Growth and Challenges of Entrepreneurial Venture – Business Management Ethics and Entrepreneurship Notes

Growth and Challenges of Entrepreneurial Venture – Business Management Ethics and Entrepreneurship Notes

Supply of entrepreneurship and economic development:

  • British economists like Adam Smith, David Ricardo and John Stuart Miii explained entrepreneurship under the head of business management.
  • According to John Mili, entrepreneurship does not require any ordinary skill”.
  • The necessity of entrepreneurship was first formally recognized by Alfred Marshall in 1890.
  • According to Marshall, there are four factors of production – land, labour, capital and organisation. Here organisation is driven by entrepreneurs.
  • Marshall stated that the abilities of entrepreneurs are so great and so numerous that very few people can exhibit them in all and in a very high degree.
  • Modern school of thought claims that the rote of entrepreneur is that of an innovator.
  • According to Kirzner, process of innovation is actually a spontaneous process of “undeliberate learning’.
  • He also stated that necessary characteristics of the entrepreneur is alertness and no intrinsic skill other than that of recognizing opportunities are necessary.

Concept of creative imitation:

  • Entrepreneurs of mostly less developed countries do not invent a new product rather they copy it from already existing ones.
  • These entrepreneurs formulate the product according to their market using their own creativity.
  • This is known as “creative imitation’.
  • It is common in developing or least developed countries.
  • It takes place when imitators better understand how an innovation can be applied, used, or sold in their original innovation.

Qualities of an Entrepreneur:

  1. Risk Bearers
  2. Co-ordinators
  3. Organizers
  4. Gap fillers
  5. Leaders
  6. Innovators
  7. Creative imitators.

Creation of Entrepreneurs:

  • As per the recent Mckinsey & Company- Nasscom report, India needs at least 8,000 new businesses to achieve its target.
  • It is also estimated that in the next 10 years, 110-130 mull n Indian citizens will be searching for jobs.
  • For creating more jobs, we need to create entrepreneurs.

While creating more entrepreneurs the country should focus on:

  • Creating right environment for source.
  • Ensuring that entrepreneurs have access to the right skill.
  • Ensuring that entrepreneurs have access to smart capital.
  • Enabling networking and exchanging between entrepreneurs.

A distinction is to be made between an employee and entrepreneur.
(a) Employee – Time is money.
Entrepreneur – Leverage is money.
(b) Employee – They work hard and their effort and reward are linear.
Entrepreneurs – They work smart and their efforts and rewards are exponential.
(c) An attitude of ‘first getting b may suit an employee but not an entrepreneur.
(d) Employees think short term whereas entrepreneurs think long term.

Challenges before an Entrepreneur:

Challenges before an Entrepreneurs Qualities needed to overcome Challenges
1.  No protection to employers 1. Innovative
2.  Global competition 2.  Risk oriented
3. Adjusting with the changing environment 3. Achievement-oriented
4. Maintaining a proper balance between project and personnel. 4. Managerial skills and leadership
5. Delayed payments 5. Mental ability
6. Uncertainty in returns 6. Ability to practice entrepreneurship
7. Other factors like ship 7. An economic activity.
  • Financial struggle during startup.
  • Non-supporting family/friends
  • Lack of qualities of entrepreneur.

→ Innovation is an essential quality of an entrepreneur.
→ Paul H Wilkeh lists out the following innovations brought out by entrepreneurs:

Change Innovation
1. Factor innovation Increase in supply or productivity of factors 1. Procuring new source of finance
2. Procuring labour from new source
3. Using new material
2. Product Innovation Changes in production process 1. Use of new production techniques
2. Change the form and structure of organisation.
3. Market Innovation Change in size or composition of the market 1. Production of new good
2. Exploring new markets.
  • The term achievement orientation means quest to success in relation to preset standards of excellence.
  • It is the prime factor that explains economic behaviour of entrepreneurs.
  • According to Peter Drucker, entrepreneurship is neither a science nor an art. It is a practice”.

Areas to be focused for developing Entrepreneurship In India
1. Creating the Right Environment for success
2. Ensure that Entrepreneurs have access to the right skills
3. Ensuring that Entrepreneurs have access to Smart Capital
4. Enabling network and Exchange

Strategic Planning for Emerging Venture:
Strategic planning is the formulation of long-range plans for the effective management of environmental opportunities and threats in the light of venture’s strengths and weaknesses.

These are five basic steps involved in Strategic Planning:

  • Examine the internal and external environments of the venture (strengths, weaknesses, opportunities and threats).
  • Formulate the venture long-range ad short-range strategies (mission, objectives, strategies and policies).
  • implement the strategic plan (programs, budgets and procedures).
  • Evaluate the performance of the strategy.
  • Take follow-up action through continuous feedback.

Financing of the Entrepreneurial Business
For procuring finance an entrepreneur has to do the following:
(i) Resource Assessment:
It refers to the activity of allocating resources to the business (whether it will be self-financed or through loan).

(ii) Capital Requirement:
It refers to the activity of ascertaining how much fixed and working capital Is needed. This depends upon the type of business.

(iii) Funds Flow:
It refers to the activity of analysing the available cash and funds.

(iv) Source of Finance:
It refers to the activity of deciding whether the source of finance will be internal or external.

(v) Means of Finance:
Borrowing is the primary means of financing.
In order to bring about a change, the following are needed by an entrepreneur:

  • Modernisation
  • Expansion
  • Diversification

(i) Modernisation:
Steps for modernisation include:

  • Conducting a research of existing situations.
  • Acquiring resources required for modernisation.
  • Following an efficient modernizing approach and carrying out modernisation.

(II) Expansion:

  • The period of expansion is the period of maturing and unfolding of the firm.
  • There is a little difference between growth and expansion.
  • Development in the internal sense is growth whereas external growth is termed as expansion.

(III) Diversification:

  • It means introduction of a new product in order to meet 1h requirements of old market.
  • Diversification is the expansion of the range of products.
  • Expansión of sale is a key goal infirm is growth phase.

Nature of Management and its Process MCQ Questions

1. Elements of business planning includes:
(a) Strategic Planning
(b) Operational Planning
(c) Both (a) and (b)
(d) None
Answer:
(c) Both (a) and (b)

2. Environmental scanning is the first step of …………………… .
(a) Strategic Planning
(b) Operational Planning
(c) Entrepreneurship
(d) None of these
Answer:
(a) Strategic Planning

3. ‘What to achieve and till when is explained by” …………………. .
(a) Objectives
(b) Mission
(c) Goal
(d) Vision
Answer:
(a) Objectives

4. Strategy implementation involves
(a) Programs
(b) Budgets
(c) Procedures
(d) All of these
Answer:
(d) All of these

5. Conversion of strategic goals into managed execution is termed as ………………….. .
(a) Innovation
(b) Strategy implementation
(c) Operational planning
(d) None of these
Answer:
(c) Operational planning

6. British economists explained entrepreneurship under head of …………………. .
(a) Business Economics
(b) Business Management
(c) Business Organisation
(d) None of these
Answer:
(b) Business Management

7. The necessity of entrepreneurship was first recognized by:
(a) Adam Smith
(b) Alfred Marshall
(c) John Mill
(d) Kizner
Answer:
(b) Alfred Marshall

8. The role of entrepreneur is that of a innovator this was claimed by-
(a) Ancient school of thought
(b) Neoclassical school of thought
(c) Modern school of thought
(d) None of these
Answer:
(c) Modern school of thought

9. The concept of creative imitation is mostly used in:
(a) Developed countries
(b) Least developed countries
(c) All the countries
(d) None of these
Answer:
(b) Least developed countries

10. Which of these is not a type of entrepreneurship?
(a) Opportunity based
(b) Need-based
(c) Situation based
(d) None of these
Answer:
(c) Situation based

11. For ………………….. time is money.
(a) Entrepreneurs
(b) Employees
(c) Competitors
(d) All of these
Answer:
(b) Employees

12. An entrepreneur has to face which of these challenges-
(a) Changing Environment
(b) Global Competition
(c) Non-Supporting Family/Friends
(d) All of these
Answer:
(d) All of these

13. Changes in production process is also referred as-
(a) Product Innovation
(b) Process Innovation
(c) Factor Innovation
(d) None of these
Answer:
(a) Product Innovation

14. Who explained the view that “Entrepreneurship is neither a science nor an art, it is a practice”?
(a) Adam Smith
(b) Peter Drucker
(c) Kizner
(d) Alfred Marshal.
Answer:
(b) Peter Drucker

15. Growth is ………………………. while expansion is ……………………..
(a) External, Internal
(b) Internal, External
(c) Static, Dynamic
(d) None of these.
Answer:
(b) Internal, External

16. ……………………….. is an increase in supply or productivity of factor.
(a) Factor innovation.
(b) Production innovation
(c) Market innovation
(d) All of these.
Answer:
(a) Factor innovation.

17. …………………….. is the process of conversion of strategic goals into managed execution.
(a) Operation Planning
(b) Strategic Planning
(c) Organising
(d) Staffing
Answer:
(a) Operation Planning

18. Which of the following is a basic type of Entrepreneurship.
(a) Opportunity based Entrepreneurship
(b) Leadership based Entrepreneurship
(c) Motivation based Entrepreneurship
(d) Skill-based Entrepreneurship
Answer:
(a) Opportunity based Entrepreneurship

19. According to Peter Drucker entrepreneurship is
(a) Science
(b) Practice
(c) Art
(d) Commerce
Answer:
(b) Practice

20. The factor which determines the mental attitude towards work and the desire to acquire money is called
(a) Cultural & Religious Factor
(b) Risk factor
(c) Capacity Factor
(d) Psychological factor
Answer:
(a) Cultural & Religious Factor

21. Borrowing money from the public is a
(a) Primary means of finance
(b) Secondary means of finance.
(c) Tertiary means of finance
(d) None of the above
Answer:
(a) Primary means of finance

22. In case of deficit budget, the cumulative amount borrowed from the public will
(a) Increase
(b) Decrease
(c) Have no effect
(d) None of the above
Answer:
(a) Increase

23. Which of the following is not included in the seven trends to be faced by an organization.
(a) Speed and uncertainty will prevail
(b) Loyalty will erode
(c) Work will be done at a specified time and place
(d) Technology will continue to disrupt and enable
Answer:
(c) Work will be done at a specified time and place

24. The first step to modernization is
(a) Research
(b) Finance
(c) Development
(d) Efficient modernizing approach
Answer:
(a) Research

25. The last step to Modernization is
(a) Development
(b) Resource Procurement
(c) Efficient modernization approach
(d) None of the above
Answer:
(c) Efficient modernization approach

26. The introduction of a new product or service to meet the needs of an old market is called
(a) Diversification
(b) Expansion
(c) Growth
(d) None of the above
Answer:
(a) Diversification

27. The basic area of focus for India to utilize its talented pools to generate good entrepreneurs is
(a) Ensuring access to the right skill
(b) Creating the right environment for success
(c) Enabling access to smart capital
(d) All of the above
Answer:
(d) All of the above

28. The formulation of effective management concentration on opportunities and threats in long-range plans is called as-
(a) Operational Planning
(b) Administration
(c) Expansion
(d) Strategic Planning
Answer:
(d) Strategic Planning

29. The first stage in the development of Entrepreneurial firm is
(a) Start up stage
(b) Seed- stage
(c) Early growth stage
(d) All of the above
Answer:
(b) Seed- stage

30. The main objective of business planning is to
(a) Prude and implement the formal and systematic business plan
(b) To expand the business
(c) To maximize profit
(d) To make the best possible use of resources
Answer:
(a) Prude and implement the formal and systematic business plan

31. As per the necessity-based entrepreneurship
(a) Entrepreneurship is necessary for the growth of the economy
(b) Choosing the entrepreneurship career is a compulsion and not a choice
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(b) Choosing the entrepreneurship career is a compulsion and not a choice

32. What is the result of modernisation?
(a) Additional burden on employees
(b) Increase in wasteful expenses
(c) Expansion of business
(d) Expansion of profit
Answer:
(c) Expansion of business:
The result of modernization is that the company would expand and will have an improved and modern material base that would both motivate employees additionally and will strengthen the production process and product quality. Thus, modernisation leads to expansion of business.

33. Introduction of new product and services and adding it to the product line is known as:
(a) Expansion
(b) Diversification
(c) Modernisation
(d) Innovation
Answer:
(b) Diversification:
The term ‘diversification’ means the introduction of a new product or service to meet the needs of an old market. It is an expansion of the range of products.

34. The necessity of entrepreneurship in production was first recognised by:
(a) Adam Smith
(b) Alfred Marshall
(c) David Ricardo
(d) John Stuart Mill
Answer:
(b) Alfred Marshall:
The necessity of entrepreneurship for production was first formally recognised by Alfred Marshall in 1890. He asserts that there are four factors of production: land; labour, capital and organization. He believed that entrepreneurship is driving element behind organization.

35. What is innovation?
(a) Bringing a change
(b) Starting a new process
(c) Introducing new idea to maximise the interests of business
(d) None of the above.
Answer:
(c) Introducing new idea to maximise the interests of business:
Innovation refers to introducing something new to maximize the interests of business. According to Peter F Drucker, innovation is a means by which entrepreneurs exploit change as an opportunity for a different business or a different service.

36. Which of the following is not an example of means of finance?
(a) Issue of equity
(b) Goods on credit
(c) Loan against shares
(d) All of these
Answer:
(c) Loan against shares:
Means of finance refers to means by which a budget deficit is financed, or a surplus is used. Means of financing are not included in the budget totals. The primary means of financing is borrowing from public which includes issue of equity, goods on credit etc. Thus, loan against shares is not a means of finance.

37. ‘Expansion’ is external and horizontal.
(a) True
(b) False
(c) It is in all direction
(d) Partly True
Answer:
(a) True:
Growth is internal or vertical surge, whereas Expansion refers to external or horizontal growth, such as that exhibited by the firm that successfully engages in mergers and acquisitions. Expansion of venture is its period of unfolding and maturation. Hence, the given statement is true.

38. Which of these four factors, Paul H. Wilken had not listed in his book?
(a) Subsequent Expansion
(b) Initial Expansion
(c) Factor Innovation
(d) Source Innovation
Answer:
(d) Source Innovation:
Paul H. Wilken in his work, Entrepreneurship: a comparative and historical study listed the following innovations by changes brought out by entrepreneurs:
– Initial expansion
– Subsequent expansion
– Factor innovation
– Production innovation
– Market innovation
Thus, source innovation is not listed in his book.

39. Leadership & managerial skill are:
(a) Interwoven to entrepreneurship
(b) Complimentary to entrepreneurship
(c) Substitute to entrepreneurship
(d) Opposite to entrepreneurship
Answer:
(a) Interwoven to entrepreneurship:
Mere building entrepreneurship process is not enough, entrepreneurs need to manage the business efficiently and effectively as well. Leadership and managerial skills are interwoven in entrepreneurship right from infant stage of an enterprise. An entrepreneur devoid of these qualities is bound to fail.

40. “What to achieve and till when” is explained by of an organization.
(a) Objectives
(b) Mission
(c) Goal
(d) Vision.
Answer:
(b) Mission:
While vision tells your ultimate goal, the mission tells how to get these. Mission explains why your business exists. It answers the following questions:
(i) What does your business do?
(ii) Who do you do it for?
(iii) Where do you exist?
(iv) How does ¡t do it?
(v) Why does your company do it? ‘
Thus, What to achieve and till when” ¡s explained by mission of an organisation.

41. A company engaged in alcohol manufacturing merged with a cigarette manufacturing firm. What type of merger is this?
(a) Horizontal merger
(b) Product extension merger
(c) Market extension merger
(d) Vertical merger.
Answer:
(b) Product extension merger:
The term diversification Is usually used to mean the introduction of a new product or service to meet the needs ot an old market. Diversification is an expansion of the range of products. It includes offering of existing product in new market, new product In old market, and new product in new market. Thus, the company is extending its product by merging to products, i.e. alcohol and cigarette. It is a product extension merger.

42. In general, Vision and Mission statements of an organisation are a result of –
(a) Operational Planning
(b) Strategic Planning
(c) Middle level Planning
(d) Performance Planning.
Answer:
(b) Strategic Planning:
Strategic planning is the key step of strategic management. Strategic plan draws the clear layout of business’s venture; vision, mission, objectives, competencies, managerial abilities, technical proficiencies and sources of funds.

43. Who among the following, first recognised the necessity of entrepreneurship for production?
(a) David Ricardo
(b) Peter F. Drucker
(c) Alfred Marshall
(d) John Stuart Mill.
Answer:
(c) Alfred Marshall:
The necessity of entrepreneurship for production was first recognised by Alfred Marshall in 1890. Marshall asserted that there are four factors of production (land, labour, capital and organisation), organisation factor is the coordinating factor that brings other factors together and entrepreneurship is driving element behind it.

44. ……………………………. claims that the role of entrepreneurs is that of innovator.
(a) Old school of thought
(b) Modern school of thought
(c) U.S. school of entrepreneurial innovation
(d) None of the above
Answer:
(b) Modern school of thought:
Modern School of thought claims that the sole of entrepreneurs is that of innovator.

45. Expansion is external and horizontal-
(a) True
(b) False
(c) It is in all direction
(d) Partly true
Answer:
(a) True
Growth is internal or vertical surge, whereas, expansion refers to external or horizontal growth, such as exhibited by the firm that successfully engages in mergers and acquisitions. Expansion of venture is its period of unfolding and maturation. Hence, the given statement is true.

46. Environmental Scanning is the first step of –
(a) Strategic Planning
(b) Operational Planning
(c) Entrepreneurship
(d) None of the above
Answer:
(a) Strategic Planning:
Strategic Planning is the key step of strategic management. It includes following steps:
(i) Environmental Scanning
(ii) Strategy Formulation
(iii) Strategy Implementation
(iv) Evaluation and Control.
Thus, environmental scanning is the first step of strategic planning.

47. Appointing a manager under some strategic decision is covered under:
(a) Strategy formulation
(b) Environment scanning
(c) Strategy implementation
(d) Strategic planning.
Answer:
(c) Strategy implementation:
Strategy implementation is the process of conducting program & (activities needed to accomplish a plan), budgets (cost of the programs), and procedures (sequence of steps needed to do the job) and it is required to be done by an officer or a manager. So, appointing a manager under some strategic decisions is covered under strategy implementation.

48. Nodu, a chocolate manufacturer based in Singapore, produces candy containing exotic ingredients from rain forests of Brazil. The ingredients are provided by a single supplier who has an exclusive control with Nodu. The chocolate manufacturer thus has a great deal of power over the market. This is an example of:
(a) Strategic vision
(b) Distinctive competence
(c) Competitive advantage
(d) Strategic management.
Answer:
(b) Distinctive competence:
Distinctive competence of a firm refers to a set of activities or capabilities that a company is able to perform better than its competitors and which gives it an advantage over them. Thus, the chocolate manufacturer has a great deal of power over the market and this comes under the example of distinctive competence.

49. In business parlance, growth is and expansion refers to
(a) External and horizontal growth internal and vertical growth
(b) External: external growth as well
(c) Internal: Internal growth as well
(d) Internal and vertical: external and horizontal growth.
Answer:
(d) Internal and vertical: external and horizontal growth:
Growth is internal or vertical surge, whereas Expansion refers to external or horizontal growth, such as that exhibited by the firm that successfully engages in mergers and acquisitions. Expansion of venture is its period of unfolding and maturation. Hence, option D is correct statement.

50. Constraints on time, money and resources are managed in:
(a) Operational Planning
(b) Strategic Planning
(c) Capital Budgeting
(d) Market Research.
Answer:
(a) Operational Planning:
Operational planning requires proactive thinking to enact strategy within the operational layer of the business. Operational planning must produce the plan outcomes while managing constraints on time, money and resources.

51. The primary motivating force behind entrepreneurs is:
(a) Fame
(b) Money
(c) Recognition
(d) Achievement.
Answer:
(d) Achievement:
McClelland emphasizes that achievement orientation is the prime factor that explains economic behaviour of entrepreneurs. It means the quest for success in relation to preset standards of excellence. He measures interest of entrepreneurs in terms of profit or achievement motive which remains constant regardless of change in events.

52. Key goal in the firms growth phase is:
(a) Expansion of capital
(b) Cutting costs
(c) Expansion of profit
(d) Expansion of sales.
Answer:
(d) Expansion of sales.
In order to bring effecting change in the business growth, the following are needed by an entrepreneur:

  • Modernisation
  • Expansion
  • Diversification

All these moves have a common thing that is an attempt to increase sale by expanding selling possibilities and the expansion of sales is a key goal in the firm’s growth phase.

53. If a business is very complex, it will only grow successfully if the entrepreneur:
(a) Is comfortable giving up control to professional management
(b) Keeps everything under his control
(c) Uses the classic entrepreneurial management style
(d) Is a Craftsman
Answer:
(a) Is comfortable giving up control to professional management:
If a business is very complex it will only grow successfully if the entrepreneur is comfortable giving up control to professional management.

54. The process of determining whether an entrepreneur’s idea is a viable foundation for creating a successful business is known as a:
(a) Strategic analysis
(b) Business plan
(c) Feasibility analysis
(d) Industry analysis
Answer:
(c) Feasibility analysis:
Feasibility analysis is the process of determining whether an entrepreneur’s idea is a viable foundation for creating a successful business.

55. SMART Capital indicates what?
(a) Resource assessment
(b) Venture capitalist
(c) Networking & exchanging
(d) None of the above
Answer:
(a) Resource assessment:
If a business is very complex It will only grow successfully if the entrepreneur is comfortable giving up control to professional management.

56. Assessment of competitive rivalry does not include an understanding of:
(a) The extent to which competitors are in balance
(b) Market growth rate
(c) Fixed costs, exit barriers and operational efficiency
(d) The management structure of an organization
Answer:
(c) Fixed costs, exit barriers and operational efficiency:
Feasibility analysis Is the process of determining whether an entrepreneur’s idea is a viable foundation for creating a successful business.

57. SMART Capital indicates what?
(a) Resource assessment
(b) Venture capitalist
(c) Networking & exchanging
(d) None of the above
Answer:
(b) Venture capitalist:
Entrepreneurs must have access to ‘Smart’ Capital. In the last few years, several venture funds have entered the Indian Market. Venture capital’ are providing capital as well as critical knowledge and access to potential partners, suppliers and clients across the globe. So, Smart capital indicates venture capital.

58. Assessment of competitive rivalry does not include an understanding of:
(a) The extent to which competitors are in balance
(b) Market growth rate
(c) Fixed costs, exit barriers and operational efficiency
(d) The management structure of an organization
Answer:
(d) The management structure of an organization:
Assessment of competitive rivalry includes:

  • Market growth
  • The extent to which competitors are in balance.
  • Fixed costs, exit barriers and operational efficiency
  • Alternative choice of goods.

It does not include, the management structure of an organization. So, option (d) is not included.

59. The Evaluation Criteria for the new product should include all of the following except ………………. .
(a) Product should be profitable
(b) Pricing and marketing policies of other firms
(c) Determination of market demand
(d) Determination of the suppliers.
Answer:
(d) Determination of the suppliers:
Evaluation criteria for a new product include its profitability, pricing and marketing policies market demand which thereby strongly influence the goal to achieve.

60. A(n) ………………………. industry is an industry that is experiencing slow or no increase in demand.
(a) Mature
(b) Emerging
(c) Global
(d) Declining
Answer:
(b) Emerging:
After becoming mature, the industry experience slow or no growth in demand.

61. Which of the following is not a Characteristic of Strategic Management?
(a) It is concerned with only the analysis of past happenings in the organization
(b) It has an external focus
(c) It has an internal focus
(d) It is interdisciplinary.
Answer:
(a) It is concerned with only the analysis of past happenings in the organization:
Characteristic of Strategic Management:

  • It is future oriented and uncertain
  • It deals with internal as well as external environment
  • It has the organisation-wide approach
  • It is fundamental for improving long term performance
  • It deals with vision, mission and objectives
  • It is interdisciplinary.

62. If a business is very complex, it will only grow successfully if the entrepreneur:
(a) is comfortable giving up control to professional management
(b) is a craftsman
(c) keeps everything under his control
(d) uses the classic entrepreneurial management style.
Answer:
(a) is comfortable giving up control to professional management:
If a business is very complex, it will only grow successfully if the entrepreneur is comfortable in giving up control to professional management.

63. The ………………………………. entrepreneur goes into business as a result of financial hardship or other negative conditions.
(a) Educated
(b) Necessity based
(c) Refugee
(d) Corporate supported
Answer:
(b) Necessity based:
An Entrepreneur is left with no other viable option to earn a living. A necessity-based entrepreneur operates not by choice but out of compulsion may be due to financial hardship or other negative condition.

64. Making the comparison of actual performance with set standard is covered in:
(a) Strategic planning
(b) Strategy implementation
(c) Evaluation and Control
(d) Environment scanning
Answer:
(c) Evaluation and Control:
The main objective of the business planning is to provide and implement the systematic business plan. The one such action under the business planning is evaluation and control where the performance is measured by comparing the actual results with the set standards.

65. Which of the following is not a stage of development in entrepreneurial firm?
(a) Start rolling
(b) Startup
(c) Early growth
(d) Seed Stage
Answer:
(a) Start rolling:
The stages of development in entrepreneurial firm are seed stage, start-up, early growth, established and corporate. Hence, start rolling is not a stage in the development in the entrepreneurial firm.

66. When advising John of what to include in the production plan of his business plan for his entrepreneurial venture, what would you not include in your recommendation?
(a) Product price
(b) Physical plant location
(c) Names of suppliers of raw materials
(d) Manufacturing process
Answer:
(c) Names of suppliers of raw materials:
On advising John, the names of the suppliers of the raw material should be excluded from the recommendations as the other factors such as product price, manufacturing process and the plant location should be given priority in making the venture successful.

67. Entrepreneur’s rate of a disturbance handler, Allocator of resources and negotiator’s role are ………………………… roles that the manager has to perform.
(a) Interpersonal
(b) Decisional
(c) International
(d) None of the Above.
Answer:
(a) Interpersonal:
Entrepreneur’s role of a disturbance handler, Allocator of resources and negotiator role are the interpersonal roles that Manager has to performs.

68. Which one of the following is Correct About business plan?
(a) Business plan is necessary only for big companies
(b) Business plan is substitute for strategic planning
(c) Business plan is substitute for strategic planning
(d) Business plan should emphasize on ideas and concepts only.
Answer:
(b) Business plan is substitute for strategic planning:
It is true that business plan is substitute for strategic planning. If strategic planning is not working, then success can be got by working on business plans.

60. The necessity of entrepreneurship for production was first formally recognised by Alfred Marshall in the year:
(a) 1890
(b) 1892
(c) 1891
(d) 1893
Answer:
(a) 1890:
The necessity of entrepreneurship for production was first formally recognized by Alfred Marshall in 1890. In his famous treatise principles of Economics, Marshall asserts that there are fours factors of production; land, labour, capital and organization.

CS Foundation Business Management Ethics and Entrepreneurship Notes

Entrepreneurship – Creativity and Innovation – Business Management Ethics and Entrepreneurship Notes

Entrepreneurship – Creativity and Innovation – Business Management Ethics and Entrepreneurship Notes

Introduction:

  • A successful entrepreneurship requires continuous innovation and innovation demands creativity.
  • Creativity and innovation are central to the entrepreneurial process.
  • All three are interlinked.
  • Let us study them in detail:

Creativity:

  • Creativity is the ability to create something new.
  • It is an art of creating something using skills and intellect.

Characteristics of creativity:

  • Creativity is an ability to create new ideas.
  • Creativity is an attitude.
  • Creativity is a continuous process.
  • Creativity requires passion and commitment.
  • Creativity is a process of using skills and binging into existence something new.
  • Creativity should be supported by interest, satisfaction and zeal of the creator.
  • It is all about to invest into a new form and to produce through imaginative skill.

Components of creativity:
Creativity requires

  • Expertise
  • Creative thinking skills
  • Motivation.

Expertise: li refers to the specialised knowledge or technical ability of a person for a particular thing.

Creative thinking: It refers to the ability to explore new ideas for solving various problems.

Motivation: It refers to the desire, passion and zeal to do something. People become creative when they feel motivated primarily by the interest, satisfaction and challenge of the situation.

Innovation:

  • Innovation is the process of creating new values.
  • It is a process by which an idea or invention is translated into goods or services.
  • According to Schuiipeter. innovation is a process of “creative destructions.”

Characteristics of Innovation:

  • Innovation involves looking into things with a new perspective.
  • Innovation is a process and not an activity.
  • Innovation has no set dimensions.
  • Innovation creates demand in the market.

Principles of Innovation:
Innovation will become a success only if following factors/principles are followed:

  • Doing the work which you desire and what you love.
  • Set a vision for your innovation.
  • Create your own ideas and work on them.
  • Try to influence people with your innovation and not with the product.
  • Take chances.
  • Put a dent in the universe. Principles of innovation by Steve Jobs in the famous book “The Innovation Secrets of Steve Jobs.

1. Do what you love (People with passion can change world)
2. Put a dent in the universe (two people can see exactly the same thing but perceive it differently based on their vision)
3. Kick start your brain (creativity is connecting things)
4. Sell dreams, not products
5. Say no to 1000 things (innovatiòn means eliminating the unnecessary so that necessary may speak)
6. Create insanely great experiences
7. Master the message. (you can have the most innovative idea in the world but if you cannot let people excited about It, it does not matter)

Relationship between Creativity and Innovation:

  • Creativity is the starting point for innovation.
  • Creativity is the seed of a new idea which when grows becomes a tree i.e. innovation.
  • Innovation is the implantation of creative inspiration.
  • In simple words, we can say creativity is a subset of innovation. This means creativity is necessary for innovation but is not sufficient.
  • All innovations begin with creative ideas.
  • No innovation is possible without creativity.
  • Entrepreneurship is a vehicle that drives creativity and innovation.
  • Entrepreneurship is an innovatory process involved in the creation of an economic enterprise based on a new product or service which differs from existing ones.

Environment Scanning:

  • Companies which scan their business environment are proven to achieve higher profit & importance of it was realised by life insurance firms in late 1970s.
  • It refers to the monitoring of an organisation’s external and internal environment for detecting early signs of opportunities and threats that may influence current and future plans.
  • Environment scanning is done to gather responses of the business from the environment and then making adjustments in the strategies.
  • Innovation requires environmental scanning. [A market analysis is required before launching any new idea or product into the market].
  • It helps in analysing and interpreting the outcomes of the innovation.

Environment scanning can be performed using various methods/techniques:

  1. SWOT Analysis
  2. PEST/PESTLE Analysis
  3. Industry Analysis

SWOT Analysis:

  • It was originated by Albert S Humphery in the 1 960s
  • It refers to the analysis of a company’s strengths, weakness, opportunities and threats
  • Components of SWOT Analysis

Components of SWOT Analysis
Entrepreneurship - Creativity and Innovation – Business Management Ethics and Entrepreneurship Notes 1

SWOT Analysis is also known as Internal-External Analysis and SWOT Matrix as lE matrix.

Here is a SWOT Analysis of a Company
INTERNAL:

STRENGTH WEAKNESS
Better product Non-availability of funds
Strong brand image Non-availability of latest technology
Wide range of product Poor customer base
Strong R & D facility Weak distribution network

EXTERNAL:

OPPORTUNITIES THREATS
Rising product demand Changing government regulations
Expansion into new segments New entrants
Falling trade barriers Recession in the market
Acquisition of rival firms Intense competition

(v) Environmental scanning is done by using the above analysis.

MACRO ENVIRONMENTAL FACTORS:

PESTLE stands for:
P – Political
E – Economic
S – Sociological
T – Technological
L- Legal
E – Environmental

As per this analysis, the environment is scanned with respect to the above factors.

It helps to ascertain the effect of these factors on the business of the entrepreneur.

PESTLE ANALYSIS:

1. PolitIcal factors:

  • Tax policy
  • Political stability

2. EconomIc factors:

  • Economic growth, inflation rates
  • Stage of business cycle

3. SocIal factors:

  • Age distribution
  • Health awareness

4. Technological factors:

  • R & D Activity
  • Impact of emerging technologies

5. Legal factors:

  • Taxation laws
  • Licensing framework

6. Environmental factors:

  • Environmental impact
  • Waste disposal

Approach to Industry Analysis:

  • It refers to the process of analysing the existing industry before undertaking innovation.
  • It is important because it helps the entrepreneur to know the extent of competition which he is exposed to.
  • The best tool for industry analysis is the Porter’s Five Forces Model.
  • As per this model, an enterprise Is exposed to competition from the following forces conducted.
  • It is also conducted for the survey of existing industry before setting up entrepreneurial endeavour.

Entrepreneurship - Creativity and Innovation – Business Management Ethics and Entrepreneurship Notes 2

(a) Supplier Power:

  • Suppliers may raise the prices of the materials.
  • The more we are dependent on a particular supplier, the more powerful he becomes.

(b) Buyers Power:

  • Buyers may switch to other products.
  • The more number of buyers, the more will be their bargaining power and hence will become more powerful.

(c) Rivalry among existing firms:

  • Rivalry means competitive firms selling substitutes or same products.
  • The more rival firms are there in the market, the weaker wtll be the position of the business (as both the buyers and suppliers can make alternative choices).

(d) Threat of New Entry:

  • The power of an enterprise is also affected by the possibility new players to enter into the market.
  • If a firm has strong barriers to entry, the more powerful position can maintain.

(e) Substitute Goods Threat of Substitution:

  • Presence of substitutes of your product may hamper your position.
  • The more substitutes are available, the weaker will be your position.

Process of Environmental Scanning:
Scanning refers to screening large amount of information for some particular bit of information. It involves the following steps:
Searching for information resources

Selecting/Choosing information resources for scanning

Identifying the criteria for scanning

Carrying out scanning process

Ascertaining scanning results and taking corrective actions if required.

Types of Environmental Scanning:
(a) Passive Scanning
(b) Active Sàannlng
(c) Directed Scanning

(a) Passive Scanning:

  • Effortless scanning is passive scanning.
  • It is performed cõntinuously.
  • The results of this type of scanning help in taking ad-hoc decisions only.

(b) Active Scanning:

  • It requires higher degree of attention.
  • It involves scanning through existing sources (literature) or continuous source (magazines or journals) which requires more attention.
  • It involves selecting continuous resources and supplementing them with existing resources as needed for better results of scanning.

(c) Directed Scanning:

  • Active scanning of a specific item is called directed scanning.
  • Here scanning is done using existing resources only.

Market Assessment:
Before launching a nw idea or innovation it is important to perform market analysis.
Market assessment refers to the process of assessing the demand of the new idea in the market.

Importance of assessing market:
(a) Helps to prepare us to enter into new market.
(b) Helps In successful launching of a product service.
(c) Helps in commencement of a new business.

Steps for performing market assessment
Defining the problem

Analysis of the situation

Obtaining data that is specific to the problem

Analysing and interpreting data

Solving of the problem! fostering ideas

Designing a plan

Note That:

  • Analysis of the situation is an informal survey of what information is available in the problem area.
  • Analysis of a situation should focus on both primary and secondary market research.
Primary Research Secondary Research
(i) It is the research created for a specific purpose. It does not focus on a specific purpose.
(ii) The first research of a particular thing is primary research. This type of research has already been conducted in the past.
(iii) It is done through surveys, focus groups, phone interviews etc. It is done through existing information in libraries, online periodicals etc.

A marketing plan shows the specifics of how the entrepreneur will market or attempt to sell his product or service.

Assessment of Business Opportunities
Business Plans:

  • Business plan refers to an idea of starting a business.
  • This require management’s focus on present as well as future.
  • Business plan is a roadmap to reach the ultimate business goals/dreams.
  • They analyse the business’s strengths and capitalize on them.
  • The most significant benefit of a business plan is the periodic review of actual results.
  • Business plans are time-bound, they can be long term or short term.
  • Business plans can be a simple outline, they need not necessarily contain complex charts, diagrams etc.

Misconceptions about business plane:

  • Business plans may require too much work but may result in no or fewer benefits.
  • Business plans are specifically for large companies.

Components of a business plan:

  • It should have goals (either long term or short term) with a timeline for the completion of each.
  • It should have a strategy in each functional area.
  • The business plan should adequately include budget and cash flow projections.
  • A review segment shows the reviews of the goals, objectives and strategies made.

Setting up of a successful business:
Initializing of the business venture requires the following things to be kept in mind:

  • There is no shortcut to success
  • Recognize a business opportunity and start with customers. First, find someone who can buy your idea.
  • Inculcate the skill to find essential resources for exploiting opportunities.

Skills needed for a successful business-

  • Engineering skills
  • Manufacturing skills
  • Selling skills
  • Business skills (making profit from above three)

Engineering + Selling skills = Needed for start of a business
Manufacturing + Business = Needed for running the business.

Process of starting a new business:
Identification and evaluation of opportunity

Development of a business plan

Determination of required resources

Management of resulting enterprise

1. Identification and evaluation of opportunity:

  • It is the primary task of starting a venture.
  • While identifying and evaluating the opportunity following factors should be considered: length of the opportunity, real and perceived value, risks and returns associated with it, its suitability to the organisational goals and its uniqueness in the competitive environment.
  • Market size and length of opportunity are primary bases for determining risks and rewards.
  • Opportunity assessment or analysis refers to the method of evaluating an opportunity.

It includes:
→Description of the product.
→ Assessment of opportunity
→ Assessment of entrepreneur and his team
→ Specifications of activities needed to convert the opportunity into a business.
→ Source for financing capital

Are opportunity analysis and business plan same thing?

Opportunity Analysis Business Plan
→ It refers to the evaluation of an opportunity. → Business plan includes evaluation as well as other activities performed for starting a business (like defining goals)
→ It is a narrower concept than business plan. → It is broader than opportunity analysis.
→ It focuses on a particular opportunity → It focuses on various other aspects of the whole venture.
→ It results into a decision that whether opportunity should be taken or not. → It results into the formation of a business.

2. DevelopIng a business plan:
(i) Business planning is the process of setting goals, explaining the objectives and mapping out a document to achieve those goals and objectives.
(ii) Business plan is the articulation and explanation of the entrepreneurial company’s plan for managing the risks and challenges involved in building or expanding the business.

(iii) Myths about the business plans

  • Business plans are only for start-up companies.
  • Business plans should be as detailed as possible, the longer the plan the better are chances for procuring finance
  • Business plans should emphasize ideas and concepts, but not people
  • Only the founding entrepreneur should prepare a business plan
  • Optimism should prevail over realism.

3. DetermIne the resources required:

  • The entrepreneur should first consider the existing resources and then determine the other resources needed.
  • Estimation should be made for the amount of resources required.
  • An effort should be made to obtain the resources at lowest possible prices by searching alternatives.

4. Manage the enterprise:

  • Managing involves the process of putting all resources together and implementing the business plan.
  • It also involves the establishment of a control system for quick problem solving.

Nature of Management and its Process MCQ Questions

1. Components of creativity does not include:
(a) Expertise
(b) Creative thinking
(c) Motivation
(d) Self-efficacy
Answer:
(d) Self-efficacy.

2. ……………………………. is the process by which an idea or invention is translated into goods or services.
(a) Innovation
(b) Creativity
(c) Creative thinking
(d) Motivation
Answer:
(a) Innovation

3. Who stated that ‘innovation is the process of creative destruction?
(a) Alfred Marshall
(b) Jacob Viner
(c) Schumpeter
(d) Samuelson
Answer:
(c) Schumpeter

4. Who gave the seven secrets of innovation?
(a) Schumpeter
(b) Jacob Viner
(c) Samuelson
(d) Steve Jobs
Answer:
(d) Steve Jobs.

5. Innovation is the starting point of creativity. This statement is:
(a) True
(b) False
(c) Partly true
(d) None
Answer:
(b) False

6. ……………………………….. is the vehicle that drives creativity and innovation.
(a) Entrepreneurship
(b) Intrapreneurship
(c) Motivation
(d) All of these
Answer:
(a) Entrepreneurship

7. Environmental scanning includes monitoring of:
(a) Only internal environment
(b) Only external environment
(c) Both (a) and (b)
(d) None of these
Answer:
(c) Both (a) and (b)

8. Which of these is not a method of environmental scanning?
(a) SWOT Analysis
(b) Industry Analysis
(c) GE Model
(d) PESTLE Analysis
Answer:
(c) GE Model

9. Albert S. Humphery was the originator of:
(a) SWOT Analysis
(b) Industry Analysis
(c) GE Model
(d) PESTLE Analysis
Answer:
(a) SWOT Analysis

10. Threat is a ……………………. while strength is a ………………………….. component.
(a) External, Internal
(b) Internal, External
(c) Internal, Internal
(d) External, External.
Answer:
(a) External, Internal

11. Expansion into new line of business is a ……………………. of the firm.
(a) Strength
(b) Weakness
(c) Opportunity
(d) Threat
Answer:
(c) Opportunity

12. In PESTLE Analysis, The word NE” stands for:
(a) Expansion
(b) Economical
(c) Environmental
(d) Ecological
Answer:
(b) Economical

13. Porter five force model is used to explain:
(a) Industry Analysis
(b) Competitive analysis
(c) Environmental Analysis
(d) None of these
Answer:
(b) Competitive analysis

14. According to Porters five force model which of these is not a competitive force for a firm-
(a) Substitute products
(b) Buyers power
(c) Suppliers power
(d) None of these
Answer:
(d) None of these

15. Which of these is not a type of environmental scanning?
(a) Passive
(b) Active
(c) Directed
(d) Specific
Answer:
(d) Specific

16. Directed scanning is a ……………………….. scanning for a specific item.
(a) Specific
(b) Active
(c) Passive
(d) None of these
Answer:
(b) Active

17. The methods of survey, focus groups, interviews are used under
(a) Primary Research
(b) Secondary Research
(c) Both (a) and (b)
(d) None
Answer:
(a) Primary Research

18. The most significant benefit of a business plan is:
(a) Lead to timely completion of goals
(b) Lays down goals and objectives
(c) Facilitate periodic review of actual results
(d) All of these
Answer:
(c) Facilitate periodic review of actual results

19. Components of a business plan includes:
(a) Goals
(b) Review
(c) Strategy
(d) All of these
Answer:
(d) All of these

20. Which of these skills is not required for a successful business:
(a) Engineering skill
(b) Management Skill
(c) Selling Skill
(d) Business Skills
Answer:
(b) Management Skill

21. …………………… and ……………………………. skills are needed for starting a business.
(a) Engineering + Selling
(b) Selling + Management
(c) Engineerin+ Business
(d) Business + Manufacturing
Answer:
(a) Engineering + Selling

22. Primary task for starting a venture is ………………………..
(a) Identification of opportunity
(b) Developing a plan
(c) Conceiving an idea
(d) Arrangement tor resources
Answer:
(a) Identification of opportunity

23. Opportunity analysis includes a business plan. The statement
(a) True
(b) False
(c) Partly true
(d) None
Answer:
(b) False

24. The word motivation has been derived from a ………………………. word which means to move”.
(a) Latin
(b) French
(c) Greek
(d) English
Answer:
(a) Latin

25. Motivation can be:
(a) Diverse
(b) Multiple
(c) Dynamic
(d) All of these
Answer:
(d) All of these

26. ……………………… is the tool of Entrepreneurship
(a) Capital
(b) Business
(c) Knowledge
(d) Innovation
Answer:
(d) Innovation

27. ………………….. is an attitude, the ability to accept changes, a flexibility of outlook.
(a) Talent
(b) Innovation
(c) Experience
(d) Creativity
Answer:
(d) Creativity

28. Which one of the following is not a component of creativity.
(a) Expertise
(b) Motivation
(c) Creative thinking skills
(d) Experience
Answer:
(d) Experience

29. ………………………………… is the process of bringing the best ideas into reality.
(a) Innovation
(b) Creativity
(c) Motivation
(d) Expertise
Answer:
(a) Innovation

30. The theory as per which an innovation creates a new demand which destroys the existing market and so on is called the theory of:
(a) Innovative destruction
(b) Creative destruction
(c) Technological destruction
(d) Penodical destruction
Answer:
(b) Creative destruction

31. The seven principles responsible for success through innovation are given by
(a) Schumpeter
(b) Bill Gates
(c) Steve Jobs
(d) None of the above
Answer:
(c) Steve Jobs

32. Which of the following is not a principle as per the 7 Principles given by Steve Jobs.
(a) Kick start your Brain
(b) Do what you love
(c) Say no to 1000 things
(d) Be Positive
Answer:
(d) Be Positive

33. ……………………….. is an innovatory process involved ¡n the creation of an economic enterprise.
(a) Management
(b) leadership
(c) Entrepreneurship
(d) Environment scanning
Answer:
(d) Environment scanning

34. …………………….. is required to anticipate and interpret the results of business innovation.
(a) Market Assessment
(b) Planning
(c) Controlling
(d) Environmental Scanning
Answer:
(d) Environmental Scanning

35. The importance of environmental scanning was first realised by
(a) Life insurance firms
(b) Banks
(c) Software firms
(d) None of the above
Answer:
(a) Life insurance firms

36. In Swot analysis ‘O’ stands for
(a) Optimising
(b) Opportunity
(c) Organisation
(d) None of the above
Answer:
(a) Life insurance firms

37. SWOT analysis was originated in the year
(a) 1975
(b) 1960
(c) 1999
(d) 1940
Answer:
(b) 1960

38. SWOT Analysis, PESTLE Analysis and Industry Analysis are techniques of
(a) Environmental Scanning
(b) Innovation
(c) Competition Analysis
(d) Marketing
Answer:
(a) Environmental Scanning

39. In PESTLE Analysis, ‘L’ stands for
(a) Long term
(b) Legal
(c) Leadership
(d) Level
Answer:
(b) Legal

40. ………………………….. is an audit of environmental influences on the business idea for using this information for decision making.
(a) PESTLE Analysis
(b) Industry Analysis
(c) SWOT Analysis
(d) None of the above
Answer:
(a) PESTLE Analysis

41. …………………. merges the external factors affecting the business with the internal factors.
(a) SWOT Analysis
(b) PESTLE Analysis
(c) Industry Analysis
(d) None of the above
Answer:
(a) SWOT Analysis

42. The theory of Industry Analysis was given by
(a) Porter
(b) Taylor
(c) Fayol
(d) Donald
Answer:
(a) Porter

43. Which of the following is not an important force in determining the competitive power as per the Porter’s Model.
(a) Supplier Power
(b) Change in technology
(c) Threat of substitution
(d) Threat of New entry
Answer:
(b) Change in technology

44. What is the second step in the Environmental Scanning Process
(a) Searching for Information Resources
(b) Identifying the Criteria by which to scan
(c) Scanning
(d) Selecting information resources to scan
Answer:
(d) Selecting information resources to scan

45. Which of the following is not a type of Environmental Scanning.
(a) Passive Scanning
(b) Active Scanning
(c) Directed Scanning
(d) Indirect Scanning
Answer:
(d) Indirect Scanning

46. What is the last step ¡n the process of Market Assessment.
(a) Posturing ideas and problem solving
(b) Designing a Plan
(c) Analysing the data
(d) Defining the problem
Answer:
(b) Designing a Plan

47. Conducting a marketing assessment helps in
(a) Entering new market
(b) Launching a new product
(c) Start a new business
(d) All of the above
Answer:
(d) All of the above

48. Which of the following statement is True?
(a) Primary research is proactively created.
(b) Secondary research is a research that has already been conducted for a specific purpose.
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(c) Both (a) and (b)

49. Which of the following is NOT an essential skill of successful business?
(a) Engineering Skills
(b) Manufacturing skills
(c) Selling skills
(d) Motivational skills
Answer:
(d) Motivational skills

50. …………………………….. refers to delivering the goods consistently and reliably with quality, service and price.
(a) Engineering Skills
(b) Manufacturing Skills
(c) Selling skills
(d) Business skills
Answer:
(b) Manufacturing Skills

51. What is the last step in the process of making a business plan?
(a Determining the resources required
(b) Development of the business plan
(c) Evaluation of opportunities
(d) Management of the resulting enterprise
Answer:
(d) Management of the resulting enterprise.

52. ………………………… are the best source of ideas for a new venture.
(a) Employees
(b) Consumers
(c) Competitors
(d) None of the above
Answer:
(b) Consumers

53. The process of setting goals, explaining the objectives arid mapping out a document to achieve these goals is called
(a) Business Planning
(b) Organising
(c) Business Assessment
(d) Industry Analysis
Answer:
(a) Business Planning

54. Which of the following statement is true?
(a) Business plans are only for start-up companies.
(b) Business plan should emphasize on ideas and concepts and not on people.
(c) Realism should prevail over-optimism
(d) Only the founding entrepreneur should prepare business plans
Answer:
(c) Realism should prevail over-optimism

55. An inner or environmental stimulus to action force or factors responsible for initiation, sustaining behaviour is called.
(a) Motivation
(b) Leadership
(c) Innovation
(d) Experience
Answer:
(a) Motivation

56. Motivation can be
(a) Diverse
(b) Multiple
(c) Dynamic
(d) All of the above
Answer:
(d) All of the above

57. Which of the following statement is not true in respect of Passive Scanning?
(a) It has been a major source of information about the external world.
(b) It is almost at an unconscious level
(c) The criterion for passive planning is specified
(d) The criteria for passive planning keeps on changing.
Answer:
(c) The criterion for passive planning is specified

58. The active scanning of an existing resource for a specific item is called as
(a) Directed Scanning
(b) Active Scanning
(c) Passive Scanning
(d) Specified Scanning
Answer:
(a) Directed Scanning

59. Which of the following is not an element of PESTLE analysis?
(a) Economics
(b) Environment
(c) Entrepreneurship
(d) Legal
Answer:
(c) Entrepreneurship

60. The belief in one’s capabilities to organize and execute the courses of action required to manage prospective situations is called as
(a) Self Efficacy
(b) Creativity
(c) Risk-taking
(d) Leadership
Answer:
(a) Self Efficacy

61. Strengths and weakness are
(a) Internal components of SWOT Analysis
(b) External Components of SWOT Analysis
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(a) Internal components of SWOT Analysis

62. Opportunities and threats are
(a) External factors of SWOT Analysis
(b) Internal Components of SWOT Analysis
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(a) External factors of SWOT Analysis

63. SWOT matrix is also called as
(a) GE Matrix
(b) lE matrix
(c) OT matrix
(d) SW matrix
Answer:
(b) lE matrix

64. Who coined the concept of “Industry Analysis”?
(a) Michael Porter
(b) HN Hansen
(c) Koontz O Donnel
(d) Joseph Schumpeter
Answer:
(a) Michael Porter:
Michael Porter coined the concept of ‘Industry Analysis. It is an important tool for environment scanning. It means to take survey of existing industry if any, before setting up on entrepreneurial endeavour.

65. As per Porter’s model, which one of the following is not a market force:
(a) Bargaining power of suppliers
(b) Technological advantage
(c) Bargaining power of customers
(d) Threats of new entrants.
Answer:
(b) Technological advantage:
Porter’s is five forces analysis assumes that there are five important forces that determine competitive power in a business situation. These are Supplies Power, Buyer Power, Competitive Rivalry, Threat of substitution and threat of new entry. Technological advantage according to porter is not a market force.

66. Which of the following is the internal factor to an organisation?
(a) Weaknesses and opportunities
(b) Strength and opportunities
(c) Strength and weaknesses
(d) Weaknesses and threats
Answer:
(c) Strength and weaknesses:
Strength and weakness are often internal to an organisation while opportunities and threats generally relate to external factors. Internal factors comprises of company’s resource analysis and strength and weakness identification.

67. ‘Age distribution’ is a term related to:
(a) Culture factors
(b) Resources factors
(c) Structure factors
(d) Social factors
Answer:
(d) Social factors:
Under PESTLE Analysis, an audit of environmental Influences on the business idea. It is an analysis of companies macro environment. Among various factors to be analysed, one of the factor is social factors which involves: health awareness, population growth rate, age distribution etc.

68. Which statement is wrong about a business plan?
(a) Preparing business plan is a forward-looking activity
(b) Preparing business plan is useful only for big organisations.
(c) Business plan assist in periodical review pf actual results.
(d) Past data is also useful in preparing business plan.
Answer:
(b) Preparing business plan is useful only for big organisations.
Business plans are for small companies as well as large. The small company can benefit from even a simple plan that is prepared in earnest. To facilitate completing the plan, an objective third party can effectively guide a business through process. Thus, the company gets benefit without the administrative burden. Hence it is incorrect to say that preparing a business plan is useful only for big organisations.

69. The general forces of environment have an impact on.
(a) All business enterprises
(b) Some specific business enterprises
(c) An individual enterprise only
(d) None of the above.
Answer:
(a) All business enterprises
General forces of environment refers to the macro forces which affects all the business enterprises in a particular industry altogether.

70. What is the result of early identification of opportunities?
(a) Gives an edge to an organisation
(b) Does not make a difference
(c) Causes high cost
(d) All of the above.
Answer:
(a) Gives an edge to an organisation
Opportunity identification and evaluation is a very difficult task yet very primary. Early identification of opportunities provides an edge to an organisation which helps them in preparation of their business plans.

71. This is not a principle of innovation’:
(a) Doing what you love
(b) Put a dent in the universe
(c) Kick start your brain
(d) All were there.
Answer:
(d) All were there:
Innovation requires fresh way of looking at things and understanding of people and an entrepreneurial willingness to take risk and to work hard. Steve Jobs has given 7 principles largely responsible for success through innovation. Which are as follows:
– Do what you love
– Put a dent in the universe
– Kick start your brain
– Sell dreams, not products
– Say no to 1.000 things
– Create insanely great experiences
– Master the message.
Thus, answer is all of the above.

72. ‘S’ in the acronym SWOT stands for:
(a) Social
(b) Strengths
(c) Scanning
(d) None
Answer:
(b) Strengths
SWOT Analysis was originated by Albert & Humphrey In 1960. SWOT is the analysis of companies:
S – Strengths
W – Weaknesses
O – Opportunities
T- Threats.
Thus, S stand for Strengths.

73. PESTLE Analysis is a part of:
(a) External environment
(b) Microenvironment
(c) Macro environment
(d) Internal and microenvironment
Answer:
(c) Macro environment:
PESTLE analysis is a scan of external macro-environment which are likely to influence the business idea and can be expressed in terms of Political, Economic, Social, Technological, Legal and Environmental factors.

74. In the acronym SWOT ‘O’ stands for:
(a) Obstacles
(b) Opportunities
(c) Openings
(d) Objections.
Answer:
(b) Opportunities:
In the acronym SWOT, ‘O’ stands for Opportunities. Entrepreneur is able to access the feasibility of his goals and objectives using the outcome of SWOT analysis and identification of the company opportunities.

75. In the acronym PESTLE, S stands for:
(a) Scientific
(b) Social
(c) Search
(d) Sound.
Answer:
(b) Social:
In the acronym PESTLE, S stands for social factors, which includes health awareness, population growth rate, age distribution, emphasis on safety, population health, education and social mobility etc.

76. Albert S. Humphrey was the originator of:
(a) SWOT Analysis
(b) Industry An&ysis
(c) GE Model
(d) BOG Matrix.
Answer:
(a) SWOT Analysis:
SWOT Analysis was originated by Albert S. Humphrey in 1 960s. SWOT analysis is as useful now as it was then. SWOT is the analysis of company’s Strengths, Weaknesses, Opportunity and threats to identify a strategic niche that the company could exploit.

77. Components of creativity do not include:
(a) Expertise
(b) Creative thinking
(c) Motivation
(d) Self-efficacy.
Answer:
(d) Self-efficacy:
Creativity is marked by the ability to create, bring into existence to invent into a new form, to produce through imaginative skill, to make to bring into existence something new. It contains only 3 components: Expertise, Creative thinking skills and motivation. Thus, creativity do not include self-efficacy.

78. Which one of the following is correct about business plan?
(a) Business plan is necessary only for big companies
(b) Business plan lays down the best growth path and strategy
(c) Business plan is substitute for strategic planning
(d) Business plan should emphasize on ideas and concepts only.
Answer:
(b) Business plan lays down the best growth path and strategy:
Business plan lays out the best growth path and strategy, as well as the rationale for the selection of the strategy over other alternatives. So the correct option is the business plan lays down the best growth path and strategy.

79. Which one of the following is not a method of environmental scanning?
(a) SWOT Analysis
(b) Industry Analysis
(c) GE Model
(d) PESTLE Analysis.
Answer:
(c) GE Model:
Entrepreneur need to carry out environmental scanning to anticipate and interpret the results that their business innovation would result in. The method of environment scanning are SWOT analysis, Industry analysis and Pestle Analysis. Thus GE Model is not a method of environment scanning.

80. Who coined the statement “sell dreams, not products?
(a) Joseph Schumpeter
(b) Jacob Viner
(c) Alfred Marshall
(d) Steve Jobs.
Answer:
(d) Steve Jobs.
To Steve Jobs, people who buy apple products are not consumers. They are the people with hopes, dreams and ambitions. He build products to help people to achieve their dreams. So the statement, “sell dreams not products” is given by Steve Jobs.

81. Expansion into new line of business is:
(a) Strength of the firm
(b) Weakness of the firm
(c) Opportunity of the firm
(d) Threat of the firm.
Answer:
(c) Opportunity of the firm:
The new line of business is an opportunity of the firm. The opportunity is identified by using input from consumers, business associates. The opportunity, must fit the personal skills and goals of the entrepreneur.

82. According to the Porter’s Five Forces Model, which one of the following is not a competitive force for a firm?
(a) Substitute products
(b) Buyer’s power
(c) Supplier’s power
(d) Unique selling proposition.
Answer:
(d) Unique selling proposition:
The five forces analysis assumes that there aro five important forces: Supplier Power, Buyer Power, competition rivalry, threat of substitution, threat of new entry. So as per Porter’s five forces model, unique selling proposition ¡s not a competitive force for a firm.

83. Primary task for running a successful venture is:
(a) Identification of opportunity
(b) Developing a plan
(c) Conceiving an idea
(d) Arrangement of resources.
Answer:
(a) Identification of opportunity:
Opportunity identification and evaluation is a very difficult task yet very primary. Opportunity must lit the personal skills and goals of the entrepreneur. It is particularly important that the entrepreneur be able to put faith, the necessary time and effort required to make the venture succeed. So the primary task for running a successful venture is Identification of opportunity.

84. In a business environment, which one of the following is not a political factor?
(a) Tax policy
(b) Employment laws
(c) Environment regulations
(d) Exchange rate.
Answer:
(d) Exchange rate
The Business Environment contains the following factors like tax policy, environmental laws, environmental regulation, political stability, etc. In Business Environment, the exchange rate is not a political factor because it is an economic factor.

85. The careful monitoring of an organisation’s internal and external environments for detecting early signs of opportunities and threats that may influence its current and future plans means –
(a) Environment Scanning
(b) Market Analysis
(c) SWOT Analysis
(d) PESTLE Analysis.
Answer:
(a) Environment Scanning:
Environment Scanning refers to the monitoring of an organisation’s external and internal environment for detecting early signs of opportunities and threats that may influence its current and future plans. In this concept, businesses gather information from the environment to achieve a sustainable competitive advantage.

86. PESTLE analysis is a useful tool for understanding the ‘big picture’ of the ……………………………… in which an entrepreneur is planning to operate –
(a) Environment
(b) Strategy
(c) Position
(d) Marketing proposition.
Answer:
(a) Environment:
PESTLE analysis is a useful tool for understanding the ‘big picture’ of the environment in which an entrepreneur is planning to operate. It helps to understand risks associated with several markets.

87. Research which is pro-actively carried out for a specific purpose is caused –
(a) Primary Research
(b) Secondary Research
(c) Active Scanning
(d) Creative Destructions.
Answer:
(a) Primary Research:
Primary research is the research created for a specific purpose. It is done through surveys, focus groups, phone interviews etc. In other words, it ¡s the first research of a particular thing.

88. Which of the following is also known as Internal-External (lE) Matrix?
(a) PESTLE Analysis
(b) Pareto Analysis
(c) SWOT Analysis
(d) Industry Analysis.
Answer:
(c) SWOT Analysis:
SWOT analysis, i.e. analysis of strengths, weakness, opportunity and threats of the business. Strength and weakness are often internal to organisation while opportunities and threats relates to external factors. For this reason, SWOT Analysis is sometimes called Internal-External Analysis and the SWOT matrix is sometimes called an lE Matrix.

89. In which type of environmental scanning, ad hoc decisions are made?
(a) Passive Scanning
(b) Active Scanning
(c) Directed Scanning
(d) None of the above.
Answer:
(a) Passive Scanning
Passive Scanning is effortless scanning which is performed continuously and helps in taking ad hoc decisions only.

90. Which one of the following is not a myth about business plans?
(a) Business plans are required only for start-up companies
(b) Business plans should be optimistic
(c) Business plans should be concise and well written
(d) Business plans should emphasize upon ideas and concepts.
Answer:
(c) Business plans should be concise and well written:
In developing a business plan, entrepreneurs generally have myths and misconceptions about the process, Among these most common are:

  • Business plans are only for straight-up companies.
  • Business plans should be as detailed as possible, the longer the plan, the better chance that the company will be financed.
  • Business plans should emphasize ideas and concepts, not people.
  • Only the founding entrepreneur should prepare business plans.
  • Optimism should prevail over reason.

Thus, business plan should be concise and well written is not a myth about business plan.

91. Who said Innovation is a means by which entrepreneurs exploit changes as an opportunity for a different business or a different service’?
(a) Steve Jobs
(b) Peter F. Drucker
(c) Joseph Schumpeter
(d) Paul H. Wilken.
Answer:
(a) Steve Jobs:
Steve Jobs said,” Innovation is a means by which entrepreneurs exploit changes as an opportunity for a different business or a different service”.

92. Which of the following are characteristics of a person with weak sense of self-efficacy?
X. Recovering quickly from setbacks and disappointments
Y. Focusing on personal failings and negative outcomes
Z. Avoiding challenging tasks
The correct option is –
(a) X and Y
(b) Y and Z
(c) X and Z
(d) X, Y and Z.
Answer:
(b) Y and Z:
Characteristics of a person with weak sense of self-efficacy are:
– Avoid challenging tasks.
– Believe that diffæult tasks and situations are beyond their capabilities.
– Focus on personal failings and negative outcomes.
– Quickly lose confidence n personal abilities. Hence, Y and Z are characteristics of person with a weak sense of self-efficacy while recovering quickly from setbacks and disappointment are the Traits of people with a strong sense of self- efficacy.

93. Environmental scanning includes-
(a) Internal
(b) External
(c) Both (a) & (b)
(d) None of the above
Answer:
(c) Both (a) & (b):
Environmental scanning refers to internal as well as external screening large amount of information for some particular bit of information. Hence, option (c) is correct

94. Principles of Steve Jobs
(i) Put a dent in the universe
(ii) Sell dreams not products
(iii) Kick start your brain
(iv) Do what you love
Write in serial order-
(a) (ii), (iv), (iii), (i)
(b) (i), (ii), (iii), (iv)
(c) (iii), (iv), (i), (ii)
(d) (iv), (i), (iii), (ii)
Answer:
(d) (iv), (i), (iii), (ii)
The Principles of Steve Jobs, the founder of Apple Mac, were as follows:

  • Do what you love.
  • Put a dent ¡n the universe.
  • Kick start your brain.
  • Sell dreams not products.

Hence, option (d) is the correct serial order.

95. Arrange the process of developing effective business plans of starting new venture in proper order
(i) Identification & evaluation of opportunity.
(ii) Determination of required resources.
(iii) Development of business plans.
(iv) Management of the resulting enterprise.
(a) (i), (ii), (iii), (iv)
(b) (iv), (i), (ii), (iii)
(c) (i), (iii), (ii), (iv)
(d) (i), (iv), (iii), (ii)
Answer:
(c) (i), (iii), (ii), (iv)
The proper order of the process of developing effective business plans of starting new venture is:

  • Identification and evaluation of opportunity.
  • Development of business plans.
  • Determination of required resources.
  • Management of the resulting enterprise.

Hence, option (c) is correct.

96. ……………………………………. is a person’s belief in his/her ability to succeed in a particular situation.
(a) Creativity
(b) Self Efficacy
(c) Leadership
(d) Risk-taking
Answer:
(b) Self Efficacy:
According to Albert Bandura, self-efficacy is a person’s belief in his /her ability to succeed in a particular situation.
Hence, option (b) is correct.

97. Which factor is most important to undertake risk-bearing?
(a) Sell – Efficacy
(b) Creativity
(c) Motivation
(d) Profit
Answer:
(d) Profit:
Profit & risk-bearing are the two sides of the same coin. In order to earn profit, the entrepreneur must take the risks regularly. Hence, profit motive is the most important factor of risk-bearing.

98. Who propounded SWOT AnaJysis?
(a) Peter F Drucker
(b) Albert S. Humphrey
(c) Joseph Schumpeter
(d) Henry Fayol
Answer:
(b) Albert S. Humphrey:
SWOT Analysis was originated by Albert S. Humphrey in 1960s. SWOT analysis is as useful now as ¡t was then. SWOT is the analysis of company’s Strengths, Weakness, Opportunity and Threats to identify a strategic niche that the company could exploit.

99. Why is environmental scanning done?
(a) For setting a vision
(b) For finding/scanning a problem
(c) For gathering the responses of the business
(d) For deriving the creativity and innovation.
Answer:
(c) For gathering the responses of the business:
Environmental scanning refers to the monitoring of an organisation’s external and internal environment. It is done to gather responses of the business from the environment and then, making adjustments in the strategies.

100. Expanded form of WSWO
(a) Strength; Weakness; Organisation; Threats
(b) Strength; Weakness; Opportunity; Threats
(c) Strength; Wasting; Opportunity; Threats
(d) Social; Weakness; Opportunity; Threats.
Answer:
(b) Strength; Weakness; Opportunity; Threats:
SWOT analysis was originated by Albert & Humphrey in 1960. SWOT is the analysis of companies:
S Strengths
W – Weaknesses
O – Opportunities
T – Threats.

101. Scanning at unconscious level is
(a) Active
(b) Passive
(c) Directed
(d) Relative
Answer:
(b) Passive:
Passive scanning refers to the effortless scanning. It is performed continuously. This scanning is done at the unconscious level.

102. Which amongst the following is not related to the Principle of Innovation by Steve Jobs?
(a) Put a dent in the universe
(b) Sell dreams not products
(c) Say no to 100 things
(d) Do what you love
Answer:
(c) Say no to 100 things
Following are the principles of Steve Jobs:

  • Do what you love
  • Put a dent in the universe
  • Kick start your brain
  • Sell dreams, not products
  • Say no to 1000 things
  • Create insanely great experience
  • Master the message.

Thus, option (c) is the correct answer.

103. Porter’s approach to the industry analysis does not include
(a) Bargaining power of suppliers
(b) Technological Advantage
(c) Bargaining power of customers
(d) Threat to new entrants.
Answer:
(b) Technological Advantage:
Porter’s five forces analysis assumes that five important forces that determine competitive power in a business situation. These are supplier’s power, buyers power, competitive rivalry, threat of substitution and threat of new entry. Thus, Technological Advantage is included in porters industry analysis.

104. The word motivation has come from the word movere which means
(a) To come
(b) To boost
(c) To go
(d) To move
Answer:
(d) To move:
The word motivation has its origin in the Latin word movere” meaning “to move”.

105. External environmental scanning includes scanning of …………………….. .
(a) Technical strength of organisation
(b) Legal Environment
(c) Manpower
(d) Resources.
Answer:
(b) Legal Environment:
In external environmental scanning, three correLated environments should be analysed:

  • immediate/industry environment
  • national environment
  • broader social-economic environment/macro-environment.
  • While analysing of macro environment Includes exploring macro-economics, social, government, legal, technological and international factors that may influence the environment.
  • Hence, external environmental scanning includes scanning of legal environment while technical strength of organisation, manpower and resources as internal factors.

106. In the word SWOT, ‘S’ stands for:
(a) Strength
(b) Strange
(c) Social
(d) Strong.
Answer:
(a) Strength:
SWOT stands for
S = Strengths
W = Weaknesses
O = Opportunities
T = Threats
In, the word SWOT ‘S’ stands for strength.

107. Early identification of opportunities:
(a) Does not makes a difference
(b) Always results in success
(c) Handles the problems without any hurdles
(d) Gives an edge to an organisation.
Answer:
(b) Always results in success:
While developing a business plan an entrepreneur should have early identification of opportunities, so that he can plan a good business and it will always result in success.

108. In the acronym PESTLE, ‘L’ stands for:
(a) Legal
(b) Logical
(c) Losses
(d) Language.
Answer:
(a) Legal
PESTLE stands for:
P = Political
E = Economic
S = Sociological
T = Technological
L = Legal
E = Environmental
So, in the acronym PESTLE, ‘L’ stands for Legal.

109. Which according to Joseph Schumpeter is not a vital function performed by the entrepreneurs?
(a) Regional development
(b) Creative destruction
(c) Challenging accepted ways of doing things
(d) Revolutionising current patterns of production.
Answer:
(b) Creative destruction:
Joseph Schumpeter believes that the concept of innovation, described as the use of an invention to create a new commercial product or service, is the key force in creating new demand and thus, new wealth. Innovation creates new demand and entrepreneurs bring the innovations to the market. This destroys the existing markets and creates new ones, which will in turn be destroyed by even newer products or services. Schumpeter calls this process, “creative destructions”.

110. When advising John of what to include in the production plan of his business plan his entrepreneurial venture, what would you not include in your commendation:
(a) Manufacturing process
(b) Product price
(c) Names of suppliers of raw materials
(d) Physical plant.
Answer:
(b) Product price:
A good business plan must be developed in order to exploit the defined opportunity. It refers to an idea of starting a business. These require management’s focus on present as well as future. The business plan should adequately include Budget and Cash flow projection. When advising for a production plan, focus should be on inputs and process, i.e. plant & machinery used, material to be used, suppliers details, process of manufacturing. Hence, while advising John, a manufacturer of what to not include in production plan is product price.

111. Which of the following is not true for social entrepreneurs?
(a) Overwhelming sense of social conscience and social responsibility.
(b) Deep desire to improve upon or fundamentally change prevailing and detrimental social-economic, educational environmental or health conditions.
(c) Fierce ambition to alter the present reality of conditions she/he deems unacceptable or inhuman.
(d) Driven to engage in certain activities because of the promise of political career.
Answer:
(d) Driven to engage in certain activities because of the promise of political career:
Social Entrepreneurship is the process of pursuing innovative solutions to social problems. Social entrepreneur takes into account a positive return to society. Social entrepreneurship typically involves social, Cultural, environmental goals. Thus, option (d) is not correct le. driven to engage in certain activities because of the promise of political career.

112. Who plays a role of an innovator?
(a) Employee
(b) Manager
(c) Investor
(d) Entrepreneur.
Answer:
(d) Entrepreneur:
Entrepreneurship has been identified with the individuals as success of enterprise depending upon imagination, vision, innovative. The entrepreneur carries Out “new combinations” thereby helping render old industry obsolete. Therefore, it can be said that creativity and innovation are two key elements of entrepreneurship. Hence, Entrepreneur plays a role of an innovator.

113. According to Porter, which one is usually the most powerful of the five competitive forces:
(a) Potential development of substitute products
(b) Bargaining power of suppliers
(c) Rivalry among competing firms
(d) Bargaining power of consumers.
Answer:
(c) Rivalry among competing firms:
According to Porter, Rivalry among competing firms is usually the most powerful of the five competitive forces. In competitive Rivalry, what is important here is the number and capability of competitors. If there are many competitors to the new product, who offer equally attractive products and services, then the product will most likely have little power in this situation, because suppliers and buyers will have alternate choices to make, in case they do not get a good deal. On the other hand, if no one else can do what you do, then you can often have tremendous strength.

114. Passive Scanning s done:
(a) Consciously or unconsciously
(b) Actively
(c) Unconsciously
(d) Consciously.
Answer:
(c) Unconsciously:
In Passive Scanning: everyone scans continually. Ongoing scanning at an almost unconscious level is passive scanning.

115. Entrepreneurship is a constant process that relies on:
(a) The ability to win over the consumer
(b) Creativity, innovation and application in the marketplace
(c) Creativity, innovation and profit
(d) Intellectual property rights.
Answer:
(b) Creativity, innovation and application in the marketplace:
Innovation is the tool of entrepreneurship. In addition both innovation and entrepreneurship demand creativity. Entrepreneurship is a constant process that relies on creativity, innovation and application in the marketplace.

116. Situation analysis involves the process of
(a) Analysing the current environment of the organisation
(b) Designing and choosing appropriate organisational strategies
(c) Evaluating the internal aspects of the organisation
(d) Analysing the external environment only.
Answer:
(b) Designing and choosing appropriate organisational strategies:
An analysis of the situation is an informal survey of what information is available in the problem area. The analysis will help define the problem and ascertain the needs for additional information. Situation analysis involves the process of designing and choosing appropriate organisational strategies.

117. ………………………. is process of creating new value:
(a) CreativIty
(b) Motivation
(c) Creative thinking
(d) Innovation
Answer:
(d) Innovation:
Innovation is the process of bringing the best ideas into reality, which cause a creative idea. It is the creation of new values. It is the process that transforms new ideas Into new value.

118. What is opportunity and threats SWOT analysis?
(a) Internal Component
(b) External Component
(c) Both Internal & External Component
(d) None.
Answer:
(b) External Component:
SWOT is the analysis of a company’s Strengths, Weakness, Opportunities, and Threats to identify a strategic niche that the company could exploit. It merges the external factors i.e. opportunities and threats identification with internal factors i.e. company’s strengths and weakness identification.

119. Who is the originator of SWOT Analysis?
(a) Alfred Marshall
(b) Jacob Viner
(c) Albert S. Humphery
(d) Schumpeter
Answer:
(c) Albert S. Humphery:
SWOT analysis was originated by Albert S Humphrey in the 1960s.

120. Principle of innovation was given by:
(a) Joseph Schumpeter
(b) HM. Honsen
(c) Steve Jobs
(d) Porter
Answer:
(c) Steve Jobs:
Steve Jobs has given 7 principles largely responsible for success through Innovation.

121. Business plan are only for start-up companies. It is:
(a) Myth
(b) Reality
(c) Both (a) and (b)
(d) None of the above
Answer:
(a) Myth :
In developing a business plan, entrepreneurs are generally found apprehensive of myths and misconceptions about the process. These are the most common myths:

  • Business plans are only for start-up companies
  • Business plans should emphasize on ideas and concepts, not people.
  • Only the founding entrepreneur should prepare business plans.
  • Optimism should prevail over realism
  • Business plans should be as detailed as possible, the longer the plan the better chance that the company will be financed. Thus, This statement is a Myth, option (a) is correct.

122. SWOT Analysis is also known as:
(a) TE Matrix
(b) OT Matrix
(c) lE Matrix
(d) UE Matrix
Answer:
(c) lE Matrix:
Strengths and weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors, for this reason the SWOT analysis is sometimes called Internal: External Analysis and also called lE matrix.

123. Political Environment includes:
(a) Legislature
(b) Ecology
(c) Demographics
(d) EXIM Policy.
Answer:
(a) Legislature:
Political environment includes legislature as one of the three political institutions ¡n shaping, directing, developing and controlling business activities.

124. Business plans for start-ups and existing business are similar, however:
(a) The focus varies slightly
(b) The plan for an existing business has no executive summary
(c) The plan is for a start-up has no executive summary
(d) The plan for an existing business does not need a section on location because the business has already got a site.
Answer:
(d) The plan for an existing business does not need a section on location because the business has already got a site: Business plans for start-ups and existing business are similar as companies at all stages of development need to prepare business plan related to financing, expansion financing merger, acquisition, overall improvement. Though existing business with respect to section on location do not need emphasis being already got a site, it do need plan to raise a necessary capital to reach next stage.

125. Environmental scanning applies to:
(a) Both external and internal environment
(b) Either external or internal environment
(c) External environment only
(d) Internal environment only.
Answer:
(a) Both external and internal environment:
Environmental scanning is careful monitoring of an organisation’s internal and external environment for detecting early signs of opportunities and threats that may influence its current and future plans.

126. When developing creative solutions to modem problems, entrepreneurs must:
(a) Remember what has worked in the past only
(b) Go beyond merely using whatever has worked in the past
(c) Limit the creative process to only profitable ventures
(d) Pay attention to limiting factors.
Answer:
(b) Go beyond merely using whatever has worked in the past:
Developing creative solutions to modern problems, entrepreneurs must go beyond merely using whatever has worked In the past as that is how he can approach problems and solutions – the capacity to put existing ideas together in new combinations.

127. Opportunities and threats are ……………………….. to the organization.
(a) Internal factors
(b) Factors not belonging
(c) Internal and external factors
(d) External factors.
Answer:
(d) External factors.
SWOT Analysis includes analysis of Strength, Weakness, Opportunities and Threats of an Organisation. Strength and Weakness are internal to an Organisation whereas Opportunities and Threats are external to an Organisation.

128. Marketing assessment does not help in:
(a) Starting a new business
(b) Finding best employees
(c) Preparation to enter new markets
(d) Launch of a new product.
Answer:
(b) Finding best employees:
Conducting a market assessment helps to:

  • Prepare to enter a new market
  • Launch a new product
  • Start a new business.

129. Observing business environmental changes on a continuous basis to ascertain the future value, is called:
(a) Monitoring
(b) Assessing
(c) Scanning
(d) Forecasting
Answer:
(c) Scanning
Environmental Scanning is careful monitoring of an organisation’s internal and external environment for detecting early signs of opportunities and threats that may influence its future and current plans.

130. AIl of the following represent barriers to creativity that entrepreneurs impose upon themselves except:
(a) Focusing on being too logical
(b) Blindly following rules
(c) Searching for more than one answer
(d) Being too practical.
Answer:
(c) Searching for more than one answer:
Generally in a business searching for more than one answer is not a barrier rather than it is a routine business analysis process.

131. A (n) ………………………………. is a written document that describes all the aspects of a business venture in a concise manner.
(a) Business Plan
(b) Operations Plan
(c) Corporate Plan
(d) Technical Model
Answer:
(a) Business Plan:
A Business plan is a written document that describes all the aspects of a business venture in a concise and systematic manner.

132. Tax jurisdiction is an example of which environmental factor?
(a) Political
(b) Technological
(c) Social
(d) Legal
Answer:
(d) Legal:
PESTLE Analysis stands for Political, Economic, Sociological, Technological, Legal and Environmental. The environment is scanned with respect to the above factors. Tax jurisdiction falls under the legal factors as these are covered under the taxation laws. Thus, option (d) is correct.

134. Which of the following is not an aim of doing PESTLE analysis?
(a) To identify the current external factors affecting an organisation
(b) To exploit the opportunities or defend againsithe threats better than the competitors would do
(c) To identify the external factors that may change n the future
(d) To identity strengths and weakness of a firm.
Answer:
(d) To identity strengths and weakness of a firm:
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental, it gives a bird’s eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan. Thus, option (d) is correct as this do not include analyzing strength and weakness.

135. Which of the following is not a strength in SWOT analysis for a business?
(a) Strong management team
(b) Strong regulations
(c) Adequate financial resources
(d) Recognised as market leader
Answer:
(d) Recognised as market leader:
SWOT analysis refers to the analysis of strengths, weakness, opportunities and threats. The strength can be better product, maintaining strong image, wide range of products etc. Thus, recognized as the market leaders is not considered as strength.

136. An entrepreneur creates new business ín the face of risk and uncertainty for the purpose of achieving profit and growth by identifying.
(a) Workers
(b) Suppliers
(c) Opportunities
(d) Jobs
Answer:
(c) Opportunities:
An entrepreneur creates new business in the face of risk and uncertainty for the purpose of achieving profits and growth by identifying the opportunities. Opportunities are a combination of different circumstances at a given time that offer a positive outcome, If taken advantage of.

137. SWOT stands for:
(a) Show Without Timing
(b) Stop Working Over Time
(c) Strength, Weakness, Opportunities and Threats
(d) Stop Working on Time
Answer:
1. (c) SWOT stands for
S = Strength
W = Weakness
O = Opportunity
T = Threats,

138. Strategic plan of a company should be:
(a) Based on projects and highest growth possibilities
(b) Based on practical and achievable projections
(c) Based on dreams
(d) Based on competitors plan only
Answer:
(b) Based on practical and achievable projections:
Strategic plan should be based on practical and achievable projections.

139. Active Scanning is done:
(a) Consciously or Unconsciously
(b) Unconsciously
(c) Consciously
(d) As per the provisions of the Companies Act, 2013
Answer:
(c) Consciously:
Active scanning involves conscious selection of continuous resources from time to time supplementing them with existing resources needed.

140. ‘Motivation’ has its origin in the:
(a) Greek word ‘motive
(b) French work ‘motia’
(c) Latin word ‘mover
(d) English word ‘motive’
Answer:
(c) Latin word ‘movere’:
Motivation is derived from the Latin word ‘Movere’.

141. Albert S. Humphery was the Originator of:
(a) SWOT Analysis
(b) Industry Analysis
(c) GE Model
(d) BCG Matrix
Answer:
(a) SWOT Analysis:
Albert S. Humphrey was the originator of SWOT analysis.

142. Components of creativity do not include:
(a) Expertise
(b) Creative Thinking
(c) Motivation
(d) Self Efficacy
Answer:
(d) Self Efficacy:
Creative Thinking, Motivation, Expertise come under components of creativity but self-efficacy does not come under components of creativity.

143. Which one of the following is not a method of environmental scanning?
(a) SWOT Analysis
(b) Industry Analysis
(c) GE Model
(d) PESTLE Analysis
Answer:
(c) GE Model:
SWOT Analysis, Industry Analysis and PESTLE Analysis all are methods of Environmental Scanning. GE model is not the method of Environment Scanning.

144. According to the Porter’s five forces model, which one of the following is not a competitive force for a firm?
(a) Substitute products
(b) Buyer’s power
(c) Supplier’s power
(d) Unique selling proposition
Answer:
(d) Unique selling proposition:
Unique selling proposition does not come under Porter’s five forces model and it does not constitute competitive force of firm.

145. Primary task for running a successful venture is:
(a) Identification of opportunity
(b) Developing a plan
(c) Conceiving an idea
(d) Arrangement of resources
Answer:
(c) Conceiving an idea:
Business or any venture can not start without any idea. If any business or venture starts without conceiving any idea then it can lead into failure but business or work start after conceiving idea lead into success.

146. SWOT Analysis also called:
(a) lE Matrix
(b) lE Analysis
(c) OT Matrix
(d) All of these
Answer:
(a) lE Matrix:
SWOT analysis is also called lE Matrix: Internal and External Matrix.

147. Media is a factor
(a) Internal factor
(b) External Factor
(c) Both (a) and (b)
(d) None of these
Answer:
(b) External Factor:
Media is a External factor or force in business that is beyond the control of an organisation.

148. Social Impact Bonds were launched in:
(a) UK
(b) USA
(c) India
(d) Australia.
Answer:
(a) UK:
The social impact bond, deserves special notice for its ability to help governments fund infrastructure and services, especially as public budgets are cut and municipal bond markets are stressed. Launched in the UK ¡ri 2010, this typo of bond is sold to private investors who are paid a returns only it the public project succeeds.

149. …………………….. is the form of pooling technique.
(a) Microfinance
(b) Small funding
(c) None of these
(d) Budgeting
Answer:
(a) Microfinance:
The pooling model has spread globally, with innovators such as IFMR Trust in Chennai, engaged in the securitization and structured finance of microfinance loan portfolios in which they retain an investment share.

CS Foundation Business Management Ethics and Entrepreneurship Notes

Entrepreneurship – Business Management Ethics and Entrepreneurship Notes

Entrepreneurship – Business Management Ethics and Entrepreneurship Notes

Introduction:

  • The concept of entrepreneurship was first established in 1700s.
  • Cantillon referred entrepreneurs as one of the classes of landowners.
  • Entrepreneurship originated in middle ages and it was applied to “the man incharge of the great architectural works: castles and fortification, public buildings, abbeys and cathedrals”.
  • The Merriam Webster dictionary defined it as ‘one who organizes, manages and assumes the risks of a business or enterprise.’
  • In business context – it means to undertake a business activity or simply to start a business.
  • Entrepreneurship in simple words is defined as the process of taking risk and earning profit.
  • The word entrepreneur is derived from the french word “entreprendre” which means to “undertake”.
  • Entrepreneurship is central for enhancing the economic opportunity of nations.

Entrepreneurship involves the following key elements.

  • Innovation
  • Risk-Taking
  • Vision
  • Organising skills

Entrepreneurship is a risk-taking factor which is responsible for the end result in the form of profit or loss.

In the 20th century, an economist Joseph Schumpeter viewed entrepreneurship as a force of “creative destruction”

The entrepreneurial motivation is one of the most important factors which accelerates the pace of economic development by bringing the people to undertake risk-bearing activities.

The entrepreneurship is essentially a creative activity or it is an innovative function. – Schumpeter

Entrepreneur is one who searches for change, responds to it, and exploits those changes as an opportunity. – Peter Drucker

Entrepreneurship is neither a science nor an art. It is a practice. It is knowledge-based. Knowledge in entrepreneurship is a means to an end, that is, by the practice” – Peter Drucker

Characteristics of Entrepreneurship:

  • It is a continuous process.
  • It is essential for economic development.
  • It involves taking risk and giving result.
  • It generates self-employment.
  • It can be regarded as a factor of production.
  • It is an innovative activity.
  • Create awareness among people about economic activity.
  • It creates human relation.

Traits/ Qualities of an entrepreneur:

  • He takes risk to achieve goals
  • He has a creative and innovative thinking
  • He owns his enterprise
  • He possess a sense of leadership
  • He is independent and takes personal responsibility
  • He has the ability of converting an idea into an opportunity
  • He is future-oriented.
  • Dissatisfied with the routine activity
  • He is innovative.

Entrepreneur:

  • Entrepreneurship is a process whereas entrepreneur is a person performing the process.
  • Entrepreneur is a trench word which means done who undertakes an endeavour”
  • An entrepreneur possesses creativity which means continuous learning questioning and thinking out of the box.

There is a direct relationship between your efforts and your income if you are an entrepreneur i.e. if your efforts are more then your reward should be more too.

Advantages of being an entrepreneur:

  • Can choose your favourite job i.e. doing what you love
  • Independence and freedom
  • It provides recognition.
  • It gives a feeling of self satisfaction
  • The income earned will have direct relationship with the efforts that are put i.e. more effort more reward.
  • An entrepreneur is his own boss.
  • An entrepreneur can bring many innovations in the organization which is the need of the hour.

Characteristics of an Entrepreneur:
(i) Mental Ability:
He must have creative thinking and ability to anticipate changes.

(ii) Business Secrecy:
He should guard his business secrets.

(iii) Human relations:
He should maintain good relations with his customers, employees etc.

(iv) Clear objectives:
He should have clear objectives about the nature of business.

(v) Communication skills:
He should have good communication skills.

Advantages of Entrepreneurship:

  1. An entrepreneur does what he loves and thus works with passion to succeed.
  2. Entrepreneurship allows a degree of freedom and independence.
  3. Entrepreneur has the feeling of recognition and self-fulfilment.
  4. Entrepreneurship offers a greater possibility for achieving significant financial rewards.
  5. Entrepreneurship are their own boss.
  6. Entrepreneurship leads to innovation and helps the local economy.

Types of entrepreneurs:

  • Idealist: He works on the basis of ideas formulated by him.
  • Optimizer: He has an optimistic approach and is satisfied with whatever he has.(Personal satisfaction of being a business owner.)
  • Hard workers: They believe in working hard to get the gains.
  • Sustainers: They maintain a proper balance between work and personal life. Apart from work, they need time for personal life.
  • Improvers: Their aim is to improve the society with their work. Their motto is to work in a manner which is morally and ethically correct so as to contribute to noble cause.
  • Adviser: These entrepreneurs have a habit of advising and pleasing their customers. They have a customer-oriented business.
  • Superstar: These types of entrepreneurs wins the heart of the people through their overwhelming personality and charisma.
  • Artiste: These are creativity oriented entrepreneurs. Their business activity is centered around creativity.
  • Visionary: These types of entrepreneurs see a dream and then put their best efforts to make that dream come true.
  • Analyst: These are expert at problem-solving techniques and making analyses.
  • Fireball: Such entrepreneurs are full of energy and enthusiasm but are too impulsive at times which leads to wrong decision making.
  • Juggler’s: These types of entrepreneurs love to take chances in business. They believe that they can handle every situation.
  • Hero: These entrepreneurs are great leaders. They motivate and inspire people around them.
  • Healer: These are cool and calm by nature and tries to bring about harmony in the organisation.

Difference between an Entrepreneur and a Manager

Entrepreneur Manager
(i) An entrepreneur conceives an idea and establishes the business with that idea A manager provides his services to the business established by the entrepreneur.
(ii) An entrepreneur takes risks arid gets the rewards A manager does not take risk and gets a fixed remuneration.
(iii) The main objective of the entrepreneur is to do innovations in the organization. The objective of manager is to supervise and manage the existing work.
(iv) As entrepreneur is himself the owner, he does not has the motive of deceiving the organization. Managers may sometimes be induced to involve in fraud or thefts.
(v) An entrepreneur becomes an entrepreneur by his qualities I.e. innovative thinking, risk-bearing etc. A manager becomes a manager by his qualifications I.e. education and degrees.
(vi) Survival and achieving long term growth. Short-term to meet deadlines set by top management.
(vii) Delegated to one self. Delegated by top management.

Nutshell:
An entrepreneur could be a manager but a manager cannot be an entrepreneur”.

Entrepreneurship:

  • Intrapreneurship is a process by which a person win the organization takes responsibility to turn an idea into opportunity.
  • This word was coined by Gifford Pinchot author of the book Intrapreneuring” written in 1985.
  • intrapreneurship = Entrepreneurship + Management skills
  • In simple words, it is the practice of entrepreneurship by the employees within an organization i.e. when manager acts as an entrepreneur it is known as Intrapreneurship.

Characteristics:

  • It Involves motivating the managers to take responsibility and act as entrepreneurs.
  • Such tasks are funded and have a support of the main organisation.
  • Creates wealth both for the manager as well as for the organization.
  • There are lesser chances of failure due to backing from the headquarters.

Difference between Entrepreneur end Intrapreneur:

Entrepreneur Intrapreneur
(i) He is the owner of the business. He is the employee of the business, generally the manager.
(ii) He likes innovations and develops new ideas for the organization. He does innovations not in the organization but for a particular product or service.
(iii) An entrepreneur shows his skills outside the organization by grabbing opportunities in the market. An intrapreneur shows all skills, creativity etc. within the organization. He is an inside entrepreneur.
(iv) Risk is high. Risk is moderate.

Nutshell: Not every business needs an entrepreneur but every business needs an Intrapreneur.

Nature of Management and its Process MCQ Questions

1. The word Entrepreneur has a ……………………… origin.
(a) Latin
(b) French
(c) German
(d) Indian
Answer:
(b) French

2. The word “ entreprendre’ means:
(a) to undertake
(b) to manage
(c) to enter into business
(d) None of these
Answer:
(a) to undertake

3. Anybody who wants to work for himself is known as-
(a) Entrepreneur
(b) Intrapreneur
(c) Manager
(d) None
Answer:
(a) Entrepreneur

4. Which of these is not an element of entrepreneurship?
(a) Innovation
(b) Risk-taking
(c) Profit-making
(d) Visionary
Answer:
(c) Profit-making

5. Who viewed entrepreneurship as a force of” creative destruction”
(a) Schumpeter
(b) Cantillon
(c) Peter Drucker
(d) None of these
Answer:
(a) Schumpeter

6. Entrepreneurship is neither a science nor an art was expressed by:
(a) Schumpeter
(b) Peter Drucker
(c) Charles Darwin
(d) Adam Smith
Answer:
(b) Peter Drucker

7. Entrepreneurship is a continuous process. State true or false:
(a) True
(b) False
(c) Partly true
(d) None
Answer:
(a) True

8. Which of these is not a trait of an entrepreneur?
(a) Innovative
(b) Future oriented
(c) Independent
(d) None of these.
Answer:
(d) None of these.

9. ………………… refers to the strong desire to achieve success.
(a) Dedication
(b) Determination
(c) Passion
(d) Self-confidence
Answer:
(b) Determination

10. A combination of common sense with knowledge and experience is termed as
(a) Leadership
(b) Flexibility
(c) Smart
(d) None of these.
Answer:
(c) Smart

11. An entrepreneur should have which of the following feature:
(a) Mental ability
(b) Communication skills
(c) Clear objectives
(d) All of these
Answer:
(d) All of these

12. ……………………. type of entrepreneurs manage both work and personal life together.
(a) Hero
(b) Healer
(c) Sustainer
(d) Artiste
Answer:
(c) Sustainer

13. One who nurtures the business by bringing harmony in the organization is known as-
(a) Superstar
(b) Healer
(c) Sustainers
(d) Advisers
Answer:
(b) Healer

14. An entrepreneur who is always ready to take chances is called ……………………………. .
(a) Superstar
(b) Hero
(c) Juggler
(d) Fireball
Answer:
(c) Juggler

15. A manager can be an entrepreneur but an entrepreneur cannot be a manager. The above statement is:
(a) True
(b) False
(c) Partly true
(d) None
Answer:
(b) False

16. When a manager becomes an entrepreneur he is called:
(a) Intrapreneur
(b) Sustainer
(c) Manager only
(d) None
Answer:
(a) Intrapreneur

17. …………………………………. is a method for the companies to reinvest themselves and improve performance.
(a) Entrepreneurship
(b) Intrapreneurship
(c) Management
(d) None
Answer:
(b) Intrapreneurship

18. Every business needs an ………………………. .
(a) Entrepreneur
(b) Intrapreneur
(c) Both
(d) None
Answer:
(b) Intrapreneur

19. One who is never dull in terms of enthusiasm, energy and attitude is …………………………….. .
(a) Fireball
(b) Juggler
(c) Superstar
(d) Hard worker
Answer:
(a) Fireball

20. Who can become an intrapreneur?
(a) Manager
(b) Employee
(c) Outsider skilled person
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)

21. In which year the concept of entrepreneurship was first established.
(a) 1700
(b) 1900
(c) 1990
(d) 1600
Answer:
(a) 1700

22. Who referred entrepreneurs as one of the classes of ‘land owners’.
(a) Peter Drucker
(b) Henry Fayol
(c) Cantillon
(d) None of these
Answer:
(c) Cantillon

23. According to whom, entrepreneurship is a Practice.
(a) Peter F Drucker
(b) A Schumpeter
(c) Cantillon
(d) None of these
Answer:
(a) Peter F Drucker

24. ‘A large income is the best recipe for happiness ever heard of ”.
(a) Napoleon Hill
(b) Maslow
(c) June Austen
(d) Hilaire Belloc
Answer:
(c) June Austen

25. Intrapreneurship is a combination of entrepreneurship and.
(a) Management skill
(b) Innovative skill
(c) Profit-making
(d) Risk-taking
Answer:
(a) Management skill

26. ………………………………. is devoted to the Promotion of any noble cause.
(a) Artiste
(b) Idealist
(c) Improver
(d) Visionary
Answer:
(c) Improver

27. “ Your real boss is the one who walks around under your hat”.
(a) Maslow
(b) Napoleon Hill
(c) Hilaire Belloc
(d) None of these
Answer:
(b) Napoleon Hill

28. The word intrapreneur was coined by Gifford Pinchot author of the book “Intrapreneuring” written in ………………… .
(a) 1986
(b) 1977
(c) 1985
(d) 1983
Answer:
(c) 1985

29. In the 20th century, an economist Joseph Schumpeter viewed entrepreneurship as a force of …………………….. .
(a) Risk-taking
(b) Profit-making
(c) Creative destruction
(d) Innovative skill
Answer:
(c) Creative destruction

30. Which of the following is not a key element of Entrepreneurship?
(a) Innovation
(b) Vision
(c) Motivation
(d) Risk-taking
Answer:
(c) Motivation

31. A person who searches for change, responds to it and exploits those changes as an opportunity is called?
(a) Manager
(b) Leader
(c) Entrepreneur
(d) Explorer
Answer:
(c) Entrepreneur

32. Which of the following is not a trait of an Entrepreneur?
(a) Innovative
(b) Satisfied with the routine activity
(c) Moderate risk taker
(d) Works under uncertainty
Answer:
(b) Satisfied with the routine activity

33. For a true entrepreneur, “success is the motivator and money is the ……………………. .
(a) Reward
(b) Objective
(c) Goal
(d) Need
Answer:
(a) Reward

34. Which of the following is not a very essential characteristic of an Entrepreneur?
(a) Mental Ability
(b) Communication Ability
(c) Clear objectives
(d) Pervasive
Answer:
(d) Pervasive

35. The most common type of Entrepreneur is
(a) Improver
(b) Idealist
(c) Super Star
(d) Hard workers
Answer:
(b) Idealist

36. The Entrepreneur which believes in consumer sovereignty is called.
(a) Improver
(b) Advisor
(c) Super Star
(d) Artiste
Answer:
(b) Advisor

37. The Entrepreneur who works for a noble cause, morally and ethically is called
(a) Optimizer
(b) Idealist
(c) Super Star
(d) Improver
Answer:
(d) Improver

38. Which of the following is not a type of Entrepreneur?
(a) Sustainer
(b) Improver
(c) Explorer
(d) Fireball
Answer:
(c) Explorer

39. The entrepreneur who are full of life, optimist and energetic are called as
(a) Jugglers
(b) Hero
(c) Healer
(d) Fireball
Answer:
(d) Fireball

40. The entrepreneur who makes an effort to manage everything themselves are called.
(a) Jugglers
(b) Fireball
(c) Hero
(d) Hard workers
Answer:
(a) Jugglers

41. The entrepreneur having good leadership skills and capability to inspire others are called.
(a) Hero
(b) Healer
(c) Artiste
(d) SuperStar
Answer:
(a) Hero

42. An Entrepreneur who has a charisma, charm and high energy and uses them to build his own personal brand is called.
(a) Hero
(b) Fireball
(c) Super Star
(d) Healer
Answer:
(c) Super Star.

43. The entrepreneur who makes a scenario planning to pre-prepare for any kind of turmoil is called.
(a) Healer
(b) Artiste
(c) Idealist
(d) Optimizer
Answer:
(a) Healer.

44. Which of the following statement is False?
(a) An entrepreneur develops new plans and ideas and the manager implements them.
(b) A manager faces more income uncertainties than entrepreneur
(c) The areas of required qualification for a manager and entrepreneurship are quite different.
(d) An entrepreneur can be a manager but a manager can not be an entrepreneur
Answer:
(b) A manager faces more income uncertainties than entrepreneur.

45. An individual employed by an organization for remuneration based on the financial results of the organization is called
(a) Manager
(b) Entrepreneur
(c) Employer
(d) Intrapreneur
Answer:
(d) Intrapreneur.

46. Which of the following statement is not true? ‘
(a) Intrapreneur is the inside entrepreneur
(b) Not every business needs an Intrapreneur but every business needs an Entrepreneur
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(b) Not every business needs an Intrapreneur but every business needs an Entrepreneur.

47. Which of the following statement is true?
(a) Entrepreneurs are found everywhere whereas intrapreneurs are to be encouraged within the organization.
(b) Intrapreneur have to face rivalry within the organization
(c) Resources are readily available to an intrapreneur
(d) All of the above.
Answer:
(d) All of the above.

48. The prime focus of an Entrepreneur is to
(a) To get traditional corporate rewards
(b) To get an independent chance and opportunity to make more money
(c) To move towards organizational and personal success
(d) None of the above.
Answer:
(b) To get an independent chance and opportunity to make more money.

49. The basic skills required for an Intrapreneur are
(a) Leadership, communication skills, planning etc.
(b) Creative, innovative, risk-taking, etc.
(c) Blend of Managerial and Entrepreneurial skills
(d) None of the above
Answer:
(c) Blend of Managerial and Entrepreneurial skills.

50. Qualities like leadership, organizing, planning etc. are the basic requirements of a
(a) Manager
(b) Employee
(c) Entrepreneur
(d) Intrapreneur
Answer:
(a) Manager.

51. A person within a large corporation who takes direct responsibility for turning an idea into profitable finished product through assertive risk-taking is called.
(a) Entrepreneur
(b) Manager
(c) Intrapreneur
(d) none of the above
Answer:
(c) Intrapreneur.

52. The practice of entrepreneurship by the employees is termed as
(a) Management
(b) Administration
(c) Intrapreneurship
(d) None of the above
Answer:
(c) Intrapreneurship.

53. The term Intrapreneurship was first coined by
(a) Gifford Pinchot
(b) Steve jobs
(c) Cantillon
(d) Taylor
Answer:
(a) Gifford Pinchot.

54. Which of the following is not a characteristic of Intrapreneurship
(a) It cultivates entrepreneurial Skills and Culture
(b) The chances of failure are high as compared to start-ups
(c) It creates wealth for the headquarters
(d) It helps in expanding the business portfolio.
Answer:
(b) The chances of failure are high as compared to startups.

55. An employee who is given the required support and resources to create new product or services is known as:
(a) Auditor
(b) Intrapreneur
(c) Entrepreneur
(d) None of the above.
Answer:
(b) Intrapreneur:
Intrapreneur refers to a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.
Thus, an employee who is given the required support and resources to create new products or services is known as an intrapreneur.

56. Which one of the following is not an element of entrepreneurship?
(a) Innovation
(b) Organisation skill
(c) Risk averseness
(d) Vision
Answer:
(c) Risk averseness:
Entrepreneurship is defined as the process of taking risk and earning profit. Entrepreneurship is central for enhancing the economic opportunity of nation.
Entrepreneurship involves the following key elements.

  • Innovation
  • Risk-taking
  • Vision
  • Organising skills

Hence, risk awareness is not an element of entrepreneurship.

57. What is the nature of entrepreneurship?
(a) An economic activity
(b) A cultural activity
(c) A political activity
(d) A technological process
Answer:
(a) An economic activity:
Entrepreneurship is defined as the process of making money, earning profits and increasing the wealth. While possessing characteristics such as risk-taking, management, leadership and innovation. It is a theory of evolution of economic activities. It is a continuous process of an ingredient of economic development. It creates awareness among people about economic activity and generates self-employment and additional employment.

58. The key element of entrepreneurship is:
(a) Management Skills
(b) Capital
(c) Creativity and innovation
(d) Business acquaintances
Answer:
(c) Creativity and innovation:
Entrepreneurship has been identified by the individuals as success of enterprise depending upon imagination, vision, innovation. The entrepreneur carries out “new combinations” thereby helping render old industry obsolete. Therefore, it can be said that creativity and innovation are the key elements of entrepreneurship.

59. For, being an entrepreneur, risk-bearing is:
(a) The only factor
(b) One of the factor
(c) The least factor
(d) Not a factor.
Answer:
(b) One of the factor:
Successful entrepreneurs are those who make better judgments about changes in the market and who cope up with risk and uncertainty better than these counterparts. Therefore for being entrepreneur, risk-bearing is one of the factor along with other important factors.

60. Intrapreneur faces competition from
(a) Entrepreneur
(b) Managers
(c) Employees within the organisation
(d) All of the above.
Answer:
(c) Employees within the organisation:
One of key point of difference between the entrepreneurs and intrapreneurs is that while entrepreneurs have competition with other entrepreneurs outside the organisation, entrepreneurs have competition with employees within the organisation since intrapreneur is himself one of the employees.

61. Entrepreneur is a person:
(a) Having high aptitude
(b) Who wants to work for himself
(c) Ready to bear risk for profit in new venture
(d) All of the above.
Answer:
(d) All of the above.
Entrepreneur is a person of very high aptitude who pioneers changes, possessing characteristics found in only a very small fraction of population. Anyone who wants to work for himself is considered to be an entrepreneur. To some economists, entrepreneur is one who is willing to bear the risk of a new venture, if there is a significant chance for profit.

62. According to Peter Drucker, entrepreneurship is:
(a) A science
(b) An art
(c) Both a science and an art
(d) Neither a science nor an art.
Answer:
(d) Neither a science nor an art.
According to business expert Peter Drucker “Entrepreneurship is neither a science nor an art. It is a practice. It is knowledge-based. Knowledge in entrepreneurship is a means to an end, that is by the practice”.

63. Which of the following is not true about an entrepreneur?
(a) An entrepreneur is creative, innovative and risk-taker
(b) An entrepreneur is independent
(c) An entrepreneur is not future-oriented
(d) None of the above
Answer:
(c) An entrepreneur is not future-oriented:
Entrepreneur carries out “new combinations” thereby helping under old industries obsolete. Entrepreneurship allows undertaking the activities of one’s choice and comfort which offers independence and freedom in return.

64. The risk borne by entrepreneurs is
(a) Less
(b) Extreme
(c) Moderate
(d) None of the above.
Answer:
(c) Moderate:
Entrepreneur is a person who develops and owns his enterprise. One of his traits is that he is a moderate risk taker and works under uncertainty for achieving the goal. Thus, it can be said that risk borne by entrepreneurs is moderate.

65. The word ‘Entrepreneur’ has its origin from:
(a) Latin word
(b) French word
(c) German word
(d) Indian word.
Answer:
(b) French word:
The word entrepreneur has a French origin. It was originated during the middle ages when the term entrepreneur was applied to the man in charge of the great architectural works. It is derived from the french word “entrependre” which means “to undertake.”

66. Which one of the following is not the characteristic of entrepreneurship?
(a) Innovation
(b) Organising skills
(c) Indifferent approach
(d) Risk-taking.
Answer:
(c) Indifferent approach:
Entrepreneurship in simple words is defined as process of taking risk and earning profit. Entrepreneurship involves the following key elements- innovation, risk-taking, vision and organising skill. So among the following, in different approach is not a characteristic of entrepreneur.

67. Which one of the following is true about investment cost per job?
(a) Investment costs per job are high in large and medium industries
(b) Investment costs per job are high in small scale enterprises
(c) Investment costs per job are high in micro-enterprises
(d) Investment costs per job are higher in micro-enterprises than small scale enterprises.
Answer:
(a) Investment costs per job are high in large and medium industries:
Investment cost per job are high in large and medium industries. Investment made into large and medium industries make better profit than the Other small scale enterprises. Investment refers to investment in plant and machinery of an organisation.

68. Cantillon referred entrepreneurs as one of the classes of …………………………. who are financially independent aristocrats.
(a) Landowners
(b) Employees
(c) Entrepreneurs
(d) Investors.
Answer:
(a) Landowners:
Cantillon referred entrepreneurs as one of the classes of landowners who are financially independent aristocrats. For him, individuals who purchased a good at a certain price used that good to produce a product and then sold that product at an uncertain price could be considered entrepreneurs.

69. One who with his charm establishes and manages business to take it to unimaginable heights is known as …………………………. entrepreneur.
(a) Superstar
(b) Idealist
(c) Artist
(d) Sustainer.
Answer:
(a) Superstar
There are various types of entrepreneurs, few of them are:
Superstar – These types of entrepreneur wins the heart of the people through their overwhelming personality and charisma. Idealist works on the basis of ideas formulated by him.

Artist are Creativity oriented entrepreneurs. Their business activity is centred around creativity. Sustainer maintains a proper balance between work and personal life. Hence, superstar is the one who with his claim establishes and manages business to take it to unimaginable heights.

70. ‘The entrepreneurship is essentially a creative activity or it is an innovative function” is said by —
(a) Schumpeter
(b) Kelsen
(c) Henry Maine
(d) Peter Drucker.
Answer:
(a) Schumpeter:
The given statement was said by Schumpeter –

71. A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation, is an –
(a) Intrapreneur
(b) Entrepreneur
(c) Manager
(d) Improver.
Answer:
(a) Intrapreneur:
Intrapreneurs are the one who are engaged within the confines of an organisation. They are primarily focused to be creative and to move towards organisational and personal successes. They takes responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.

72. Which of the following is a characteristic of intrapreneurship?
X. Intrapreneurship is a risk-taking factor, which is responsible for the end result in the form of profit or loss
Y. It cultivates entrepreneurial skills
Z. Its followers are called managers.
Correct option is –
(a) X and Y
(b) Y and Z
(c) X and Z
(d) X, Y and Z.
Answer:
(b) Y and Z
Following are characteristics of intrapreneurship –

  • It promotes managers to be more innovative.
  • These projects are funded by large business organisations.
  • Managers are motivated to accept more risk.
  • Managers follow intrapreneurship.
  • Chances of failure are low.
  • It cultivates entrepreneurial skill.

Thus, answer is Y and Z.

73. Who among the following propounded the concept of ‘creative destructions’?
(a) Steve Jobs
(b) Albert S Humphrey
(c) Joseph Schumpeter
(d) Cantillon.
Answer:
(c) Joseph Schumpeter
Joseph Schumpeter focused how the entrepreneur’s drive for innovation and improvement which creates upheaval and change. He viewed entrepreneurship as a force of “ creative destruction”. The entrepreneurs carries out “new combinations”, thereby helping sender old industries obsolete.

74. Which of the following is feature of juggler?
(a) They have a habit of advising their customers.
(b) They are creatively oriented entrepreneurs.
(c) They believe in working hard to get the wins.
(d) They love to take chances in business.
Answer:
(d) They love to take chances in business.
A juggler means entertainer who keeps several plates, knives, balls or other objects in the air at once by tossing & catching them. The juggler entrepreneur likes the concept that the businessman gives them a chance in business to handle everything themselves.

75. Who coined the word Intrapreneurship?
(a) Gifford Pinchot
(b) Peter Drucker
(c) Steve jobs
(d) Joseph Schumpeter
Answer:
(a) Gifford Pinchot:
The word ‘intrapreneurship’ was coined by the management consultant Gifford Pinchot, author of the 1985 book entitled Intrapreneuring. Hence, option (a) is correct.

76. Which of the following is one of the key elements of entrepreneurship?
(a) Motivation
(b) Mission
(c) Innovation
(d) Supervision
Answer:
(c) Innovation:
Four key elements of Entrepreneurship are:

  1. Innovation
  2. Risk-taking
  3. Vision
  4. Organising skills.

Hence, innovation is the one of the Key elements of entrepreneurship.

77. Which type of entrepreneur is lead by charisma, charm & high energy?
(a) Superstar
(b) Fireball
(c) Juggler
(d) Hero
Answer:
(a) Superstar:
Superstar is lead by charisma, charm & high energy. An entrepreneur like this has an overwhelming personality which works in his favour, so does in the favour of business.

78. …………………. means to undertake a business activity or to start one’s own business.
(a) Intrapreneurship
(b) Entrepreneurship
(c) Leadership
(d) Both (a) & (b)
Answer:
(b) Entrepreneurship:
The word entrepreneur has a french origin. It is derived from the French word entreprendre which means to ‘undertake’. In a business context, it means to undertake a business activity or to simply start a new business.

79. The basic skills required for an intrapreneur are-
(a) Leadership, communication, planning
(b) Creativity, innovation, risk-taking
(c) Blend of managerial & entrepreneurial skill
(d) None of the above.
Answer:
(c) Blend of managerial & entrepreneurial skill:
Intrapreneurship is a combination of entrepreneurship & management skills. In simple words, intrapreneurship is the practice of entrepreneurship by employees within an organisation.
Hence, it is a blend of managerial & entrepreneurship skills.

80. The word ‘entreprendre’ means:
(a) To undertake
(b) To manage
(c) To enter into business
(d) None of these.
Answer:
(a) To undertake:
The word entrepreneur is derived from the French word “entreprendre”, which means “to undertake.”
Hence, option (a) is correct.

81. In which year the concept of the entrepreneurship was first established?
(a) 1700
(b) 1900
(c) 1990
(d) 1600
Answer:
(a) 1700
The concept of entrepreneur was first established in 1790 & the meaning was evolved ever since. Hence, option (a) is correct.

82. Cantillon referred Entrepreneurs one of the
(a) Classes of landowners
(b) Classes of employees
(c) Classes of entrepreneurs
(d) Classes of investors.
Answer:
(a) Classes of landowners:
Cantillon referred entrepreneurs as one of the classes of landowners who are financially independent aristocrats. For him, individuals who purchased a good at a certain price used that good to produce a product and then, sold that product at an uncertain price could be considered ‘entrepreneurs’.

83. What is the remuneration of Entrepreneur?
(a) Love
(b) Profit
(c) Money
(d) Interest
Answer:
(b) Profit:
Entrepreneurship is defined as the process of taking risk and earning profit. Thus profit is the remuneration of entrepreneur.

84. Which amongst the following is incorrect regarding entrepreneurship –
(a) Entrepreneurship is derived from French word ‘entreprendre’.
(b) Entrepreneurship is related with innovative thinking.
(c) Entrepreneurship is related with organising skills.
(d) Entrepreneurship is mainly related with profit-making.
Answer:
(d) Entrepreneurship is mainly related with profit-making:
Entrepreneurship involves the following key elements:

  • Innovation
  • Risk-Taking
  • Vision
  • Organising Skills

Entrepreneurship is a risk-taking factor which is responsible for the end result in the form of profit or loss. Thus, entrepreneurship is not Mainly related with profit Making.

85. The word entrepreneur is derived from the french word ……………….. .
(a) Intraprenure
(b) Entreprendre
(c) Intraprendre
(d) Entrepreneure
Answer:
(b) Entreprendre:
The word entrepreneur has a French origin. It was originated during the middle ages when the term entrepreneur was applied to the man in charge of the great architecture. It is derived from the French word “entrepreneur” which means “to undertake”.

86. Which type of entrepreneur is full of life, energy and optimism.
(a) Fireball
(b) Healer
(c) Juggler
(d) Optimiser
Answer:
(a) Fireball:
Fireball are types of entrepreneurs which are full of energy and enthusiasm but are too impulsive at times which leads to wrong decision making.

87. Which of the following statement is not true?
(a) Intrapreneur is the inside entrepreneur
(b) Not every business needs an intrapreneur but every business needs an entrepreneur
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(b) Not every business needs an intrapreneur but every business needs an entrepreneur:
Intrapreneurship is a process by which a person within the organisation takes responsibility to turn an idea into opportunity.
Intrapreneurship = Entrepreneurship + Management Thus, not every business needs an entrepreneur but every business needs an intrapreneur, Thus, option (b) is correct.

88. Which of the following is not a type of entrepreneur?
(a) Sustainer
(b) Explorer
(c) Improver
(d) Fireball
Answer:
(b) Explorer:
Following are types of entrepreneurs:

  • Idealist
  • Optimiser
  • Hard workers
  • Sustainers
  • Improver
  • Advisor
  • Superstar
  • Artiste
  • Visionary
  • Analyst
  • Fireball
  • Jugglers
  • Hero
  • Healer.

Thus, explorer is not a type of entrepreneur.

89. Who among the following realises his dreams?
(a) Investor
(b) Manager
(c) Entrepreneur
(d) Employee.
Answer:
(c) Entrepreneur
Normally, all the businesses are founded keeping a vision in mind. The founding members (i.e. entrepreneurs) who visualize a dream and materialize the same are known as visionary (a type of entrepreneur). These are thinkers who pursue to make their vision come true. Thus, we can say that an entrepreneur is a person who realises his dreams.

90. Generally micro-entrepreneurs operate:
(a) For their choice
(b) For their need
(c) For their luxury
(d) None applicable.
Answer:
(a) For their choice:
Micro-enterprises is considered a small business employing 10 people or less and have a capital asset less than 30,00,000. Most Micro-enterprises are family businesses employing one or more persons. These micro-entrepreneurs operate micro-enterprises by choice. Most micro-enterprises owners are primarily interested in earning a living to support themselves and their families.

91. Which of the following is not a type of entrepreneur?
(a) Villain
(b) Artiste
(c) Fireball
(d) Superstar
Answer:
(a) Villain:
Following are types of entrepreneurs:

  • Idealist
  • Optimiser
  • Hard Workers
  • Sustainers
  • Improver
  • Advisor
  • Superstar
  • Artiste
  • Visionary
  • Analyst
  • Fireball
  • Jugglers
  • Hero
  • Healer

Thus, Villain is not a type of entrepreneur.

92. What type of entrepreneur do not do new things?
(a) Superstar
(b) Fireball
(c) Jugglers
(d) Sustainers
Answer:
(d) Sustainers:
The sustainer type of entrepreneurs comprise of people who like to maintain a balance between work and a personal lite, they do not wish the business to grow too large where it will cut into their personal life, they do not do new things they just need enough to survive.

93. Artiste entrepreneurs are:
(a) Artist in T.V. serials
(b) Proclaim themselves to be artist
(c) Persons with creativity orientation
(d) Artist in movies.
Answer:
(c) Persons with creativity orientation:
Artistic, these are creativity oriented entrepreneurs, thus, the type of business also are those which demand huge levels of creativity such as advertising -agencies and people in the music industry.

94. Entrepreneur was distinguished from capital provider in:
(a) 17 century
(b) 18Th century
(c) 19th and 2O century
(d) Middle ages
Answer:
(a) 17 century:
The concept of entrepreneurship was established in 1700s and the meaning has evolved ever since. Various economists and philosophers termed this differently in their own unique ways.

95. The meaning of the word Entrepreneur:
(a) To manage
(b) To enter into business
(c) To undertake
(d) None of these
Answer:
(c) To undertake
The term ‘Entrepreneur’ is derived from French word, ‘entreprendre’ which means to ‘undertake’.

96. Who plays the role of innovator?
(a) Entrepreneur
(b) Retailer
(c) Professional
(d) Enterprise
Answer:
(a) Entrepreneur
The entrepreneur plays a role of an innovator who markets his innovation.

97. Entrepreneur works for:
(a) Profits
(b) Innovations
(c) Salary
(d) Remuneration
Answer:
(a) Profits:
Entrepreneur is a person who works for profit. Entrepreneurship is defined as the process of making money, earning profits and increasing the wealth.

98. What is meant by Entrepreneur?
(a) Business
(b) Risk-taking
(c) Profit
(d) All are applicable
Answer:
(d) All are applicable
Following are the characteristics of Entrepreneur:

  • Risk-taking
  • Management
  • Leadership
  • Innovation
  • Profit
  • Business

Thus, option (d), all the above is correct.

99. Which of the following are not considered as Entrepreneurs?
(a) Climber
(b) Hero
(c) Juggler
(d) Fireball
Answer:
(a) Climber
Following are types of Entrepreneurs:

  • Idealist
  • Optimiser
  • Hard workers
  • Jugglers
  • Healer
  • Sustainer
  • Improver
  • Advisor
  • Superstar
  • Artiste
  • Fireball
  • Analyst
  • Hero

Thus, option (a) i.e. climber not a type of Entrepreneur.

100. Cantillon referred Entrepreneur as on the class of:
(a) Landowners
(b) Innovation
(c) Vision
(d) Risk-taking
Answer:
(a) Landowners
Cantillon referred entrepreneurs as one of the classes of Landowners who are financially independent aristocrats. For him, individuals who purchased a good at a certain price used that good to produce a product and then sold that product at an uncertain price could be considered entrepreneurs.

101. Which one of this following is not the characteristics of entrepreneur.
(a) Innovation
(b) Organising
(c) Indifferent approach
(d) Risk-taking
Answer:
(c) Indifferent approach:
Characteristics of Entrepreneur:

  • Mental ability
  • Business secrecy
  • Clear objectives
  • Human relation
  • Communication Ability

Thus, option (c) i.e. indifferent Approach is not a characteristic of Entrepreneur.

102. Which of the following ¡s not a personality trait or characteristic common among entrepreneurs?
(a) Alert to opportunities
(b) Self-starter
(c) Short attention span
(d) Visionary
Answer:
(c) Short attention span:
Short attention span is not a personality trait or characteristic common among entrepreneurs. It means when someone is not able to listen or pay attention to their surroundings or get easily distracted.

103. Superstar Entrepreneurs are:
(a) Stars in T.V. serials
(b) Actor’s in movies
(c) Persons with charisma, charm and high energy
(d) Proclaim themselves to be a star.
Answer:
(c) Persons with charisma, charm and high energy:
Superstar entrepreneurs are person with charisma, charm and high Energy. An entrepreneur like this has an overwhelming personality which works in his favour. So does in the favour of his business.

104. Which of the following is not a type of entrepreneurs?
(a) Serial Entrepreneur
(b) Social Entrepreneur
(c) Sleeping Entrepreneur
(d) Lifestyle Entrepreneur.
Answer:
(c) Sleeping Entrepreneur:
Sleeping entrepreneur Ts not a type of entrepreneur as they do not take active part in managing the affairs as he should be idealist, optimizer, hard worker, sustainer etc. who are capable of taking substantial risk in being the owner and operator of a business.

105. A managers job is more concerned with:
(a) Exploring new opportunities for making profits
(b) Taking risk
(c) Undertaking creative pursuits
(d) Meeting deadlines set up by top management.
Answer:
(d) Meeting deadlines set up by top management:
A manager job is more concerned with meeting deadlines set up by top management. He does provide his services in an enterprise established by entrepreneurs. He is an employee and does not undertake responsibility of any risk.

106. Which of the following is not true concerning entrepreneurs and risk?
(a) They see risk differently than the general public
(b) They minimise1 risk to every extent possible
(c) They usually take high risk
(d) They define risks early in the start-up process.
Answer:
(c) They usually take high risk:
An entrepreneur is the owner of the organization and he bears all the risk and uncertainties involved in running. an organization. He is a moderate risk taker and works under, uncertainty for achieving the goal.

107. Which of the following is not a type of entrepreneur?
(a) Artiste
(b) Superstar
(c) Fireball
(d) Villain
Answer:
(d) Villain:
Types of Entrepreneurs:

  • Idealist Entrepreneur
  • Optimisers” Entrepreneur
  • Hard Workers Entrepreneur
  • Sustainers Entrepreneur
  • Improvers Entrepreneur
  • Advisor Entrepreneur
  • Superstar Entrepreneur
  • Artiste Entrepreneur
  • Visionary Entrepreneur
  • Analyst Entrepreneur
  • Fireball Entrepreneur
  • Juggler Entrepreneur
  • Hero Entrepreneur
  • Healer Entrepreneur.

108. Which one of the following factors does not matter for a person to become an entrepreneur?
(a) Skin Colour
(b) Education
(c) Family background
(d) Personal values
Answer:
(a) Skin Colour:
The skin colour does not matter for becoming an entrepreneur. A successful entrepreneur comes in varying sizes and colour and are of different race, caste, creed or religion.

109. The term Intrapreneurship was first coined by ………………… .
(a) Joseph Schumpeter
(b) Peter Drucker
(c) Gifford Pinchot
(d) Philip Kotler
Answer:
(c) Gifford Pinchot:
The word intrapreneur is a recently coined corporate counterpart to long-existing term entrepreneur. This word is coined by Gifford Pinchot, author of the book entitled Intrapreneuring in 1985.

110. Which of the following is not a common trait of Entrepreneur?
(a) Persistence despite failure
(b) A passion for the buyer
(c) Intolerance to ambiguity
(d) Self-Confidence.
Answer:
(a) Persistence despite failure:
Entrepreneur is one who searches for change, respond to it and exploits those changes as an opportunity. It involves in it innovation, risk-taking, vision and organizing skills but the trait which is not common is the persistence despite failure.

111. Which of the following is not a type of entrepreneurs?
(a) Serial Entrepreneur
(b) Sleeping Entrepreneur
(c) Lifestyle Entrepreneur
(d) Social Entrepreneur
Answer:
(b) Sleeping Entrepreneur:
Sleeping Entrepreneur is not a type of entrepreneur as they can be optimizer, hard workers, superstar, adviser, here or healer.

112. Which of the following factors does not affect a person for being an entrepreneur?
(a) Nationality
(b) Work History
(c) Education
(d) Personal values
Answer:
(a) Nationality:
Entrepreneurship is essentially a creative activity or it is an innovative function where motivation is one of the important factors. Thus, nationality is not a factor which affect a person in becoming the entrepreneur while education, personal values and work history can be considered for the same.

113. Which according to Joseph Schumpeter is not a vital function performed by the entrepreneur?
(a) Challenging accepted ways of doing things
(b) Revolutionising current patterns of production
(c) Creative destruction
(d) Regional development
Answer:
(d) Regional development:
Destructive creation was coined as a play on Joseph Schumpeter’s famous term “creative destruction”, which suggests that innovation leads to changes and Economic growth, challenging accepted ways of doing things and revolutionizing current pattern of production. Thus, regional development is not the factor considered in the definition by Joseph Schumpeter.

114. Analyst entrepreneurs are:
(a) Good at problem-solving
(b) Not focused
(c) Not creative
(d) Illogical
Answer:
(a) Good at problem-solving:
Analyst Entrepreneurs are experts at problem-solving techniques and making analysis which offers greater possibilities for achieving significant financial rewards.

115. Practice of entrepreneurship in an established firm is known as ……………………. .
(a) Leadership
(b) Manager Entrepreneurship
(c) Entrepreneurship
(d) Intrapreneurship
Answer:
(d) Intrapreneurship:
In simple words, the practice of entrepreneurship by the employees within an organization i.e when the manager acts as an entrepreneur is known as Intrapreneur. Hence option (d) is correct.

116. Which of the following is not a type of entrepreneur?
(a) Improver
(b) Climbers
(c) Advisor
(d) Juggler
Answer:
(b) Climbers:
Various type of Entrepreneurs are:

  • Idealist
  • Optimiser
  • Hard worker
  • Sustainer
  • Improver
  • Advisor
  • Superstar
  • Artiste
  • Visionary
  • Analyst
  • Fireball
  • Jugglers
  • Hero
  • Healer

117. Risk Bearing Capacity of an entrepreneur is generally:
(a) Low
(b) Conservative
(c) Extreme
(d) Moderate
Answer:
(c) Extreme:
One of the major characteristics of entrepreneur is that he has extreme capacity to bear risk.

118. Generally, micro-entrepreneur operate:
(a) For their choice
(b) For their need
(c) For their luxury
(d) None is applicable
Answer:
(a) For their choice:
Micro-Enterprise are very small enterprises and they operate as per their choice.

119. All of the following are enhancements to individual creativity except:
(a) Keeping a journal to record thoughts & ideas
(b) Allowing yourself to be creative
(c) Limiting your reading sources
(d) Enhancing your knowledge base.
Answer:
(c) Limiting your reading sources:
Limiting your reading sources is not an enhancement to individual creativity.

120. Generally, the main reason behind starting a business is:
(a) Earning profits
(b) Social science
(c) Earning name
(d) Spiritual reasons
Answer:
(a) Earning profits:
The main reason behind starting a business is earning profit.

121. The rewards for an entrepreneurial work comes in the form of ……………………….. .
(a) law
(b) wages
(c) interest
(d) profit
Answer:
(d) profit:
Profit is the return or reward of entrepreneur.

122. The word Entrepreneur’ has its original from:
(a) Latin word
(b) French word
(c) German word
(d) Indian word
Answer:
(a) Latin word:
‘Entrepreneurship’ word is derived from the french word which means enter into business with undertaking the risk. Entrepreneur is a person who undertakes the risk of whole business.

123. Expansion into new line of business is:
(a) Strength of the firm
(b) Weakness of the firm
(c) Opportunity of the firm
(d) Threat of the firm.
Answer:
(c) Opportunity of the firm:
Opportunity is also known as chance and there are so many opportunities come into the firm. Expansion into new line or increment into new line is opportunity of firm.

124. What to Achieve and by when is explained by …………………………… of an organization.
(a) Objectives
(b) Mission
(c) Strategy
(d) Vision
Answer:
(a) Objectives:
Organisation should always come into existence with some objectives and it is necessary to establish some aims for achievement otherwise organisation can not work rapidly. What to achieve, when to achieve, how to achieve is all explained by ‘objectives’ at an organisation.

125. Which of the following is not the characteristics of entrepreneurship?
(a) Innovation
(b) Organising skills
(c) Indifferent Approach
(d) Risk-Taking
Answer:
(c) Indifferent Approach:
The Characteristics of Entrepreneurship are follows:

  • Innovation
  • Organising Skills and Techniques
  • Risk-taking
  • Growth of business by Inventing new tricks and tips
  • Leadership or leading or motivating to employees.
  • Different Approach

Indifferent Approach is not a Characteristics of Entrepreneurship because entrepreneur thinks different in different – different situations for handling these situations.

126. Question referred entrepreneurs as one of the classes of who are financially independent aristocrat
(a) Landowners
(b) Employees
(c) Entrepreneurs
(d) Investors
Answer:
(a) Landowners:
Entrepreneurship are classified as landowners who are financially independent aristocrats or Aristocrat means Governed by one person. Entrepreneur is one who alone invests capital and alone bears loss and enjoys profits like a landowner. So, entrepreneurs come under class of landowners.

127. Analyst type of entrepreneur are:
(a) Not intelligent
(b) Not future or,anted
(c) Able to crop up the solution at not cost and less time
(d) Both (a) and (b)
Answer:
(c) Able to crop up the solution at not cost and less time:
Analyst entrepreneurs excel at problem-solving in a systematic way. They are able to crop up the solution at no cost and less time.

128. Person who has very high risk-taking capacity
(a) Entrepreneur
(b) Intrapreneur
(c) Both (a) and (b)
(d) None of these
Answer:
(a) Entrepreneur:
A person who bear higher level of risk to undertake a venture is, Entrepreneur.

129. Who conceives the idea of business:
(a) Entrepreneur
(b) Managing Director
(c) Entrepreneurship
(d) All of these
Answer:
(c) Entrepreneurship:
Entrepreneurship is equated to simply stating one’s own business. Most economists believe it is more than that. To some economists, the entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for profit.

130. Advisor Entrepreneurs are:
(a) believe in Consumer Saverteighty
(b) believe in advising everyone
(c) believe in self-satisfaction
(d) None of these
Answer:
(a) believe in Consumer Saverteighty:
Advisor Entrepreneurs are the types of people who believe in consumer sovereignty they indulge excessively in providing customer services.

131. Which type of entrepreneurs are creativity oriented entrepreneurs?
(a) Improver
(b) Idealist
(c) Artiste
(d) Hero.
Answer:
(c) Artiste:
Artists are creativity oriented entrepreneurs. Thus, the type of business also are those which demand huge level of creativity such as – advertising agencies and people in music industry.

132. What are the key elements of entrepreneurship?
(a) Innovation
(b) Risk-taking
(c) Vision
(d) All of above.
Answer:
(a) Innovation:
Four key elements of entrepreneurship are –

  1. Innovation
  2. Risk-taking
  3. Vision
  4. Organising skills

133. Entrepreneur as ‘card owner’ is given by
(a) Peter Drucker
(b) Cantillon
(c) Alfred Marshall
(d) All
Answer:
(b) Cantillon:
Cantillon referred entrepreneurs as one of the classes of ‘landowners’ who are financially independent aristocrats.

134. Entrepreneur who is never dull.
(a) Fireball
(b) Creativity
(c) Artiste
(d) Healer
Answer:
(a) Fireball:
One who is never dull in terms of enthusiasm, energy and attitude is known as fireball.

135. Entrepreneurs mainly come into light
(a) During I world war
(b) During II world war
(c) 1700s
(d) Cold war
Answer:
(c) 1700s:
Entrepreneur come into light and was first established in the “1 700s” and the meanings has involved ever since various economists and philosophers termed this differently in their own unique way.

136. Do what you love and you will never have to work for a day in your life
(a) Confucius
(b) Napoleon Hill
(c) Maslow
(d) Peter F. Drucker
Answer:
(a) Confucius:
One of the advantages of being an entrepreneur is doing what one cove. Choose a job that you like and you will never have to work a day in your life.

CS Foundation Business Management Ethics and Entrepreneurship Notes

E-Correspondence – Business Management Ethics and Entrepreneurship Notes

E-Correspondence – Business Management Ethics and Entrepreneurship Notes

Introduction:

  • System of interlinked hypertext documents accessed via the internet is called World Wide Web (WWW).
  • World Wide Web and internet are two separate but related things.
  • The letters were written by one party to another, and the answers thereto. make what is called the correspondence of the parties.
  • Such correspondence is done through electronic signals via internet is called E-Correspondence.
  • With a web browser, one can view web pages that contain text, video, multimedia etc.

Web:

  • WWW or web is way of accessing information over the medium of internet
  • Protocol used by Web is HTTP (HyperText Transfer Protocol).
  • Web also utilises web browsers such as Internet Explorer, Mozilla, Google Chrome to access web pages that are linked to each other via links to form web documents.
  • It contains graphics, sounds, text and video.
  • Web is just a part of internet, the true term are not synonyms and should not be confused.

Internet:

  • It is a network of networking infrastructure.
  • Information travels in internet through a variety of languages known as protocols.
  • It is a global connection of people/computers linked together by telephone lines.
  • it is a collection of textual documents and other resources.
  • It can be called as an application riinning on the internet.

Uses of Internet:

  • Sending e-mail
  • Publicity and Advertisement
  • Teleconferencing
  • E-commerce.

E- Correspondence:

  • It is also known as “e-mail correspondence” or “electronic correspondence”.
  • It is a method of providing information through e-mail.

E-mail:

  • E-mail is also known as electronic mail.
  • It involves sending messages through telecommunication links.
  • E-mail refers to exchange of text messages and computer files over a communication network.
  • It can be sent simultaneously to a large number of people.
  • Today it is a central component of business communication.

History of E-mail:

  1. By 1974, email in its improved form was being used by the US military.
  2. 2. By 1975, efforts to organize the email bore fruits.
  3. A general operating area known as email Account was created for user who wanted to avail the email services,
  4. Access controlling was done by giving the user a secret password which only he/she would know.
  5. E-mail services were being offered in commercial packages and per-minute charges were applicable to those using their services.
  6. By the early 11 90s free and user-friendly email providers had taken the industry by storm.
  7. Player like yahoo’ and ‘Hotmail were competing for the market share.
  8. Today there are more than 600 million email users across the globe, with newer players like Google (Gmail) and Rediff entering.
  • In 1965, the Massachusetts Institute of Technology was first to demonstrate the use of first e-mail system, known as “MAILBOX”.
  • Tomlinson is called the “Father of e-mail” and is credited with its invention.
  • He provided the symbol “@” as an addressing standard.
  • In 1972, FTP (File Transfer Protocol) was used but it resulted in various problems. For every recipient a new mail was created which required a huge memory space.
  • Nowadays,
    SMTP is used to send e-mails
    POP is used to receive e-mails.

Notes:
SMTP (Simple Mail Transfer Protocol):
SMTP is an Internet standard for electronic mail transmission across internet protocol (IP) networks.

POP (Post Office Protocol):
It is an application-layer internet standard protocol used by local e-mail clients to retrieve e-mails from a remote server over a TCP/IP connection.

Features of E-mail

  • E-mail is an electronic mode of message transmission. Messages are sent using HTML (HyperText Markup Language)
  • E-mail has become one of the cost-effective modes of fast communication
  • Packages like Messenger’ and Outlook’ helps to compose new mails and forwarding emails to the people whose e-mas addrésses are stored in the “Address Box” Packages also allow us to format the content changing its size, font and colour.
  • An interlace between e-mail programs and word processing programs allows us to perform various functions.

Electronic Mail System:

  • Some standards of professionalism should be adopted while using e-mail.
  • Separate personal, as well as professional mail accounts, should be maintained.
  • Limiting or monitoring the size of distribution list for proper management.
  • Various establishment policies for sending or receiving. attachment should be followed.
  • Responding promptly to e-mail messages.
  • Ensuring day to day viewing of e-mails.
  • Pay attention towards the work performed by professionals through e-mails.

2. Optimizing personal E-mail use:

  • Expert and managers can take several steps to maximize the efficiency of their company’s email system.
  • These tips extend from pattern of personal email use to serve as a guideline for company-wide email policies.
  • User of electronic mail are encouraged to adopt the same standard of professionalism that dictate the tone and appearance of postal correspondence.
  • Separate the personal mail account from professional one.
  • Monitor size of distribution List to keep them manageable.
  • Establish policies for receiving attachments.
  • Augment your email address to ensure accurate identification.
  • Promptly respond to E-mail messages of any significance.
  • Establish efficient daily e-mail practices.
  • Pay Attention.

3. Proper use of E-correspondence:

  • We deal with different type of email correspondence whether it be for business, for personal use, or for school, we all need to know proper way of sending email to other.
  • E-mail correspondence comes in various colours and designs and it is creative as the sender making it words used in email are like.
  • Small hit match, they can be useful to mend fragile relationships, warm the heart and high the way, or they can ignite whole forest a frame that could cause hence and destruction.

E-mail Etiquette:

  • Basic rules should be kept in mind while addressing people through e-mail.
  • It is very difficult to express the tone in writing. Tone here refers to accent used while writing an e-mail.
  • Be concise while writing an e-mail.
  • A person should stay away from writing abbreviations. A person should be professional while writing an e-mail.
  • Proper grammar and spelling should be used.
  • Before entering the e-mail address, the e-mail should be checked twice.

Advantages of E-mail:

  • Managing e-mails is very easy task.
  • E-mails are delivered very fast from any part of the world.
  • Compared to other modes of communication e-mails are less expensive.
  • E-mail can be filtered easily by the subject line present in e-mail.
  • The level of security and reliability in transmission of e-mail is very high.

Disadvantages of E-mail:

  • Sometimes, sending a mail is time-consuming because organizing and reading of information through e-mail can consume more time and may also act as a hindrance on workers’ productivity.
  • Sensitive information can be send through mail anywhere in the world. It does not matter that mail is sent accidentally or deliberately. This may harm any organisation from security point of view.
  • Sometimes, the meaning conveyed by sender is different from the meaning understood by receiver due to impersonal communication.
  • Sometimes, understanding the e-mails in wrong way i.e. misunderstanding is due to differences in communication.
  • It takes time to destroy hard copy or printed copy but by a simple hard drive crash, all mails can be lost.

Note :

  • E-mail is not the confidential mode of communication. E-mail cannot be replaced by direct as well as face to face communication.
  • E-mails cannot be relied in case of emergency.
  • E-mail is dependent upon internet. Sometimes networks get disturbed and system loses connectivity.

Intranet:

  • The word intra means within or internal.
  • The intranet is a type of information system that facilitates communication within the organisation among widely dispersed departments, division and regional locations.
  • External people cannot access the internet, thus secured.
  • Intranet connects people to gather with internet technologies using web browsers, web servers arid data warehouses in a single view.
  • With a web browser, one can view web pages that contain text, video, other multimedia etc.

Benefits of Intranet:

  • Intranet helps the user to locate and view information easily and faster.
  • It also help to use application relevant to their roles and responsibilities.
  • Intranet allow organisation to distribute information within time so that employees may get link to relevant information at their convenience.
  • Intranet act as a powerful tool for communication within an organisation by both the ways, horizontally as well as vertically.
  • Web publishing helps to understand and access corporate information which is complex and not easily available.
  • Intranet acts as a platform for development of applications to manage business operations and management.
  • Intranet is cost-effective as it saves time, money as well as natural resources.
  • Easy accessibility of information by all authorized users.
  • Each person has an ability to view same information within the intranet, thus promoting common corporate culture.
  • People are updated by latest laws and specifications with the help of intranet.

Purposes of internet:

  1. InternaI communication.
  2. To deliver tools and applications, thus advancing productivity.
  3. Used as a corporate culture-change platform.
  4. Send private messages.

Nature of Management and its Process MCQ Questions

1. The letter written by one party to another, and the answers thereto, make what is called the correspondence of parties such correspondence It done through electronic signals via internet is called …………………………..
(a) Intranet
(b) E-mail
(c) E-correspondence
(d) None of the above.
Answer:
(c) E-correspondence.

2. Full form of HTTP
(a) Hypertext transfer protocol
(b) Hyper transfer text protocol
(c) Hypertext transfer plan
(d) None of the above.
Answer:
(a) Hypertext transfer protocol.

3. ………………………………….. is a networking infrastructure.
(a) Internet
(b) Intranet
(c) Extranet
(d) E-mail
Answer:
(a) Internet.

4. What is the other name for e-corresponclence7
(a) E-mail – correspondence
(b) Electronic -correspondence
(c) Both (a) & (b)
(d) None of the above.
Answer:
(c) Both (a) & (b).

5. Full form of URL is:
(a) Uniform Reachable Locator
(b) Uniform Resource Locator
(c) Uniform Research Locator
(d) Uniform Readable Locator
Answer:
(b) Uniform Resource Locator.

6. First e-mail system was known as:
(a) MALE BOX
(b) MAILBOX
(c) EMAIL BOX
(d) None of the above.
Answer:
(b) MAILBOX.

7. When was FTP (File Transfer Protocol) put in use ……………………….. .
(a) 1952
(b) 1962
(c) 1972
(d) 1982
Answer:
(c) 1972.

8. Which protocol is used to receive mail?
(a) SMTP
(b) POP
(c) HTTP
(d) FTP
Answer:
(b) POP.

9. Which of the following is not the feature of E-mail?
(a) Spam
(b) Search
(c) Signature
(d) Settlement
Answer:
(d) Settlement.

10. Which is not an E-mail etiquette?
(a) Be concise
(b) Be Realistic
(c) Be Professional
(d) Watch your tone.
Answer:
(b) Be Realistic.

11. Which protocol is used by web?
(a) HTTP
(b) SMTP
(c) FTP
(d) POP
Answer:
(a) HTTP.

12. Unsolicited or junk mails are filtered through the option of
(a) Delete
(b) Trash
(c) Spam
(d) None of the above.
Answer:
(c) Spam.

13. WWW stands for
(a) World web-wide
(b) Wide world web
(c) World wide web
(d) None of the above.
Answer:
(c) World wide web

14. Who s called as the “father of E-mail”?
(a) Merrian
(b) Aristotle
(c) Tomlinson
(d) None of the above.
Answer:
(c) Tomlinson.

15. This began as an American experiment in computer communication technology during the cold war and has revolutionised the world.
(a) Fax
(b) SMS
(c) Telegram
(d) Email
Answer:
(d) Email.

16. …………………………. allows a central communication area for the entire company.
(a) Intranet
(b) Internet
(c) Extranet
(d) None of the above.
Answer:
(a) Intranet.

17. ……………………………….. is used in place for paper to communicate.
(a) Internet
(b) Intranet
(c) Email
(d) All of the above.
Answer:
(d) All of the above.

18. Full form of IMAP:
(a) Internet Message Access Plan
(b) Internet Message Access Protocol
(c) Intranet Message Access Protocol
(d) None of the above.
Answer:
(b) Internet Message Access Protocol.

19. Full form of POP:
(a) Post office plan
(b) Point office protocol
(c) Post office protocol
(d) Point office plan.
Answer:
(c) Post office protocol.

20. Which year was watershed year in e-mail marketing?
(a) 1946
(b) 1956
(c) 1966
(d) 1976
Answer:
(d) 1976.

21. Uses of Internet:
(a) Sending e-mail
(b) Teleconferencing
(c) E-commerce
(d) All of the above
Answer:
(d) All of the above.

22. It is an electronic, cost-effective and fastest mode of communication as of today.
(a) Internet
(b) E-mail
(c) E- Correspondence
(d) None of the above
Answer:
(a) Internet.

23. In year the MIT was the first to demonstrate the use of the first e-mail system, known as MAIL Box.
(a) 1965
(b) 1974
(c) 1976
(d) 1968
Answer:
(a) 1965.

24. Full form of FTP is
(a) Full-time protocol
(b) File transfer program
(c) Fun time program
(d) File transfer protocol
Answer:
(d) File transfer protocol.

25. The ……………….. option allows us to share documents, worksheets, presentations, pictures and videos along with the mails
(a) Spam
(b) Interface
(c) Attachments
(d) None of the above
Answer:
(c) Attachments.

26. Which of this is not an advantage of EMAIL?
(a) Managing E-mail is easy
(b) E-mail is fast
(c) E-mail is Inexpensive
(d) Security
Answer:
(d) Security.

27. Purposes of Intranet:
(a) Internet Communication
(b) Send private messages
(c) Used as a corporate culture -change platform
(d) All of the above.
Answer:
(d) All of the above.

28. Full form of HTML is:
(a) Hypertext mail language
(b) Hyper transfer markup language
(c) Hypertext markup language
(d) High time markup language
Answer:
(c) Hypertext markup language.

29. With reference to e-mail, BCC stands for ……………………………. .
(a) Blind carbon copy
(b) Before carbon copy
(c) Before copy carbon
(d) Blind copy carbon
Answer:
(a) Blind carbon copy:
With respect to e-mail, BCC Stands for Blind Carbon Copy. It is used or chosen to send a group or list of people the same message using BCC, which is kindest and least obvious way to send mail short of encryption.

30. Which one of the following is a system of interlinked documents accessed via internet?
(a) Intranet
(b) Extranet
(c) World wide web
(d) Local area network.
Answer:
(c) World wide web:
World Wide Web is a system of interlinked documents accessed via internet. The worldwide web is way of accessing information over the medium of the internet.

31. Which one of the following protocols is generally used in internet
(a) HTTP
(b) HPPT
(c) TTPH
(d) TPTH
Answer:
(a) HTTP:
Protocol generally used in Internet is HTTP. (HyperText Transfer Protocol)

32. ………………….. option forbids unwanted e-mails to enter into the Inbox.
(a) Interface
(b) Spam
(c) Protocols
(d) Jargon.
Answer:
(b) Spam:
Unsolicited or Junk mails can be tittered by using the Spam’ option which forbids unwanted mails to enter your inbox.

33. In which year does US Military Started using improved form of email?
(a) 1965
(b) 1974
(c) 1975
(d) 1972
Answer:
(b) 1974:
It was the year 1974 in which US military started using improved form of email.

34. Who is the founder of E-mail?
(a) Merrian
(b) Tomlinson
(c) Aristotle
(d) None
Answer:
(b) Tomlinson:
Tomlinson is called the “father of e-mail and is credited with its invention.

35. What is the watershed year in the history of e-mail mailoeting?
(a) 1976
(b) 1974
(c) 1972
(d) 1970
Answer:
(a) 1976 :
Year 1976 was a waters head year in the history of e-mail marketing. E-mail services was being offered in the commercial packages and per-minute changes were applicable to those using these services.

36. What is the full form of HTTP?
(a) Hydro Text Transfer Protocol
(b) Hyper Text Transfer Protocol
(c) Hyper Text Transfer Process
(d) None of these.
Answer:
(b) Hyper Text Transfer Protocol:
HTTP refers to as HyperText Transfer Protocol

37. Which of the following is the full form of the abbreviation www?
(a) World wide web
(b) World work web
(c) Wide world web
(d) Web worldwide.
Answer:
(a) World wide web:
The abbreviation ‘www’ stands for World Wide Web which is a system of interlinked hypertext documents accessed via the internet. With a web browser, one can view web pages that may contain text, images, videos and other multimedia and navigate between them via hyperlinks.

38. Choose the correct statement:
(a) Messenger and outlook express are a part of web browsers
(b) The specialists prefer programmes like Eudora
(c) E-mail packages help us to compose and forward messages
(d) All the stated options are correct.
Answer:
(c) E-mail packages help us to compose and forward messages:
Option C is the correct statement i.e. E-mail packages helps us to compose and forward messages through the computer.

39. Choose the incorrect option about e-mail services:
(a) E-mail is a replacement of Teleconferencing
(b) E-mail depends on internet connectivity
(c) E-mail cannot be considered a confidential mode of communication
(d) E-mails are not expensive.
Answer:
(a) E-mail is a replacement of Teleconferencing:
Features of E-mail:
E-mail is an electronic mode of message transmission.
⇒ It has become one of the cost-effective modes of fast communication.
⇒ E-mails are delivered very fast from any part of the world.

Note:

  • E-mail is not the confidential mode of communication
  • It cannot be replaced by teleconferencing
  • It cannot be relied in case of emergency
  • it is dependent upon internet.

So, option A is not correct statement regarding E-mail. i.e. E-mail Is a replacement of teleconferencing.

40. Unsolicited or junk mails are filtered through the option of:
(a) Packages
(b) Spam
(c) Inbox
(d) Attachments.
Answer:
(b) Spam:
Spam: Unsolicited or Junk mails can be filtered by using the ‘spam’ option which forbids unwanted mails to enter your inbox.

41. Who is the founder of E-mail:
(a) Tomlinson
(b) Aristotle
(c) Meridian
(d) None of the above
Answer:
(a) Tomlinson:
Tomlinson is the founder of E-mail and Is credited with its invention.

42. What is the other name of E – correspondence?
(a) Electronic – correspondence
(b) Email correspondence
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b):
E-correspondence is also called electronic correspondence and E-mail correspondence. Thus options (a) & (b) are correct.

43. Who is called the ‘Father of E-mail’ and is credited with the invention?
(a) Tomlinson
(b) Merriam
(c) Morse
(d) Aristotle.
Answer:
(a) Tomlinson:
Tomlinson is called the ‘father of email’ and is credited with its invention because he chose the ‘@’ symbol to provide an addressing standard in the form of “user@host”, which is in use till date.

44. Choose the incorrect option about E-mail services?
(a) E-mail is a replacement for Tele-conferencing
(b) E-mail can be considered a confidential mode of communication
(c) E-mails are not expensive
(d) E-mails depend on internet connectivity.
Answer:
(b) Service information system:
E-mail can be considered a confidential mode of communication. This statement is incorrect as sensitive information can be easily shared and distributed within a business. An email can be intercepted by a hacker or go on an incorrect e-mail address and wind up in someone’s else inbox.

45. Which of the following is incorrect about the language of an e-mail?
(a) One should not use jargon unless writing to people of one’s own profession
(b) One may freely use abbreviations
(c) One should use words with positive connotations.
(d) Salutation is not necessary.
Answer:
(b) One may freely use abbreviations:
The language of E-mail:

  • Write short, crisp and focused paragraphs.
  • Use concrete words with positive connotations.
  • Do not use abbreviations and acronyms
  • Don’t use jargon or slang. It can be used if you are communicating with people of same profession.
  • Use short and simple sentences.

46. What is the full form of the abbreviation SIS with respect to communication?
(a) Senior information supervisor
(b) Service information system
(c) Strategic important system
(d) Strategic information system.
Answer:
(d) Strategic information system:
Abbreviation SIS w.r.t. Communication is Security and Intelligence. ServIces SIS are developed in response to corporate business initiative, lise of such communication systems provide business competitive advantage on their competitors as they see provide a good or service in a way that is better than that of their peer.

47. E-mail etiquettes include:
(a) Going into unnecessary details
(b) Watching your tone
(c) Display whatever you have
(d) Being unprofessional.
Answer:
(b) Watching your tone
E-mail etiquettes Include:
→ Mind your manners
→ Watch your tone
→ Be concise
→ Be professional
→ Use correct spelling and proper grammar
→ Wait to fill in the ‘TO’ email address.

48. Which of the following is/are an advantage/advantages of e-mail?
(a) It is cheaper than a letter
(b) It is faster than a letter
(c) Locations do not prove any obstacle in its path
(d) All the stated options are correct.
Answer:
(d) All the stated options are correct.
“Electronic mail” or “e-mail” as it is commonly called the process of sending or receiving a computer file or message by computer modem over telephone wires to a pre-selected “mailbox” or “address” on another computer. E-mail can also be sent automatically to a large number of electronic addresses via mailing lists (through ‘mail-merge option). E-mail messages can range from the simplest correspondence to business presentations, engineering blueprints, book chapters, or detailed contracts. Hence it is cheaper, faster than a letter and location do not create any obstacle.

49. Which of the following protocol is used by the web?
(a) TTPH
(b) TPTH
(c) HTTP
(d) HTPT.
Answer:
(c) HTTP:
The World Wide Web, or simply Web, is a way of accessing information over the medium of the internet. It is an information-sharing model that is built on top of the Internet. The Web uses the HTTP protocol (one of the languages spoken over the Internet) to transmit data. Web services, which use HTTP to allow applications to communicate in order to exchange business logic, use the Web to share information.

50. Which of the following is incorrect about the language of an email?
(a) One should not use Jagran unless writing to people of one’s own profession.
(b) One should use words with positive connotations
(c) Salutation is not necessary
(d) One may freely use abbreviations
Answer:
(d) One may freely use abbreviations:
The use of abbreviations in the Email shall be avoided as far as possible. The statement d is incorrect as freely use of abbreviations should be avoided.

51. Which of the following is a system of interlinked hypertext documents accessed via the internet?
(a) World wide web
(b) Internet
(c) Emails
(d) Extranet
Answer:
(a) World wide web:
World Wide Web is a system of interlinked hypertext documents accessed via the internet.

52. Which of the following is not an advantage of e-mail?
(a) It lacks the personal touch of traditional method of correspondence in business
(b) It is easy to filter
(c) E-mail packages allow us to out, copy and park
(d) In email communication differences in location do not prove to be an obstacle
Answer:
(a) It lacks the personal touch of traditional method of correspondence in business:
Lack of personal touch of traditional method of correspondence is a disadvantage.

53. Advantage of E-mail
(a) Easy to manage
(b) Email is expensive
(c) Can be treated as valuable evidence
(d) Both (a) and (c)
Answer:
(d) Both (a) and (c)
Advantages of an E-mail:

  • Easy to manage
  • Is Inexpensive
  • Easy to filter
  • Transmission is secure and reliable.

54. …………….. option forbids unwanted e.mails to enter into the Inbox
(a) Interstate
(b) Spam
(c) Protocols
(d) Jargon
Answer:
(b) Spam: Spam option forbids unwanted e-mails to enter into the Inbox.

55. This began as a American experiment in computer communication technology during cold war and has revolutionized the world?
(a) Fax
(b) Telegram
(c) Internet
(d) Radar
Answer:
(d) Radar: Radar began as a American experiment in computer communication technology during cold war and has revolutionized the world.

56. Causes unnecessary delays file backups storage problem:
(a) Virus
(b) Spam
(c) Attachments
(d) Emotions
Answer:
(a) Virus
These viruses cause unnecessary delay, storage problems, file backups etc. Ineffective consumer search:
A close look at the e-commerce market.

CS Foundation Business Management Ethics and Entrepreneurship Notes

Social Entrepreneurship – Business Management Ethics and Entrepreneurship Notes

Social Entrepreneurship – Business Management Ethics and Entrepreneurship Notes

Introduction:

  1. Any organization that uses business methods to address a social or environment problem in an innovative way is called social Entrepreneurship.
  2. It is a revolution occurring around the world today, where people from all walk of life are developing and implementing innovative, effective and sustainable solutions in response to social and environmental challenges.
  3. These solutions includes products, services, frameworks and interventions brought to market by both new startup and existing organizations, whether for profit or non-profit.

Definition of Social Entrepreneurship:
Greg Dees, co-founder of the centre for the Advancement of Social Entrepreneurship at Duke University and a member of the Impact

Entrepreneurship advisory board, wrote the definitive definition:
Who is a Social Entrepreneur:

  1. They are individuals and innovative solutions to society’s most pressing social problems.
  2. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change.
  3. They find what is not working and solve the problem by changing the system, spreading the solution, and persuading entire societies to take new leaps.
  4. They often seem to be possessed by their ideas, committing their lives to changing the directions of their field.
  5. They are both visionaries and ultimate realists, concerned with the practical implementation of their vision above all else.
  6. Each social entrepreneur presents ideas that are user friendly, understandable, ethical and engage widespread support in order to maximize the number of local people that will stand up, seize their idea and implement with it.
  7. In other words, every leading social entrepreneur is mass recruiter of local change makers – a role model proving the citizens who channel their passion in to action can do almost anything.
  8. Over the past two decades, the citizen sector has discovered what the business sector learned long ago:“ There is nothing as powerful as a new idea in the hands of a first-class entrepreneur.”

Why “Social” Entrepreneur?

  • Social entrepreneurs act as the change agents for society.
  • A business entrepreneur might create entirely new industries, a social entrepreneur comes up with new solutions to social problems and then implements them on a large scale.

Historical Examples of leading Social Entrepreneurs:
1. Susan B. Anthony (U.S.): Fought for Women’s Rights in the United States, including the right to control property. Helped spearhead adoption of the 19th amendment.

2. Vinoba Bhave (India):

  • Founder and leader of the Land Gift Movement.
  • Caused the redistribution of more than 70,00,000 acres of land to India’s untouchable and landless.

3. Dr. Maria Montessori (Italy):
Developed the Montessori approach to early childhood education.

4. Florence Nightingale (U.K.)
Founder of modern nursing, she established the first school for nurses and fought to improve hospital conditions.

5. Margaret Sanger (U.S.)

  • Founder of the Planned Parenthood Federation of America.
  • She led the movement for family planning efforts around the world.

6. John Muir (U.S.):

  • He is a Naturalist and conservationist.
  • He established the National Park System and helped found the Sierra Club.

7. Lean Mormet (France):

  • He is responsible for the reconstruction of the french economy following World War II, including the establishment of the European Coal and Steel Community (ECSC).
  • The ECSC and the European Common Market were direct precursors of the European Union.

Social Entrepreneurs play the role of change agents in the social sector by:

  • Adopting a mission to create and sustain value.
  • Recognizing and relentlessly pursuing new opportunities to serve that mission.
  • Engaging in a process of continuous innovation, adoption and learning.
  • Acting boldly without being limited by resources currently in hand.
  • Exhibiting heightened accountability to the constituencies served and for the outcomes created.

How to identify a social entrepreneurship opportunity:

  • Social entrepreneurship is developing dynamically in Europe, solving the problems of unemployment, social securities, civic engagement.
  • The main mission of social entrepreneurship is to bring benefits to society.
  • Entrepreneurship with a social aspect has great potential around the world and in Ukraine as well.
    Social enterprises operate in complex environment.
  • Some may be competing against fully commercial businesses and some against state subsidized services.
  • Creating Social values becomes the main driver for social, entrepreneurs, alongside achieving the relevant financial substainability to maintain that value.
  • Several types of market niche filled by social enterprises can include.

1. Markets serving the very poor, where business margins are low and risks tend to be high. In some sectors such as micro financing.

  • There is an on-going debate as to whether a fully commercial operation can fulfill the needs to the poorest client groups more and effectively than modified NGO models.
  • Examples: Micro clinics run in low income areas; selling affordable irrigation tools to poor, smallholder farmers.

2. Other new and challenging markets where high costs may be incurred to stimulate demand and create new opportunities to the need to overcome stigma, acclimatize clients to more complex technology, challenge perceptions that services should be provided by the state.

Example: Social entrepreneurs which are operating in this market niche are providing counseling services to the people living with HIV, AIDS and other socially managed groups.

3. Markets for products producing environmental benefits but which may not be fully commercially competitive. Clearly, many environmentally beneficial business lines are fully commercially viable.

Creating a Social Business Model:

  • Social enterprises apply business solutions to social problems.
  • Since there are no shareholders in a non-profit organization, the profits from the related social enterprise are completely re-invested in the work of the organization.

A business model includes two key elements:
1. An operating strategy:
It includes internal organizational structure and external partnerships that are crucial for creating the organization’s intended impact.

2. A resource strategy:
It defines where and on what terms the organization will acquire the resource it needs to do its work.

A social enterprise can be integrated integrated with the non-profit organization in one of several ways.

Embedded Integrated External
1. The enterprise and the social program are one and the same. The business activities overlap with the social program. Social and business activities are separate and may not be related to the mission of the organization.
2. The business is created to serve clients. The business is created as a funding mechanism and to enhance the mission of the organization. The business is created mainly as a funding mechanics to support social activities.

Social Enterprise New Balance Sheet:

  • By raising a portion of the capital it needs from equity investors. A risky business can then borrow money from debt investors who seek predictable returns.
  • In the emerging model of social enterprise capital markets, donors play the role of equity holders, providing capital that supports an enterprise.
  • The tools that are taking social entrepreneurs in the direction are as follows.
    Social Entrepreneurship – Business Management Ethics and Entrepreneurship Notes 1

Funding Social Ventures: Strategies for success:

  • Social enterprises are entrepreneurial organisations that innovate to solve problems.
  • They include non profit and for profit ventures and their returns social benefits and financial revenues.
  • Some social enterprises earn a profit that is sufficient to get the business funded by investors.
  • They might provide goods and services to customers willing to pay a premium for a socially beneficial product green energy, say or organic food. They might sell an essential service to poor customers at decent profits.
  • Social enterprises cannot fund themselves entirely through sales or investment.
  • They are not profitable enough to access traditional financial markets resulting in financial social return gap.
  • A lack of funding opportunities is one of the major disadvantages that social enterprises face.

Innovation in Practice:
Some of the more forward – thinking foundations and social investors have realized that the current methods of financing social enterprises are inefficient, for the enterprises and themselves have started working to broadened the access to capital.

There are some of the mechanisms they are employing.

Loan Guarantees:

  • The Bill and Melinda Gates foundation now issues loan guarantees, rather than direct funds.
  • Its first guarantee allowed a charter school in Houston to raise $67 million in commercial debt at a low rate.
  • It saves the school (and its donors) almost $10 million in interest payments.

Quasi equity debt:

  • A quasi equity debt severity is particularly useful for enterprises that are legally structured as non-profits and therefore cannot obtain equity capital.
  • The important characteristics of equity investment
  • Its returns are indexed to the organization’s financial performance.

Pooling – Techniques that involve pooling funds have also opened new financial doors to Social enterprises, because the pooling institution can tailor its liabilities to the needs of different kinds of investors.

Social Impact Bonds:

  • The social impact bond, deserves special notice for its ability to help governments fund infrastructure and services, specially as public budgets are cut and municipal bond markets are stressed.
  • Launched in UK in 2010, this type of bond is sold to private investors who are paid a return only if public project succeeds.
  • The government, for its part, pays a fixed return to investors for verifiable results.
  • U.S. for an instance, issuing “space bonds” that would pay a return only if a manned were to reach Mars on schedule and under budget.
  • Challenges for the Indian Social Enterprise Sector.

Major Challenges that this new age social enterprise sector faces are:

Limited access to early stage capital due to difficulties faced by domestic and foreign investment.
Indian regulations still don’t formally recognize for-profit social enterprise.

Social Entrepreneurship MCQ Questions

1. Any organization that uses business methods to address a social or environmental problem in an innovative way is know as:
(a) Innovation
(b) Enterprise
(c) Social Entrepreneurship
(d) Entrepreneurship
Answer:
(c) Social Entrepreneurship

2. Who act as a change agent of the society?
(a) God
(b) Human Beings
(c) Investors
(d) Social
Answer:
(d) Social

3. Which among the following is a social Entrepreneur ________.
(a) Susan B. Anthony
(b) Vinoba Bhave
(c) John Muir
(d) All of these
Answer:
(d) All of these

4. Social Impact Bonds where launched in:
(a) US
(b) UK
(c) India
(d) Australia
Answer:
(b) UK

5. ________ is a form of Pooling Techniques.
(a) Bonds
(b) Micro Finance
(c) Small funding
(d) Collective Investment
Answer:
(b) Micro Finance

6. ________ is one of the challenges facing a social entrepreneur.
(a) United access to early stage capital
(b) Development of new product
(c) Maintaining profits
(d) All of the above
Answer:
(a) United access to early stage capital

7. Which of the following is a key element of Social Business Model.
(a) An operating strategy
(b) A resource strategy
(c) Both (a) and (b)
(d) None of these
Answer:
(c) Both (a) and (b)

8. Social enterprises are entrepreneurial organizations that ________ to solve problems.
(a) Think
(b) Foster
(c) Innovate
(d) Wants
Answer:
(c) Innovate

9. Which of the following is a major disadvantages that social enterprises face.
(a) Lack of innovation
(b) Lack of Funding opportunities
(c) Both (a) and (b)
(d) None of these
Answer:
(b) Lack of Funding opportunities

10. ________ is particularly useful for enterprises that are legally structured as non profits and therefore cannot obtain equity capital.
(a) Quasi equity debt security
(b) Loan security
(c) Deemed security
(d) All of the above
Answer:
(a) Quasi equity debt security

11. The innovative methods used in social enterprises to broader the access of capital includes:
(a) Loan Guarantee
(b) Quasi equity Debt
(c) Pooling
(d) All of the above
Answer:
(d) All of the above

12. The funding of social enterprise is essentially a problem of:
(a) Availability of Investment options
(b) Financial structuring
(c) Profits
(d) None of these
Answer:
(b) Financial structuring

13. The key to managing return or funding in social enterprises is to offer ________.
(a) Consistent risks and returns to all investors.
(b) Different risks and returns to different kinds of investors.
(c) Returns on the basis of type of Social enterprise.
(d) All of the above
Answer:
(b) Different risks and returns to different kinds of investors.

14. In a social enterprise business model measurable impact is created by the generation of ________.
(a) Social Value
(b) Economic Value
(c) Service Value
(d) Funding Value
Answer:
(a) Social Value

15. As a Socia Entrepreneur ________ fought for Women’s Rights in the United States, including the right to control property and helped spearhead adoption for the 19th amendment.
(a) Dr. Maria Montessori
(b) Vinoba Bhave
(c) Susan B. Anthony
(d) Margaret Sanger
Answer:
(c) Susan B. Anthony

16. What would a return only if a manned mission were to reach Mars on schedule and under budget ________.
(a) Mars Bond
(b) Planet Bond
(c) Space Bond
(d) Satellite Bone
Answer:
(c) Space Bond

17. Who issues loan guarantees rather than direct funds.
(a) George F. Terry
(b) Bill Gates
(c) Bill and Melinda Gates
(d) All of these
Answer:
(c) Bill and Melinda Gates

18. Which of the following tools of Innovation are in Practice.
(a) Quasi – equity Debt
(b) Pooling
(c) Social Impact Bond
(d) All of these
Answer:
(d) All of these

CS Foundation Business Management Ethics and Entrepreneurship Notes

Government Initiatives for Business Development – Business Management Ethics and Entrepreneurship Notes

Government Initiatives for Business Development – Business Management Ethics and Entrepreneurship Notes

Start Up India Government Initiatives:
1. The Ministry of skill Development and entrepreneurship aim to skill on a large scale with speed and high standards in order to achieve its vision of a skilled India.

2. It is aided in these initiatives by its functional arms:

  • NSDA → National Skill Development Agency
  • NSDC → National Skill Development Corporation
  • NSDF → National Skill Development Fund
  • SSCS → 33 Sector Skill Councils

It also has 187 training partners registered with NSDC.

National Skill Development Agency (NSDA):

  1. It is an autonomous body which was created with the mandate to co-ordinate and harmonise the skill development activities in the country.
  2. It is a part of the Ministry of Skill Develdpment and Entrepreneurship (MSDE).

The philosophy of NSDC is based on the following:

  1. Create: Proactively catalyse creation of large, quantity vocational training institutions.
  2. Funds: Reduce risk by proyiding patient capital including grants and equity.
  3. Enable: The creation and sustainability of support system required for shall development.

Objectives of NSDC:

  1. Upgrade skills to international standards.
  2. Enhance, support and co-ordinate private sector initiative.
  3. Play the role of “market-maker”
  4. Prioritize initiative that can have a multiplier or catalytic effect.

Partnerships:
NSDC operates through partnerships with multiple stakeholders in catalysing and evolving the skilling ecosystem.

  • Private Sector
  • International Engagement
  • Central Ministries
  • State Government
  • University/ School System
  • Non-profit organisations
  • Innovations

Achievements:

  • Over 5.2 million students trained.
  • 235 private sector partnerships for training and capacity building.
  • 38 sector skill councils CSSC approved in services, manufacturing, agriculture and allied services and informal sectors.
  • 1386 Qualification Packs with 6,744 unique National Occupational Standards (NOS)
  • Vocational training introduced in to states, covering 2400+ schools, 2 Boards, benefjtting over 2.5 lakhs students.
  • Designated implementation agency for largest voucher-based skill development program, Pradhan Mantri Kaushal Vikas Yojana.
  • Skill development Management System with 1400 partners, 28179 training centres, 16479 trainers, 20 job portals, 77 assessment agencies and 49863 empanelled assessors.
  • Hosting infrastructure certified by ISO 20,000/27,000 supported by dedicated personnel.

Start Up India –

Introduction:
A Start up is a company that is in the first stage of its operations.
These companies are often initially bank rolled by their entrepreneurial founder as they attempt to capitalize on developing a product or service

“Is searching for answers to the product it will sell, the customers it will serve and the way it will make money from delivering value to its customers”

Latest Policy Initiatives for Start-ups Ease of doing Business:

  • To simplify the regulatory framework, the government introduced the lease of doing business wherein an MSMF unit has to fill in a single one page self-declaration online form called – Udyog Aadhaar
  • The Apprentices Act, 1961 was amended to enable even the MSMF unit engage apprentices which will enable the units to get trained labours as well as in turn supply skilled labour.
  • To give boost to the make India programme, MSME Ministry has launched the ASPIRE Scheme in March 2015, a scheme for promotion of innovation, Rural industry and entrepreneurship.

Atal Innovation Mission (AIM):
This programme operated from NITI Aayog is about an Innovation Promotion Platform involving academics, entrepreneurship and research and draw upon national and international experience to foster a culture of innovation, R&D and scientific research in India.

SETU (Self Employment and Talent Utilization)
SETU meaning bridge in Hindi is a Techno Financial, Incubation and Facilitation Programme to support all aspects of start up businesses and other self-employment activities, particularly in technology driven areas operated from NITI Aayog.

The expert committee has identified five major drivers for creating a vibrant entrepreneurial eco-system.

  • Catalytic government policy and regulatory framework.
  • Easy access to equity capital and debt.
  • Businesses as entrepreneurial hubs.
  • Culture and institutions which encourage entrepreneurship over careerism.
  • Adequate and effective collaboration forums.

Start Up India:

  • The stand-up India Scheme provides loans to entrepreneurs of the , Scheduled Caste as well as women.
  • The loans range from ₹ 10 lakh to ₹ 1 crore.
  • The scheme helps them out by facilitating loans for non-farm sector entrepreneurship.

Eligibility:

  • SC/ST and /or women entrepreneur, above 18 years of age.
  • Loans under the scheme is available for only green field project.
  • In case of non-individual enterprise, 51% of the shareholding and controlling stake should be held by either SC/ST and or women Entrepreneur.
  • Borrower should not be in default to any bank/financial institution.
  • The product must be related to commercialisation.
  • The age of company must not exceed 5 years
  • Certification from DIPP.

Government Initiatives for Business Development MCQ Questions

1. Which ministry is responsible for co-ordination of all skill development efforts across the country?
(a) Ministry of finance
(b) Ministry of skill development and Entrepreneurship
(c) Ministry of Corporate
(d) All of these
Answer:
(b) Ministry of skill development and Entrepreneurship

2. The functional arms of Ministry of Skill Development and Entrepreneurship are:
(a) National Skill Development Agency (NSDA)
(b) National Skill Development Corporation (NSDC)
(c) National Skill Development Fund (NSDF)
(d) All of these
Answer:
(d) All of these

3. NSDC is a unique model created with a well though underlying philosophy based on which pillars:
(a) Create
(b) Fund
(c) Both (a) and (b)
(d) None of these
Answer:
(c) Both (a) and (b)

4. National Skill Development Agency is based under which Act:
(a) Society’s Registration Act 1860
(b) Entrepreneurship Act, 1980
(c) Ministry Development Act, 1872
(d) Partnership Act, 1932
Answer:
(a) Society’s Registration Act 1860

5. NSDC operates through with multiple stakeholders in catalysing and evolving the skilling ecosystem.
(a) Partnership
(b) Good faith
(c) Mutual concern
(d) None of these
Answer:
(a) Partnership

6. The main objectives of the NSDC are to:
(a) Upgrade skills to international standards ‘
(b) Enhance, support and co-ordinate private sector initiatives
(c) Prioritize initiatives that can have a multiplier or catalytic effect
(d) All of these
Answer:
(d) All of these

7. Which of these functional arms play a role of a “market-maker” __________.
(a) NSDC
(b) NSDA
(c) NSDC
(d) MSDE
Answer:
(a) NSDC

8. NSDC operates through partnerships with __________.
(a) Private Sector
(b) Central Ministries
(c) State Government
(d) All of these
Answer:
(a) NSDC

9. For the ease of doing business the MSME unit has to fill in a single one page self-declaration online from called __________.
(a) Udyog Adhaar
(b) E-Adhaar
(c) Company Incorporation Form
(d) None of these
Answer:
(a) Udyog Adhaar

10. STAND UP INDIA scheme provides loans to entrepreneurs of:
(a) Schedule caste
(b) Schedule Tribe
(c) Women
(d) All of these
Answer:
(d) All of these

11. What is the meaning of term SETU in Hindu?
(a) Wheat
(b) Rice
(c) Bridge
(d) Pool
Answer:
(c) Bridge

12. A start up is a company that is in the stage of its operations __________.
(a) Early
(b) First
(c) Middle
(d) Slow
Answer:
(b) First

13. The key objectives of the AIM (Atal Innovation Mission) are __________.
(a) To create an umbrella structure
(b) To provide platform and collaboration
(c) To create awareness and provide knowledge
(d) All of these
Answer:
(d) All of these

14. To get a loan from stand up India Scheme, the age of the company should not exceed __________.
(a) 1 year
(b) 2 years
(c) 3 years
(d) 5 years
Answer:
(d) 5 years

15. Under the __________ 50 percent of stipend payable to apprentices would be reimbursed by the government for the first two years is an incentive for MSME units to take in more apprentices.
(a) Apprentice Protsahan Yojana
(b) Apprenticeship Act 1961
(c) Workmens Compensation Act
(d) None of the above
Answer:
(a) Apprentice Protsahan Yojana

16. The scheme launched by MSME Ministry in March 2015, for promotion of Innovation, Rural Industry and Entrepreneurship.
(a) Aspire scheme
(b) Mudra scheme
(c) Atal Innovation Mission
(d) All of the above
Answer:
(a) Aspire scheme

17. Businesses as entrepreneurial hubs is one of the major drivers identified by The expert committee on Innovation and Entrepreneurship Innovative start ups Incubation Policy None of the a __________.
Answer:
(a) The expert committee on Innovation and Entrepreneurship
(b) Innovative start ups
(c) Incubation Policy
(d) None of the above
Answer:
(a) The expert committee on Innovation and Entrepreneurship

18. In the World Bank’s Ease of Doing Business Ranking 2015 India is placed at __________.
(a) 154 place out of the total of 184 economies
(b) 142 place out of total of 189 economies
(c) 148 place out of total of 190 economies
(d) 146 place out of a total of 188 economies
Answer:
(b) 142 place out of total of 189 economies

19. Globally India Ranks in __________.
(a) 3rd position with 4200 startups
(b) 4th position with 4200 startups
(c) 2nd position with 4500 startups
(d) 5th position with 4800 startups
Answer:
(a) 3rd position with 4200 startups

20. The loans given to SC/ST and women Entrepreneurs under stand up India Scheme range from:
(a) ₹ 5 lakh to ₹ 1 crore
(b) ₹ 15 lakh to ₹ 1 crore
(c) ₹ 10 lakh to ₹ 1 crore
(d) ₹ 15 lakh to ₹ 2 crore
Answer:
(c) ₹ 10 lakh to ₹ 1 crore

21. Expansion of term SETU is __________.
(a) Self exchange and talent utilization
(b) Self exchange and trust utilization
(c) Self expert and team utilization
(d) Self Employment and talent utilization
Answer:
(d) Self Employment and talent utilization

22. To give boost to the make in India programme, the MSME Ministry launched __________.
(a) NDFC
(b) SBA
(c) SETU
(d) ASPIRE
Answer:
(d) ASPIRE

23. Which Ministry encourages skilled India?
(a) MSDC
(b) MSDE
(c) MDEI
(d) None of these
Answer:
(b) MSDE
MSDE: Ministry of skill Development and Entrepreneurship encourages skilled India.

24. Over 5.2 million students trained under __________.
(a) Start up India
(b) Grown up India
(c) From developing to developed Scheme
(d) Both (a) and (c)
Answer:
(a) Start up India
Start Up India: Government Initiative achievements are –

  • Over 5.2 million students trained
  • Designated implementation agency for the largest voucher-based

Skill Development Program, Pradhan Mantri Kaushal Vikas Yojna (PMKVY) etc

25. SMILE scheme of ₹ ________ has also been launched to catalyze.
(a) 10,000 crore
(b) 10,000 LK
(c) 1,000 Million
(d) None
Answer:
(a) 10,000 crore
A SIDBI make in India loan for small enterprises (SMILE) scheme of ₹ 10,000 crore has also been launched to catalyze tens of thousands of crores equity investment in start-ups and MSMES.

26. ASPIRE scheme was launched in __________.
(a) March, 2018
(b) March, 2014
(c) March, 2015
(d) March, 2013
Answer:
(c) March, 2015
To give boost to the make in India programme, the MSME Ministry has launched the ASPIRE scheme in March 2015, a scheme for promotion of innovation, rural industry and entrepreneurship.

27. Full form SIDBI:
(a) Structure Industries Development Bank of India
(b) Social Industries Development Bank of India
(c) Small Industries Development Bank of India
(d) None of these
Answer:
(c) Full form of SIDBI is Small Industrial Development Bank of India.

28. The loan given to SC/ST and women entrepreneur under standu scheme __________.
(a) 5 lack – 1 crore
(b) 10 lack – 1 crore
(c) 15 lack – 2 crores
(d) None
Answer:
(b) 10 lack – 1 crore
The stand up India scheme, provides loans to entrepreneurs of the Scheduled Caste and Scheduled Tribes, as well as women. The loan range from ₹ 10 lakh to ₹ 1 crore.

CS Foundation Business Management Ethics and Entrepreneurship Notes

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

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:

  1. Buyer: Person who buys or agrees to buy the goods.
  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
Sale of Goods Act, 1930 – CS Foundation Business Law Notes IMG 1

  • 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:

Sale Agreement of Sell
It is an executed contract. It is an executory contract.
Property in goods are transferred from seller to buyer when the contract is made. Transfer of property in goods takes place at some future date.
Seller cannot resell the goods as the property is with the buyer. Seller can further resell the goods as the property in good remains with him.
Risks passes to the buyer, as he becomes the owner. Risks is with the seller as he remains the owner.
Performance is absolute without any condition. Performance is conditional and is made in future.
Breach on part of buyer, seller can sue for the price and damages both. Breach on part of buyer, seller can sue for damages only and not for the price.
Breach on part of seller, buyer can compel him to deliver the goods or pay the damages. Breach on part of seller, buyer can sue for damages only and cannot compel him to deliver the goods.
Gives the buyer ‘Just-in-Rem’ i.e. right against the whole world. Gives the buyer “Just-in-Personam” i.e. right against a particular person.
Sale is contract plus conveyance. It is pure and simple agreement.
In this, if goods are destroyed then loss will be of Buyer. In this, if goods are destroyed by accident, loss will fall on seller.

‘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.
    Sale of Goods Act, 1930 – CS Foundation Business Law Notes IMG 2

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.
    Sale of Goods Act, 1930 – CS Foundation Business Law Notes IMG 3

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.
Sale of Goods Act, 1930 – CS Foundation Business Law Notes IMG 4
(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.
  • Trade customs.

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.
  • If buyer had acted in good faith.
  • 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,
  • Buyer acquires a good title as against the original buyer.

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.

3. Sale by official receiver, official assignee, receiver or liquidator coveys goods title to buyer.

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.
    Sale of Goods Act, 1930 – CS Foundation Business Law Notes IMG 5

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.
  • Where buyer becomes insolvent.

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.
  • Buyer has become insolvent.
  • 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:

  • Buyer taking delivery
  • 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.
Answer:
(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
(c) Tamilnadu
(d) Uttar Pradesh.
Answer:
(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.
Answer:
(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.
Answer:
(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).
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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 ___________.
(a) Either Buyer or Seller
(b) Buyer only
(c) Seller only
(d) Buyer and Seller to the extent of their shares.
Answer:
(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.
Answer:
(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).
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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).
Answer:
(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.
Answer:
(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.
Answer:
(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).
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
(d) Ready state
Answer:
(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
Answer:
(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
Answer:
(a) True

Question 38.
In cases of goods sent on approval basis, the goods are at the if they perish in an inevitable accident.
(a) Buyer’s Risk
(b) Seller’s Risk
(c) Combined Risk of Buyer and Seller
(d) Carrier’s Risk
Answer:
(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
Answer:
(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
(b) Let the Buyer beware
(c) No consideration – No contract
(d) Ignorance of law is no excuse
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
(c) Adequate time
(d) A reasonable time
Answer:
(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)
Answer:
(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 ___________.
(a) Buyer
(b) Seller
(c) Carries
(d) Insurer
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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)
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(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
(d) Payment of price Answer:
Answer:
(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
Answer:
(d) Claim damages

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

Question 61.
Delivery is the ………………. transfer of possession from one person to another
(a) Property
(b) Voluntary
(c) Goods
(d) Involuntary
Answer:
(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 ……………….
(a) Buyer
(b) Seller
(c) Transporter
(d) (a) & (b) both
Answer:
(a) Buyer

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

Question 66.
In sale by auction, goods are offered to be taken by ___________.
(a) Buyer
(b) Bidders
(c) Public
(d) Sellers
Answer:
(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
Answer:
(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
(b) Bill of loading
(c) Carrier document
(d) None of the above
Answer:
(b) Bill of loading

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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(c) Either (a) or (b)

Question 76.
An unpaid seller is having rights against ___________.
(a) Goods only
(b) The buyer only
(c) Both Goods & buyer
(d) None of the above
Answer:
(c) Both Goods & buyer

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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(a) Ownership of goods

Question 81.
The position of the hirer is that of a ___________.
(a) Bailor
(b) Bailee
(c) Seller
(d) Buyer
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(a) Money

Question 88.
When goods are exchanged for goods, it is a ___________.
(a) Sale
(b) Agreement to sale
(c) Barter
(d) Bailment
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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:
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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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:
(a) The buyer
(b) The seller
(c) Both the buyer and the seller
(d) None of the above.
Answer:
(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
(b) Buyer
(c) Hirer
(d) None of the above.
Answer:
(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.
Answer:
(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.
  • to the buyer.
  • 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:
(a) Against the buyer only
(b) Against both the buyer and the goods
(c) Against the goods only
(d) None of the above.
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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 ________.
(a) Let the buyer beware
(b) Let the seller beware
(c) Let the buyer be brave
(d) Let the seller be brave
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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.
  • to the buyer
  • 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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
(b) Must buy the goods
(c) Has an option to buy the goods
(d) Must return the goods
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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 ________.
(a) Against the buyer only
(b) Against both the buyer and the goods
(c) Against the goods only
(d) None of the above.
Answer:
(b) Unpaid Seller of Goods has right against the both the Goods and the Seller.

Question 147.
Selling follow which rule?
(a) Caveat Emptor
(b) Caveat Vendor
(c) Both (i) & (ii)
(d) None
Answer:
(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.
Answer:
(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
Answer:
(a) Gold rare coins are never be treated as money.

Question 150.
Agreement to sell; ownership is of:
(a) Buyer
(b) Seller
(c) Buyer if agreed by both the parties
(d) None of these
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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.

CS Foundation Business Environment and Law 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.

Indian Contract Act, 1872 – CS Foundation Business Law Notes 1

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:
Kedarnath V Gorie Mohammad

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:
Khwaja Muhammad v Hussaini Begum

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.
Indian Contract Act, 1872 – CS Foundation Business Law Notes 2

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:

Indian Contract Act, 1872 – CS Foundation Business Law Notes 3

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
Raj Rani v. Prem Adib

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.

2. Foreign Sovereigns and Ambassadors:

  • 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.

Indian Contract Act, 1872 – CS Foundation Business Law Notes 4

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 had free and independent advice
  • 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
  • Restraint of trade.

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.

Restraint of Trade (Sec. 27):
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:
Madhub Chunder V. Racoomer
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.
Indian Contract Act, 1872 – CS Foundation Business Law Notes 5

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.
Indian Contract Act, 1872 – CS Foundation Business Law Notes 6

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:
Indian Contract Act, 1872 – CS Foundation Business Law Notes 7
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)
Indian Contract Act, 1872 – CS Foundation Business Law Notes 8

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
Indian Contract Act, 1872 – CS Foundation Business Law Notes 9

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:
Hadley v. Barendale

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:
Indian Contract Act, 1872 – CS Foundation Business Law Notes 10a

(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:
Indian Contract Act, 1872 – CS Foundation Business Law Notes 12
(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.
  • Receive notice of sale.

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:
Indian Contract Act, 1872 – CS Foundation Business Law Notes 14

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.
Indian Contract Act, 1872 – CS Foundation Business Law Notes 10

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 buy goods ,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.
  • Admission made by agent, is deemed to be admission made by the principal.
  • 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:
Indian Contract Act, 1872 – CS Foundation Business Law Notes 11

  • 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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(a) Two parties

Question 5.
Contractual rights and duties are created by-
(a) State
(b) Statute
(c) Parties
(d) Custom or Usage.
Answer:
(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.
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(a) Agreement

Question 10.
An Agreement is
(a) Offer
(b) Offer+ Acceptance
(c) Offer+ Acceptance + Consideration
(d) Contract
Answer:
(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
Answer:
(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)
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(a) A rejection of the original offer

Question 23.
A person making a proposal is called:
(a) Promisor
(b) Vendor
(c) Contractor
(d) Promise
Answer:
(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.
Answer:
(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.
Answer:
(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).
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(b) No, he will not succeed.

Question 31.
Which one of the following falls into the category of offer?
(a) Newspaper advertisement regarding sale.
(b) Display of goods by a shopkeeper in his window with prices marked on them
(c) An advertisement for a concert.
(d) Announcement of reward to the public.
Answer:
(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.
Answer:
(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
Answer:
(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’.
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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)
Answer:
(b) Section 2(b)

Question 45.
The person making the proposal is called
(a) Promisor
(b) Promisee
(c) Participator
(d) Principal
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(a) The person to whom it is made

Question 49.
Terms of an offer must be-
(a) Ambiguous
(b) Uncertain
(c) Definite
(d) Vague
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(a) True

Question 55.
Acceptance can precede an offer
(a) True
(b) Partly True
(c) False
(d) None of the above.
Answer:
(c) False

Question 56.
Acceptance in ignorance of the offer is-
(a) Valid
(b) Invalid
(c) Void
(d) Voidable
Answer:
(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
Answer:
(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.
Answer:
(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)
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(a) True

Question 71.
Capacity to Contract has been defined in –
(a) Section 10
(b) Section 11
(c) Section 12
(d) Section 25.
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(b) Mistake of Fact

Question 82.
If an agreement suffers from any uncertainty. It is-
(a) Voidable
(b) Void
(c) Unenforceable
(d) Illegal.
Answer:
(b) Void

Question 83.
All illegal agreements are-
(a) Void- ab- initio
(b) Valid
(c) Contingent
(d) Enforceable
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(c) Vindictive Damages

Question 91.
A finder of lost goods is a-
(a) Bailor
(b) Bailee
(c) True Owner
(d) Thief.
Answer:
(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.
Answer:
(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.
Answer:
(b) Pawnee

Question 94.
Which of the following is not a charge on the property:
(a) Pledge
(b) Bailment
(c) Mortgage
(d) Hypothecation.
Answer:
(b) Bailment

Question 95.
How agency is created:
(a) By Direct appointment
(b) By implication
(c) By necessity
(d) All of the above
Answer:
(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
Answer:
(b) Pledge

Question 97.
An agreement enforceable by law is a-
(a) Promise
(b) Contract
(c) Obligation
(d) Lawful Promise
Answer:
(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
Answer:
(b) An Agreement & An Obligation

Question 99.
A proposal when accepted becomes a-
(a) Promise.
(b) Contract
(c) Acceptance
(d) Agreement
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(b) Can be vague

Question 105.
An offer may lapse by-
(a) Revocation
(b) Counteroffer
(c) Rejection by offeree
(d) All of the above
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
(c) Consideration is adequate
(d) Consideration must be something, which a promisor is not bound to do
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(b) Not be enforced

Question 116.
Ordinarily, a minor’s agreement is-
(a) Void ab initio
(b) Voidable
(c) Valid
(d) Unlawful
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(b) Valid

Question 122.
A contract made by mistake about Indian law is-
(a) Void
(b) Valid
(c) Voidable
(d) Illegal
Answer:
(b) Valid

Question 123.
A contract made by mistake about some foreign law, is-
(a) Void
(b) Valid
(c) Voidable
(d) Illegal
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(b) Voidable

Question 129.
Moral pressure is involved in case of-
(a) Coercion
(b) Undue influence
(c) Misrepresentation
(d) Fraud
Answer:
(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
Answer:
(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?
(a) Trading with enemy
(b) Trafficking in public offences
(c) Marriage brokerage contracts
(d) Contracts to do impossible acts
Answer:
(d) Contracts to do impossible acts

Question 132.
Wagering means
(a) Betting
(b) Bidding
(c) Both (a) & (b)
(d) None of above
Answer:
(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
Answer:
(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
Answer:
(a) Minors

Question 135.
In India, wagering agreements are void except in-
(a) Kanpur
(b) Mumbai
(c) Delhi
(d) None of the above
Answer:
(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
Answer:
(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
Answer:
(b) Prevention of unjust enrichment at expense of other

Question 138.
A contingent contract is
(a) Void
(b) Voidable
(c) Valid
(d) Illegal
Answer:
(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:
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
Answer:
(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
(c) Can sell that good if true owner is not found
(d) Both (b) & (c)
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(c) Both (a) & (b)

Question 145.
A contract which is impossible to perform is-
(a) Voidable
(b) Void
(c) Illegal
(d) Enforceable
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(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.
Answer:
(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)
Answer:
(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
Answer:
(d) None of the above

Question 162.
An agency may also arise by
(a) Estoppel
(b) Necessity
(c) Ratification
(d) All of the above
Answer:
(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
Answer:
(a) Factors

Question 164.
The threat to commit suicide amounts to
(a) Coercion
(b) Undue influence
(c) Misrepresentation
(d) Fraud
Answer:
(a) Coercion

Question 165.
Consensus-ad-idem is an essential of
(a) Agreement
(b) Promise
(c) Both (a) & (b)
(d) Consideration
Answer:
(a) Agreement

Question 166.
Agreement which are not contracts
(a) Social Matters
(b) Relating to partnership
(c) Domestic Agreements
(d) Both (a) & (c)
Answer:
(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
Answer:
(a) Party making an offer

Question 168.
Which one is not a type of offer
(a) Specific
(b) General
(c) Open
(d) Temporary
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(a) Contract by post

Question 172.
Quid Pro Quo means-
(a) Meeting of Minds
(b) Something in return
(c) To do something
(d) Promise
Answer:
(b) Something in return

Question 173.
No consideration, no contract is-
(a) True
(b) False
(c) Can’t say
(d) Partly True
Answer:
(a) True

Question 174.
Under English law, consideration may move from-
(a) Promisor
(b) Stranger
(c) Both (a) & (d)
(d) Promisee
Answer:
(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
Answer:
(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
Answer:
(d) None of these

Question 177.
According to performance, contract are:
(a) Unilateral
(b) Bilateral
(c) Multilateral
(d) Both (a) and (b)
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(d) All of the above

Question 183.
A wrong statement made is called-
(a) Misrepresentation
(b) Fraud
(c) Undue Influence
(d) Mistake
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(a) For the whole obligation

Question 190.
Because of supervening impossibility, the contract becomes-
(a) Illegal
(b) Void
(c) Voidable
(d) Remains Valid
Answer:
(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
Answer:
(d) None of the above

Question 192.
The damages in their nature are-
(a) Restoring
(b) Compensatory
(c) Reimbursing
(d) None of these
Answer:
(b) Compensatory

Question 193.
A contract of indemnity is a type of-
(a) Quasi Contract
(b) Wagering Contract
(c) Contingent Contract
(d) Voidable Contract
Answer:
(c) Contingent Contract

Question 194.
The person who gives a guarantee is called-
(a) Principal Debtor
(b) Surety
(c) Indemnifier
(d) Creditor
Answer:
(b) Surety

Question 195.
A guarantee given for loan taken by a minor is-
(a) Illegal
(b) Void
(c) Valid
(d) Voidable
Answer:
(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
Answer:
(a) Co-extensive with that of principal debtor

Question 197.
A bailment cannot be made about-
(a) A Car
(b) Furniture
(c) Money
(d) Television
Answer:
(c) Money

Question 198.
In a bailment, there is a transfer of goods-
(a) Custody
(b) Ownership
(c) Possession
(d) Both (b) & (c)
Answer:
(c) Possession

Question 199.
General lien can be exercised by-
(a) Banker
(b) Mechanics
(c) Unpaid Seller
(d) Finder of goods
Answer:
(a) Banker

Question 200.
Which of the following is not an essential element of agency
(a) Principal
(b) Agent
(c) Consideration
(d) An agreement
Answer:
(c) Consideration

Question 201.
A pretended agent is appointed by the-
(a) Principal
(b) Agent
(c) Sub-Agent
(d) None of these
Answer:
(d) None of these

Question 202.
Which of the following is not a mercantile agent-
(a) Factor
(b) Broker
(c) Auctioneer
(d) Insurance agent
Answer:
(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
Answer:
(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
Answer:
(d) Section 124-238

Question 205.
A proposal when accepted becomes a-
(a) Contract
(b) Promise
(c) Agreement
(d) None of the above
Answer:
(b) Promise

Question 206.
Consensus-ad-idem means
(a) Meeting of minds
(b) Meeting of opinion
(c) Equal rights
(d) Existing condition
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
(b) A receives B’s acceptance
(c) B has posted the letter of acceptance
(d) Reasonable period of time
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(d) Ordinary damages

Question 220.
A contract is always based upon-
(a) Consensus-ad-idem
(b) Consideration
(c) Intent to create legal obligation
(d) All of the above
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(a) The contract will be binding on the principal

Question 236.
The meeting of the mind is called:
(a) Jus in reum
(b) Consensus -ad-idem
(c) Jus in personam
(d) Void ab initio.
Answer:
(b) Consensus -ad-idem

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.
Answer:
(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.
Answer:
(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.
Answer:
(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).
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
(d) Consideration must be adequate.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
(c) Consideration is inadequate
(d) The .object of contract is expressly declared void by the act itself.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(b) Bonafide means in good faith.

Question 290.
Offer + Acceptance = _________.
(a) Consideration
(b) Promise
(c) Obligation
(d) Agreement
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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

Therefore, answer is option(c).

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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
(d) Trading on future goods
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
(c) Buyer
(d) Owners
Answer:
(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
(c) Consideration is inadequate
(d) The object of contract is expressly
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(b) According to indian Contract Act, 1872, agreement with minor is a void agreement as a minor is incompetent to enter into a contract. But when agreement by a parent or guardian entered into on behalf of minor is binding on him provided it is for his benefit or is for legal necessity.

Question 340.
Best class of example for contingent contract:
(a) Indemnity
(b) Guarantee
(c) Both A and B
(d) Wagering Agreements
Answer:
(c) A contingent contract is one where the promisor performs the obligation only when certain condition are met. The contract of insurance, indemnity and guarantee are considered to be the best examples of contingent contract.

CS Foundation Business Environment and Law Notes

Theory of Production, Costs and Revenue – CS Foundation Economics Notes

Theory of Production, Costs and Revenue – CS Foundation Economics Notes

1. Production
An economic term is to describe the inputs that are used in the production of goods or services in an attempt to make an economic profit. Things that are brought by producers for production are called input and the final goods or services are called production. The demand for a factor of production is a derived demand, meaning that the firm’s demand for a factor of production is derived from its decision to supply goods in another market. Factors of production – The term factors of production relates to the key factors that go into making goods. The resources that are required for production can be divided into four major groups.

  • Land
  • Capital
  • Labour
  • Entrepreneurship

Land – It is a natural resource that can not be created. It includes the resources that are above ground (climate, rain, etc.), resources that are below the ground (mineral resources, etc.), and resources on the ground (agricultural land, etc.). It is a primary but passive factor in production. It is primary in nature because production can not begin unless this resource is present but passive because it is dependent on other factors of production.
The characteristic feature of land are that

  • it has no social cost as we did not create it we got it free
  • the land is perfectly inelastic and is immobile

Capital-It is like a backbone for production. It includes machines, tools, etc. It is income, assets, money, everything that helps in the creation of input. It is a manufacturing resource. Land and labor are combined with manufactured resources in order to produce the things that we desire. These manufactured resources are called capital.
Certain features of capital are that

  • it is perfectly elastic
  • mobile and unlike labor, it can be increased as well as stored.

Labour – In order to produce the things we desire, a human resource must be used. That human resource consists of the productive contributions of labor made by individuals who work—for example, steelworkers, ballet dancers, etc. It is only human activity that is included thus the work performed by machines or animals is not included. Certain features of labor are that

  • it is inelastic, cannot be increased beyond its availability.
  • It is a mobile and active factor and can not be stored.

Entrepreneurship – There is, in effect, the fourth type of input used in production. It is a special type of human resource; it consists of entrepreneurial ability or entrepreneurship. Entrepreneurship is associated with the founding of new businesses or the introduction of new products and new techniques. The entrepreneur also takes on all of the risks and rewards of the business. He is the person who uses all the other uses to make the production of goods are reality.

2. Theory of production
In economics, an effort to explain the principles by which a business firm decides how much of each commodity that it sells (its “outputs” or “products”) it will produce, and how much of each kind of labor, raw material, fixed capital good, etc., that it employs (its “inputs” or “factors of production”) it will use. The theory involves some of the most fundamental principles of economics. These include the relationship between the prices of commodities and the prices of the productive factors used to produce them. It determines how the producer Production function – The production function relates the output of a firm to the number of inputs, typically capital and labor. It is important to keep in mind that the production function describes the technology, not economic behavior. It states how the desired output can be produced with the minimum input. There are two types of the production function
Y = F (K, L)
Y is the maximal amount of output that is possible to produce given the quantities of the inputs, capital, K, and labor, L. There are two types of the production function
(1) Short-run production function
(2) Long-run production function
1. Short run production function – in this capital input is fixed thus we are required to consider the change of labor.
Thus Y= F (K,L) only L will change
2. Long run production function – in this quantity of all the variables can be changed
Thus Y= F (K,L) K, L both can be changed.
There are two alternative theories for these production functions.

  • – Law of Diminishing Returns
  • – Law of Returns to scale Law of diminishing return
    The law of diminishing returns is a classic economic concept that states that as more investment in an area is made, overall return on that investment increases at a declining rate, assuming that all variables remain fixed. Features of law are
  • – When one variable is increased keeping all other variables constant than the output of production increases till some particular point and diminishes after that.
  • – To continue to make an investment after a certain point (which varies from context to context) is to receive a decreasing return on that input.
  • – It is also known as Law of variable proportions because as the input of one variable i§ increased its proportion with other fixed variable changes.
  • – This law is applied to short-run production.
  • – Alfred Marshall agreed to the law of diminishing return Assumptions of law

The assumptions of the law of diminishing returns are as follows:

  • Units of capital and labor are used as variable factors.
  • The prices of the factors do not change.
  • All units of variable factors are equally efficient.
  • There is no change in the technique of production.
  • The best combination of factors of production has crossed the level of optimum point.
  • There is no change in the fixed factor of production.
  • Law operates in short-run

Consider a factory that employs laborers to produce its product. If all other factors of production remain constant, at some point each additional laborer will provide less output than the previous laborer. At this point, each additional employee provides less and less return. If new employees are constantly added, the plant will eventually become so crowded that additional workers actually decrease the efficiency of the other workers, decreasing the production of the factory.
There are three stages in the law of variable proportion

(1) Stage of increasing returns – in this stage total product is increasing and continues to increase till the end of this stage along with this marginal product as well as average products are also increasing

(2) Stage of diminishing returns – at the end of this stage marginal product becomes zero. Total product and average product are also declining. It is called the stage of diminishing returns because all three total products (TP), marginal product (MP), and average product (AP) are declining.

(3) Stage of negative returns – Here marginal product becomes negative while total product and average product are still declining.
In the stage of diminishing returns there comes a point where total production is maximum and marginal production is zero. This stage is the most fruitful stage for the production.

3. Law of returns to scale
The law of returns to scale is concerned with the scale of production. The scale of production of a firm is determined by the amount of factors units.

Changes in production occur when all resources are proportionately changed in the long run. Returns to scale come in three forms—increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. Returns to scale are the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.

Increasing returns to scale – here when the inputs are increased in a given proportion the output increases in a greater proportion. Thus if the increase in output is 20 % output increases more than 20 %. The constant return to scale -Here with the increase in input-output also increases in the same proportion. Thus if the input is increased by 20% then output also increase by 20%

Decreasing returns to scale – Here with the increase in input there is a decrease in output thus returns to scale are diminishing.
Suppose, for example, that The Willy Company employs 1,000 workers in a 5,000 square foot factory to produce 1 million Stuffed potatoes each month. Returns to scale indicate what happens to production if the scale of operation expands to 2,000 workers in a 10,000 square foot factory-a doubling of the inputs.

If production increases to exactly 2 million Stuffed potatoes, twice the original quantity, then The Wacky Willy Company has constant returns to scale. If production increases by more than 2 million Stuffed potatoes, then The Willy Company has increasing returns to scale. And if production increases by less than 2 million Stuffed potatoes, then The Willy Company has decreasing returns to scale.

4. Theory of costs
In economics, the cost of production theory of value is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it. Cost is the value at which the product can be sold in the market. The cost can be determined by checking the cost of the production of good or services which includes the cost of all the inputs like land, labor etc., cost may be analyzed in two ways.

  • Short run costs
  • Long run costs Short run costs

In the short run, because at least one factor of production is fixed, output can be increased only by adding more variable factors. Hence we consider both fixed and variable costs. We use short run costs primarily to compute how much to produce while maximizing profits. New firms do not enter the industry, and existing firms do not exit.
(i) Fixed costs- Fixed costs are business expenses that do not vary directly with the level of output i.e. they are treated as independent of the level of production. Examples of fixed costs include the rental costs of buildings
(ii) Total cost curve – it comprises of total cost as well as total variable cost.
(iii) TFC – If output is taken on x axis and cost on y axis than total fixed cost curve is parallel to x axis.
(iv) TVC – the variable cost curve is positively related and moves up as variable cost increases. It’s origin is from zero.
(v) Total cost = TFC+TVC
Thus total cost curve is also positive in nature. .
(vi) Average cost curve – It has two categories average fixed cost and average variable cost.
(vii) AFC- it declines with the increase in output. It is rectangular hyperbola (viii) AVC – it first falls and then increases . the curve shape is like U.
Average cost curve lies above average variable cost curve
(ix) Marginal cost curve – since total fixed cost does not change in short run so marginal cost curve is dependent only on average variable cost. Thus marginal cost curve (MC) is also U shaped. MC curve lies below AVC.
Long run costs
In long run the firm can change all the inputs quantity so the cost of all input is variable. To make their long-run decisions firms look at the costs of various inputs and the technologies available for combining these inputs and then decide which combination offers the lowest cost. Characteristic features of long run costs are
As per classical approach TC increases with an increase in output, thus TC curve is straight line. Also AC and MC remains constant throughout.
As per modem economic theory firm experiences varying returns of scale. The shape of the long-run cost curve is due to the existence of economies and diseconomies of scale. The law of diminishing marginal productivity does not hold in the long run. The shape of the long-run cost curve is due to the existence of economies and diseconomies of scale. There is an envelope relationship between long-run and short-run average total costs.

  • Each short-run cost curve touches the long-run cost curve at only one point.
  • Thus If producing each unit of output becomes less costly there are economies of scale.
  • And if producing each unit of output becomes more costly there are diseconomies of scale.
  • If unit costs remain constant as output rises then there are constant returns to scale.

5. Theory of revenue
The income received by firm on selling the goods or services over a certain period of time is revenue Revenue may be measured in three ways:
Total Revenue (TR)
Average Revenue (AR)
Marginal Revenue (MR)
Total revenue – it is the total amount generated by the firm by selling all the quantity of output.
TR = quantity sold x price per unit
Average revenue – it is calculated by dividing total revenue by quantity to get price per unit
Marginal revenue – MR is the extra revenue that a firm gains when it sells one more unit of a product in a given time period. It is the ratio of change in total revenue to change in total units sold.
Different relationship between MR, AR and TR graphically For first unit
MR = AR = TR After that
When MR is positive TR slopes upwards When MR below X axis TR slopes downwards.
AR if parallel to X axis than MR also parallel to X axis
If AR is straight line than MR curve will bisect each perpendicular distance of it from Y axis.
Kinked demand curve – According to the kinked demand theory, each firm will face two market demand curves for its product. At high prices, the firm faces the relatively elastic market demand At low prices, the firm faces the relatively inelastic market demand curve The two market curve intersect and form kinked demand curve. In such cases AR falls in straight line with 2 unequal slopes and 2 segments. Since the slopes of AR are unequal so they cause a jink and as a result kinked demand curve is formed.

6. Producers equilibrium
Producer’s equilibrium refers to the level of output of a commodity that gives the maximum profit to the producer of that commodity. Therefore, the output level at which ‘total revenue less total cost’ is maximum is called the equilibrium output level. According to this approach there are two conditions of producer’s equilibrium

  • TR-TC Approach.
  • MR-MC Approach

TR-TC Approach – A point where the difference between total revenue and total cost is maximum is the equilibrium point. The total revenue (TR) minus total cost (TC) method (TR – TC) relies on the fact that profit is equal to the difference between revenue and costs MR-MC Approach – As per this approach a firm will adjust the quantity of output it supplies until finding a point where the marginal revenue associated with selling that quantity is equal to the marginal cost of producing that quantity. That is, the firm will produce where MR = MC.

(1) MR-MC
When one more unit of output is produced, MR is the gain and MC is the cost to the producer. Clearly, so long as benefit is greater than the cost, or MR is greater than MC, it is profitable to produce more. Therefore, so long as MR is greater than MC, the maximum profit level, or the equilibrium level is not reached. The equilibrium is not achieved because it is possible to add to profits by producing more. The producer is also not in equilibrium when MR is less than MC because benefit is less than the cost. By producing less the producer can add to his profits. When MC is equal to MR, the benefit is equal to cost, the producer is in equilibrium subject to that MC becomes greater than MR beyond this level of output.

(2) MC is greater than MR after MC = MR output level
‘MC = MR’ is a necessary condition but not sufficient enough to ensure equilibrium. It is because the producer may face more than one MC =MR outputs. But out of these only that output beyond which MC becomes greater than MR is the equilibrium output. It is because if MC is greater than MR, producing beyond MC = MR output will reduce profits. And when it is no longer possible to add to profits the maximum profit level is reached. On the other hand, if MC is less than MR beyond the MC = MR output, it is possible to add to profits by producing more. Therefore this MC = MR level is not the equilibrium level. For a producer to be in equilibrium it is necessary that MC equals MR as well MC becomes greater than MR if more output is produced.

7. Economies and diseconomies of scale
There are benefits and drawbacks in increasing the size of operation of a business. Economies of scale are the cost advantage from business expansion. As some firms grow in size their unit costs begin to fall. A business can become so large that its unit costs begin to rise. Expanding firms can experience diseconomies of scale

8. Economies of scale
It is reduction in cost of production with increase in firm size which may be due to several reasons like administrative economies or bulk purchasing making the cost more efficient and many more.

Example: Assume you are a small business owner and are considering printing a marketing brochure. The printer quotes a price of Rs. 5,000 for 500 brochures, and Rs. 10,000 for 2,500 copies. While 500 brochures will cost you RslO per brochure, 2,500 will only cost you Rs. 4 per brochure. In this case, the printer is passing on part of the cost advantage of printing a larger number of brochures to you. This cost advantage arises because the printer has the same initial set-up cost regardless of whether the number of brochures printed is 500 or 2,500. Once these costs are covered, there is only a marginal extra cost for printing each additional brochure. _
It is divided into two categories

Internal economies of scale – They occur due to indigenous causes. Internal economies of scale arise when firms increase their scale of production. Hence, they incur lower average costs of production, either through specialization or other factors like increase in borrowing power of larger organisation, better utilization of inputs due to technical up gradation, advertising, marketing etc. When average costs fall, giving the price of the good to be constant, profit margins of these firms will be increased. Thus, the individual firm benefits from internal economies of scale. Internal economies of scale affect the firm’s average cost curve by shifting the initial position to the right along the curve.

External economies of scale – The lowering of a firm’s costs due to external factors. There are some external factors that affect the firm such as some research and development in industry. This research and development is going to help whole industry and a single firm of that industry gets the benefit which may help to reduce its cost. External economies of scale will increase the productivity of an entire industry, geographical area or economy. The external factors are outside the control of a particular company and encompass positive externalities that reduce the firm’s costs. Another factor which can*be discussed is getting the information which is a requirement for the whole industry, if this information is collectively collected than it is cheaper than a firm individually trying to get it. Thus getting the information cheaply affects the firm’s production.

9. Diseconomies of scale
After reaching a certain size, it becomes increasingly expensive to manage a gigantic organization for a number of reasons, including its complexity, bureaucratic nature and operating inefficiencies. This undesirable phenomenon is referred to as “diseconomies of scale” Internal Diseconomies of scale -When a firm expands its production scale beyond a certain level, it suffers certain disadvantages. These disadvantages are called internal diseconomies of scale. The result of this diseconomy of scale is a fall in output and an increase in the long-run average cost. There are a number of factors that might give rise to inefficiencies as the size of the firm grows,

As the size of the firm grows beyond a certain level, organization, control, and planning is needed. This makes the administrative duties more difficult. Delegation of much of the management functions to lower personnel becomes very common. Since this personnel lacks the requisite experience to undertake the task, it may result in low output at a higher cost. Again it is often difficult to arrive at quick decisions since large firm often has many entrepreneurs and directors through whom suggestions must pass before they are implemented. All these lead to an increase in the long-run average cost.

External Diseconomies of Sca/e-External factors beyond the control of a company increase its total costs, as output in the rest of the industry increases. The increase in costs can be associated with market prices increasing for some or all of the factors of production. External diseconomies are costs that are outside the control of a single firm and result of the growth of a specific industry. For example, negative externalities, such as road congestion, can result from the growth of an industry in a specific region. Resources may become exhausted and the price of resources may rise as demand outstrips supply.

Theory of Production, Costs and Revenue MCQ Questions

Question 1.
Production is
a. Creation of something
b. Creation of value
c. Creation of Utility
d. Both b& c
Answer:
d. Both b& c

Question 2.
Characteristic feature Uncommon with the primary production of function are
a. It costs money
b. It is inelastic
c. It is immobile
d. It needs Labour
Answer:
a. It costs money

Question 3.
______________ is Not present in the feature of labour
a. Active factor
b. Mobile factor
c. Elastic factor
d. All of the above
Answer:
b. Mobile factor

Question 4.
If 1 orchard, 7 workers, and 3 tons of fertilizer yield 1,000 bushels of peaches, while 1 orchard, 7 workers, and 4 tons of fertilizer yield 1,300 bushels,
a. The average product of labor equal 1,150 bushels.
b. The marginal product of labor cannot be calculated.
c. The average product of fertilizer equals 1,150 bushels.
d. The marginal product of fertilizer cannot be calculated
Answer:
b. The marginal product of labor cannot be calculated.

Question 5.
Which of the following statement best describes the general form of a production function?
(i) It is a purely technological relationship between quantities of input and quantities of output.
(ii) It represents the technology of an organization, sector of an economy
(iii) Prices of inputs or of the output do not enter into the production function
(iv) It is flow concept describing the transformation of inputs into output per unit of time.
a. (i), (ii) and (iv)
b. (i) and (ii)
c. (i) and (iv)
d. all of the above
Answer:
d. all of the above

Question 6.
Marginal cost is:
a. the change in cost following a managerial decision
b. the change in output following a one dollar change in cost.
c. The change in cost following a unit change in output
d. The change in average cost following a one- unit change in output
Answer:
c. The change in cost following a unit change in output

Question 7.
The breakeven level of output occurs when
a. marginal cost equals marginal revenue
b. marginal cost equals marginal revenue.
c. Marginal profit equals zero.
d. Total profit equals zero.
Answer:
d. Total profit equals zero.

Question 8.
If there is an increase in the costs of production it will lead to
a. shift demand curve outwards
b. shift demand curve inwards
c. shift supply outwards and other things unchanged
d. shift supply inwards.
Answer:
d. shift supply inwards.

Question 9.
There is an increase in price but all other things
are unchanged. This will lead to:
a. A shift in supply outwards
b. A shift in supply inwards
c. There is no change in supply
d. An extension of supply
Answer:
d. An extension of supply

Question 10.
A country enjoys a comparative advantage over
another country in producing oil when
a. it has more oil than the other country.
b. It can produce oil at a lower opportunity cost than the other country
c. It does not need to import oil.
d. It wants to export oil as much as it has
Answer:
b. It can produce oil at a lower opportunity cost than the other country

Question 11.
For a given short-run production, function
a. technology is assumed to change as capital stock changes.
b. Technology is assumed to change as the labor input changes.
c. Technology is considered to be constant for a given production function relationship
d. Technology is assumed to change positively until diminishing return set in and then it changes in the other direction.
Answer:
c. Technology is considered to be constant for a given production function relationship

Question 12.
Suppose a firm is using two inputs, labor and capital. What will happen if the price of labor falls?
a. The firm’s average cost curve will shift downward.
b. The firm’s marginal cost curve will shift downward.
c. To produce an unchanged output, the firm would use more labor
d. All of the above
Answer:
d. All of the above

Question 13.
Which of the following is not a reason for the existence of economies of large scale production?
a. bulk buying;
b. small markets;
c. specialized workers;
d. costs not increasing in proportion to volume or output;
Answer:
b. small markets;

Question 14.
Average fixed cost
a. is U-shaped.
b. Declines over the entire output range.
c. Is a long-run concept only.
d. Is influenced by diminishing returns to production.
Answer:
b. Declines over the entire output range.

Question 15.
if average total cost is 100 for a given output and marginal cost is 70, we then know that average fixed cost is
a. 30.
b. 170.
c. 70.
d. Not possible to determine with the information given.
Answer:
d. Not possible to determine with the information given.

Question 16.
Which of the following statements about the relationship between marginal cost and average cost is correct?
a. when MC is falling, AC is falling.
b. AC equals MC and MC’s lowest point.
c. When MC exceeds AC, MC must be rising.
d. When AC exceeds MC, MC must be rising.
Answer:
c. When MC exceeds AC, MC must be rising.

Question 17.
The slope of the total variable cost curve equals
a. average variable cost.
b. Marginal cost.
c. Average cost.
d. Marginal physical product.
Answer:
b. Marginal cost.

Question 18.
X believed that if people were free to pursue their own interests, then
a. greed and cheating would prevail in the market.
b. Less would be produced than if altruism were our guiding principle
c. They would generally be encouraged to produce goods and services that other valued highly (relative to their costs).
d. The public interest would be best served, but the interests of employees would be hurt.
Answer:
c. They would generally be encouraged to produce goods and services that other valued highly (relative to their costs).

Question 19.
An increase in wages will lead the aggregate supply curve to
a. Remains unchanged.
b. Shift outward.
c. Shift inward
d. Becomes flat
Answer:
c. Shift inward

Question 20.
An increase or decrease in consumption of a goods or services is termed as.
a. Marginal utility
b. Revenue curves.
c. Producer’s equilibrium.
d. Total utility
Answer:
a. Marginal utility

Question 21.
The total cost (TC) of producing sports shoes (Q) is given as TC – 200 + 5 Q. What is the variable cost?
a. 5Q
b. 5
c. 5+ (200/Q)
d. 200
Answer:
a. 5Q

Question 22.
The typical production possibilities curve is:
a. an upsloping line that is concave to the origin.
b. A downsloping line that is convex to the origin
c. A downsloping line that is concave to the origin
d. A straight upsloping line
Answer:
c. A downsloping line that is concave to the origin

Question 23.
When per unit price goes up as output is increased it is
a. Diseconomies of scale
b. Economies of scale
c. Production cost
d. None of the above.
Answer:
a. Diseconomies of scale

Question 24.
In the presence of a diminishing marginal rate of technical substitution between labour and capital, output can be kept unchanged only if
a. equal successive sacrifices of capital go hand in hand with even small increases of labor
b. equal successive sacrifices of capital go hand in hand with ever small increases of labor
c. equal successive increases in labor go hand in hand with ever small increases in capital
d. equal successive increases in labor go hand in hand in hand with ever small sacrifices of capital
Answer:
d. equal successive increases in labor go hand in hand in hand with ever small sacrifices of capital

Question 25.
A movement along the demand curve drawn in quantity-price space to the left may because by
a. an increase in supply
b. a rise in income.
c. A rise in the price of complementary good
d. A fall in the number of substitute goods
Answer:
a. an increase in supply

Question 26.
The output where diminishing returns to production begin is also the output where
a. marginal cost is at a minimum
b. average total cost is at a minimum
c. average variable costs is at a minimum
d. marginal and average cost intersects.
Answer:
a. marginal cost is at a minimum

Question 27.
Which of the following statements about marginal cost is incorrect?
a. A U-shaped marginal cost curve implies the existence of diminishing returns over all ranges of output.
b. When marginal cost equals averages cost, average cost is at tits minimum
c. In the short run, the shape of the marginal cost curve is due to the law of diminishing marginal returns.
d. When marginal cost is falling, total cost is rising
Answer:
a. A U-shaped marginal cost curve implies the existence of diminishing returns over all ranges of output.

Question 28.
Which of the following statements about the relationship between marginal cost and average cost is correct?
a. when MC is falling, AC is falling
b. AC equals MC and MC’s lowest point.
c. When MC exceeds AC, must be rising
d. When AC exceeds MC, MC must be rising
Answer:
c. When MC exceeds AC, must be rising

Question 29.
In the short run, diminishing marginal returns are implied by
a. rising marginal cost
b. Rising average cost
c. Rising average variable cost
d. All of the above
Answer:
a. rising marginal cost

Question 30.
Because of fixed cost
a. Marginal cost almost always begins below average total cost
b. Marginal cost is always equal to Total average cost
c. Marginal cost is always above total cost
d. None of the above
Answer:
a. Marginal cost almost always begins below average total cost

Question 31.
If an economy is operating at a point inside the production possibilities curve,
a. its resources are being wasted.
b. The curve will begin to shift inward.
c. The curve will begin to shift outward.
d. This is a trick question because an economy cannot produce at a point inside the curve
Answer:
a. its resources are being wasted.

Question 32.
In any production process the marginal product of labour equals
a. total output divided by total labour inputs.
b. Total output minus the total capital stock.
c. The change in total output resulting from a small change on the labour input
d. Total output produced by labour inputs
Answer:
c. The change in total output resulting from a small change on the labour input

Question 33.
If a new motorway is built near to a company, thus reducing its costs, this is an example of:
a. commercial economies of scale
b. Financial economies of scale
c. Managerial economies of scale
d. External economies of scale
Answer:
d. External economies of scale

Question 34.
Which one of the following is correct in a situation of diminishing marginal returns to labour?
a. Productions remains unchanged
b. Production is increasing
c. Production is decreasing
d. All of the above
Answer:
b. Production is increasing

Question 35.
Supply of labour includes
a. Duration for which they work
b. Intensity with which they work
c. Their efficiency
d. All of the above
Answer:
d. All of the above

Question 36.
Capital includes
a. assets
b. money
c. entrepreneurship
d. Both a & b
Answer:
d. Both a & b

Question 37.
It is Not uncommon for the characteristic feature found in Capital
a. elasticity
b. gift of nature
c. mobile factor
d. All of the above
Answer:
d. All of the above

Question 38.
In the production equation Qx = f(L,K,T ———–n), L is
a. Labour
b. Level of technology
c. Loyalty
d. None of the above
Answer:
a. Labour

Question 39.
When output increases in greater proportion to input it is
a. Constant returns to scale
b. Increasing return to scale
c. Diminishing return to scale
d. all of the above
Answer:
a. Constant returns to scale

Question 40.
As per MR MC approach two conditions are required for a firm to be in equilibrium
a. Marginal revenue should be equal to marginal cost
b. Marginal cost curve should cut marginal revenue curve from below
c. Both a& b
d. None of the above
Answer:
c. Both a& b

Question 41.
Which of the following best describes the law of diminishing marginal returns when an employee is increased?
a. Marginal product of the new employee will be more then that of the previous employee.
b. Marginal product of the new employee will be less then the previous employee.
c. It will remain unchanged
d. None of the above
Answer:
b. Marginal product of the new employee will be less then the previous employee.

Question 42.
Price exceeds Average variable cost but is smaller than average Total cost at the optimum level of output, the firm is
a. making a profit and should continue to produce
b. incurring a loss but should continue to produce
c. incurring a loss and should stop producing immediately
d. break even and maintain current output
Answer:
b. incurring a loss but should continue to produce

Question 43.
The wages paid out to casual workers can be considered
a. at fixed cost
b. at variable cost
c. partly at variable and partly at fixed cost
d. at opportunity cost
Answer:
b. at variable cost

Question 44.
Which of the following industries most closely approximates perfectly competitive market in India?
a. automobile
b. newspapers
c. beverages
d. sachet pure water
Answer:
d. sachet pure water

Question 45.
The following are some of the economic factors influencing the location of an enterprise in India except
a. nearest to state capital
b. availability of raw materials
c. nearest to power supply
d. availability of transportation system
Answer:
a. nearest to state capital

Question 46.
Average cost is defined as
a. Average cost divided by marginal cost.
b. total cost divided by total output
c. total output divided by average cost
d. total output times marginal cost
Answer:
b. total cost divided by total output

Question 47.
The marginal cost when output = 10 is equal to
a. the slope of a line drawn tangent to the total cost curve where output = 10.
b. The total cost of 10 units of output divided by its average cost.
c. The average cost of 10 units
d. None of the above.
Answer:
c. The average cost of 10 units

Question 48.
How will a decrease in the equilibrium price in the market of a perfectly competitive industry affect the total revenue of a typical firm
a. Both total revenue and economic profit will increase at all rates of output
b. Both total revenue and economic profit will remain same
c. Both total revenue and economic profit will decrease at all rates of output
d. None of the above are true
Answer:
c. Both total revenue and economic profit will decrease at all rates of output

Question 49.
The perfectly competitive firm’s short run supply curve is same as the
a. total revenue
b. Supply of other firms in the industry
c. Upward sloping portion of its marginal cost curve at or above minimum AVC curve
d. Upward sloping portion of its MR curve
Answer:
c. Upward sloping portion of its marginal cost curve at or above minimum AVC curve

Question 50.
If average cost is at a minimum, then
a. it is equal to marginal cost.
b. Total cost is also at a minimum
c. Profit is at a maximum
d. All of the above are true
Answer:
d. All of the above are true

Question 51.
The marginal principle asserts that, in general, the net benefit is maximized when
a. total benefit will be equal to total cost.
b. Average benefit will be equal to average cost.
c. Marginal benefit will be equal to average cost.
d. Average cost will be above total cost but below average benefit.
Answer:
c. Marginal benefit will be equal to average cost.

Question 52.
Supply curve reflects
a. Total cost curves.
b. Average cost curves.
c. Marginal cost curves.
d. Average production curves.
Answer:
c. Marginal cost curves.

Question 53.
A constant cost industry is distinguished by the fact that
a. The long run industry supply curve is perfectly inelastic
b. The long run industry supply curve is perfectly elastic
c. average revenue is equal to zero
d. none of the above is correct
Answer:
b. The long run industry supply curve is perfectly elastic

Question 54.
If both average cost (AC) and marginal cost (MC) are U shaped, then
a. AC will reach a minimum at a level of output that is less than that at which MC reaches a minimum
b. AC> MC
c. AC will reach a minimum at a level of output that is greater than that at which MC reaches a minimum
d. AC =MC.
Answer:
c. AC will reach a minimum at a level of output that is greater than that at which MC reaches a minimum

Question 55.
If a firm’s marginal revenue is greater than its marginal cost, then the firm should
a. increase output to increase profit
b. decrease output to increase profit
c. Increase input to decrease profit
d. Marginal revenue should be changed
Answer:
a. increase output to increase profit

Question 56.
In a firm’s average revenue is equal to its average cost, then
a. profit is at a maximum
b. profit is at a minimum
c. profit is equal to zero
d. the firm is in equilibrium
Answer:
c. profit is equal to zero

Question 57.
From the given option-

Theory of Production, Costs and Revenue – CS Foundation Economics Notes Chapter 3 img 1

Figure Time period for supply
Figure (i) (A) Very long run.
Figure (ii) (B) Short run
Figure (iii) (C) Long run
Figure (iv) (D)Yery long run.

a. (a): (i) (B), (ii) (0), (iii) (A), (iv) (C)
b. (i) (A), (ii) (B), (iii) (C), (iv) (0).
c. (i) (B), (ii) (C), (iii) (0), (Iv) (A)
d. (i) (C), (ii) (0), (iii) (B), (iv) (A)
Answer:
a. (a): (i) (B), (ii) (0), (iii) (A), (iv) (C)
Hint
Short run – in this not frequent changes in quantity but frequent changes in prices. Long run – in this frequent changes in quantities but price change is not frequent. Very long run – no change in price in respect to quantity supplied.
Very short run – quantity supplied does not change but price changes.

Question 58.
Marginal product is-
a. Addition to total product by increase in additional units of all inputs
b. Change in total product caused by a fall in additional units of all inputs
c. ≅QO/≅N where II stands for change, TQ stands for total products and N stands for units of a single variable input.
d. ≅N/≅TQ
Answer:
c. ≅QO/≅N where II stands for change, TQ stands for total products and N stands for units of a single variable input.
Hint
≺≺≺≺Q/≺N where △Stands for change, TQ stands for total products and N stands for units of a single variable input.
Marginal product is the output that results from one additional unit of a factor of production (such as a labor hour or machine hour), all other factors remain constant.

Question 59.
Average product is rising then marginal product would
a. Keep rising
b. Be more than average product
c. Would be less than the average product
d. Be indeterminate because the units of
Answer:
b. Be more than average product
Hint
Average product is rising then marginal product would be more than average product The relation between average product and the marginal product is

  • If the marginal is less than the average, then the average declines.
  • If the marginal is greater than the average, then the average rises.
  • If the marginal is equal to the average, then the average does not change,

Question 60.

Table A Table B Table C Table D
X Input Y Output X Input Y Output X Input Y Output X Input Y Output
1 5 2 4 1 8 4 40
2 10 4 8 3 24 4 60
3 15 6. 12 10 80 4 80

Which of these does not represent fixed proportion of inputs and outputs of X and Y respectively-
a. Table A
b. Table B
c. Table C
d. Table D
Answer:
d. Table D
Hint
In table D inputs are not changing in corresponding to output which is changing while in all other tables input is changing in fixed proportion in relation to output as in Table A with 1 unit increase in input, output is increasing 5 units. In table B with 1 unit increase in input, output increases 2 units. In table C with 1 unit increase in input, output increases 8 units.

Question 61.
Which one of the following short run cost curves always falls with an increase in the level of output?
a. Average fixed cost curve
b. Total fixed cost curve
c. Average variable cost curve
d. Total cost curve.
Answer:
a. Average fixed cost curve
Hint
AFC- it declines with the increase in output. It is rectangular hyperbola Average fixed cost curve always falls with an increase in the level of output.

Question 62.
Which of the following figures given below represents correct relationship between AC and MC:-

Theory of Production, Costs and Revenue – CS Foundation Economics Notes Chapter 3 img 2

a. Figure (i)
b. Figure (ii)
c. Figure (iii)
d. Figure (iv)
Answer:
c. Figure (iii)
Hint
The relationship between the marginal cost and average cost is the same as that between any other marginal-average quantities. When marginal cost is less than average cost, average cost falls and when marginal cost is greater than average cost, average cost rises.

Question 63.
From the following output schedule, the value of Marginal Product against Y will be

Unit of Variable Input Total Product Marginal Product
4 60 15
7 90 Y

a. 30
b. 90
c. 40
d. 10
Answer:
d. 10
Hint
Marginal product is the output that results from one additional unit of a factor of production (such as a labor hour or machine hour), all other factors remain constant.
Marginal Product = □ □□Q/DN whereA stands for change, TQ stands for total products and N stands for units of a single variable input. MP = 90-60/7-4 = 30/3 = 10

Question 64.
in a graph, when we plot AC and AFC curves, the difference between AC and AFC curves measures
a. TFC
b. WC
c. AVC
d.MC
Answer:
c. AVC
Hint
Average cost curve – it has two categories average fixed cost and average variable cost. AFC- it declines with the increase in output. It is rectanguiar hyperbola AVC – it first falls and then increases . the curve shape is like U. Average cost curve lies above average variable cost curve AC = AFC+AVC AC- AFC = AVC

Question 65.
Marginal cost at any level of output is affected
a. Only by fixed costs
b. Only by variable costs
c. Both by fixed costs and variable costs
d. More by fixed costs and less by variable costs.
Answer:
b. Only by variable costs
Hint
Marginal cost curve – since total fixed cost doesnot change in short run so marginal cost curve is dependent only on average variable cost. Thus marginal cost curve (MC) is also U shaped. MC curve lies below AVC.

Question 66.
if on a given straight line demand curve, elasticity of demand is equal to unity, the value of marginal revenue will be
a. Indeterminate
b. Zero
c. Infinite
d. Maximum
Answer:
b. Zero
Hint
In a straight-line demand curve we know that the elasticity at the middle point is equal to one. It follows that marginal revenue corresponding to the middle point of the demand curve (or AR curve) will be equal to zero.

Question 67.
Long-run average cost curve falls due to the application of:
a. The law of increasing returns to a factor
b. The law of increasing returns to scale
c. The law of variable proportions
d. The law of demand.
Answer:
b. The law of increasing returns to scale
Hint
In long run the firm can change all the inputs quantity so the cost of ail input is variable .To make their long-run decisions firms look at the costs of various inputs and the technologies available for combining these inputs and then decide which combination offers the lowest cost. As per modern economic theory firm experiences varying returns of scale .The shape of the long-run cost curve is due to the existence of economies and diseconomies of scale. Long-run average cost curve falls due to the application of the law of increasing returns to scale.

Question 68.
Which of the following statements is not true?
a. As average product rises, marginal product will be more than the average product
b. As average product rises, marginal product will keep on rising
c. Marginal product will be equal to average product when average product is maximum
d. If marginal product becomes negative, total product will begin to fall.
Answer:
c. Marginal product will be equal to average product when average product is maximum
Hint
The relation between average product and marginal product is

  • If the marginal is less than the average, then the average declines.
  • If the marginal is greater than the average, then the average rises.
  • If the marginal is equal to the average, then the average does not change
  • If marginal product becomes negative, total product will begin to fall

Question 69.
Which one of the following graphs is the correct presentation of the relationship between average product and marginal product? (Q is quantity of output and N is unit of variable factor).

Theory of Production, Costs and Revenue – CS Foundation Economics Notes Chapter 3 img 3

The correct option is:
a. Figure 1
b. Figure 2
c. Figure 3
d. Figure 4
Answer:
d. Figure 4
Hint
There are three stages in law of variable proportion
(1) Stage of increasing returns – in this stage total product is increasing and continues to increase till the end of this stage . along with this marginal products as well as average products are also increasing
(2) Stage of diminishing returns – at the end of this stage marginal product becomes zero. Total product and average product are also declining . It is called stage of diminishing returns because all three total product (TP), marginal product (MP) and average product (AP) all are declining.
(3) Stage of negative returns – Here marginal product becomes negative while total product and average product are still declining but never zero.
In figure 2 and 3 AP is being shown negative which is wrong.

Question 70.

Unit of variable factors Total Product units
1 30
2 70
3 120

In the product schedule as given above, the marginal proddct of the 4th unit of input would be:
a. 30 units
b. 60 units
c. 70 units
d. 25 units.
Answer:
b. &0 units
Hint
Marginal product is the output that results from one additional unit of a factor of production (such as a labor hour or machine hour), all other factors remain constant.
Marginal Product = >
pnnQ/DN where Astands for change, TQ stands for total products and N stands fpr units of a single variable input.
MP for 1st unit =30-0/1 =30
MP for 2nd unit = 70-30/1 =40
MP for 3rd unit = 120-70/1 = 50
MP for 4th unit = 60 (by looking at the sequence)

Question 71.
Which of the following tables represents diminishing returns to scale? (In the tables – K stands for Capital, L for Labour and TP for Total Production)

Table 1
K L TP K L TP K L TP K L TP
1 2 10 1 2 10 1 2 10 1 2 10
2 4 30 2 4 20 2 4 18 2 4 50
4 8 100 4 8 40 4 8 35 4 8 200

The correct option is: _
a. Table 1
b. Table 2
c. Table 3
d. None of the above
Answer:
c. Table 3
Hint
Decreasing returns to scale – Here with the increase in input there is decrease in output thus returns to scale are diminishing. Suppose, for example, that The Willy Company employs 1,000 workers in a 5,000 square foot factory to produce 1 million Stuffed potatoes each month. Returns to scale indicate what happens to production if the scale of operation expands to 2,000 workers in a 10,000 square foot factory–a doubling of the inputs. If production increases to exactly 2 million Stuffed potatoes, twice the original quantity, then The Wacky Willy Company has constant returns to scale. If production increases by more than 2 million Stuffed potatoes, then The Willy Company has increasing returns to scale. And if production increases by less than 2 million Stuffed potatoes, then The Willy Company has decreasing returns to scale.
AP= TP/Q
So for table 1 AP = 5,7.5,12.5 respectively for 1st, 2nd and 3rd unit
Similarly for table 2 AP = 5,5,5 respectively
For table 3 AP = 5,4.5,4.38 respectively
For table 4 AP = 5,12.5,25 respectively

Question 72.
Laws of returns to scale are based on the assumption of:
a. Variable proportions of factor-inputs
b. Fixed proportions of factor-inputs
c. Excess demand for fixed inputs
d. Deficient demand for fixed inputs.
Answer:
a. Variable proportions of factor-inputs
Hint
The law of returns to scale is concerned with the scale of production. The scale of production of a firm is determined by the amount of factors units.
Changes in production occur when all resources are proportionately changed in the long run. Returns to scale come in three forms-increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs.

Question 73.
Which of the following expressions is not correct?
a. MC — TC<sub>N</sub> – TCN<sub>N_1</sub>
b. MC = TC/<sub>≺</sub>N
c. MC = <sub>≺</sub>TVC/<sub>≺</sub>N
d. MC=<sub>≺</sub>TFC/<sub>≺</sub>N.
Answer:
d. MC=<sub>≺</sub>TFC/<sub>≺</sub>N.
Hint
Marginal cost curve – since total fixed cost doesnot change in short run so marginal cost curve is dependent only on average variable cost.

Question 74.
Match the following:

X. U-shaped curve (i) AC = MC
Y. Rectangular Hyperbola (ii)TC
Z. Continuously rising curve (iii) AFC
W. Optimum output (iv) AC

“The correct option is
a. X (iv); Y (iii); Z (ii); W (i)
b. X (iii); Y (ii); Z (i); W (iv)
c. X (ii); Y (i); Z (iii); W (iv)
d. X (i); Y (iv); Z (ii); W (iii).
Answer:
a. X (iv); Y (iii); Z (ii); W (i)
Hint
AFC- it declines with the increase in output. It is rectangular hyperbola TC(Total cost) = TFC+TVC
Total cost curve is also positive in nature thus continuously rising curve
AC -Average cost curve lies above average variable cost curve and is U shaped.
AC=MC – gives optimum output.

Question 75.
Under Production Theory, the expression ax = f(L.K) represents:
a. Demand function
b. Revenue function
c. Cost function
d. Production function.
Answer:
d. Production function.
Hint
Production Function – The production function relates the output of a firm to the amount of inputs, typically capital and labor.
Y = F (K, L)
Y is the maximal amount of output that is possible to produce given the quantities of the inputs, capital, K, and labor, L.

Question 76.
Study the three tables given below –

Table-1 Table-2 Table-3
Input -X Input -Y Input -X Input -Y Input -X Input -Y
1 20 1 10 1 20
2 10 2 10 2 16
3 4 3 10 3 8

Which of the above tables is showing fixed factor proportions –
a. Table -1
b. Table-2
c. Table – 3
d. None of the above.
Answer:
d. None of the above.
Hint
Fixed factor proportions means the capital labour ratio will be same at all levels of production.

Question 77.
Which of the following figures is showing correct relationship between average product and marginal product under production theory?

Theory of Production, Costs and Revenue – CS Foundation Economics Notes Chapter 3 img 4

Figure 3
Correct option is
a. Figure 1
b. Figure 2
c. Figure 3
d. Figure 4
Answer:
c. Figure 3
Hint
There are three stages in law of variable proportion
1 Stage of increasing returns – in this stage total product is increasing and continues to increase till the end of this stage, along with this marginal products as well as average products are also increasing
2 Stage of diminishing returns – at the end of this stage marginal product becomes zero. Total product and average product are also declining. It is called stage of diminishing returns because all three total product (TP), marginal product (MP) and average product (AP) all are declining.
3 Stage of negative returns – Here marginal product becomes negative while total product and average product are still declining but never zero

Question 78.
With an increase in the units of a variable input, total product keeps rising at a constant rate, marginal product curve will be best represented as a-
a. Rising straight line
b. Falling straight line
c. Vertical straight line
d. Horizontal straight line.
Answer:
a. Rising straight line
Hint
With an increase in input TP keeps rising at constant rate MP will also rise and represent a straight line.

Question 79.
In the production theory, the optimum level of output is represented at a point where
a. Marginal product curve begins to fall
b. Average product curve begins to fall
c. Marginal product becomes zero
d. Average product becomes zero.
Answer:
c. Marginal product becomes zero
Hint
In the stage of diminishing returns there comes a point where total production is maximum and marginal production is zero. This stage is the most fruitful stage for production.

Question 80.
Increasing returns to scale are obtained when –
a. Fixed factors begin to yield increasing marginal returns
b. Proportionate increase in output is more than the proportionat increase in inputs .
c. The total output reflects an erratic behaviour
d. None of the above.
Answer:
b. Proportionate increase in output is more than the proportionat increase in inputs .
Hint
Increasing returns to scale – here when the inputs are increased in a given proportion the output increases in a greater proportion. Thus if increase in output is 20 % output increases more than 20 %.

Question 81.
Subsistence production means –
a. Self consumption
b. Self utilization
c. Self-reliance
d. None of these
Answer:
a. Self consumption
Hint
Subsistence agriculture is self-sufficiency farming in which the farmers focus on growing enough food to feed themselves and their families.

Question 82.
When TP is maximum, then MP will-
a. Start declining
b. Be negative
c. Be declining above AP
d. Be Zero
Answer:
d. Be Zero
Hint
In the stage of diminishing returns there comes a point where total production is maximum and marginal production is zero. This stage is the most fruitful stage for the production.

Question 83.
Which of these is not a variable factor for the agriculture sector?
a. Land
b. Labour
c. Fertilizers
d. Machinery and Equipment
Answer:
a. Land
Hint
The term factors of production relate to the key factors that go into making goods. The resources that are required for production can be divided into four major groups.

  • Land
  • Capital
  • Labour
  • Entrepreneurship

In case of agriculture land is not a variable factor. A characteristic feature of land are that

  • it has no social cost as we did not create it we got it free
  • land is perfectly inelastic and is immobile

Question 84.
Which of these is a passive factor of production?
a. Land
b. Labour
c. Capital
d. None of these
Answer:
a. Land
Hint
Land – It is a natural resource which can not be created. It includes the resources that are above ground (climate , rain etc.), resources that are below the ground (mineral resources etc.) and resources on the ground (agricultural land etc.). It is primary but passive factor in production . it is primary in nature because production can not begin unless this resource is present but passive because it is dependent on other factors of production.

Question 85.
Which one of the following factors of production gets profit as reward?
a. Land
b. Labour
c. Capital
d. Entrepreneur
Answer:
d. Entrepreneur
Hint
Entrepreneurship – There is, in effect, a fourth type of input used in production. It is a special type of human resource; it consists of entrepreneurial ability, or entrepreneurship. Entrepreneurship is associated with the founding of new businesses or the introduction of new products and new techniques. The entrepreneur also takes on all of the risks and rewards of the business. He is the person who uses all the other uses to make production of goods are reality.

Question 86.
Land is a good or not?
a. Yes, it is a good
b. No, it is not a good
c. It may be a good
d. None
Answer:
b. No, it is not a good
Hint
The land is a natural resource that can not be created. It is not a good but a fixed factor of production.

Question 87.
When the input is increased by 80%, output increases by 100%. This is known as¬
a. Increasing return to scale
b. Decreasing return to scale
c. Constant return to scale
d. None of these
Answer:
a. Increasing return to scale
Hint
Increasing returns to scale – here when the inputs are increased in a given proportion the output increases in a greater proportion. Thus if increase in output is 20 % output increases more than 20 %.

Question 88.
Law of return to scale works in:-
a. Long run
b. Short run
c. Very short run
d. Very Long run
Answer:
a. Long run
Hint
Returns to scale are the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.

Question 89.
When the production is increasing, then AFC will be-
a. Increasing
b. Decreasing
c. Constant
d. None of the above
Answer:
b. Decreasing
Hint
AFC- it declines with the increase in output. It is rectangular hyperbola.

Question 90.
What will we get from fixed factor “Land”?
a. Profit
b. Wages
c. Interest
d. Rent
Answer:
d. Rent
Hint
Land generates rent while.

Question 91.
Which of the following is correct about long run production function?
a. In Long run production function, quantity of all outputs varies
b. In Long run production function, quantity of one input varies while quantities of all other inputs remain constant.
c. In Long run production function, quantity of all inputs varies
d. In Long run production function, the quantity of all inputs remain constant
Answer:
c. In Long run production function, quantity of all inputs varies
Hint
Returns to scale are the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.

Question 92.
For which factor of production, the supply price for society is zero?
a. Capital.
b. Labour
c. Land
d. Material
Answer:
c. Land
Hint
A characteristic feature of land are that

  • it has no social cost as we did not create it we got it free
  • land is perfectly inelastic and is immobile

Question 93.
As per theory of cost, Average Fixed Cost (AFC) curve is
a. Convex and upward sloping
b. Concave and upward sloping
c. Concave and downward sloping
d. Convex and downward sloping
Answer:
d. Convex and downward sloping
Hint
AFC- it declines with the increase in output. It is a rectangular hyperbola. It is convex and downward sloping

Question 94.
As per the theory of revenue, If price is denoted by (P) and quantity is denoted by (0), then the total revenue (TR) will be:
a.\(\frac { P }{ Q }\)
b. \(\frac { Q }{ P }\)
c. P × Q
d. P × \(\frac { P }{ Q }\)
Answer:
c. P × Q
Hint
The income received by a firm on selling the goods or services over a certain period of time is revenue.
Total revenue – it is the total amount generated by the firm by selling all the quantity of output.
TR = quantity sold x price per unit

Question 95.
Which of the following explains the functional relationship between ‘input and output?
a. Production Function
b. Demand Curve
c. Input Function
d. Consumer Surplus
Answer:
a. Production Function
Hint
Production function – The production function relates the output of a firm to the number of inputs, typically capital and labor: It is important to keep in mind that the production function describes the technology, not economic behavior. It states how the desired output can be produced with the minimum input.

Question 96.
When a total product is maximum, then the marginal product will be:
a. Each one is possible
b. Positive
c. Zero
d. Negative
Answer:
c. Zero
Hint
In the stage of diminishing returns there comes a point where total production is maximum and marginal production is zero. This stage is the most fruitful stage for the production.

Question 97.
Which of the following is known as an increase in total output that results from a one-unit increase in the input keeping all other inputs constant:
a. Average product
b. Total product
c. Marginal product
d. All are correct
Answer:
c. Marginal product
Hint
An increase in total output that results from a one-unit increase in the input keeping all other inputs constant is a Marginal product.

Question 98.
According to the Law of Constant Returns to Scale, what is the rate of increase in output?
a. Output increases with a lesser speed than the increase in inputs
b. Output increases with a greater speed than the increase in inputs
c. Output Increases with the same speed as inputs
d. Output increases with a constant speed irrespective of the increase in inputs.
Answer:
c. Output Increases with the same speed as inputs
Hint
The constant return to scale —Here with the increase in input-output also increases in the same proportion. Thus if the input is increased by 20% than an output also increase by 20%

Question 99.
If a firm’s wage cost increases, this will cause:
a. Average fixed cost will rise as output will increase
b. The marginal cost to increase as output falls
c. Marginal revenue to increase as output to fall
d. Opportunity cost to increase, the firm will dose.
Answer:
b. The marginal cost to increase as output falls
Hint
If wage cost increases MC will increase.

Question 101.
For using which factor of production, profit is the economic reward?
a. Labour
b. Entrepreneur
c. Land
d. Capital.
Answer:
b. Entrepreneur
Hint
Entrepreneurship is associated with the founding of new businesses or the introduction of new products and new techniques. The entrepreneur also takes on all of the risks and rewards of the business, He is the person who uses all the other uses to make the production of goods are reality.

Question 101.
Which of the following is not an assumption of production function?
a. The firm uses its output at the maximum level of efficiency
b. The level of technology remains constant
c. The firm uses its maximum level of efficiency to increase the output
d. The firm uses its inputs at the maximum level of efficiency
Answer:
c. The firm uses its maximum level of efficiency to increase the output
Hint
Assumptions of production function are

  • The firm uses its input at the maximum level of efficiency
  • Technology level remains constant

CS Foundation Business Economics Notes

Indian Partnership Act, 1932 – CS Foundation Business Law Notes

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),
  • “Business includes every trade, occupation and profession.”
  • 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.
    Indian Partnership Act, 1932 – CS Foundation Business Law Notes 1

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
  • Nature and Scope of business and address(s) of business place(s)
  • 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.
Indian Partnership Act, 1932 – CS Foundation Business Law Notes 2

  • 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.
    Indian Partnership Act, 1932 – CS Foundation Business Law Notes 3

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.
Indian Partnership Act, 1932 – CS Foundation Business Law Notes 4

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.
  • Goodwill of the business.

Relevant Case Law:
Narayanappa V. Bhaskaia Krishnappa

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.

Buyers Rights include:

  • 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.
Indian Partnership Act, 1932 – CS Foundation Business Law Notes 5

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,
  • Principal place of business,
  • Other places of business,
  • 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.

Advantages of 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).

Disadvantages of LLP:

  • 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.
Indian Partnership Act, 1932 – CS Foundation Business Law Notes 6

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.
Indian Partnership Act, 1932 – CS Foundation Business Law Notes 7

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
(c) Business collaborations
(d) All of the above.
Answer:
(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.
Answer:
(b) 1st day of October 1932

Question 3.
According to the Partnership Act, “Business” includes ___________.
(a) Trade
(b) Occupation
(c) Profession
(d) All of the above.
Answer:
(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.
Answer:
(a) Contract

Question 5.
The name under which the partnership business is carried on, is called ___________.
(a) Trademark
(b) Partnership firm
(c) Firm Name
(d) Registered Name
Answer:
(c) Firm Name

Question 6.
Which of these are not necessary for constituting a partnership ?
(a) Sharing of business profits
(b) Mutual agency
(c) Two or more persons
(d) Written contract.
Answer:
(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.
Answer:
(b) Unlimited

Question 8.
The true test of partnership is ___________.
(a) Mutual agency
(b) Profit sharing
(c) Agreement
(d) All of the above
Answer:
(a) Mutual agency

Question 9.
Partnership agreements may be ___________.
(a) Expressed
(b) Implied
(c) Neither (a) nor (b)
(d) Either (a) or (b)
Answer:
(d) Either (a) or (b)

Question 10.
Sharing of profits implies sharing otherwise.
(a) True
(b) Partly True
(c) False
(d) None of these
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(d) Two minors

Question 48.
The term ‘business’ includes every ___________.
(a) Trade
(b) Occupation
(c) Profession
(d) All of the above
Answer:
(d) All of the above

Question 49.
___________ means the excess of returns over advance
(a) Losses
(b) Profit
(c) Sales
(d) Goodwill
Answer:
(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
(c) Carry on business
(d) Sharing of profits
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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
(c) By business becoming illegal
(d) All of the above
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(c) Profits and losses

Question 74.
___________ is the essential feature for formation of partnership.
(a) Agreement
(b) Memorandum
(c) Relation
(d) All of above
Answer:
(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
Answer:
(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
Answer:
(c) Dissolution

Question 77.
Partnership is classified in ___________ categories.
(a) One
(b) Two
(c) Three
(d) None of these
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(b) Oniy minors

Question 85.
Which type of partner is not personally liable..
(a) Active
(b) Dormant
(c) Nominal
(d) Minor
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(d) None of these

Question 91.
Value of reputation of a business is ___________.
(a) Capital
(b) Interest
(c) Goodwill
(d) Debt
Answer:
(c) Goodwill

Question 92.
A partner who only give their name to business is ___________.
(a) Partner by Estoppel
(b) Dormant
(c) Nominal
(d) Ostensible
Answer:
(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
Answer:
(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
Answer:
(c) Agent

Question 95.
Goodwill is a/an ___________.
(a) Tangible Asset
(b) Intangible Asset
(c) Liquid Asset
(d) vesting Asset
Answer:
(b) Intangible Asset

Question 96.
Who is personally liable in HUF firm ___________.
(a) Co-parcener
(b) Karta
(c) Both (a) & (b)
(d) Minor
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
(a) Admission
(b) Retirement
(c) Death
(d) Insolvency
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(c) Not fixed

Question 108.
The maximum number of members for a private company is ___________.
(a) 55
(b) 200
(c) 45
(d) 60
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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)
Answer:
(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
Answer:
(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
Answer:
(a) Sub partner

Question 129.
Every limited liability partnership shall have at least ___________ partners.
(a) 1
(b) 2
(c) 3
(d) 5
Answer:
(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
Answer:
(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
Answer:
(a) within India

Question 132.
In which of the following cases a partnership firm is re-constituted:
(a) Admission
(b) Retirement
(c) Death
(d) All of the above.
Answer:
(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
(c) Perpetual losses in business
(d) All of the above.
Answer:
(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.
  • Perpetual losses in business.

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.
Answer:
(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.
Answer:
(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.
Answer:
(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?
(a) To have access to books of account
(b) To take part in the conduct of the business
(c) To share the profits
(d) To receive remuneration.
Answer:
(d) (a) Every partner has a right to take part in the conduct and management of the business.

(b) Every partner has right of free access to books and accounts of 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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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.
Answer:
(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
Answer:
(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 ‘
(b) A business firm
(c) A sole proprietor
(d) A hindu undivided family
Answer:
(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
Answer:
(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) Voluntary but advisable
Answer:
(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
(d) A business firm.
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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?
(a) To have access to books of Account
(b) To take part in the Conduct of the business
(c) To Share the Profits
(d) To receive remuneration
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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
Answer:
(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.
Answer:
(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 Business Environment and Law Notes

Statistics: An Overview – CS Foundation Statistics Notes

Statistics: An Overview – CS Foundation Statistics Notes

Statistics is the study of the collection, organization, analysis, interpretation, and presentation of data. It deals with all aspects of data, including the planning of data collection in terms of the design of surveys and experiments. Statistics has perhaps its origin from Latin word ‘Status meaning political state’, word ‘Stato ‘ (Italian) and ‘Statisik’ (German) is also used for statistics. The word statistics is used in two senses

  • Statistics data
  • Statistical method

1. Statistics as numerical data
Webster defined Statistics as “The classified facts respecting the condition of the people in a state- especially those facts which can be stated in numbers or in tables of numbers or in any tabular or classified arrangement”.
The basic feature of statistics as quantitative or numerical data is as follows:

  • Statistics are aggregates of facts.
  • Statistics does not refer to a single figure but refers to a series of figures. Although the figure may be numerical if there is only one numerical figure it can not be compared. Thus for statistics, it is required that more than one figure be there.
  • Statistics are numerically expressed.
  • Statistics must have a numerical value. In the case of statistics data like old young, slow-fast are immaterial unless they have numerical data. This qualitative data is of no use for statistics.
  • Statistics must be comparable to each other. Thus the figures collected should be comparable. It means the figures collected should be homogeneous for comparison and not heterogeneous.
  • Statistics are affected to a marked extent by a multiplicity of causes.

2. Statistics as the statistical method
Bowley says “Statistics, may be called the science of counting”. At another place, he says that “Statistics may rightly be called the science of averages”.

3. Stages of statistical enquiry
Different stages of enquiry are

1. Planning the enquiry
Before collecting the data it is to predefine about the purpose, so that only the relevant data is collected The plan section is about how the data will be gathered.. After the purpose is decided, then it is to be decided what all data will be required

2. Collection of data
The collection part is the backbone of the inquiry. If the collection of data is not in proper form, in that case the conclusions drawn can never be reliable. The source of data may be primary i.e., collected directly, or the data may be secondary i.e., available from existing published sources. The first hand collection of data is one of the
most difficult and important tasks faced by file investigator. Primary data is the one that is collected directly from the source by investigator and secondary data is the one which is collected from already published one. Reasons for preferring a primary source

– The secondary source may contain mistakes due to errors which may not be easy to detect.
– The primary source usually includes definitions of terms and units used.
– The primary source often includes a copy of the schedule/questiortnaire and description of the procedures used in selecting the sample and in collecting the data.
– The primary source usually shows data in greater detail. The secondary source may omit some of the information.

3. Organisation of the data
The most important point in organizing a group of data is editing. This is done to correct omission, inconsistencies and wrong calculations in the survey. The classification is done to arrange the data according to some common characteristics. The last step in organisation is tabulation. The object of tabulation is to arrange the data in columns and rows for complete clarity.

4 Presentation of the organised data
After collection and organisation, the data should be presented. Finally the data is given the shape of diagram, chart and graph wherever necessary.

5 Analysing the presented data
Once the data are collected, organized and presented, the next step is that of analysis. The methods most commonly used are measures of Central Tendency and are called measures of the first order. Measures of Dispersion are called measures of the second order. Skewness, Correlation, Regression, Interpolation etc. are called measures of the third order. The analysis of facts based on observation is termed as (a) Scientific analysis, (b) Numerical analysis, (c) empirical analysis.

6 Interpretation of the collected data andforecasting
The last stage of statistical investigation is to derive the results and give comments on the inquiry in question. The interpretation of data is not an easy job and requires a high degree of skill and experience. If the analyzed data are not properly interpreted, the whole object of the inquiry may be erroneous. It is only correct interpretation which may lead to reliable conclusions.

4. Importance and functions of statistics
The various functions performed by statistics in modem times are discussed under:

1. Simplification of Complex Facts
The foremost purpose of the statistics is to simplify huge collection of numerical data. It is beyond the reach of human mind to remember and recollect the huge facts and figures. Statistical method makes it possible to understand the whole in the short span of time and in a better way.

2. Comparison
Comparison of data is yet another function of statistics, simplifying the data; it can be correlated or compared by a certain mathematical questions like averages, ratios, coefficients etc.
Some of the techniques used for comparison are averages, graphs, index numbers etc

3 . Relationship between Facts
Statistical methods are used to investigate the cause and effect relationship between two or more facts.

4. Formulation and Testing of Hypothesis
The most theoretical function of statistics is to test the various types of hypotheses and discover a new theory. For instance, by using appropriate statistical tools we can test the hypothesis of whether a particular coin is fair or not, whether Indian consumers are brand loyal etc.

5. Forecasting
Statistical methods are of great use to predict the future course of action of the phenomenon. It is only on the basis of statistical techniques like time series etc we can forecast.

6. Enrich the Individual Knowledge:
Statistical methods sharpen the faculty of rational thinking and reasoning of an individual. It is a master-key that solves the problems of mankind in every sphere of life.

7. Classification of Data:
Classification refers to a process of splitting up the data into certain parts which helps in the matters of comparison and interpretation of the various features of the data. This is done by the various improved ‘ techniques statistics.

8. To Draw Rational Conclusion:
In various fields of uncertainty like business and commerce, it is very much necessary to draw rational conclusions on the basis of facts collected and analyzed. For this, the mind of the decision-maker should be free from any bias and prejudices.

5. Statistics science or art
Statistics is science as it is the science of collecting, analyzing, presenting, and interpreting data. Governmental needs for census data as well as information about a variety of economic activities provided much of the early impetus for the field of statistics. Currently, the need to turn the large amounts of data available in many applied fields into useful information has stimulated both theoretical and practical developments in statistics.
Statistics can be termed as art because its application is dependent on the knowledge and skill of the person who is using it. It does not tell the facts but instead analyzes and gives us the merit and demerit and explains how to achieve the objective.

Actually, statistics is both sciences as well an art. Statistics is the art and science of deciding:

  • what are the appropriate data to collect
  • deciding how to collect them efficiently
  • then use them to give information

6. Laws of statistics
There are two laws of statistics

1. Law of statistical regularity
2. Law of Inertia of a large number

1. Law of statistical regularity
The law of statistical regularity is the basic assumption in statistics that a random sample taken from a larger group will reflect the characteristics of the larger group. The larger the size of the sample in relation to the whole group, the more accurately it will reflect the group. This law holds good if the sample is large and is random.

2. Law of Inertia of large numbers
It is important because it guarantees stable long-term results for the averages of random events. The theorem is probability theory which states that the number of successes increases as the size of the sample increases.

7. Divisions of statistics

• Descriptive Statistics
Descriptive statistics are those which help reveal patterns in one or more sets of data through numerical analysis, Here the goal is to describe. Numerical measures are used to tell about features of a set of data. Descriptive statistics simply describe data. They include modes, means, ranges, and frequencies which help demonstrate striking trends, similarities, and differences within a set of data or between multiple sets of data. Descriptive statistics is concerned with telling about certain features of a data set. Although this is helpful in learning things as such it can not generalize.

• Inferential Statistics,
Inferential statistics refer to those used after analysis to make conclusions, evaluations, and further predictions based on previous research. Inferential statistics study a statistical sample, and from this analysis is able to say something about the data from which the sample came. Inferential statistics does start with a sample and then generalizes.

• Inductive statistics
The branch of statistics that deals with predictions, estimations, and decisions from data initially presented e.g. forecasting

• Mathematical statistics
It is the study of statistics from a mathematical standpoint, using other branches of mathematics such as linear algebra for analysis. Some of the techniques used are algebra, trigonometry, matrix theory, etc.

• Applied statistics,
This method is used to apply statistical methods to tackle a specific problem. Thus if we have to find out for which product there will be demand in the market we use applied statistics.

• Analytical statistics
A statistical study in which action will be taken on the basis of comparison.

8. Application of statistics
Statistics involves the collection, analysis and interpretation of data. A number of specialties have evolved to apply statistical theory and methods to various disciplines.
The areas where statistics can be applied are many

1. Business and economics.
Statistics in business process applies statistical methods to data sets (often very large) to develop new insights and understanding of business performance & opportunities. Business statistics is the science of good decision making in the face of uncertainty and is used in many disciplines such as financial analysis, econometrics, auditing, production and operations including services improvement, and marketing research.

Thus statistics is able to answer the basic question of economics that is what to produce when to produce and how much to produce out of our limited resources.
Statistics play a major role in economics. On the basis of data economic problems are understood and with the help of various techniques of statistics time series analysis, forecasting etc. Analysis can be done so that on the basis of this analysis suitable policies can be drafted

2. Education
Statistics help to understand the education level in the country. We can analyse on the base of data how many students are going to school ?, how many children from rural area are going to school etc. and on this basis the policies can be drafted by government.

3. State
State authorities are always in need of statistics as it can help them in drafting policies for the government. With the help of data collected the real picture of the work and after results of various policies drafted is revealed. Government has its own agencies which collect data for the government. What are the best combinations of fertilizers, pesticides, etc are all replied with the help of statistics.

4. Social science
It has vast application in this field also. So much information like mortality rate, population control, birth rate, etc are of great importance for our economy and statistics is the answer to sought out such problems.

5. Management
Various functions of management planning, organizing, control, etc need an analytical approach. We need data to make such analyses and take decisions. In business, decisions can not be done on a hit and trial basis thus the techniques of statistics are used to get informed decisions.

6. Natural Science
It helps to find the causes for the diseases, how the disease did spread, how it was controlled, and various other things. In research work also it is of great importance.

9. Limitations of statistics

1. Statistics does not study qualitative phenomena:
Statistics deals with facts and figures. So the quality aspect of a variable or the subjective phenomenon falls out of the scope of statistics. For example, qualities like honesty, intelligence, etc. Which cannot be numerically expressed Can not form part of statistical data. This limits the scope of the subject.

2. Statistical laws are not exact:
Statistical laws are not exact as incase of natural sciences. These laws are true only on average. They hold good under certain conditions. They cannot be universally applied. So statistics has less practical utility.

3. Statistics does not study individuals:
Statistics deals with an aggregate of facts. Single figures are not statistics. This is considered to be a major handicap of statistics. It is the study of group data.

4. Statistics can be misused:
Statistics is mostly a tool of analysis. Statistical techniques are used to analyze and interpret the collected information in an inquiry. As it is, statistics are more dependent on the analyst and his experience. Statistical methods used by fewer expert hands will lead to inaccurate results. Here the fault is not of the data but with the person who makes wrong use of it. Statements supported by statistics are more appealing and are commonly believed. For this, statistics are often misused. Statistical methods rightly used are beneficial but if misused these become harmful.

Statistics: An Overview MCQ Questions

Question 1.
Organization of data does Not include
a. Editing
b. Classification
c. Collection
d. Tabulation
Answer:
c. Collection

Question 2.
Statistics is essential to psychologists because
a. People differ a lot and in many respects.
b. It is compulsory
c. People’s experiences are much the
d. By using statistic psychologist can claim to be the cleverest researchers
Answer:
a. People differ a lot and in many respects.

Question 3.
Descriptive statistics are:
a. The number of adjectives.
b. About whether or not you can generalize from a sample.
c. The methods used to describe the essential characteristics of the data.
d. All of the things.
Answer:
c. The methods used to describe the essential characteristics of the data.

Question 4.
A procedure used to select a sample of n objects from a population in such a way that each member of the population is chosen strictly by chance, each member of the population is equally likely to be chosen, and every possible sample of a given size, n, has the same chance of selection is known as
a. Statistics thinking
b. Inferential statistic
c. Descriptive
d. All of the above
Answer:
d. All of the above

Question 5.
A specific characteristic of a population is known as an
a. sample
b. parameter
c. statistic
d. descriptive statistic
Answer:
b. parameter

Question 6.
A specific characteristic of a sample is known as an
a. sample
b. parameter
c. statistic
d. information
Answer:
c. statistic

Question 7.
Statistics was also termed as
a. The science of king
b. Science of statecraft
c. Political arithmetic
d. All of the above Data is
Answer:
d. All of the above Data is

Question 8.
a. Collection of information about a person
b. Collection of information regarding the comparative things
c. Both a & b
d. None of the above
Answer:
b. Collection of information regarding the comparative things

Question 9.
Both descriptive and inferential statistic is used to change data into information that in turn is converted into ____________ that lead to better decision making.
a. knowledge
b. a process
c. a forecast
d. a parameter
Answer:
a. knowledge

Question 10.
An observed set of the population that has been selected for analysis is called
a. a sample
b. a process
c. a forecast
d. descriptive statistics
Answer:
a. a sample

Question 11.
Keeping in view of all the statistical methods like tabulation etc. we can call statistics as
a. It’s application depends on the skill 7 experience of the statistician
b. It’s methods are systematic and have general application
c. Both a & b
d. None of the above
Answer:
a. It’s application depends on the skill 7 experience of the statistician

Question 12.
As per the law of statistics given by King
a. If data is chosen randomly from a large group then that data will invariably show the characteristic of the group
b. The law developed by King is more correct if applied to a large group
c. Data sample which is to be taken for a large group should be systematic so that invariably it shows the characteristic of large group
d. Both a &b
Answer:
d. Both a &b

Question 13.
Where conclusions are taken out on the basis of estimates regarding the population. It is _______ type of statistics
a. Inductive statistics
b. Descriptive statistics
c. Applied statistics
d. None of the above
Answer:
d. None of the above

Question 14.
Inferential statistics is a process that involves all of the following EXCEPT
a. estimating a parameter
b. estimating a statistic
c. test a hypothesis
d. analyze relationships
Answer:
b. estimating a statistic

Question 15.
Why do we use inferential statistics?
a. Inferential statistics are used to help us to compare the sample to the whole population.
b. Inferential statistics are used to help us to generalize from the sample to the whole population.
c. Inferential statistics are used to help us to show the difference between the sample and the whole population.
d. All of the above apply to the use of inferential statistics.
Answer:
b. Inferential statistics are used to help us to generalize from the sample to the whole population.

Question 16.
Statistics is an indispensable function of the State as
a. Suitable policies are to be formed
b. It is dispensable if applied only to Central Government
c. Improve the working of the system
d. Both a & c
Answer:
d. Both a & c

Question 17.
The allocation of limited resources in the most appropriate manner amongst unlimited ends is
a. Statistics
b. Economics
c. Market
d. All of the above
Answer:
b. Economics

Question 18.
For studying the various national income components it is required that data should be collected on
a. Expenditure
b. Investments
c. Income
d. All of the above
Answer:
d. All of the above

Question 19.
Business managers also need statistics for planning as
a. Decisions can not be made on a trial basis
b. Always systematically; organized data help in the formation of developing decision policies
c. Both a & b
d. None of the above
Answer:
c. Both a & b

Question 20.
Natural science uses statistics
a. For finding the data related to disease
b. To find IQ
c. For studying fertility
d. All of the above
Answer:
a. For finding the data related to disease

Question 21.
In statistics the facts
a. Should be expressed numerically
b. Should be related to other facts for comparison
c. Should be datum
d. Both a & b
Answer:
d. Both a & b

Question 22.
Statistical data can be collected by
a. Actual counting
b. Estimation
c. Measurement
d. All of the above
Answer:
d. All of the above

Question 23.
Statistical data of estimation should be
a. Able to draw meaningful conclusions
b. Have reasonable accuracy
c. Both a & b
d. None of the above
Answer:
c. Both a & b

Question 24.
We use inferential statistics to generalize from our samples and descriptive statistics to describe our samples.
a. True
b. False
c Partially true
d None of the above
Answer:
a. True

Question 25.
For data to be statistics it should Not
a. Be numerically expressed
b. Be estimated
c. Have predetermined purpose
d. None of the above
Answer:
d. None of the above

Question 26.
You’ve been given a data group that contains 256 students’ first names’ last names’ grades in school, and six standardized test scores. Which of the following is the most appropriate way to I code the names of the students?
a. Sort the date on a first-name basis and assign consecutive numbers to each name beginning with 100.
b. Sort the data on last name basis and assign consecutive numbers to each name beginning with 001.
c. assigns random numbers to students’ names.
d. Sort the data on the basis of test results and assigning consecutive numbers to each rank starting with 001.
Answer:
b. Sort the data on last name basis and assign consecutive numbers to each name beginning with 001.

Question 27.
The definition of statistics explaining statistics to be the collection, presentation, analysis, and interpretation of numerical data was given by
a. A.L. Bowley
b. Lovin
c. Hing
d. Coxton and Cowden
Answer:
d. Coxton and Cowden

Question 28.
Secondary data is the data collected
a. By Investigation
b. From published data
c. From unpublished but collected data
d. Both b & c
Answer:
d. Both b & c

Question 29.
Which of the following statistics would give you the estimate of the typical examination score of a class of 35 students?
a. A correlation coefficient
b. The variance
c. The standard deviation
d. The mean
Answer:
d. The mean

Question 30.
What is a reasonable explanation for a data set of the test scores of 75 students in which the mean score is 81 and the median is 68?
a. An extremely low score
b. A number of typical scores
c. Too many scores
d. Two extremely high scores
Answer:
d. Two extremely high scores

Question 31.
the study of the methods of organization summarization and presentation of statistical data is referred to as
a. inferential statistics
b. descriptive statistics
c. sampling
d. none of the above
Answer:
b. descriptive statistics

Question 32.
The commonly found limitations to statistics are
a. It is dealing for individuals
b. Statistics gives precise and accurate information
c. Results of statistics are based on assumptions
d. All of the Above
Answer:
c. Results of statistics are based on assumptions

Question 33.
Select the principles and methods used in statistics
a. Organization of data
b. Collection of data
c. Interpretation of data
d. All of the above
Answer:
d. All of the above

Question 34.
Descriptive statistics is concerned with ______ while the goal of statistical inference is to ______ with the help of ________
a. generalizing sample data, draw inductive conclusions, probabilities
b. summarizing data, draw inductive conclusions probabilities
c. describing data, draw deductive concussions, probabilities
d. describing data, draw deductive conclusions, histograms
Answer:
b. summarizing data, draw inductive conclusions probabilities

Question 35.
The only science that enables different experts using the same figures to draw different conclusions is called
a. Economics
b. philosophy
c. Statistics
d. Mathematics
Answer:
c. Statistics
Hint
Statistics is the study of the collection, organization, analysis, interpretation and presentation of data. It deals with all aspects of data, including the planning of data collection in terms of the design of surveys and experiments.

Question 36.
The techniques that are used in summarizing and describing the main features of data constitute
a. Descriptive Statistics
b. Inductive Statistics
c. Mathematical Statistics
d. Applied Statistics
Answer:
a. Descriptive Statistics
Hint
Descriptive statistics are those which help reveal patterns in one or more sets of data through numerical analysis, Here the goal is to describe. Numerical measures are used to tell about features of a set of data. Descriptive statistics simply describe data. They include modes, means, ranges and frequencies which help demonstrate striking trends, similarities and differences within a set of data or between 1 multiple sets of data.

Question 37.
One of the following does not qualifies to be called “statistics”
a. Tables of numbers
b. Census results for a number of districts
c. The daily number of cars passing through a traffic intersection
d. A time series of marks scored by a student in each year till class 12<sup>th</sup>
Answer:
a. Tables of numbers
Hint
The basic feature of statistics as quantitative or numerical data are as follows:
– Statistics are aggregates of facts.
– Statistics does not refer to a single figure but it refers to a series of figures. Although the figure may be numerical if there is only one numerical figure it can not be compared. Thus for statistics, it is required that more than one figure be there.
– Statistics are numerically expressed.
– Statistics must have a numerical value. In the case of statistics data like old young, slow-fast are immaterial unless they have numerical data. This qualitative data is of no use for statistics.
– Statistics must be comparable to each other. Thus the figures collected should be comparable. It means the figures collected should be homogeneous for comparison and not heterogeneous.
– Statistics are affected to a marked extent by the multiplicity of causes.

Question 38.
Arrange the following steps in order of a statistical enquiry
(i) Interpretation of data
(ii) Analysis of data
(iii) Collection of data
(iv) Organisation of data
The options are
a. (a) (iii), (iv), (ii), (i)
b. (b) (iv), (iii), (ii), (i)
c. (C) (i), (ii), (iii), (iv)
d. (d) (ii), (iii), (iv), (i)
Answer:
a. (a) (iii), (iv), (ii), (i)
Hint
Stages of statistical inquiry Different stages of enquiry are
1. Planning the enquiry
2. Collection of data
3. Organisation of the data
4. Presentation of the organised data-
5. Analysing the presented data-
6. Interpretation of the collected data and forecasting

Question 39.
Which of the following statements can be ranked as statistics?
a. India’s real per capita income in 2013 is ~ 50,000 whereas in China, Japan, South Korea and other ‘countries it is more than ~1,00,000
b. Neha is taller than Amrita
c. Abdul earns Rs. 5 crores for a single endorsement.
d. Today rainfall was estimated at 6 cm.
Answer:
a. India’s real per capita income in 2013 is ~ 50,000 whereas in China, Japan, South Korea and other ‘countries it is more than ~1,00,000
Hint
The basic feature of statistics as quantitative or numerical data are as follows:
– Statistics are aggregates of facts.
– Statistics does not refer to a single figure but it refers to a series of figures. Although the figure may be numerical but if there is only one numerical figure it can not be compared. Thus for statistics, it is required that more than one figure be there .
– Statistics are numerically expressed.
– Statistics must have a numerical value. In case of statistics data like old young, slow-fast are immaterial unless they have numerical data. This qualitative data is of no use for statistics.
– Statistics must be comparable to each other. Thus the figures collected should be comparable. It means the figures collected should be homogeneous for comparison and not heterogeneous.
– Statistics are affected to a marked extent by the multiplicity of causes.

Question 40.
in the method, the sample is selected on a basis other than on probability considerations. Which one of the following is the correct option to fill in the blank space?
a. Non-random sampling
b. Stratified sampling
c. Systematic random sampling
d. Simple random sampling.
Answer:
b. Stratified sampling
Hint
A type of probability sampling method in which sample members from a larger population are selected according to a random starting point and a fixed, periodic interval.

Question 41.
Arrange the following stages of a statistical inquiry in proper order:
(I) Organisation and presentation of data
(II) Interpretation of data
(III) Collection of data
(IV) Analysis of data
The correct option is –
a. (a) (III), (I), (IV), (II)
b. (b) (I), (II), (III), (IV)
c. (c) (IV), (III), (II), (I)
d. (d) (II), (I), (III), (IV)
Answer:
a. (a) (III), (I), (IV), (II)
Hint
Stages of statistical enquiry Different stages of enquiry are
1. Planning the enquiry
2. Collection of data
3. Organisation of the data
4. Presentation of the organised data-
5. Analysing the presented data- .
6. Interpretation of the collected data and forecasting

Question 42.
Which of the following statements qualifies to be called ‘statistics’?
a. Metro rail length all over India is 600 Kms.
b. Indian automobile industry produced 2 million cars during the year 2012-13
c. The minimum support price for wheat for the crop season 2013-14 has been fixed at Rs.1,800 per quintal, as against Rs. 1,750 in the previous season
d. More people0 are making use of public transport, thereby causing traffic problems.
Answer:
b. Indian automobile industry produced 2 million cars during the year 2012-13
Hint
The basic feature of statistics as quantitative or numerical data are as follows:

  • Statistics are aggregates of facts.
  • Statistics does not refer to a single figure but it refers to a series of figures. Although the figure may be numerical but if there is only one numerical figure it can not be compared. Thus for statistics, it is required that more than one figures be there .
  • Statistics are numerically expressed.
  • Statistics must have a numerical value. In the case of statistics data like old young, slow-fast are immaterial unless they have numerical data. This qualitative data is of no use for statistics.
  • Statistics must be comparable to each other. Thus the figures collected should be comparable. It means the figures collected should be homogeneous for comparison and not heterogeneous.
  • Statistics are affected to a marked extent by a multiplicity of causes.

Question 43.
The quote about the nature of statistics, “Statistics are like they clay from which you can make a God or a devil as you please”, is attributed to-
a. Croxton and Cowden
b. W. I. King
c. A. L. Bowley
d. Lincoln L. Chao.
Answer:
b. W. I. King

Question 44.
Bio-statistics is a part of
a. Biology
b. Management
c. Social-Science
d. Economics
Answer:
c. Social-Science

Question 45.
Which of the following can not be considered as a use of statistics in Business Management:
a. Fertility rate
b. Quality control
c. Forecasting
d. Production planning
Answer:
b. Quality control

Question 46.
From the view of nature, statistics is:
a. An art
b. Neither science nor art
c. Science and art both
d. A science
Answer:
c. Science and art both
Hint
Statistics is science as it is the science of collecting, analyzing, presenting, and interpreting data. Governmental needs for census data as well as information about a variety of economic activities provided much of the early impetus for the field of statistics. Statistics can be termed as art cause its application is dependent on the knowledge and skill of the person who is using it. Actually, statistics is both science as well as art.

Question 47.
The lower limit of class interval 20 – 30 is:
a. 25
b. 20
c. 30
d. 15
Answer:
b. 20

Question 48.
“If a large sample is taken from a population in a random way, it will be fairly representative of the population”. This statement forms the:
a. Doesn’t form any law
b. Law of inertia of large numbers
c. Law of statistical regularity
d. Central limit theorem.
Answer:
c. Law of statistical regularity
Hint
The law of statistical regularity is the basic assumption in statistics that a random sample taken from a larger group will reflect the characteristics of the larger group. The larger the size of the sample in relation to the whole group, the more accurately it will reflect the group This law holds good if the sample is large and is random.

Question 49.
Which of the following is not a function of statistics?
a. Giving Decisions
b. Testing Hypothesis
c. Framing Hypothesis
d. Facilitating comparisons.
Answer:
a. Giving Decisions
Hint
The most theoretical function of statistics is to test the various types of hypotheses and discover a new theory. For instance, by using appropriate statistical tools we can test the hypothesis of whether a particular coin is fair or not, whether Indian consumers are brand loyal etc. Giving decisions is not a function of statistics.

CS Foundation Business Economics Notes