Module-wise Marks Distribution I-5
Module-wise Comparison with Study Material I-9 SECTION A FUNDAMENTALS OF BUSINESS LAWS
MODULE 2:
CHAPTER 2.3
CHAPTER 2.4
CHAPTER 2.5
CHAPTER 2.6
CHAPTER 2.7
CHAPTER 2.8
CHAPTER 2.10
MODULE
CHAPTER 3.1
MODULE 4: NEGOTIABLE INSTRUMENTS ACT, 1881
CHAPTER 4.1
CHAPTER 4.2
CHAPTER 4.3
CHAPTER 4.4
SECTION B
BUSINESS COMMUNICATION
MODULE 5: BUSINESS COMMUNICATION
CHAPTER
CHAPTER
Solved Paper : December 2024 (Suggested Answers)
Quick Revision of the chapter
INTRODUCTION:
Law revolves around rights and liabilities. In India people have three types of rights:
(
a) Human Rights: There is no law. United Nations have adopted a Universal Declaration of Human Rights which has been adopted by member countries including India. We have National Human Rights Commission and State Human Rights Commission. Human is above common law.
(
b) Constitutional Rights: This is available to all citizens as per constitution. Basic rights are called fundamental rights and if Govt. or Govt. organisation violates any right, remedy is available to the citizen by making writ petition to High Court.
(
c) Contractual Rights: These are rights and obligations created voluntarily between parties by making contracts.
Before enactment of Indian Contract Act, 1872, the courts in India used to apply English Common laws as suited to Indian conditions, customs and usages. Some difficulties were noticed in using English Common laws. Accordingly later the courts started deciding cases based on Hindu Personal laws and Muslim personal laws. But the same were still not found fit to address the business complexities.
Accordingly separate Indian Contract Act, 1872 was enacted. This Act is based on English Common law, which is to a large extent made up of judicial precedents.
The law relating to contracts is contained in the Indian Contract Act, 1872.
The Indian Contracts Act came into force on 1st September, 1872
The act is applicable to the whole of India.
2(a) Proposal/offer When one person signi es to another, his willingness to do or to abstain from doing anything, with a view of obtaining the assent of that other person to such act, abstinence, he is said to make proposal.
2(b) Promise When the person to whom the proposal is made signi es his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.
2(c) Promisor & Promisee
The person making the proposal is called “promisor” & person accepting it is called “promisee”
2(d) Consideration When at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing or promises to do or abstain from doing something, such act or abstinence or promise is called consideration.
2(e) Agreement
Every promise & every set of promises, forming the consideration for each other is an agreement.
2(h) Contract An agreement between two or more parties enforceable by law.
All contracts are agreements, but all agreements are not contract. All agreements need not give rise to a contract because for becoming contract, the agreement must give rise to legal obligation. An agreement can be social obligation or legal obligation. An agreement giving rise to legal obligation can only be contract; if it gives rise to social obligation then it cannot be converted into a contract.
Elements
Explanation
Agreement For valid contract there must be an agreement which further comprises of offer (whose terms must be de nite) & acceptance (which should be absolute & unconditional) between 2 or more parties.
Free consent If the consent of the parties is obtained through coercion, undue in uence, fraud, misrepresentation or mistake then a valid contract cannot take place. The consent must be free.
Lawful consideration Consideration means something in return. It may be an act or abstinence. But it should be real & lawful.
Competent parties
A competent person is one who is
1. At least of 18 years
2. Of sound mind
3. Not disquali ed by any law for contracting. If any point is missing in the person then he cannot be termed as competent person.
Legality of object The object of the contract must be legal or else the contract will not be valid.
Legal relationships Parties must create legal relationship. Agreements with social or domestic obligations are not contract. Agreements not to be expressly declared void Agreements should not be void or illegal.
Certainty & capability of performance
Legal formalities
The terms & conditions of agreement must be certain & capable of being performed.
There are certain legal formalities to be ful lled until which the agreement cannot be enforced. For eg. Registration, etc. The contract can be oral or written. Written is preferable.
CLASSIFICATION OF CONTRACT:
A proposal is defined under section Sec 2(a) as previously discussed on page no. 2.
An offer is an expression of willingness to contract on certain terms, made by promisor or offeror with an intention that it shall become binding as soon as it is accepted by the person to whom it is addressed, the “offeree or promisee or acceptor”.
TYPES OF OFFER:
TYPES
Expressed offer When an offer is express in written or in verbal form then this offer is known as expressed offer.
Implied offer When an offer is given by gesture or by action or by the conduct is known as implied offer. The offeree can accept the offer by understanding the action of the offeror.
General offer When an offer made at large or in public or in general is known as General Offer. It can be accepted by any interested individual or public.
Speci c offer The offer which is made to a speci c individual or to a speci c group of individual is speci c offer. Only that individual or group can accept that offer.
Counter offer When an offeror makes an offer to offeree and offeree with some modi cation in it makes converse offer which makes initial offer void and the other comes in existence, which changes the position of the party from offeror and offeree to offeree and offeror respectively is called as counter offer.
Cross offer When the offeror and offeree make the same offer to one another having same terms coincidentally is called cross offer. Standing offer When tender is submitted to supply certain goods or any quantity as and when required it will amount to standing offer. In such a case contract does not come into existence merely when tender is accepted, but a contract takes place only after the order is placed. Each order in such a case is acceptance and as soon as the offer is accepted the contract comes into existence.
In the case of invitation to offer the person sending out invitation does not make an offer but only invites the other parties to make an offer. Eg. The mannequins standing outside shops are not for sale. Instead, the owner is inviting us to visit their shop make an offer for clothes we want to buy. Now, it depends on owner to accept the same or not. One cannot force him to sell on the price stated except if price is specified by law then goods will be sold at specified price. An advertisement for sale of goods by auction, quotations, catalogues of prices or display of goods at show room with price tag, prospectus of company, invitation for subscriptions, invitation for jobs, etc. are invitation to offer not offer.
Offer may be expressed or implied
An offer may be expressed or may be implied from the conduct of the parties or circumstances of the case.
Offer may be speci c or general A speci c offer is one which is made to a particular person or it can be made to public at large. It can be accepted by the person to whom it has been made, no one else can accept such an offer.
Offer must give rise to legal obligation
Terms of an offer must be de nite and certain
Offer must be distinguished from an invitation to offer
Offer must be communicated
An offer to be valid must create legal relationship between the parties. The very purpose of entering into an agreement is to make it enforceable at a Court of law.
The terms of an offer should not be vague or inde nite.
An offer must be distinguished from an invitation to offer.
An offer must be communicated to the person to whom it is made. A person can accept the offer only when he knows about it. If he does not know it, he cannot accept it.
Offer must be made with a view to obtaining the consent of the other party
The offer must be made with an intention to get the consent of the other party to do or to abstain from doing the act and not simply with a view to making known the intention of making an offer. Sometimes a person declares that he has the intention to do something and this does not amount to an offer. Such a declaration only means that the offer will be made or invited in future.
Offer should not impose an unnecessary obligation to communicate non-acceptance
Thus an offeror cannot say that if acceptance is not communicated by Sunday next, the offer would be considered as accepted.
Communication of Special Terms Special terms of a contract must be communicated. These terms must be communicated beforehand only, if they are communicated afterwards then the customer are not bound by it.
Offer to make an offer is not an offer
Acceptance is defined under section Sec 2(b) as previously discussed on page no. 2. An offer can be accepted by the person to whom the offer is made. If it is a specific offer, then it will be accepted by that specified person or group. If the offer is made to public at large, then it can be accepted by any person.
Acceptance must be absolute and unquali ed Sec. 7(1)
Acceptance must be communicated Sec. 7(2)
Acceptance must be in a prescribed or reasonable mode Sec. 7(2)
There must be an absolute and unquali ed acceptance of all the terms of the offer. Quali ed acceptance would amount to rejection of the offer.
Acceptance must be communicated by the acceptor or by other person authorised by offeree to the offeror. Silence cannot be construed as acceptance.
If the offer or prescribes no mode of acceptance, the acceptances must be communicated according to some usual and reasonable mode. The usual modes of communication are by words spoken or written or by conduct.
Acceptance must be given within a reasonable time and before the offer lapses
Acceptance cannot precede an offer
Acceptance must be given only by the person to whom the offer is made
Rejected offer can be accepted only on renewal
Revocation of acceptance
Acceptance to give an acceptance is not an acceptance
Acceptance must be given within the speci ed time limit, if any and if no time is stipulated, acceptance must be given within a reasonable time because an offer cannot be kept open inde nitely.
Again the acceptance must be given before the offer is revoked or lapses by reason of offeree’s knowledge of the death or insanity of the offeror. Acceptance given to a revoked offer is not valid.
Acceptance must be given after receiving the offer.
An offer can be accepted only by the person or persons to whom it is made. It cannot be accepted by another person unless authorised by offeree..
Rejected offer can be accepted only, on renewal; offer once rejected can’t be accepted again unless a fresh offer is made.
Under English Law acceptance is revocable, whereas under Indian Law acceptance is irrevocable.
Communication is very important for contracts. It can be said as receiving or sending of information by related parties for proper understanding & undertaking of the contract. It can be through mails, phone, telegrams, etc.
Revocation means taking back. Revocation can be of both proposal and acceptance. WHEN COMMUNICATION IS COMPLETE, IN DIFFERENT CASES
Offer Acceptance Revocation
As per Para 1 of Sec. 4, the communication of offer comes to an end when it comes to the knowledge of the person to whom it is made.
As per Para 2 of Sec. 4, Communication of acceptance against proposer is complete when it is put into course of transmission to him & out of reach of acceptor.
Communication of acceptance against promisee or acceptor is complete when it comes to the knowledge of the proposer.
As per Para 3 of Sec. 4, Communication of revocation comes to an end against the person who revocates it, when it is put into course of transmission to whom it is made & out of reach of person revocating it. Communication of revocation comes to an end against the person to whom it is made when it comes to his knowledge.
MODES FOR REVOCATION: SECTION 6
Communication of notice of revocation by proposer
Communication of notice of revocation by acceptor
Time lapse
Failure to ful l condition
Death or insanity of proposer or acceptor
The proposer can revoke his offer at any time before the letter of acceptance is posted to him.
The acceptor can revoke his acceptance at any time before the letter of acceptance is received by the offeror.
If the offer is not accepted within the prescribed time & the prescribed time lapses. And if no time is prescribed the by lapse of reasonable time. (What is a reasonable time is a question of fact in each case.)
If the acceptor fails to ful ls the condition precedent to acceptance.
The acceptor comes to know about death or insanity of proposer before acceptance.
The acceptor dies after writing his acceptance before posting the same, the offer lapses. Posting it after his death makes no sense.
Counter offer
Failure to accept through given mode
Change in law
Already discussed
If the acceptor fails to accept offer through given mode, then offer lapses. But, the offeror has to give notice for the same to acceptor.
An offer comes to an end if the law is changed so as to make the contract contemplated by the offer illegal or in capable of performance.
Q.1. In an executed contract, the obligation of
(a) Both the parties have been fulfilled
(b) Both the parties are outstanding
(c) Obligation of one party is outstanding
(d) None of these [Sep. 2014]
Q.2. The term consideration is defined in______ section of the Indian Contract Act, 1872.
(a) 2(a)
(b) 2(d)
(c) 3(a)
(d) 2(h) [Sep. 2014, March 2015]
Q.3. An agreement & contract are one and same thing:
(a) True
(b) False
(c) Depends on the situation
(d) None of these [Sep. 2014, June 2016]
Q.4. Two persons have the capacity to contract:
(
a) If both are not of unsound mind
(b) If none is disqualified from contracting by any law to which he is subject
(
c) If both have attained the age of maturity
(d) All of the above [Sep. 2014]
Q.5. A contract can be performed by:
(
a) Promisor himself
(
b) Agent of the promisor
(
c) Legal representative of the promisor
(d) Either of these three [Sep. 2014]
Q.6. In a contract not specifying the time for performance, the promisor can perform the contract:
(a) Immediately
(
b) Within the shortest time
(c) Within a reasonable time
(d) Within next 21 days [Sep. 2014]
Q.7. The void agreement is one which is:
(
a) Valid but not enforceable
(b) Enforceable at the option of both the parties
(
c) Enforceable at the option of one party
(d) Not enforceable in a Court of law. [Dec. 2014]
Q.8. When the consent of a party is not free, the contract is:
(a) Void
(b) Voidable
(c) Valid
(d) Illegal [Dec. 2014]
Q.9. Consideration must move at the desire of:
(a) Promisor
(b) Promisee
(c) Any other person
(d) Any of these [Dec. 2014, June 2016]
Q.10. Ordinarily, a minor’s agreement is:
(a) Void ab initio
(b) Voidable
(c) Valid
(d) Unlawful [Dec. 2014]
Q.11. A voidable contract is one which:
(a) Can be enforced at option of aggrieved party
(b) Can be enforced at option of both parties
(c) Cannot be enforced in a Court/ Tribunal of law
(d) Courts prohibit [Dec. 2014]
Q.12. General offer can be accepted by the:
(a) Person to whom it is addressed
(b) General public at large
(c) Anybody fulfilling the conditions attached to the offer
(d) Only senior citizen having PAN number [March 2015, June 2024]
Q.13 The Indian Contract Act, 1872:
(a) Contains the basic principles of contract
(b) Is not a complete code on contract?
(c) Does not cover all types of contract
(d) All of the above [June 2015, Sep. 2015]
Q.14. An agreement created by words spoken or written is called:
(a) Express agreement
(b) Execute agreement
(c) Implied agreement
(d) Voidable agreement [June 2015]
SECTION A : FUNDAMENTALS OF BUSINESS LAWS
Q.15. An offer stands revoked:
(a) If the fact of the death or insanity of offeror is known to offeree
(b) By counter offer
(c) By rejection of offer
(d) All of the above [June 2015]
Q.16. The term ‘proposal’ used in the Indian Contract Act is synonymous with the term.
(
a) Contract
(b) Offer
(c) Agreement
(d) None of these [June 2015]
Q.17. A Counter offer is:
(
a) An invitation to treat
(b) An acceptance of the offer
(c) A rejection of the original offer
(d) A bargain [June 2015, Dec. 2015, March 2016, Dec. 2022]
Q.18. When goods are displayed in a show-window bearing price-tags, it indicates.
(a) Offer to sell goods at prices mentioned on the price tags
(b) An invitation to make an offer
(c) An advertisement
(d) An announcement [June 2015]
Q.19. In Indian Contract Act, the term consensus ad idem means
(a) Parties under a mistake
(b) Parties under the free consent
(c) Parties agreeing upon the same thing in same sense
(d) None of these [June 2015, Dec. 2023]
Q.20. P engages B to kill C and borrows 100 from D to pay B. If D is aware of the purpose of the loan, the transaction is:
(a) Valid
(b) Void
(c) Illegal
(d) Not enforceable [June 2015]
Q.21. A contracts with B to construct a building for a fixed price, B supplying the necessary timber. This reciprocal promises is
(a) Mutual and independent
(b) Mutual and dependent
(c) Mutual and concurrent
(d) None of the above [June 2015]
Q.22. The Indian Contract Law is based on
(a) English Law
(b) Australian Law
(c) American Law
(d) French Law [Sep. 2015, March 2016]
Q.23. Parole contracts are also known:
(a) Simple contract
(b) Format contract
(c) Void contract
(d) Conditional contract [Sep. 2015, June 2016]
Q.24. The Term “Proposal or offer” has been defined in Section:
(a) Section 2(a)
(b) Section 2(b)
(c) Section 2(c)
(d) Section 2(d) [Sep. 2015, Dec. 2015]
Q.25. Express offers and acceptances may be proved by the agreement between the parties but implied offers can be proved only by:
(a) The words
(b) The conduct
(c) Circumstantial expenses
(d) Implied offer [Sep. 2015]
AUTHOR : LEENA LALIT PARAKH
PUBLISHER : TAXMANN
DATE OF PUBLICATION : JANUARY 2025
EDITION : 2ND EDITION
ISBN NO : 9789364552516
NO. OF PAGES : 228
BINDING TYPE : PAPERBACK
This book caters specifically to the requirements of the Foundation Level Cost & Management Accountancy Examination, offering a thorough collection of past exam questions with detailed answers, all aligned with the latest ICMAI syllabus.
The Present Publication is the 2nd Edition for the CMA Foundation | June/Dec. 2025 Exams. This book is authored by CA. Leena Lalit Parakh, with the following noteworthy features:
• [Aligned with the Latest ICMAI Syllabus] Complete adherence to the current curriculum
• [Comprehensive Content]
o Tabular summaries at the start of each chapter
o 800+ MCQs
o Practice questions at the end of every chapter for in-depth preparation.
o Descriptive past exam questions transformed into MCQs, reflecting the latest exam pattern
• [Detailed & Structured Answers] Designed to enhance conceptual clarity and support exam-focused study
• [Point-wise Presentation] Facilitates quick recall and efficient revision
• [Marks Distribution Analysis] Provides module-wise marks analysis from December 2022 onwards
• [Comparison with ICMAI's Study Material] is provided module-wise
