CA Foundation Business Law
Chapter 1 Indian Regulatory Framework
Question 1 (Study Material)
What is Law?
Answer: Law is a set of obligations and duties imposed by the government for
securing welfare and providing justice to society. India’s legal framework
reflects the social, political, economic, and cultural aspects of our vast and
diversified country. 17
Question 2 (Study Material)
What is the process of making Law?
Answer: When a law is proposed in parliament it is called a Bill. After discussion
and debate, the law is passed in Lok Sabha. Thereafter, it has to be passed in
Rajya Sabha. It then has to obtain the assent of the President of India. Finally,
the law will be notified by the Government in the publication called the Official
Gazette of India. The law will become applicable from the date mentioned in the
notification as the effective date. Once it is notified and effective, it is called
an Act of Parliament.
Question 3 (Study Material)
What are different types of Laws in Indian Legal System?
Answer: The laws in the Indian legal system could be broadly classified as
follows:
(a) Criminal law is concerned with laws pertaining to violations of the rule of law
or public wrongs and punishment of the same. Murder, rape, theft, fraud,
cheating and assault are some examples of criminal offences under the law.
(b) Civil Law Matters of disputes between individuals or organisations are dealt
with under Civil Law. Civil courts enforce the violation of certain rights and
obligations through the institution of a civil suit. Civil law primarily focuses on
dispute resolution rather than punishment. Some examples of civil offences are
breach of contract, non-delivery of goods.
(c) Common Law A judicial precedent or a case law is common law. A judgment
delivered by the Supreme Court will be binding upon the courts within the
territory of India under Article 141 of the Indian Constitution.
(d) Principles of Natural Justice Natural justice, often known as Jus Natural
deals with certain fundamental principles of justice going beyond written law.
Nemo judex in causa sua (Literally meaning “No one should be made a judge in his
own cause, and it’s a Rule against Prejudice), audi alteram partem (Literally
Business Law by CA Swati Agrawal
, CA Foundation Business Law
meaning “hear the other party or give the other party a fair hearing), and
reasoned decision are the rules of Natural Justice. A judgement can override or
alter a common law, but it cannot override or change the statute.
Question 4 (Study Material)
Explain Role of SEBI?
Answer: The Securities and Exchange Board of India (SEBI)
18
•is the regulatory body
• for securities and commodity market in India
• under the ownership of Ministry of Finance within the Government of India.
• It was established on 12 April, 1988 as an executive body and was given
statutory powers on 30 January, 1992 through the SEBI Act, 1992.
Question 5 (Study Material)
Explain functions of RBI?
Answer: Reserve Bank of India-
•is India's Central Bank and regulatory body responsible for regulation of the
Indian banking system.
•It is under the ownership of Ministry of Finance, Government of India.
• It is responsible for the control, issue and maintaining supply of the Indian
rupee.
• It also manages the country's main payment systems and works to promote its
economic development.
• Bharatiya Reserve Bank Note Mudran (BRBNM) is a specialised division of RBI
through which it prints and mints Indian currency notes (INR) in two of its
currency printing presses located in Nashik (Western India) and Dewas (Central
India).
•RBI established the National Payments Corporation of India as one of its
specialised divisions to regulate the payment and settlement systems in India.
•Deposit Insurance and Credit Guarantee Corporation was established by RBI as
one of its specialised divisions for the purpose of providing insurance of deposits
and guaranteeing of credit facilities to all Indian banks.
Question 6 (Study Material)
Explain in brief structure of Indian Judicial System?
Answer: When there is a dispute between citizens or between citizens and
the Government, these disputes are resolved by the judiciary. The functions
of judiciary system of India are:
♦ Regulation of the interpretation of the Acts and Codes,
♦ Dispute Resolution,
♦ Promotion of fairness among the citizens of the land.
Business Law by CA Swati Agrawal
, CA Foundation Business Law
Chapter 2 The Indian Contract Act, 1872
Unit 1: Nature Of Contract
Question 1 (Study Material)
“All contracts are agreements, but all agreements are not contracts”.
Comment.
Answer: An agreement comes into existence when one party makes a proposal or
1
offer to the other party and that other party gives his acceptance to it. A
contract is an agreement enforceable by law. It means that to become a contract
an agreement must give rise to a legal obligation i.e. duty enforceable by law. If
an agreement is incapable of creating a duty enforceable by law, it is not a
contract. There can be agreements which are not enforceable by law, such as
social, moral or religious agreements. The agreement is a wider term than the
contract. All agreements need not necessarily become contracts but all contracts
shall always be agreements.
All agreements are not contracts: When there is an agreement between the
parties and not intend to create a legal relationship, it is they do not a contract.
All contracts are agreements: For a contract there must be two things (a) an
agreement and (b) enforceability by law. Thus, existence of an agreement is a
pre-requisite existence of a contract. Therefore, it is true to say that all
contracts are agreements. Thus, we can say that there can be an agreement
without it becoming a contract, but we can’t have a contract without an
agreement.
Question 2 (Study Material)
A sends an offer to B to sell his second-car for ₹1,40,000 with a condition
that if B does not reply within a week, he (A) shall treat the offer as
accepted. Is A correct in his proposition?
Answer: Acceptance to an offer cannot be implied merely from the silence of the
offeree, even if it is expressly stated in the offer itself. Unless the offeree has
by his previous conduct indicated that his silence amount to acceptance, it cannot
be taken as valid acceptance. So, in the given problem, if B remains silent, it does
not amount to acceptance.
The acceptance must be made within the time limit prescribed by the offer. The
acceptance of an offer after the time prescribed by the offeror has elapsed will
not avail to turn the offer into a contract.
Business Law by CA Swati Agrawal
, Question 3 (Study Material/ Rtp Nov 2018, Mtp 1 Dec 2022)
Explain the type of contracts in the following agreements under the Indian
Contract Act, 1872:
(i) A coolie in uniform picks up the luggage of A to be carried out of the
railway station without being asked by A and A allows him to do so.
(ii) Obligation of finder of lost goods to return them to the true owner.
(iii) A contract with B (owner of the factory) for the supply of 10 tons of
sugar, but before the supply is affected, the fire caught in the factory and 2
everything was destroyed.
Answer: (i) It is an implied contract and A must pay for the services of the coolie
detailed by him.
Implied Contracts: Implied contracts come into existence by implication. Most
often the implication is by law and or by action. Section 9 of the Act contemplates
such implied contracts when it lays down that in so far as such proposal or
acceptance is made otherwise than in words, the promise is said to be implied.
(ii) Obligation of finder of lost goods to return them to the true owner cannot be
said to arise out of a contract even in its remotest sense, as there is neither
offer and acceptance nor consent. These are said to be quasi-contracts.
Quasi-Contract: A quasi-contract is not an actual contract but it resembles a
contract. It is created by law under certain circumstances. The law creates and
enforces legal rights and obligations when no real contract exists. Such
obligations are known as quasi-contracts. In other words, it is a contract in which
there is no intention on part of either party to make a contract but law imposes
a contract upon the parties.
(iii) The above contract is a void contract.
Void Contract: Section 2 (j) states as follows: “A contract which ceases to be
enforceable by law becomes void when it ceases to be enforceable”. Thus, a void
contract is one which cannot be enforced by a court of law.
Question 4 (Study Material)
Shambhu Dayal started “self-service” system in his shop. Smt. Prakash
entered the shop, took a basket and after taking articles of her choice into
the basket reached the cashier for payments. The cashier refuses to accept
the price. Can Shambhu Dayal be compelled to sell the said articles to Smt.
Prakash? Decide as per the provisions of the Indian Contract Act, 1872.
Answer: Invitation to offer: The offer should be distinguished from an
invitation to offer. An offer is the final expression of willingness by the offeror
to be bound by his offer should the party chooses to accept it. Where a party,
Chapter 1 Indian Regulatory Framework
Question 1 (Study Material)
What is Law?
Answer: Law is a set of obligations and duties imposed by the government for
securing welfare and providing justice to society. India’s legal framework
reflects the social, political, economic, and cultural aspects of our vast and
diversified country. 17
Question 2 (Study Material)
What is the process of making Law?
Answer: When a law is proposed in parliament it is called a Bill. After discussion
and debate, the law is passed in Lok Sabha. Thereafter, it has to be passed in
Rajya Sabha. It then has to obtain the assent of the President of India. Finally,
the law will be notified by the Government in the publication called the Official
Gazette of India. The law will become applicable from the date mentioned in the
notification as the effective date. Once it is notified and effective, it is called
an Act of Parliament.
Question 3 (Study Material)
What are different types of Laws in Indian Legal System?
Answer: The laws in the Indian legal system could be broadly classified as
follows:
(a) Criminal law is concerned with laws pertaining to violations of the rule of law
or public wrongs and punishment of the same. Murder, rape, theft, fraud,
cheating and assault are some examples of criminal offences under the law.
(b) Civil Law Matters of disputes between individuals or organisations are dealt
with under Civil Law. Civil courts enforce the violation of certain rights and
obligations through the institution of a civil suit. Civil law primarily focuses on
dispute resolution rather than punishment. Some examples of civil offences are
breach of contract, non-delivery of goods.
(c) Common Law A judicial precedent or a case law is common law. A judgment
delivered by the Supreme Court will be binding upon the courts within the
territory of India under Article 141 of the Indian Constitution.
(d) Principles of Natural Justice Natural justice, often known as Jus Natural
deals with certain fundamental principles of justice going beyond written law.
Nemo judex in causa sua (Literally meaning “No one should be made a judge in his
own cause, and it’s a Rule against Prejudice), audi alteram partem (Literally
Business Law by CA Swati Agrawal
, CA Foundation Business Law
meaning “hear the other party or give the other party a fair hearing), and
reasoned decision are the rules of Natural Justice. A judgement can override or
alter a common law, but it cannot override or change the statute.
Question 4 (Study Material)
Explain Role of SEBI?
Answer: The Securities and Exchange Board of India (SEBI)
18
•is the regulatory body
• for securities and commodity market in India
• under the ownership of Ministry of Finance within the Government of India.
• It was established on 12 April, 1988 as an executive body and was given
statutory powers on 30 January, 1992 through the SEBI Act, 1992.
Question 5 (Study Material)
Explain functions of RBI?
Answer: Reserve Bank of India-
•is India's Central Bank and regulatory body responsible for regulation of the
Indian banking system.
•It is under the ownership of Ministry of Finance, Government of India.
• It is responsible for the control, issue and maintaining supply of the Indian
rupee.
• It also manages the country's main payment systems and works to promote its
economic development.
• Bharatiya Reserve Bank Note Mudran (BRBNM) is a specialised division of RBI
through which it prints and mints Indian currency notes (INR) in two of its
currency printing presses located in Nashik (Western India) and Dewas (Central
India).
•RBI established the National Payments Corporation of India as one of its
specialised divisions to regulate the payment and settlement systems in India.
•Deposit Insurance and Credit Guarantee Corporation was established by RBI as
one of its specialised divisions for the purpose of providing insurance of deposits
and guaranteeing of credit facilities to all Indian banks.
Question 6 (Study Material)
Explain in brief structure of Indian Judicial System?
Answer: When there is a dispute between citizens or between citizens and
the Government, these disputes are resolved by the judiciary. The functions
of judiciary system of India are:
♦ Regulation of the interpretation of the Acts and Codes,
♦ Dispute Resolution,
♦ Promotion of fairness among the citizens of the land.
Business Law by CA Swati Agrawal
, CA Foundation Business Law
Chapter 2 The Indian Contract Act, 1872
Unit 1: Nature Of Contract
Question 1 (Study Material)
“All contracts are agreements, but all agreements are not contracts”.
Comment.
Answer: An agreement comes into existence when one party makes a proposal or
1
offer to the other party and that other party gives his acceptance to it. A
contract is an agreement enforceable by law. It means that to become a contract
an agreement must give rise to a legal obligation i.e. duty enforceable by law. If
an agreement is incapable of creating a duty enforceable by law, it is not a
contract. There can be agreements which are not enforceable by law, such as
social, moral or religious agreements. The agreement is a wider term than the
contract. All agreements need not necessarily become contracts but all contracts
shall always be agreements.
All agreements are not contracts: When there is an agreement between the
parties and not intend to create a legal relationship, it is they do not a contract.
All contracts are agreements: For a contract there must be two things (a) an
agreement and (b) enforceability by law. Thus, existence of an agreement is a
pre-requisite existence of a contract. Therefore, it is true to say that all
contracts are agreements. Thus, we can say that there can be an agreement
without it becoming a contract, but we can’t have a contract without an
agreement.
Question 2 (Study Material)
A sends an offer to B to sell his second-car for ₹1,40,000 with a condition
that if B does not reply within a week, he (A) shall treat the offer as
accepted. Is A correct in his proposition?
Answer: Acceptance to an offer cannot be implied merely from the silence of the
offeree, even if it is expressly stated in the offer itself. Unless the offeree has
by his previous conduct indicated that his silence amount to acceptance, it cannot
be taken as valid acceptance. So, in the given problem, if B remains silent, it does
not amount to acceptance.
The acceptance must be made within the time limit prescribed by the offer. The
acceptance of an offer after the time prescribed by the offeror has elapsed will
not avail to turn the offer into a contract.
Business Law by CA Swati Agrawal
, Question 3 (Study Material/ Rtp Nov 2018, Mtp 1 Dec 2022)
Explain the type of contracts in the following agreements under the Indian
Contract Act, 1872:
(i) A coolie in uniform picks up the luggage of A to be carried out of the
railway station without being asked by A and A allows him to do so.
(ii) Obligation of finder of lost goods to return them to the true owner.
(iii) A contract with B (owner of the factory) for the supply of 10 tons of
sugar, but before the supply is affected, the fire caught in the factory and 2
everything was destroyed.
Answer: (i) It is an implied contract and A must pay for the services of the coolie
detailed by him.
Implied Contracts: Implied contracts come into existence by implication. Most
often the implication is by law and or by action. Section 9 of the Act contemplates
such implied contracts when it lays down that in so far as such proposal or
acceptance is made otherwise than in words, the promise is said to be implied.
(ii) Obligation of finder of lost goods to return them to the true owner cannot be
said to arise out of a contract even in its remotest sense, as there is neither
offer and acceptance nor consent. These are said to be quasi-contracts.
Quasi-Contract: A quasi-contract is not an actual contract but it resembles a
contract. It is created by law under certain circumstances. The law creates and
enforces legal rights and obligations when no real contract exists. Such
obligations are known as quasi-contracts. In other words, it is a contract in which
there is no intention on part of either party to make a contract but law imposes
a contract upon the parties.
(iii) The above contract is a void contract.
Void Contract: Section 2 (j) states as follows: “A contract which ceases to be
enforceable by law becomes void when it ceases to be enforceable”. Thus, a void
contract is one which cannot be enforced by a court of law.
Question 4 (Study Material)
Shambhu Dayal started “self-service” system in his shop. Smt. Prakash
entered the shop, took a basket and after taking articles of her choice into
the basket reached the cashier for payments. The cashier refuses to accept
the price. Can Shambhu Dayal be compelled to sell the said articles to Smt.
Prakash? Decide as per the provisions of the Indian Contract Act, 1872.
Answer: Invitation to offer: The offer should be distinguished from an
invitation to offer. An offer is the final expression of willingness by the offeror
to be bound by his offer should the party chooses to accept it. Where a party,
