CA Foundation Question Paper with Solution June 2024 - Business Laws

Table of Contents

1. Q 1 (A) R owns an electronics store. P visited the store
2. Q 1 (B) A company. ABC limited as on 31.03.2023
3. Q 1 (C) The Indian Partnership Act does not make the
4. Q 2 (A) Sony, a friend of Priya wanted to buy her two-wheeler
5. Q 2 (B) Ram wants to incorporate a company in which he will
6. Q 2 (C) A LLP is a new form of legal business entity with
7. Q 3 (A) (i) P, Q, and R formed a partnership agreement to
8. Q 3 (A) (ii) A and B operate a textile merchant business in
9. Q 3 (B) (i) XYZ is a company incorporated under The
10. Q 3 (B) (ii) M and N holding 70% and 30% of the shares in the
11. Q 3 (C) Explain in brief with reference to the provisions of
12. Q 4 (A) (i) Mr .J entered into an agreement with Mr.S to
13. Q 4 (A) (ii) Rama directs Shyam to sell laptops for him
14. Q 4 (B) A promissory note,, payable at a certain period after
15. Q 4 (C) Desciibe in brief about the following Regulatory
16. Q 5 (A) PCC Hotels in Bombay decided to sell their furniture
17. Q 5 (B) Dissolution of partnership doesn't mean dissolution
18. Q 5 (C) Where a party to a contract refuses altogether to
19. Q 6 (A) Mr.  Y  issued  a cheque for
20. Q 6 (B)Explain the term Wagering agreement in the light
    OR
21. Q 6 (B) What is the meaning of contingent contract? Write briefly
22. Q 6 (C) J, a wholesaler of premium Basmati rice delivered on approval

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Question 1 (A)

R owns an electronics store. P visited the store to buy a water purifier priced at  ₹ 54,000/-. He specifically requested R for a purifier with a copper filter. As P wanted to buy the purifier on credit, with the intention of paying in 9 equal monthly instalments, R demands a guarantor for the transaction. S (a friend of P) came forward and gave the guarantee for payment of water purifier. R sold P, a water purifier of a specific brand. P made payment for 4 monthly instalments and after that became insolvent.

Explain with reference to the Indian Contract Act 1872, the liability of S as a guarantor to pay the balance price of water purifier to R. What will be your answer, if R sold the water purifier misrepresenting it as having a copper filter, while it actually has a normal filter? Neither P nor S was aware of this fact and upon discovering the truth, P refused to pay the price. In response to P’s refusal, R filed the suit against S, the guarantor. Explain with reference to the Indian Contract Act 1872, whether S is liable to pay the balance price of water purfier to R?

Answer :

Question 1 (B)

A company. ABC limited as on 31.03.2023 had a paid-up capital of > I lakh (10.000 equity shares of ₹ 10 each). In June 2023, ABC limited had issued additional 10,000 equity shares of ₹ 10 each which was fully subscribed. Out of 10,000 shares. 5.000 of these shares were issued to XYZ private limited company. X Z is a holding company of PQR private limited by having control over the composition of its board of directors. Now, PQR private limited claims the status of being a subsidiary of ABC limited as being a subsidiary of its subsidiary i.e. XY-Z private limited. Examine the validity of the claim of PQR private limited. State the relationship if any, between ABC limited & XYZ private limited as per the provisions of The Companies Act, 2013. 

Answer :

 Question 1 (C)

The Indian Partnership Act does not make the registration of firms compulsory, yet the consequences or disabilities of non-registration have a persuasive pressure for their registration. Still, there are some cases where non-registration of firm does not affect certain rights. - Explain with reference to the provisions of the Indian Partnership Act, 1932. 

Answer :

It is true to say that Indian Partnership Act, 1932 does not make the registration of firms compulsory nor does it impose any penalty for non-registration.

Following are consequences of Non-registration of Partnership Firms in India:

The Indian Partnership Act, 1932 does not make the registration of firms compulsory, nor does it impose any penalty for non-registration. However, under Section 69, non-registration of partnership gives rise to a number of disabilities, which we shall presently discuss. Although registration of firms is not compulsory, yet the consequences or disabilities of non-registration have a persuasive pressure for their registration. These disabilities briefly are as follows:

(i) No suit in a civil court by firm or other co-partners against a third party:

The firm or any other person on its behalf cannot bring an action against the third party for breach of contract entered into by the firm, unless the firm is registered and the persons suing are or have been shown in the register of firms as partners in the firm. In other words, a registered firm can only file a suit against a third party and the persons suing have been in the register of firms as partners in the firm.

(ii) No relief to partners for set-off of claim:

If an action is brought against the firm by a third party, then neither the firm nor the partner can claim any set-off, if the suit be valued for more than ₹ 100 or pursue other proceedings to enforce the rights arising from any contract.

(iii) Aggrieved partner cannot bring legal action against other partner or the firm:

A partner of an unregistered firm (or any other person on his behalf) is precluded from bringing legal action against the firm or any person alleged to be or to have been a partner in the firm. But, such a person may sue for dissolution of the firm or for accounts and realization of his share in the firm’s property where the firm is dissolved.

(iv) Third party can sue the firm:

In case of an unregistered firm, an action can be brought against the firm by a third party.

Question 2 (A)

Sony, a friend of Priya wanted to buy her two-wheeler. Priya agreed to sell her two-wheeler to Sony and it was decided that price of her two- wheeler will be fixed by Priya’ s father, who is an auto dealer. Priya immediately handed over the keys to Sony. However, Priya’ s father refused to fix the price as he did not want Priya to sell her vehicle. Priya expressed her inability to sell the two-wheeler to Sonv and asked for return, but Sony refused to return the same. Explain -

(i) Can Priya take-back the vehicle from Sony? 

(ii) Will your answer be different, if Priya had not handed over the vehicle to Sony?

Answer :

As per the provisions of Section 24 of the Sale of Goods Act, 1930, when goods are delivered to the buyer on approval or "on sale or return" or other similar terms, the property therein passes to the buyer-

(a) when the buyer signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time; or

(c) he does something to the good which is equivalent to accepting the goods, e.g. he pledges or sells the goods.

Referring to the above provisions, we can analyze the situation given in the question.

(i) In the instant case, sony, who had taken delivery of the two wheeler on Sale or Return basis pledged the two-wheeler to priya father, has attracted the third condition that she has done something to the good which is equivalent to accepting the goods e.g. she pledges or sells the goods. Therefore, the property therein (Two wheeler) passes to priya father Now in this situation, priya cannot claim back her two wheeler from priya father, but she can claim the price of the two-wheeler from sony only.

(ii) It may be noted that where the goods have been delivered by a person on “sale or return” on the terms that the goods were to remain the property of the seller till they are paid for, the property therein does not pass to the buyer until the terms are complied with, i.e., price is paid for.

Hence, in this case, it is held that at the time of pledge, the ownership was not transferred to sony Thus, the pledge was not valid and priya could recover the two wheeler from priya father.

Question 2 (B)

Ram wants to incorporate a company in which he will be the only member. According to piovisions of I he Companies Act, 2013, what type of company can be incorporated? What are the salient features of this type of company? 

Answer :

Ram can incorporate a One Person Company (OPC), which allows him to be the sole member while benefiting from limited liability and simplified compliance requirements. This type of company is designed to support individual entrepreneurs, providing a structured and regulated entity with personal asset protection and perpetual succession.

OPC (One Person Company) - significant points

• Only one person as member.
• Minimum paid up capital – no limit prescribed.
• The memorandum of OPC shall indicate the name of the other person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of the company.
• The other person whose name is given in the memorandum shall give his prior written consent in prescribed form and the same shall be filed with Registrar of companies at the time of incorporation of the company along with its e-memorandum and e-articles.
• Such other person may be given the right to withdraw his consent.
• The member of OPC may at any time change the name of such other person by giving notice to the company and the company shall intimate the same to the Registrar.
• Any such change in the name of the person shall not be deemed to be an alteration of the memorandum.
• Only a natural person who is an Indian citizen whether resident in India or otherwise and has stayed in India for a period of not less than 120 days during the immediately preceding financial year

• • shall be eligible to incorporate a OPC;
  • shall be a nominee for the sole member of a OPC.
• No person shall be eligible to incorporate more than one OPC or become nominee in more than one such company.
• No minor shall become member or nominee of the OPC or can hold share with beneficial interest.
• Such Company cannot be incorporated or converted into a company under section 8 of the Act. Though it may be converted to private or public companies in certain cases.
• Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate.

Question 2 (C)

A LLP is a new form of legal business entity with limited liability. It’s an alternative corporate business vehicle that only gives the benefits of limited liability at low compliance cost but allows its partners the flexibility of organizing their internal structure as a traditional partnership. Keeping in view of above, define the following characteristics of LLP.

(i) Body Corporate 

(ii) Mutual Agency 

(iii) ForeignLLPs 

(iv) Artificial legal person 

Answer :

LLP is a body corporate: Section 2(1)(d) of the LLP Act, 2008 provides that a LLP is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners and shall have perpetual succession. Therefore, any change in the partners of a LLP shall not affect the existence, rights or liabilities of the LLP. Section 3 of LLP Act provides that a LLP is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners.

Mutual Agency: No partner is liable on account of the independent or unauthorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct. In other words, all partners will be the agents of the LLP alone. No one partner can bind the other partner by his acts

Foreign LLPs: Section 2(1)(m) defines foreign limited liability partnership “as a limited liability partnership formed, incorporated, or registered outside India which established as place of business within India”. Foreign LLP can become a partner in an Indian LLP

Artificial Legal Person: A LLP is an artificial legal person because it is created by a legal process and is clothed with all rights of an individual. It can do everything which any natural person can do, except of course that, it cannot be sent to jail, cannot take an oath, cannot marry or get divorce nor can it practice a learned profession like CA or Medicine. A LLP is invisible, intangible, immortal (it can be dissolved by law alone) but not fictitious because it really exists.

Question 3 (A)

(i) P, Q, and R formed a partnership agreement to operate motor buses along specific routes for a duration of 12 years. After operating the business for four years, it was observed that the business incurred losses each year. Despite this, P is determined to continue the business for the remaining Period. Examine with reference to the Indian Partnership Act, 1932, Can P insist to continue the business? If so, what options are available to Q and R who are reluctant to continue operating the business? 

Answer :

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Question 3 (A)

(ii) A and B operate a textile merchant business in partnership. Mi. A finances the business and is a sleeping partner. In the regular course of business, B acquires certain fabric goods belonging to C. However, B is aware that these goods are stolen property. Despite this knowledge, B proceeds to purchase and sell some of these stolen goods. Moreover, B records proceeds from these sales in the firm’s books. Now, A wants to avoid the liability towards C on the grounds of misconduct by B. The light of the provisions of the Indian Partnership Act, 1932 discuss the liability of A and B towards C. 

Answer :

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Question 3 (B)

(i) XYZ is a company incorporated under The Companies Act, 2013 .  The paid up share capital of the company is held by others as on 31.03.2024 is as under : 

(1) Government of India 20% 

(2) Life Insurance Corporation of India (Public Institution) 8% 

(3) Government of TamilNadu 10% 

(4) Government of Rajasthan 10% 

(5) ABC Limited (owned by Government Company) 15% As per above shareholding, state whether XYZ limited be called a government company under the provisions of The Companies Act, 2013. 

Answer :

As per Section 2(45) of the Companies Act, 2013 

“Government company” means any company in which not less than fifty-one per cent. of the paid-up share capital is held by

• the Central Government, or
• by any State Government or Governments, or
• partly by the Central Government and partly by one or more State Governments, and
• includes a companywhich is a subsidiary company of such a Government company;

Explanation.- For the purposes of this clause, the “paid up share capital ” shall be construed as “total voting power ”, where shares with differential voting rights have been issued.

In the given scenario,

we should calculate the % of holding of various entities and whether they would be covered under various categories provided above so as to make XYZ a government company -

Government of India – 20%

LIC (Public Institutions) – 8%

Government of Tamil Nadu – 10%

Government of Rajasthan – 10%

ABC Ltd. (owned by Government Company) – 15%

Total holding by the Government = 20 + 8 + 10 + 10 + 15 = 63%

Thus, it can be easily concluded that XYZ Limited will be called a government company as not less than 51% of the paid up share capital is held by various above categories.

[Note – LIC is 100% owned by Central Goevernment thus will be considered in above calculation to determine the % of holding (to decide whether it is a government company or not)

Question 3 (B)

(ii) M and N holding 70% and 30% of the shares in the company. Both died in an accident. Answer with reference to the provisions of the Companies Act, 2013, what will be the legal effect on the company as both the members have died? 

Answer :

Question 3 (C)

Explain in brief with reference to the provisions of The Indian Contract Act, 1872, what are the rights enjoyed by Surety against the Creditor, the Principal Debtor and Co-Sureties? 

Answer :

Rights of Surety

1. Right against the principal debtor

(a) Rights of subrogation [Section 140]: Where, a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor. This right is known as right of subrogation. It means that on payment of the guaranteed debt, or performance of the guaranteed duty, the surety steps into the shoes of the creditor.

(b) Implied promise to indemnify surety [Section 145]: In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety. The surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but not sums which he paid wrongfully.

2. Right against the Creditor

(a) Surety’s right to benefit of creditor’s securities [Section 141]: A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and, if the creditor loses, or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.

(b) Right to set off: If the creditor sues the surety, for payment of principal debtor’s liability, the surety may have the benefit of the set off, if any, that the principal debtor had against the creditor

(c) Right to share reduction: The surety has right to claim proportionate reduction in his liability if the principal debtor becomes insolvent.

3. Rights against co-sureties

“Co-sureties (meaning)- When the same debt or duty is guaranteed by two or more persons, such persons are called co-sureties”

(a) Co-sureties liable to contribute equally (Section 146): Unless otherwise agreed, each surety is liable to contribute equally for discharge of whole debt or part of the debt remains unpaid by debtor.

(b) Liability of co-sureties bound in different sums (Section 147): The principal of equal contribution is, however, subject to the maximum limit fixed by a surety to his liability. Co-sureties who are bound in different sums are liable to pay equally as far as the limits of their respective obligations permit.

Question 4 (A)

(i) Mr .J entered into an agreement with Mr.S to purchase his house for ₹20 lakh, within three months. He also paid ₹50,000-/ as token money. In the meanwhile, in an anti-encroachment drive of the local administration , Mr.S's house was demolished. When Mr.J was informed about the incident he asked for the refund of token money.Reffering to the relevant provisions of the Indian Contract Act, 1872 state whether Mr.J is entitled to the refund of the amount paid.

Answer :

As per Section 56 of the Indian Contract Act,

a contract to do an act, which after the contract is made, become-

• impossible, or, unlawful
• by reason of some events which the promisor could not prevent, eg. change in law,

becomes void when the act become impossible or unlawful and parties discharged from performance. 

In the given scenario, when Mr. J entered into an agreement with Mr. S to purchase his house, the performance on the contract was quite feasible. However, pertaining to changes in the law and the anti-encroachment drive of the local administration, Mr. S’s house was demolished.

Thus, the parties are discharged from performance but Mr. J is entitled for the refund of his token money as in the event of non-performance of contract, all the monies received by either of the parties should be refund/ returned.

Question 4 (A)

(ii) Rama directs Shyam to sell laptops for him and agrees to give Shyam eleven percent (11%) commission on the sale price fixed by Rama for each laptop. As Government of India put restrictions on import of Laptops, Rama thought that the prices of laptops might go up in near future and he revokes Shyam s authority for any further sale. Shyam, before receiving the letter at his end, sold 5 laptops at the price fixed by Rama. Shyam asked for 11% commission on the sale of 5 Laptops for ₹1 lakh each. Explain under the provisions of The Indian Contract Act, 1872 :

(1) Whether sale of laptops after revoking Shyam’s authority is binding on Rama? 

(2) Whether Shyam will be able to recover his commission from Rama, if yes, what will be the amount of such commission? 

Answer :

Question 4 (B)

A promissory note,, payable at a certain period after sight, must be presented to the maker thereof for payment. Under which scenarios presentment for payment is not necessary and the instrument is dishonoured at the due date for presentment according to the provisions of The Negotiable Instrument Act, 1881? 

Answer :

As per Section 76 of the Negotiable Instruments Act, 1881, No presentment for payment is necessary, and the instrument is dishonoured at the due date for presentment, in any of the following cases –

(a)

1. If the maker, drawee or acceptor intentionally prevents the presentment of the instrument, or
2. if the instrument being payable at his place of business, he closes such place on a business day during the usual business hours, or
3. if the instrument being payable at some other specified place, neither he nor any person authorised to pay it attends at such place during the usual business hours, or
4. if the instrument not being payable at any specified place, he cannot after due search be found;

(b) as against any party sought to be charged therewith, if he has engaged to pay notwithstanding non-presentment;

(c) as against any party if, after maturity, with knowledge that the instrument has not been presented—

• he makes a part payment on account of the amount due on the instrument,
• or promises to pay the amount due thereon in whole or in part,
• or otherwise waives his right to take advantage of any default in presentment for payment;

(d) as against the drawer, if the drawer could not suffer damage from the want of such presentment.

Question 4 (C)

Desciibe in brief about the following Regulatory bodies of the Government of India: - 

(i) Securities Exchange Board of India 

(ii) Reserve Bank of India 

(iii) Insolvency & Bankruptcy Board of India 

Answer :

(i)The Securities and Exchange Board of India (SEBI)

• 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

(ii) 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 itscurrency printing presses located in Nashik (Western India) and Dewas (Central India).
• RBI established the National Payments Corporation of India as one of its specialised division to regulate the payment and settlement systems in India.
• Deposit Insurance and Credit Guarantee Corporation was established by RBI as one of its specialised division for the purpose of providing insurance of deposits and guaranteeing of credit facilities to all Indian banks.

(iii) Insolvency and Bankruptcy Board of India (IBBI)-

• Is the regulator for overseeing insolvency proceedings and entities like Insolvency Professional Agencies (IPA), Insolvency Professionals (IP) and Information Utilities (IU) in India.
• It was established on 1 October 2016 and given statutory powers through the Insolvency and Bankruptcy Code, which was passed by Lok Sabha on 5th May 2016.
• It covers Individuals, Companies, Limited Liability, Partnerships and Partnership firms. The new code will speed up the resolution process for stressed assets in the country.
• It attempts to simplify the process of insolvency and bankruptcy proceedings.
• It handles the cases using two tribunals like NCLT (National company law tribunal) and Debt recovery tribunal.

Question 5 (A)

PCC Hotels in Bombay decided to sell their furniture by auction sale. For this purpose, they appointed RN & Associates as auctioneer. They invited top ten renowned Architects in Bombay for bidding. A right to bid was not notified by them. Furniture was put up in lots for sale. It was decided that for every lot of furniturethere will be a reserve price. On 25th Feb 2024, Auction sale was started at 10.a.m in the lawn of PTC Hotels Bombay. For a special lot of furniture three parties came for bidding Mr. Neel, Mr. Raj and Mr. Dev on behalf of their respective companies. Bidding was as follows:

The sale was completed in favour of Mr. Neel by RN & Associates by fall of hammer. Mr. Dev's Bid was rejected on ground that Right to bid was reserved and company of Mr. Dev was not invited to bid.

For another bid of Italian Furniture was made by two parties as follows:

Sale was completed in favour of Mr. Dheer instead of Mr. Madhu.

Mr. Dev and Mr. Madhu argued that auction sale was not lawful. Give your opinion with reference to provisions of the sale of Goods Act, 1930 whether Auction Sale will be considered lawful or not?

Answer :

Coming Soon

Question 5 (B)

Dissolution of partnership doesn't mean dissolution of firm". Do you agree with this statement? State any three situations where court can dissolve the partnership firm.

Answer :

Dissolution by the court (Section 44):
the Court may, at the suit of the partner, dissolve a firm on any of the following ground:
(a) Insanity/unsound mind:
Where a partner (not a sleeping partner) has become of unsound mind, the court may dissolve the firm on a suit of the other partners or by the next friend of the insane partner. Temporary sickness is no ground for dissolution of a firm.
(b) Permanent incapacity:
When a partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner, then the court may dissolve the firm. Such permanent incapacity may result from physical disability or illness, etc.
(c) Misconduct:
Where a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of business, the court may order for dissolution of the firm, by giving regard to the nature of business. It is not necessary that misconduct must relate to the conduct of the business. The important point is the adverse effect of misconduct on the business. In each case, nature of business will decide whether an act is misconduct or not.
(d) Persistent breach of agreement:
Where a partner other than the partner suing, willfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct of its business, or otherwise so conduct himself in matters relating to the business that it is not reasonably practicable for other partners to carry on the business in partnership with him, then the court may dissolve the firm at the instance of the partners. Following comes in the category of breach of contract:
• Embezzlement,
• Keeping erroneous accounts
• Holding more cash than allowed
• Refusal to show accounts despite repeated request, etc.
(e) Transfer of interest:
Where a partner other than the partner suing, has transferred the whole of his interest in the firm to a third party or has allowed his share to be charged or sold by the court, in the recovery of arrears of land revenue, the court may dissolve the firm at the instance of any other partner.
(f) Continuous/Perpetual losses:
Where the business of the firm cannot be carried on except at a loss in future also, the court may order for its dissolution.
(g) Just and equitable grounds:
Where the court considers any other ground to be just and equitable for the dissolution of the firm, it may dissolve a firm. The following are the cases for the just and equitable grounds-
(i) Deadlock in the management.
(ii) Where the partners are not in talking terms between them.
(iii) Loss of substratum.
(iv) Gambling by a partner on a stock exchange.

Question 5 (C)

Where a party to a contract refuses altogether to perform, or is disabled from performing his part of it, the other party has a right to rescind it". Discuss this statement and the effects of such refusal under the provisions of The Indian Contract Act, 1872.

Answer :

Coming Soon

Question 6 (A)

Mr.  Y  issued  a cheque for ₹ 10,000 to r.Z  which was  dishonoured by the Bank because  Y  did not have enough funds in his account and has no authority to overdraw. Examine as per the provisions of the Negotiable Instruments Act, 1831 whether-  

(i) Mr. Y is liable for dishonour of cheque, if yes, what are the consequences for such an offence? 

(ii) What would be your answer if Y issued a cheque as a donation to Mr. Z? 

Answer :

Coming Soon

Question 6 (B)

Explain the term Wagering agreement in the light of the Indian Contract Act, 1872. Also, explain some transactions resembling with wagering transaction but which are not void. 

Answer :

Wagering agreement (Section 30 of the Indian Contract Act, 1872):

An agreement by way of a wager is void. It is an agreement involving payment of a sum of money upon the determination of an uncertain event. The essence of a wager is that each side should stand to win or lose, depending on the way an uncertain event takes place in reference to which the chance is taken and in the occurrence of which neither of the parties has legitimate interest.For example, A agrees to pay ₹ 50,000 to B if it rains, and B promises to pay a like amount to A if it does not rain, the agreement will be by way of wager. But if one of the parties has control over the event, agreement is not a wager.Transactions resembling with wagering transaction but are not void:

(i) Chit fund: Chit fund does not come within the scope of wager (Section 30). In case of a chit fund, a certain number of persons decide to contribute a fixed sum for a specified period and at the end of a month, the amount so contributed is paid to the lucky winner of the lucky draw

(ii) Commercial transactions or share market transactions: In these transactions in which delivery of goods or shares is intended to be given or taken, do not amount to wagers.

(iii) Games of skill and Athletic Competition: Crossword puzzles, picture competitions and athletic competitions where prizes are awarded on the basis of skill and intelligence are the games of skill and hence such competition are valid. According to the Prize Competition Act, 1955 prize competition in games of skill are not wagers provided the prize money does not exceed ₹ 1,000.

(iv) A contract of insurance: A contract of insurance is a type of contingent contract and is valid under law, and these contracts are different from wagering agreements.

OR

Question 6 (B)

What is the meaning of contingent contract? Write briefly its essentials. Also, explain any three rules relating to enforcement of a contingent contract. 

Answer :

1. The performance of a contingent contract would depend upon the happening or non-happening of some event or condition. The condition may be precedent or subsequent.
2. The event, referred to, is collateral to the contract. The event is not part of the contract. The event should be neither a performance promised nor a consideration for a promise.
3. The contingent event should not be a mere ‘will’ of the promisor. The event should be contingent in addition to being the will of the promisor.
4. The event must be uncertain. Where the event is certain or bound to happen, the contract is due to be performed, then it is a not contingent contract.

Question 6 (C)

J, a wholesaler of premium Basmati rice delivered on approval 100 bags of rice of 10 kg each to a local retailer, on sale or returnable basis within a month of delivery. The next day the retailer sold 5 bags of rice to a regular customer K. A week later K informed the retailer that the quality of rice was not as per the price.

The retailer now wants to return all the rice bags to J, including the 4 bags not used by K. Can the retailer do so?

Answer :

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