(d) All of the above
(d) All of the above

Question 96.
The Delivery of goods by one person to another as security, for the payment of a debt is called-
(a) Bailment
(b) Pledge
(c) Mortgage
(d) Hypothecation
(b) Pledge

Question 97.
An agreement enforceable by law is a-
(a) Promise
(b) Contract
(c) Obligation
(d) Lawful Promise
(b) Contract

Question 98.
A contract is a combination of two elements-
(a) An Agreement & An Promise
(b) An Agreement & An Obligation
(c) A Promise & An Obligation .
(d) An offer & An Acceptance
(b) An Agreement & An Obligation

Question 99.
A proposal when accepted becomes a-
(a) Promise.
(b) Contract
(c) Acceptance
(d) Agreement
(a) Promise.

Question 100.
A void agreement is one which is-
(a) Valid but not enforceable
(b) Enforceable
(c) Enforceable by one party
(d) Not enforceable in law
(d) Not enforceable in law

Question 101.
Agreement which are not contracts-
(a) Mr. A purchases goods from Mr. B.
(b) Avanshu supplies goods to Mohit’s firm.
(c) An agreement for watching cinema.
(d) None of the above
(c) An agreement for watching cinema.

Question 102.
Which one is correct-
(a) All contracts are agreements
(b) AH agreements are contracts
(c) All agreements are not contracts
(d) Both (a) & (c)
(d) Both (a) & (c)

Question 103.
An agreement which is enforceable by law at the option of one party-
(a) Valid contract
(b) Void contract
(c) Voidable contract
(d) Illegal contract
(c) Voidable contract

Question 104.
Which of the following is false? An offer-
(a) Must be clear, definite, final & complete
(b) Can be vague
(c) Must be communicated
(d) May be general or specific
(b) Can be vague

Question 105.
An offer may lapse by-
(a) Revocation
(b) Counteroffer
(c) Rejection by offeree
(d) All of the above
(d) All of the above

Question 106.
Which of the following is false? An acceptance-
(a) Must be communicated
(b) Must be absolute
(c) Must be unconditional
(d) May be presumed from silence of offeree
(d) May be presumed from silence of offeree

Question 107.
In case of illegal agreements, the collateral agreements are-
(a) Valid
(b) Void
(c) Voidable
(d) None of the above
(b) Void

Question 108.
An offer by post may be accepted by-
(a) Post
(b) Over telephone’s
(c) Both (a) & (b)
(d) None of the above
(a) Post

Question 109.
An offer is made only when-
(a) The letter is posted
(b) Letter reaches the offeree
(c) Offeree post his acceptance
(d) None of the above
(b) Letter reaches the offeree

Question 110.
Which of the following is true?
(a) Consideration must result in benefit to both party
(b) Past consideration is no consideration in India
(d) Consideration must be something, which a promisor is not bound to do
(a) Consideration must result in benefit to both party

Question 111.
Which of the following statement is false? Consideration-
(a) Must move at desire of the promiser
(b) May move from any person
(c) Must be illusionary
(d) Must be of some value
(c) Must be illusionary

Question 112.
Which of the following is true?
(a) There can be a stranger to a contract
(b) There can be a stranger to a consideration
(c) There can be a stranger to contract & consideration
(d) None of above
(b) There can be a stranger to a consideration

Question 113.
Consideration in simple term means-
(a) Anything in Return
(b) Something in Return
(c) Everything in Return
(d) Nothing in Return
(b) Something in Return

Question 114.
Which of the following statement is false-
(a) Generally, a stranger to a contract cannot sue
(b) A verbal promise to pay a time barred debt is valid
(c) Completed gifts need no consideration
(d) No consideration is necessary to create an agency.
(b) A verbal promise to pay a time barred debt is valid

Question 115.
A Gratuitous Promise can-
(a) Be enforced
(b) Not be enforced
(c) Be enforced in court of law
(d) None of above
(b) Not be enforced

Question 116.
Ordinarily, a minor’s agreement is-
(a) Void ab initio
(b) Voidable
(c) Valid
(d) Unlawful
(a) Void ab initio

Question 117.
A minor’s liability for ‘necessaries’ supplied to him-
(a) Arises after he attains majority age
(b) Is against only minor’s property
(c) Does not arises at all
(d) Arises if a minor promises for it.
(b) Is against only minor’s property

Question 118.
Which of the following statement is not true about minor’s position in a firm?
(a) He cannot become a partner
(b) He can become a partner
(c) He can be admitted only to the benefits
(d) He can become a partner after majority attaining
(c) He can be admitted only to the benefits

Question 119.
Which of the following statement is true?
(a) A contract with a minor is voidable at option of minor
(b) An agreement with a minor can be ratified after he attains majority
(c) A person who is usually of unsound mind cannot enter into a contract when he is of sound mind
(d) A person who is usually of sound mind cannot enter into a contract when he is of unsound mind
(d) A person who is usually of sound mind cannot enter into a contract when he is of unsound mind

Question 120.
When the consent of both the parties is given by mistake, the contract is-
(a) Void
(b) Valid
(c) Voidable
(d) Illegal
(a) Void

Question 121.
The contract is void on account of bilateral mistake of fact, but if there is a mistake of only one party, then contract is-
(a) Void
(b) Valid
(c) Voidable
(d) Illegal
(b) Valid

Question 122.
(a) Void
(b) Valid
(c) Voidable
(d) Illegal
(b) Valid

Question 123.
(a) Void
(b) Valid
(c) Voidable
(d) Illegal
(a) Void

Question 124.
A mistake as to law not in force in India has the effect as-
(a) Mistake of fact
(b) Mistake of Indian law
(c) Fraud
(d) Misrepresentation
(a) Mistake of fact

Question 125.
In case of innocent misrepresentation-
(a) Contract become voidable and damages are payable
(b) Contract become voidable and damages are not payable
(c) Contract become valid and damages are payable
(d) Contract remains valid and damages are not payable.
(b) Contract become voidable and damages are not payable

Question 126.
In case of willful misrepresentation or fraud-
(a) Contract becomes voidable & damages are payable
(b) Contract become voidable & damages are not payable
(c) Contract become void & damages are payable
(d) Contract become void & damages are not payable.
(a) Contract becomes voidable & damages are payable

Question 127.
Consent is not said to be free when it is caused by
(a) Coercion
(b) Undue influence
(c) Fraud
(d) All of above
(d) All of above

Question 128.
When the consent of a party is obtained by fraud, the contract is-
(a) Void
(b) Voidable
(c) Valid
(d) Illegal
(b) Voidable

Question 129.
Moral pressure is involved in case of-
(a) Coercion
(b) Undue influence
(c) Misrepresentation
(d) Fraud
(b) Undue influence

Question 130.
Which of the following statement is true?
(a) A threat to commit suicide does not amount to coercion
(b) Undue influence involves use of physical pressure
(c) Ignorance of law is no excuse
(d) Silence always amount to fraud
(c) Ignorance of law is no excuse

Question 131.
An agreement is void if it is opposed to public policy. Which of the following is not covered under heads of public policy?
(b) Trafficking in public offences
(c) Marriage brokerage contracts
(d) Contracts to do impossible acts
(d) Contracts to do impossible acts

Question 132.
Wagering means
(a) Betting
(b) Bidding
(c) Both (a) & (b)
(d) None of above
(a) Betting

Question 133.
An agreement in restraint of marriage, i.e. agreement preventing a person from marrying is-
(a) Valid
(b) Voidable
(c) Void
(d) Contingent
(c) Void

Question 134.
An agreement in restraint of marriage is valid in case of following persons-
(a) Minors
(b) Educated
(c) Married
(d) None of above
(a) Minors

Question 135.
In India, wagering agreements are void except in-
(a) Kanpur
(b) Mumbai
(c) Delhi
(d) None of the above
(b) Mumbai

Question 136.
If any party has received any benefit under a contract from the other party, he must restore it or make compensation to other party. It is the case of—
(a) Quantum meruit
(b) Restitution
(c) Consideration
(d) Quasi-contract
(b) Restitution

Question 137.
The basis of quasi contractual relation is the-
(a) Existence of a valid contract between parties
(b) Prevention of unjust enrichment at expense of other
(c) Provision contained in section 10 of contract act
(d) Existence of a voidable contract between the parties
(b) Prevention of unjust enrichment at expense of other

Question 138.
A contingent contract is
(a) Void
(b) Voidable
(c) Valid
(d) Illegal
(c) Valid

Question 139.
A contract is said to be discharged or terminated-
(a) When the rights and obligation are completed
(b) When the contract becomes voidable
(c) Both (a) & (b)
(d) None of the above Answer:
(a) When the rights and obligation are completed

Question 140.
Which is not the mode of discharge of contract-
(a) Performance of contract
(b) Lapse of time
(c) Breach of contract
(d) Injunction
(d) Injunction

Question 141.
A person finds certain goods belonging to some other persons. In such a case, the finder-
(a) Becomes the owner of that good
(b) Is under a duty to trace the real owner
(d) Both (b) & (c)
(d) Both (b) & (c)

Question 142.
If in a contract, the time lapses and if the party fails to perform the contract within specified time the contract becomes-
(a) Voidable
(b) Void
(c) Illegal
(d), Enforceable in the court
(a) Voidable

Question 143.
Change in one or more of the important terms in a contract, it is the case of-
(a) Novation
(b) Rescission
(c) Remission
(d) Alternation
(d) Alternation

Question 144.
In both the cases, devolution of joint liabilities and devolution of joint rights, if a promisor dies, who will perform on behalf of him-
(a) Other promiser
(b) His legal representation
(c) Both (a) & (b)
(d) None of the above
(c) Both (a) & (b)

Question 145.
A contract which is impossible to perform is-
(a) Voidable
(b) Void
(c) Illegal
(d) Enforceable
(b) Void

Question 146.
A party entitled to rescind the contract, loses the remedy where-
(a) He has ratified the contract
(b) Third party has acquired right in good faith
(c) Contract is not separable
(d) All of the above
(d) All of the above

Question 147.
The special damages i.e. the damages which arises due to some special or unusual circumstances—
(a) Are not recoverable altogether
(b) Are illegal being positive in nature
(c) Cannot be claimed as a matter of right
(d) Can be claimed as a matter of right
(c) Cannot be claimed as a matter of right

Question 148.
Which of the following statement is/are correct-
(a) Ordinary damages afe recoverable
(b) Special damages are recoverable only if parties know about them
(c) Remote or indirect damages are not recoverable
(d) All of these
(d) All of these

Question 149.
Exemplary damages are not awarded in such case
(a) Breach of promise to marry
(b) Wrongful dishonour & customers cheque by banker
(c) Breach of any business contract
(d) None of the above
(c) Breach of any business contract

Question 150.
Damages which the contracting parties fix at the time of contract in case of breach-
(a) Unliquidated Damages
(b) Liquidated Damages
(c) Nominal Damages
(d) None of the above
(b) Liquidated Damages

Question 151.
A order of court restraining a person from doing a particular act, it’s a case of—
(a) Specific performance
(b) Injuction
(c) Both (a) & (b)
(d) None of the above
(b) Injuction

Question 152.
Under the Indian Contract Act, the contract of indemnity is restricted to such cases-
(a) Where the loss promise to be reimbursed is caused by the conduct of the promisor or any other person
(b) The loss caused by the any events or accident which does not depend upon conduct of any person
(c) Both (a) & (b)
(d) None
(b) The loss caused by the any events or accident which does not depend upon conduct of any person

Question 153.
What is the ratio of parties in contract of indemnity and contract of guarantee-
(a) 2 : 3
(b) 3 : 2
(c) 1 : 3
(d) 2 : 1
(a) 2 : 3

Question 154.
In contract of indemnity, what is the liability of indemnifier against the indemnified
(a) Primary
(b) Secondary
(c) No liability
(d) Both (a) & (b)
(a) Primary

Question 155.
In case of contract of guarantee, what is the liability of the surety against the principal debtor
(a) Primary
(b) Secondary
(c) No liability
(d) Fully liable
(b) Secondary

Question 156.
Which is not the case of discharge of surety
(a) By notice of revocation
(b) By death of surety
(c) If creditor releases the principal debtor
(d) None of the above
(d) None of the above

Question 157.
What is the right of the bailee against the goods
(a) Owner
(b) Possessor
(c) Bailee can sell those goods
(d) Both (a) & (b)
(b) Possessor

Question 158.
In case of Contract of guarantee, if the creditor loses or parts with any security which the debtor provides him at time of contract, the surety is discharged to the extent of
(a) The value of the security
(b) The surety can be fully discharged
(c) The surety can claim damages
(d) All of the above
(a) The value of the security

Question 159.
Which one is not the duties of bailee
(a) The bailee must take care of goods as of his goods.
(b) The bailee cannot use bailor’s goods in an unauthorised manner.
(c) The bailee should return the goods without demand on the expiry of the time period.
(d) He can set up adverse title to the goods.
(d) He can set up adverse title to the goods.

Question 160.
A lien which is available only against that property of which the skill and labour have been exercised—
(a) General Lien
(b) Particular Lien
(c) Ordinary Lien
(d) Both (a) & (b)
(b) Particular Lien

Question 161.
Which is not the case of termination of bailment
(a) Where the bailee wrongfully uses or dispose of the goods bailed.
(b) When the period of bailment expires
(c) When the object of bailment has been achieved
(d) None of the above
(d) None of the above

Question 162.
An agency may also arise by
(a) Estoppel
(b) Necessity
(c) Ratification
(d) All of the above
(d) All of the above

Question 163.
A mercantile agent employed to sell goods which have been placed in his possession or contract to buy goods for his principal—
(a) Factors
(b) Brokers
(c) Del Credere Agent
(d) Auctioneers
(a) Factors

Question 164.
The threat to commit suicide amounts to
(a) Coercion
(b) Undue influence
(c) Misrepresentation
(d) Fraud
(a) Coercion

Question 165.
(a) Agreement
(b) Promise
(c) Both (a) & (b)
(d) Consideration
(a) Agreement

Question 166.
Agreement which are not contracts
(a) Social Matters
(b) Relating to partnership
(c) Domestic Agreements
(d) Both (a) & (c)
(b) Relating to partnership

Question 167.
Offeror is-
(a) Party making an offer
(b) Third party
(c) Party to whom offer is made
(d) None of the above
(a) Party making an offer

Question 168.
Which one is not a type of offer
(a) Specific
(b) General
(c) Open
(d) Temporary
(d) Temporary

Question 169.
Cross offer is
(a) Termination of original offer
(b) Rejection of original offer
(c) Both (a) & (c)
(d) None of these
(a) Termination of original offer

Question 170.
Offer can be revoked-
(a) Before its acceptance
(b) By withdrawal of acceptance
(e) Both (a) & (b)
(d) None of these
(a) Before its acceptance

Question 171.
Which one is mode of contract-
(a) Contract by post
(b) By SMS
(c) By Internet
(d) By none of the above
(a) Contract by post

Question 172.
Quid Pro Quo means-
(a) Meeting of Minds
(b) Something in return
(c) To do something
(d) Promise
(b) Something in return

Question 173.
No consideration, no contract is-
(a) True
(b) False
(c) Can’t say
(d) Partly True
(a) True

Question 174.
Under English law, consideration may move from-
(a) Promisor
(b) Stranger
(c) Both (a) & (d)
(d) Promisee
(d) Promisee

Question 175.
Under doctrine of privity of contract, third party can-
(a) Sue
(b) Cannot Sue
(c) Both (a) and (b)
(d) None of these
(b) Cannot Sue

Question 176.
Which one is odd-
(a) Agreement may not result in a contract
(b) Contract constitutes an agreement
(c) Contract creates legal relations
(d) None of these
(d) None of these

Question 177.
According to performance, contract are:
(a) Unilateral
(b) Bilateral
(c) Multilateral
(d) Both (a) and (b)
(d) Both (a) and (b)

Question 178.
Voidable contracts is defined under section-
(a) 2(i)
(b) 2(f)
(c) 2(h)
(d) 2(a)
(a) 2(i)

Question 179.
A menu card handed by a waiter in a hotel is an offer-
(a) True
(b) Partly True
(c) False
(d) Can’t Say
(c) False

Question 180.
Consideration may be in the form of-
(a) A return promise
(b) Forbearance
(c) Doing an act
(d) All of these
(d) All of these

Question 181.
If there is no consideration, there will be a-
(a) Void Contract
(b) Voidable Contract
(c) Illegal Contract
(d) No Contract
(d) No Contract

Question 182.
Which of the following is a person of unsound mind-
(a) Lunatics
(b) Idiots
(c) Drunkard
(d) All of the above
(d) All of the above

Question 183.
A wrong statement made is called-
(a) Misrepresentation
(b) Fraud
(c) Undue Influence
(d) Mistake
(a) Misrepresentation

Question 184.
Agreements tending to create monopolies are void as being:-
(a) Immoral
(b) Fraudulent
(c) Forbidden by law
(d) Opposed to public policy.
(d) Opposed to public policy.

Question 185.
An agreement for marriage brokerage is not opposed to public policy,
(a) True
(b) False
(c) Partly true
(d) Partly false
(b) False

Question 186.
Which one is Contingent Contract-
(a) D promises to pay E Rs 20,000, if goods lying in E’s godown are destroyed by fire
(b) D promise to pay E, if he purchases his goods
(c) D promises to pay E, if he sells his car to him
(d) D promises to pay E to buy his scooter, if he is ready to sell it
(a) D promises to pay E Rs 20,000, if goods lying in E’s godown are destroyed by fire

Question 187.
Finder of goods is the next best owner to real amount-
(a) True
(b) False
(c) Partly True
(d) None of the above
(a) True

Question 188.
A valid ‘tender’ must be-
(a) Conditional
(b) Unconditional
(c) Made to a third party
(d) Made in a foreign currency
(b) Unconditional

Question 189.
To be a valid ‘tender’, it must be-
(a) For the whole obligation
(b) For the necessary part of obligation
(c) For at least 75% of the obligation
(d) None of these
(a) For the whole obligation

Question 190.
Because of supervening impossibility, the contract becomes-
(a) Illegal
(b) Void
(c) Voidable
(d) Remains Valid
(b) Void

Question 191.
Which of the following is a ground of supervening impossibility-
(a) Strikes
(b) Lock-Outs
(c) Riots
(d) None of the above
(d) None of the above

Question 192.
The damages in their nature are-
(a) Restoring
(b) Compensatory
(c) Reimbursing
(d) None of these
(b) Compensatory

Question 193.
A contract of indemnity is a type of-
(a) Quasi Contract
(b) Wagering Contract
(c) Contingent Contract
(d) Voidable Contract
(c) Contingent Contract

Question 194.
The person who gives a guarantee is called-
(a) Principal Debtor
(b) Surety
(c) Indemnifier
(d) Creditor
(b) Surety

Question 195.
A guarantee given for loan taken by a minor is-
(a) Illegal
(b) Void
(c) Valid
(d) Voidable
(c) Valid

Question 196.
The liability of surety is
(a) Co-extensive with that of principal debtor
(b) More than principal debtor
(c) Always less than the principal debtor
(d) Always decided by the Court
(a) Co-extensive with that of principal debtor

Question 197.
(a) A Car
(b) Furniture
(c) Money
(d) Television
(c) Money

Question 198.
In a bailment, there is a transfer of goods-
(a) Custody
(b) Ownership
(c) Possession
(d) Both (b) & (c)
(c) Possession

Question 199.
General lien can be exercised by-
(a) Banker
(b) Mechanics
(c) Unpaid Seller
(d) Finder of goods
(a) Banker

Question 200.
Which of the following is not an essential element of agency
(a) Principal
(b) Agent
(c) Consideration
(d) An agreement
(c) Consideration

Question 201.
A pretended agent is appointed by the-
(a) Principal
(b) Agent
(c) Sub-Agent
(d) None of these
(d) None of these

Question 202.
Which of the following is not a mercantile agent-
(a) Factor
(b) Broker
(c) Auctioneer
(d) Insurance agent
(d) Insurance agent

Question 203.
A person appointed by an agent to act for the principal, is called-
(a) Agent
(b) Sub-agent
(c) Substituted agent
(d) Pretended agent
(c) Substituted agent

Question 204.
The contracts of indemnity, guarantee, bailment, pledge and agency is covered by section-
(a) Section 1 -75
(b) Section 76-100
(c) Section 124-128
(d) Section 124-238
(d) Section 124-238

Question 205.
A proposal when accepted becomes a-
(a) Contract
(b) Promise
(c) Agreement
(d) None of the above
(b) Promise

Question 206.
(a) Meeting of minds
(b) Meeting of opinion
(c) Equal rights
(d) Existing condition
(a) Meeting of minds

Question 207.
Which of the following statements is NOT correct with reference to an agreement?
(a) All contracts are agreements
(b) All agreements are contracts
(c) The parties must intend to create a legal relationship
(d) Agreement gives birth to a contract
(b) All agreements are contracts

Question 208.
If Mr. A offers to Mr. B to sell his car at Rs 5,00,000 and Mr. B agrees to buy it at Rs 4,50,000 and Mr. A refuses it. Later on B offers to buy the car for Rs 5,00,000 then
(a) A is bound to sell the car
(b) B can sue A for Breach of Contract
(c) Both (a) and (b)
(d) This will be considered as a fresh offer by B and A is not bound to sell his car
(d) This will be considered as a fresh offer by B and A is not bound to sell his car

Question 209.
Which of the following statements is NOT correct?
(a) Acceptance can be expressed or implied
(b) Acceptance can be conditional
(c) Acceptance must be given before the offer lapses
(d) Acceptance must be made in the manner prescribed
(b) Acceptance can be conditional

Question 210.
Privity of contract means-
(a) Privacy of the terms of contract
(b) Giving priority to one party
(c) A stranger to a contract cannot sue
(d) Interest of all parties
(c) A stranger to a contract cannot sue

Question 211.
If A makes an offer to B on a particular day, then the offer can be revoked by A before-
(a) B accepts the offer
(c) B has posted the letter of acceptance
(d) Reasonable period of time
(c) B has posted the letter of acceptance

Question 212.
If B accepts A’s offer by posting a letter of acceptance, and afterwards B wants to revoke the agreement, the acceptance can be revoked before —
(a) A has posted his confirmation
(b) If revocation letter reaches before letter the acceptance letter
(c) Reasonable period of time
(d) None of the above
(b) If revocation letter reaches before letter the acceptance letter

Question 213.
Which one of the following is not a kind of consideration?
(a) Executory consideration
(b) Executed consideration
(c) Past consideration
(d) Conditional consideration
(d) Conditional consideration

Question 214.
Which of the following is not a consequence of an illegal contract?
(a) It is voidable
(b) Void
(c) The collateral agreements are
(d) None of the above also illegal
(a) It is voidable

Question 215.
The substitution of a new contract in place of an old contract thereby discharging the rights and liabilities of the old contract is called as-
(a) Substitution
(b) Novation
(c) Discharge
(d) Replacement
(b) Novation

Question 216.
The two types of breach are-
(a) Actual breach and Deemed breach
(b) Actual breach and Conditional breach
(c) Actual breach and Anticipatory breach
(d) Actual breach and Remedial breach
(c) Actual breach and Anticipatory breach

Question 217.
Where the amount of compensation claimed is left to be assessed by the court, then it is called as-
(a) Judicial damages
(b) Liquidated damages
(c) Unliquidated damages
(d) None of the above
(c) Unliquidated damages

Question 218.
Where the contracting parties agree in advance the amount payable in the event of breach, the sum payable is called as-
(a) Liquidated damages
(b) Unliquidated damages
(c) Judicial damages
(d) Preliminary damages
(a) Liquidated damages

Question 219.
The damages intended to put the injured party in the same position he was before the contract are called-
(a) Unliquidated damages
(b) Special damages
(c) Exemplary damages
(d) Ordinary damages
(d) Ordinary damages

Question 220.
A contract is always based upon-
(b) Consideration
(c) Intent to create legal obligation
(d) All of the above
(d) All of the above

Question 221.
The law provides for certain remedies in case there is no real agreement. Which of the following remedy .cannot be claimed by the parties?
(a) The agreement to be considered as void
(b) The party at fault can be compelled to pay damages
(c) The contract becomes voidable at the option of the parties
(d) Right to sell the personal property of the other party
(d) Right to sell the personal property of the other party

Question 222.
The damages which are accorded to establish the right of decree for breach of contract is called a-
(a) Nominal damages
(b) Liquidated damages
(c) Exemplary damages
(d) Special damages
(a) Nominal damages

Question 223.
The damages awarded for breach of promise of marriage or wrongful dishonour of cheque is called as-
(a) Nominal damages
(b) Exemplary damages
(c) Liquidated damages
(d) Special damages
(b) Exemplary damages

Question 224.
A contract by which one party promises to save the other by the loss caused by the conduct of the promisor is called as-
(a) Contract of indemnity
(b) Bailment
(c) Contract of guarantee
(d) Contract of warranty
(a) Contract of indemnity

Question 225.
The rights of the indemnity holder is covered by-
(a) Sec. 125
(b) Sec. 101
(c) Sec. 224
(d) None of the above
(a) Sec. 125

Question 226.
Which of the following remedy is not available to the indemnity holder?
(a) Right to receive the damages paid by him from the promisor
(b) Right to receive from the promisor the cost incurred in any suit
(c) Receive from the promisor an appropriate sum for loss caused to his image
(d) Receive from the promisor, all sums of money paid by him in terms of compromise of the suit
(c) Receive from the promisor an appropriate sum for loss caused to his image

Question 227.
A contract to perform a promise or discharge the liability of a third party is called-
(a) Contract of indemnity
(b) Contract of agency
(c) Contract of guarantee
(d) Contract of warranty
(c) Contract of guarantee

Question 228.
How many parties are there in a contract of indemnity and guarantee respectively?
(a) 2 and 3
(b) 3 and 2
(c) 2 and 5
(d) 5 and 2
(a) 2 and 3

Question 229.
Which of the following statement is true?
(a) There are three parties in a contract of a guarantee
(b) The liability of the surety is co- extensive with that of the principal debtor
(c) A creditor is not bound to proceed against the principle debtor
(d) All of the above
(d) All of the above

Question 230.
An agent in NOT personally liable for-
(a) Contract entered with third parties on behalf of employer
(b) Signs the agreement in his own name
(c) Where the agent works for foreign principal
(d) Where the contract expressly provides for the personal liability
(a) Contract entered with third parties on behalf of employer

Question 231.
Principal is NOT liable for the agents act if-
(a) Agent acts within the scope of his authority
(b) Agent exceeds his authority
(c) Fraud or misrepresentation committed for benefit of the principal
(d) Work done out of his authority but the principal accepts it
(b) Agent exceeds his authority

Question 232.
An agency comes to an end:
(a) By performance of contract
(b) By agreement between the principal and the agent
(c) By renunciation of his authority by the agent
(d) All of the above
(d) All of the above

Question 233.
An agency is irrecoverable:
(a) Where the authority of agency is one coupled with interest
(b) Where the agent has incurred personal liability
(c) Both (a) and (b)
(d) None of the above
(c) Both (a) and (b)

Question 234.
The termination of an agents authority terminates the authority of the sub-agent appointed by the agent.
(a) True
(b) Partly true
(c) False
(d) Partly false
(a) True

Question 235.
In case the contract of agency has been terminated and a third party enters into a contract with the agent without knowing this fact, then —
(a) The contract will be binding on the principal
(b) The contract will not be binding on the principle
(c) The contract will only be binding on the agent
(d) None of the above
(a) The contract will be binding on the principal

Question 236.
The meeting of the mind is called:
(a) Jus in reum
(c) Jus in personam
(d) Void ab initio.

Question 237.
A husband promised to pay his wife a household allow once Rs 2,500 every month. Later parties separated and the husband failed to pay the amount. This is
(a) Contract
(b) Not a contract
(c) Agreement enforceable by law
(d) None of the above.
(b) Not a contract

Question 238.
A general offer can be accepted by
(a) Any person to whom communication reaches
(b) Only by person to whom it is made
(c) A person who lives nearer to person making offers.
(d) All of the above.
(a) Any person to whom communication reaches

Question 239.
When offer is made to particular person it can be acceptor by
(a) Any person from public
(b) Any member of his family
(c) Him alone
(d) Any of the above.
(c) Him alone

Question 240.
Acceptance must be given within
(a) One year from the date of receiving offer
(b) Prescribed time.
(c) If no time limit is prescribed, it must be given with in a reasonable time
(d) (b) & (c).
(d) (b) & (c).

Question 241.
What is the age of attaining majority as per Indian Contract Act, 1872 when the minor is under the guardianship of the court of wards?
(a) 16 years
(b) 18 years
(c) 21 years
(d) 20 years.
(c) In India, the age of majority is regulated by the Indian Majority Act, (Act ix of 1875). Every person domiciled in India attains majority on the completion of 18 years of age. But If any minor is under the guardianship of the court of words, he will attain majority on the completion of 21 years of age.

Question 242.
Display of goods in a shop window with prices marked upon them is:
(a) Agreement
(b) Promise
(c) Invitation to offer
(d) Contract.
(c) An invitation to an offer is only a circulation of an offer, it is an attempt to induce offers and precedes a definite offer. Acceptance of an invitation to an offer does not result in contract and only an offer emerges in the process of negotiation. Thus, display of goods in a shop window with prices marked upon them is an invitation to offer.

Question 243.
A contract of agency may be created by:
(a) Express agreement
(b) Implied agreement
(c) Ratification
(d) All of the above.
(d) A contract of agency may be express or implied but consideration is not on essential element in this contract. Agency may also arise by estoppel, necessity or ratification. In contract of agency an agent is mere connecting link between the principal and a third party. During this period an agent is acting for his principal, he is clothed with the capacity of his principal. Thus, contract of agency can be formed by all the three methods.

Question 244.
A threat to commit suicide is deemed as:
(a) Fraud
(b) Undue Influence
(c) Misrepresentation
(d) Coercion.
(d) In Section 15 of Indian Contract Act, 1872 coercion means “the committing or threatening to commit any act forbidden by the Indian Penal Code, or unlawful detaining or threatening to detain, any property to the prejudice of any person whatever with the intention of causing any person to enter into an agreement.”

Thus, a threat to commit suicide is an act of Coercion.

Question 245.
In a contract of indemnity, the liability of indemnifier is-:
(a) Secondary
(b) Conditional
(c) Primary
(d) Optional.
(c) The person who promises to indemnify or make good the loss is called the indemnifier and in a contract of indemnity, the liability of the indemnifier is primary.

Question 246.
The expression “Quantum Meruit” literally means:
(a) As much as earned
(b) As per the claim of the aggrieved party
(c) As much as work done
(d) None of the above.
(a) The expression ‘Quantum Meruit’ literally means “as much as earned or reasonable remuneration:”
It is used where a person claims reasonable remuneration for the services rendered by him when there was no express promise to pay the definite remuneration.

Question 247.
What is the status of a contract when the consent of a party is caused by coercion?
(a) Void
(b) Voidable
(c) Valid
(d) Illegal
(b) If the consent of a party is caused by coercion in ahy contract, that contract will be voidable because aggrieved party can avoid that contract as his consent was not free.

Question 248.
Which of the following statements is true about consideration?
(a) Past consideration is valid in India
(b) Consideration must result in benefit to both the parties.
(c) If there is no consideration, there is no contract
(a) Consideration is the doing or not doing of something which the promisor desires to be done. Consideration may be past, present or future. Consideration need not be adequate, but should be real.

In some cases, without consideration, contract wilt be valid and enforceable.
Example: Natural Love and Affection, completed gift etc.

Question 249.
In which of the following situations original contract need not be performed:
(a) When parties substitute a new contract for the old one
(b) When the parties to a contract agree to rescind it .
(c) When the parties to a contract agree to alter it
(d) All of the above.
(d) The general rule is that contract must be performed but there are some situations when original contract need not be performed:

• On novation of a contract.
• On rescission of a contract.
• On alteration of a contract.

Thus, the answer is all of the above.

Question 250.
According to section 2 (h) of the Indian Contract Act, ” is an agreement enforceable by law.”
(a) Consideration
(b) Agreement
(c) Promise
(d) Contract
(d) According to Section 2 (h) of the Indian Contract Act, “Contract is an agreement enforceable by law”.

Question 261.
In a contract, when the object and consideration is unlawful it is deemed as:
(a) Void
(b) Voidable
(c) Valid
(d) Contingent
(a) In a contract, when the object and consideration is unlawful, it is deemed as Void Contract. Because without any legal effect a contract cannot be enforced in a Court of Law.

Question 262.
Which one of the following damages is not recoverable under the Indian Contract Act, 1872?
(a) Ordinary damages
(b) Special damages
(c) Nominal damages
(d) None of the above.
(d) There are following damages which are recoverable under the Indian Contract Act, 1872:

• General/Ordinary Damages.
• Special Damages.
• Exemplary/Punitive Damages.
• Nominal Damages.
• Liquidated Damages & Penalty.
• No damage is recoverable for any remote or indirect loss.

Thus, rest all other damages are recoverable.

Question 263.
What is the legal status of an agreement with uncertain meaning?
(a) Valid
(b) Void
(c) Voidable
(d) Illegal
(b) An uncertain agreement means an agreement the meaning of which is not certain or capable of being made certain. Such agreements are void.

Example: A agrees to sell B “my white horse for ? 5,000 or ? 10,000. There is nothing to show which of the two prices was to be given. The agreement is void.

Question 264.
A person who makes a promise is known as:
(a) Promisor
(b) Promisee
(c) Offerer
(a) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted, becomes a promise and the person who makes a promise is known as promisor.

Question 265.
‘Vdidable’ contract means:
(a) Parties are incompetent to contract
(b) Free consent of the parties is missing
(d) The .object of contract is expressly declared void by the act itself.
(b) A voidable contract is one which a party can put to an end. He can exercise his option, if his consent was not free.

Note: The Contract will however be-binding if the option is not Exercised within a reasonable period of time.

Question 266.
An agreement in restraint of marriage:
(a) Is voidable at the option of the promisor
(b) Is voidable at the option of the promisee
(c) Is expressly declared as void
(d) Cannot be enforced as there is no privity of contract.
(c) An agreement in restraint of marriage is expressly declared void as it is against public policy but is not illegal. An agreement not to marry at all or not to marry any particular person or class of persons is void as it is in restraint of marriage.

Question 267.
For acceptance to be considered as valid it must:
(a) Be absolute ,
(b) Be unqualified
(c) Be both absolute and unqualified
(d) Be conditional.
(c) Acceptance must be unqualified and absolute i.e. unconditional and must correspond with all the terms of the offer. A qualified and conditional acceptance amounts to no acceptance at all and is treated as a counter offer due to which the original offer lapses.

Question 268.
The phrase quantum meruit literally means:
(a) As much as earned or reasonable remuneration
(b) The fact in itself
(c) A contract for sale
(d) As much as is gained.
(a) The expression ‘Quantum Meruit’ literally means “as much as earned” or reasonable remuneration. It is used where a person claims reasonable remuneration for the services rendered by him when there was no express promise to pay the definite remuneration.

Question 269.
A contract is _________.
(a) A promise to do something or abstain from doing something
(b) A communication of intention to do something or abstain from doing something
(c) A set of promises
(d) An agreement enforceable by law
(d) The Indian Contract Act has defined contract in Section 2(h) as “an agreement enforceable by law.”

Question 270.
If a new contract is substituted in place of an existing contract, it is called _________.
(a) Alteration
(b) Rescission
(c) Novation
(d) Waiver
(c) A contract may be discharged by mutual agreement of parties. One of the methods to discharge is novation which occurs when an existing contract is substituted by a new one, either between same parties or between new ones.

Question 271.
A contract of indemnity is a _________.
(a) Contingent contract
(b) Wagering contract
(c) Quasi contract
(d) Void agreement.
(a) Contingent contract refers to a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. Example – contract of insurance, indemnity and guarantee etc.
Thus, contract of indemnity is a contingent contract.

Question 272.
When consent is obtained under undue influence, the contract is termed as _________.
(a) Valid contract
(b) Vdid contract
(c) Voidable contract
(d) Unilateral contract.
(c) A contract is said to be induced by ‘undue influence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage of the other. When the consent is caused by undue influence, though the agreement amounts to a contract, such a contract is voidable at the option of the party whose consent was so obtained.

Question 278.
A surety may be discharged from liability :
X. By notice of revocation of guarantee
Y. On the failure of payment by the main creditor.
Z. If the creditor does any act which is against the rights of the surety.
Correct option is _________
(a) X and Y
(b) Y and Z
(c) X and Z
(d) X; Y and Z.
(c) A surety is discharged in the following ways –

• By giving notice to creditor for future transactions in case of continuing guarantee.
• In absence of any contract to the contrary, continuing guarantee is revoked on death of surety.
• Where there is any variance in terms of contract between the principal debtor and creditor without surety’s consent.
• If principal debtor is discharged by – a contract, any act, or any omission.
• if creditors makes an arrangement with the principal debtor for composition, for giving time or not suing him without surety’s consent.
• if creditor does any act or omission, thereby impairing sureties eventual remedy.
• if creditor loses or parts with security

Question 279.
An agreement for rendering services entered into by a father on behalf of his minor daughter is _________.
(a) Void
(b) Voidable
(c) Valid
(d) Quasi.
(a) An agreement by a parent or guardian entered into on behalf of the minor is binding on him provided it is for the benefit or is for legal necessity. However, it has been held that an agreement for service, entered into by a father on behalf of his minor daughter, is not enforceable at law and is therefore, void.

Question 280.
An agent who in consideration of extra commission gives guarantees to his principal that the purchaser of the goods on credit will pay for the goods is called _________.
(a) Sub-agent
(b) Mercantile agent
(c) Brokers
(d) Del credere agent.
(d) A del credere agent is a mercantile agent, who in consideration of an extra remuneration guarantees to his principal that purchasers who buy on credit will pay for the goods they take. In the event of failing to pay, the del credere agent is bound to pay his principal the sum owned by third-party.

Question 281.
If the behaviour of a person shows that he is a partner in a firm (when actually he is not), such a person is known as _________.
(a) Nominal partner
(b) Sleeping partner
(c) Sub-partner
(d) Partner by estoppel.
(d) If the behaviour of a person arises misunderstanding that he is a partner in a firm (when actually he is not), such a person is estoppel from later on denying the liabilities for acts of the firm. Such person is called partner by estoppel.

Question 282.
The meaning of legal maxim ‘mens rea’ is _________.
(a) A pending suit
(b) Immediate profits
(c) During litigation
(d) A guilty mind.
(d) The legal maxim, “mens rea”means a guilty mind.

Question 283.
All contracts are agreements. This statement is _________.
(a) True
(b) False
(c) Partly True
(d) Partly False
(a) As per Indian Contract Act, a contract is an agreement enforceable by law. While agreements in which the idea of bargain is absent and there is no intention to create legal relations are not contract. Thus, it can be said all contracts are agreement, but all agreements are not contract.

Question 284.
All void agreements are illegal, this statement is _________.
(a) True
(b) False
(c) Partly True
(d) Partly False
(b) An agreement not enforceable by law are void. They are not always illegal and its collateral transactions are legal.
Hence, the above statement in false.

Question 285.
Which of the following is not a chief flaw in a contract?
(a) Mistake
(b) Fraud
(c) Coercion Fraud
(d) None of these
(d) According to Contract Act, 1872, chief flaws in contract are as follows:

• Incapacity
• Mistake
• Misrepresentation
• Fraud t
• Undue Influence
• Coercion
• Illegality
• Impossibility

Thus option (d) is correct.

Question 286.
Coercion is _________.
(a) Void
(b) Illegal
(c) Voidable
(d) None of the above
(c) “Coercion” is 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 whatever, with the intention of causing any person to: enter into an agreement. Thus, an agreement which is included by coercion is voidable at the’option of party coerced.

Question 287.
Which of the following is not an essential element of a valid contract?
(a) Offer
(b) Legality of object
(c) Lawful consideration
(d) Impossibility of performance
(d) According to Sec. 10, of Indian Contract Act, 1872, essential elements of a valid Contract are as follows:

• Proper offer and proper acceptance with intention to create legal relationship.
• Lawful Consideration
• Capacity
• Free Consent
• Lawful agreement

Thus, Impossibility of performance is not essential element of a valid Contract.

Question 288.
Wagering agreements are illegal in _________.
(a) Mumbai
(b) Delhi
(c) Chennai
(d) Kolkata
(a) In India except Mumbai, wagering agreements are void. In Mumbai, wagering agreements have been declared illegal by the Avoiding Wagers Act, 1865.

Question 289.
Bonafide means _________.
(a) Said by the way
(b) In good faith
(c) From the beginning
(d) None of the above
(b) Bonafide means in good faith.

Question 290.
Offer + Acceptance = _________.
(a) Consideration
(b) Promise
(c) Obligation
(d) Agreement
(b) As per Section 2 (b) of Indian Contract Act defines promise as, “A proposal when accepted becomes a promise.”
Thus, Offer + Acceptance = Promise

Question 291.
A contract which becomes impossible to perform is known as _________ contract.
(a) Voidable
(b) Void
(c) Valid
(d) Illegal
(b) As per Section 2 (j) of Indian Contract Act, “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.”
Thus, a Contract which becomes impossible to perform is known as void contract.

Question 292.
The expression ‘Quantum Meruit’ means _________.
(a) As much as earned
(b) Equal consideration
(c) On the basis of merit
(d) Meeting of minds
(a) The expression “quantum Meruit” means ‘as much as earned’ or reasonable remuneration. It is used where a person claims reasonable remuneration for the services rendered by him when there is no express promise to pay the definite remuneration.

Question 293.
Which amongst the following are the types of lien?
(a) Particular lien
(b) General lien
(c) Both (a) and (b)
(d) Neither (a) nor (b)
(c) Lien refers to the right of one person to retain the possession of some goods, belonging to another person until some debt or liability is discharged.
There are two types of lien:

• Particular Lien
• General Lien

Question 294.
Which of the following is an invitation to offer;
(a) Application for loan
(b) Participation in an auction sale
(c) Tender for supply of goods in time
(d) List for sale of goods.
(b) An invitation to offer is only a circulation of an offer, it is an attempt induce offers and precedes a definite offer. Acceptance of invitation does not result in contract.
Thus Participation in an auction sale is a type of an invitation to offer. In this auctioneers request for bids (which are offered by the bidders)

Question 295.
A person who finds goods belonging to another and takes them into his custody:
(a) Is subject to the same responsibilities as a bailee
(b) Becomes the owner of those goods thereafter
(c) Is allowed to sell them and retain the money realised from such sale
(d) Has no obligation to return those goods.
(a) The liability of a finder of goods belonging to someone else is that ‘ of a bailee. This mean that he must take as much care of the goods as a man of ordinary prudence would take of his own goods of the same kind. Therefore, a person who finds belonging to another and takes them into his custody is subject to-the same responsibilities as a bailee.

Question 296.
An agreement the object of which is unlawful is:
(a) Valid
(b) Void
(c) Voidable
(d) Optional.
(b) Under section 23, any agreement of which the consideration or object is unlawful is a void agreement.

Question 297.
The person giving guarantee is called:
(a) Sub-debtor
(b) Principal debtor
(c) Surety
(d) Creditor.
(c) The person giving guarantee is called surety because he is the person who undertakes an obligation to pay a sum of money or to perform some duty or promise for another in the event that person fails to act.

Question 298.
Voluntary transfer of possession by one person to another is known as _________.
(a) Bailment
(b) Delivery
(c) Possession
(d) Transfer.
(a) Bailment is a voluntary delivery of goods for a temporary purpose on the understanding that they are to be returned in specie in the same or altered form. The ownership of the goods remains with the bailor, the bailee getting only the possession.

Question 299.
X contracted with Y for supplying of high quality 1000 Quintals of oii. V supplied the desired quantity but of low quality. The contract is _________.
(a) Void
(b) Voidable
(c) Void ab initio
(d) None
(b) X contracted with Y for supplying of high quality 1000 Quintals of oil Y supplied the desired quantity but of low quality the contracts is voidable. The buyer can accept the goods or treat the contract as repudiated.

Question 300.
A person who provides guarantee in a contract is called _________.
(a) Debtor
(b) Principal debtor
(c) Surety
(d) Creditor
(c) contract of guarantee is a contract to perform the promise, as discharge the liability of a third person in case of his default. The person who gives the guarantee is called the surety.

Question 301.
A minor child was provided treatment in hospital by a doctor. The doctor can recover his reasonable expenses from _________.
(a) Can’t recover as there was no contract
(b) Can recover from minor personally
(c) Can recover from guardian’s of minor
(d) Can recover from estate of minor as it was a necessary of life supplied to him.
(d) According to Section 68 of the Indian Contract Act, a minors estate is liable to pay a reasonable price for necessaries supplied to him or to any other whom minor is bound to support.

Question 302.
When the consent of a party is obtained by fraud, the contract is:
(a) Valid
(b) Voidable
(c) Illegal
(d) Void
(b) An agreement is deemed as voidable if it is effected by these flaws:

• Misrepresentation
• Fraud
• Undue influence
• Coercion

Question 303.
Which of the following statement is true?
(a) Silence always amounts to fraud
(b) A threat to commit suicide does not amounts to coercion
(c) Undue influence involves use of physical pressure
(d) ignorance of law is no excuse.
(d) If there is a mistake of law of the land, the contract is binding because every one is deemed to have knowledge of law of the land and ignorance of law is no excuse, (ignarantia juris non excusat).

Question 304.
There was a woman who took a loan from another person at the rate of 100% p.a. interest. This is the case of:
(a) Fraud
(b) Misrepresentation
(c) Undue-influence
(d) Coercion
(c) Where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. In the given case the other person is in a dominating position and use it to obtain an unfair advantage. So this is the case of ‘undue influence’.

Question 305.
The following will make a contract voidable:
(a) Fraud
(b) Undue influence
(c) Coercion
(d) All of the above
(d) In the following circumstances contract will be voidable:

• Coercion
• Undue influence
• Fraud
• Mistake
• Misrepresentation

Thus, option (d) is correct.

Question 306.
If a contract required by statue to be wholly in writing is not in writing, it is:
(a) Voidable
(b) Void
(c) Valid
(d) Unforceable
(b) If statute defined that the contract must be in writing then the parties should compulsorily create the contract in writing. If parties does not create the contract in writing, it is a void contract.

Question 307.
Agreement in restraint of marriage is:
(a) Void
(b) Illegal
(c) Valid
(d) Voidable
(a) An agreement in restrain of marriage is expressly declared void as it is against public policy but is not illegal. An agreement not to marry at all or not to marry any particular person or class of person is void as it is in restrain of marriage.

Question 308.
Agreement in restraint of trade is if the restraint imposed is reasonable.
(a) Void
(b) Illegal
(c) Valid
(d) Voidable
(c) An agreement by which any person is restrained from exercising a lawful profession, trade or business of any kind, is to the extent void, but this rule is subject to the some exceptions i.e. where a person sells the goodwill of a business and agrees with the buyer to restrain from carrying on a similar business, within specified local limits, so long as the buyer or his successor in interest carries on a like business therein, such an agreement is valid.

Question 309.
A contract made by mistake of the Indian law is:
(a) Void
(b) Enforceable
(c) Illegal
(d) Voidable.
(b) Contract made by mistake of Indian law is enforceable and contract is binding because everyone is deemed to have knowledge of law and ignorance of law is no excuse.

Question 310.
An acceptance must be _________.
(a) Conditional
(b) Absolute and unqualified
(c) Optional
(d) Futuristic.
(b) An acceptance must be unqualified and absoluu. It must correspond with all the terms of the offer.

Question 311.
A contract dependant on the happening of future uncertain event is a:
(a) Void Contract
(b) Voidable Contract
(c) Uncertain Contract
(d) Contingent Contract.
(d) The contract dependent on the happening of future uncertain event is the contingent contract. Contract of insurance and contract of indemnity and guarantee are popular instances.

Question 312.
An agreement enforceable by law is a:
(a) Offer
(b) Obligation
(c) Contract
(d) Promise
(c) According to Sec. 2(b) of the Indian Contract Act. “A contract is a agreement enforceable by law”.

Question 313.
Consequences of coercion, fraud, misrepresentation is that the contract is:
(a) Still enforceable
(b) Void
(c) Voidable
(d) Illegal
(c) Consent is said to be free when it is not caused by:

• Coercion
• Undue Influence
• Fraud
• Misrepresentation
• Mistakes.

When a free consent is absent, the contract is said to be voidable.

Question 314.
A contract dependent on the happening of future uncertain event is a:
(a) Uncertain contract
(b) Void contract
(c) Voidable contract
(d) Contingent contract
(d) Contingent contract is a contract that is dependant upon happening or non happening of a future uncertain event.

Question 315.
Which is not true in case of a finder of goods?
(a) If the owner is found, but the owner refuses to pay lawful charges, then he can retain the goods until payment is received.
(b) He can sell the goods if the goods are of perishable nature.
(c) He can retain the goods till the owner is found.
(d) He cannot sell the goods in any condition.
(d) Since the position of the finder of the goods is that of a bailee, he is supposed to take the same amount of care with regard to the goods as is expected of a bailee under Section 151. He is also subject to all the duties of a bailee, including a duty to return the goods after the true owner is found. If he refuses to return, he could be made liable for conversion’ He can even sell the goods if the goods are of perishable nature. Hence option D would be the answer.

Question 316.
The mercantile agents include:
(a) Promoters.
(b) Bidder.
(c) Factor.
(d) Manufacturer
(c) Mercantile Agent include factors among the other options as he is employed to sell the goods in his possession, contract to buy goods for his principal, can sell and receive payment, has an insurable interest and have a general lien in respect of any claim.

Question 317.
Which of the following statement is false regarding acceptance?
(a) Acceptance must be communicated
(b) Acceptance must be accepted by a perspn having authority to accept
(c) Acceptance must be absolute and unconditional
(d) Acceptance may be presumed from silence of offeree
(d) The general rule is that silence does not constitute acceptance. In order for silence to be considered acceptance, there usually are some prior dealings between the two parties and that it is customary for the two parties to treat silence as an acceptance. Another way j that silence may be considered acceptance is where both parties J have agreed that silence can be treated as acceptance.

Question 318.
If a creditor does not file a suit against the buyer for recovery of the price within three years, the debts becomes:
(a) Not time -barred
(b) Time barred and hence irrecoverable
(c) Renewed
(d) Time barred but recoverable.
(b) A debt barred by limitation cannot be recovered and a promise to pay such debt without any consideration. Thus, if a creditor does not ; file a suit against a buyer for recovery of price within a specified time j then the debt will be said to be called as time barred debt and hence irrecoverable.

Question 319.
Which is the example of wagering agreement?
(a) To purchase a lottery ticket ”
(b) Speculative trading in stock exchange
(c) Speculative trading in commodity exchange
(a) Lottery being a game of chance is a wagering agreement. It is void and illegal, thus option (a) is correct.

Question 320.
The person giving guarantee is called:
(a) Sub Debtor
(b) Surety
(c) Principal Debtor
(d) Creditor
(b) In a contract of guarantee, the person who gives guarantee is called Surety.

Question 321.
Express contract means:
(a) Contract which is made by words either spoken or written
(b) Contract which is made by both words and deeds
(c) Contract which is made by promises
(d) Contract which is made by deeds
(a) Express contract mean any contract which is made with the words either written or oral.

Question 322.
An agreement whereby one of the parties agrees to close his business for a consideration of certain sum of money being paid by another party is:
(a) Void
(b) Valid
(c) Enforceable
(d) Voidable
(a) Any agreement in restraint of trade is void (Sec. 7).

Question 323.
The buyer will get a good tittle if he buys in good faith, from a mercantile agent who is in possession of good with the consent of the _________.
(a) Seller
(b) Principal
(d) Owners
(c) If any person buys in good faith from mercantile agent who is possession of goods with the consent of seller can also convey good tittle.

Question 324.
‘Voidable’ contract means:
(a) Parties are incompetent to contract
(b) Free consent of the parties is missing
(d) The object of contract is expressly
(b) Voidable contract means when the consent of party is not free or in other words, it is contract in which parties does not give their consent wilfully. Consent obtained from ‘coercion’ ‘Undue Influence’ ‘Mistake’, ‘Misrepresentation’. ‘Fraud’ is not free so, contract without free consent is not valid contract but it is voidable contract. Aggrieved party can claim damages or rescind contract within reasonable time otherwise it is valid contract.

Question 325.
An agreement in restraint of marriage:
(a) Is voidable at the option of the promisor
(b) Is voidable at the option of the promisee
(c) Is expressly declared as void
(d) Cannot be enforced an there is no privity of contract.
(c) An agreement in restraint of marriage is opposed to public policy and hence, it is declared to be void.

Question 326.
For acceptance to be considered as valid, it must:
(a) Be absolute
(b) Be unqualified
(c) Be both absolute and unqualified
(d) Be conditional
(c) Acceptance must be absolute and unqualified. If acceptance is not absolute and unqualified then it s not a valid acceptance.

Question 327.
Who is not a Mercantile Agent:
(a) Factor
(b) Bidder
(c) Broker
(d) Auctioneers
(b) A Mercantile Agent works as :

• Factor
• Commission Agent
• Del-Credere Agent
• Broker
• Auctioneers etc.

Thus, option (b) is correct.

Question 328.
Crime against Society is _________.
(a) Stalking
(b) Forgery
(c) Trafficking
(d) (b) and (c) both
(d) Trafficking, forgery, murder etc. at any offence committed against social welfare is a crime against society.

Question 329.
A Contract is:
(a) A promise to do something or abstain tram doing something
(b) A communication of intention to do something or abstain from doing something
(c) A set of promises
(d) An agreement enforceable by law
(d) The Indian Contract Act has defined contract in Section 2(h) as “an agreement enforceable by law”.

Question 330.
If a new contract is substitute in place of an existing contract, it is called:
(a) Alteration
(b) Rescission
(c) Novation
(d) Waiver
(c) Novation occurs when an existing contract is substituted by new one either between same parties or between the new ones. Therefore if a new contract is substituted in place of existing contract it is called Novation.

Question 331.
A contract of indemnity is a:
(a) Contingent contract
(b) Wagering contract
(c) Quasi contract
(d) Void agreement
(a) Contingent contract refers to a contract to do or not to do something if some event, collateral to such contract, does or does not happen.

Example : contract of insurance indemnity and guarantee, etc. Thus, contract of indemnity is a contingent contract.

Question 332.
When consent is obtained under undue influence, the contract is termed as:
(a) Valid Contract
(b) Void Contract
(c) Voidable Contract
(d) Unilateral Contract
(c) A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage of the other. When the consent is caused by undue influence, though the i agreement amounts to a contract, such a contract is voidable at the ; option of the party whose consent was so obtained.

Question 333.
A surety may be discharged from liability:
X. By notice of revocation of guarantee
Y. On the failure of payment by the main creditor
Z. If the creditor does any act which is against the rights of the surety
(a) X and Y
(b) Y and Z
(c) X and Z
(d) X, Y and Z
(c) A surety is discharged in the following ways:
(i) By giving notice to creditors for future transactions in case of continuing guarantee.

(ii) In absence of any contract to the contrary, continuing guarantee is revoked on death of surety.

(iii) Where there is any variance in terms of contract between the principal debtor and creditor without surety’s consent.

(iv) If principal debtor is discharged by:

• a contract
• any act or
• any omission

(v) If creditors makes an arrangement with the principal debtor for composition, for giving time or not suing him without surety’s consent.

(vi) If creditor does any act or omission, there by impairing sureties eventual remidy.

(vii) If creditor losses or parts with security without surety’s consent. Thus, the answer is X and Z.

Question 334.
An agreement for rendering services entered into by a father an behalf of his minor daughter is:
(a) Void
(b) Voidable
(c) Valid
(d) Quasi
(a) An agreement by a parent or guardian entered into on behalf of the minor is binding on him provided it is for the benefit or is for legal necessity. However, it has been held that an agreement for service, entered into by a father on behalf of his minor daughter is not enforceable at law and is therefore void.

Question 335.
An agent who in consideration of extra commission gives guarantees to his principal that the purchaser of the goods on credit will pay for the goods is called:
(a) Sub-agent
(b) Mercantile agent
(c) Brokers
(d) Del credere agent
(d) A del credere agent is a mercantile agent, who in consideration of an extra remuneration guarantees to his principal that purchasers who buy oh credit will pay for the goods they take. In the event of failing to pay. the del credere agent is bound to pay his principal the sum owned by third-party.

Question 336.
Agreement is a:
(a) Promise
(b) Contract
(c) Enforcable by law
(d) None of above.
(d) As per Section 2 (e) of Indian Contract Act, “every promise and every set of promise forming the consideration for each other, is an agreement”. It is evident from the definition given above that an agreement is based on a promise and an agreement gives birth to contract.

Question 337.
Quasi contract emerge froms _________.
(a) Contingency
(b) Existence of valid contract
(c) Prevention of on just enrichment on cost of other
(d) Existence of voidable contract between parties
(c) “Certain relations resembling those created by contact” are known as quasi contract. Sometimes obligations are imposed by parties by law on the basis of principal of equity which states “no one can enrich himself on the cost of other”. It is an obligation which is created in absence of any agreement.

Question 338.
An illegal contract is _________.
(a) Void ab initio
(b) Voidable
(c) Valid
(d) None of Above.
(a) An agreement with an unlawful object and consideration is known as illegal agreement. It has no legal effects as between immediate parties and transactions collateral to it also become tainted with illegality and are therefore void-ab-initio. Parties to an unlawful agreement cannot get any help from court.

Question 339.
Agreement with minor for beneficiary is:
(a) Illegal
(b) Valid
(c) Void
(d) Can’t say