RBSE Solutions for Class 12 Business Studies Chapter 10 Contract: Legal Provisions

Rajasthan Board RBSE Class 12 Business Studies Chapter 10 Contract: Legal Provisions

RBSE Class 12 Business Studies Chapter 10 Textbook Exercise

RBSE Class 12 Business Studies Chapter 10 Very Short Answer Type Questions

Question 1.
Give the difference between a contract and quasi-contract.
Answer:
A contract is an agreement between two or more parties which creates a legal obligation between the parties whereas quasi contract presumes the existence of contract, even though no agreement was made between the parties

Question 2.
Define Consideration.
Answer:
Consideration is when both the parties give something and get something in return.

Question 3.
What is Misrepresentation?
Answer:
Misrepresentation is a false statement which the person making it honestly believes to be true or which he does not know to be false.

Question 4.
Define Coercion.
Answer:
Coercion is the 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 whatsoever, with the intention of causing any person to enter into an agreement.

Question 5.
Is Insurance a wager?
Answer:
No, insurance is not a wagering agreement, it is a valid agreement.

Question 6.
What do you understand by Quasi-Contract?
Answer:
Quasi contracts are agreements which are not decided by the parties by interacting with each other. It presumes the existence of contract between the parties by law or that the law created the contracts.

Question 7.
What is the contract of ‘guarantee’?
Answer:
A contract of ‘guarantee’ is a contract to perform, to promise or to discharge the liability of a third person in case of his default.

Question 8.
Who can be appointed as an agent?
Answer:
Anyone can be appointed as an agent, but minors and persons of unsound mind can be dangerous to the principal.

Question 9.
Who is bailee?
Answer:
The person to whom goods are delivered is called the bailee.

Question 10.
Who is pledger or pawnor?
Answer:
The bailment of goods as a security for payment of a debt is pledge, and the bailor is called the pledger or pawnor.

Question 11.
Define void agreements.
Answer:
Any agreement which is not enforceable by law is called a void agreement.

Question 12.
Is threat to commit suicide a coercion?
Answer:
Yes, this is a coercion as this is against the Indian law.

Question 13.
Name the parties to the contract of indemnity.
Answer:
Indemnifier and indemnity holder are the parties to the contract of indemnity.

Question 14.
Is keeping jewellery in bank locker a bailment contract?
Answer:
Yes, it is a bailment contract, as for security purpose jewellery is kept.

Question 15.
Give the differences between an agent and a servant.
Answer:
Agent gets the remuneration in the form of fees or commission, whereas a servant gets the remuneration on the salary basis.

RBSE Class 12 Business Studies Chapter 10 Short Answer Type Questions

Question 1.
State the difference between an offer and intention to make an offer.
Answer:
When one person offers another person his willingness to do or to abstain from doing anything with a view to obtain the assent of other to such act or abstinence, then it is said that first person has offered something to other person, but the conversation of only disclosing the intention to making an offer will never be counted as one party has offered something to other party. Therefore, an invitation to make an offer does not constitute an offer or just saying anything to the other party does not constitute an offer.

Question 2.
What do you mean by capacity to contract?
Answer:
Capacity to contract means competence of the parties to enter into a valid contract. According to Section 11, every such person is competent to contract:

1. Who has attained the age of maturity.
2. Who is of sound mind.
3. Is not disqualified from contracting by any law to which he is subject.

Question 3.
Explain the meaning of fraud, with an example.
Answer:
According to Section 17, fraud means any act committed by a party to a contract, or with his connivance or by his agent with the intent to deceive or to induce a person to enter into a contract.
Example : If any shopkeeper gives the customer a cotton piece of cloth saying that it is terrycot, than it is said that shopkeeper has shown fraud behaviour to the customer.

Question 4.
Write a brief note on contingent contract.
Answer:
A contingent contract is a contract to do or not to do something if some event, collateral to such contract, does or does not happen (Sec. 31). Where, For example : goods are sent on approval, the contract is a contingent one, depending on the acts of the buyer to accept or reject the goods.
Example : Ram contracts to pay ₹ 10,000 if Ramesh’s house is burnt. This is a contingent contract.
Therefore, contingent contracts depend on the happening of an uncertain future event and cannot be enforced till the event has happened. If the event becomes impossible, such contracts become void.

Question 5.
Give the importance of Quasi-Contract.
Answer:

1. These are created by law.
2. An obligation is imposed by a law upon a person for the benefit of another, even in the absence of contract.
3. There is no express contract between the parties.
4. Quasi contracts are also known as law of restitution.

Question 6.
Enlist different types of bailment.
Answer:
Bailment are of two types :

• Gratuitous Bailment :
  In gratutious bailment, no consideration passes between the bailor and the bailee.
  For example : when ‘A’ lends his book to ‘B’.
• Non-gratuitous Bailment :
  In non-gratuitous bailment, some consideration passes between the bailor and the bailee.
  For example : When ‘A’ hires a taxi from ‘B’.

Question 7.
State the essential elements of contract of pledge.
Answer:

1. Contract of pledge is concerned only with moveable property.
2. Delivery is necessary to complete a pledge.
3. The goods to be pledged should be divisible
4. Existing goods can be pledged, for a specific purpose.

Question 8.
What do you understand by agency by necessity?
Answer:
When the law confers an authority on a person to act as an agent for another, without requiring the consent of that other in certain circumstances, such agency is called agency by necessity.

Question 9.
Clarify the statement – “No returns no contract.”
Answer:
For any contract, to have a legal consideration, it should have lawful consideration which means ‘something in return. The agreement is legally enforceable only when supported by consideration, i.e. when both the parties give something and get something in return. Without consideration, a contract becomes void.

Question 10.
In which circumstances does guarantee becomes illegal / invalid?
Answer:

1. When creditor doesn’t reveal all the facts, related to principal debtor.
2. If the guarantee given by surety is not at the request of the principal debtor.
3. If any changes are made in the terms of the contract by the principal creditor without informing the surety.
4. The lunacy of the surety will discharge him of his future liability towards the guarantee given.
5. A guarantee obtained by means of misrepresentation made by the creditor.

RBSE Class 12 Business Studies Chapter 10 Long Answer Type Question

Question 1.
Elucidate the legal provisions related to offer and acceptance.
Answer:
Legal provisions related to offer are as follows :

1. There must be at least two parties for the offer.
2. The proposal may be negative or positive.
3. Proposal can be implied or expressed, specific or general.
4. Proposal should be made to create legal relationship.
5. Offer must be such as in law it is capable of being accepted and it gives rise to legal relationship.
6. Offer must be distinguished from :
   • a declaration of intention,
   • an invitation to make an offer to do business.
7. Offer must be communicated for getting acceptance. Ignorance of the offer is not acceptance and does not confer any right on the acceptor.
8. Offer must be definite, unambiguous, certain, and not loose and vague.

Legal Provisions Related to Acceptance

1. Acceptance must be absolute and unqualified.
2. It must be communicated to the offeror in some perceptible form. It must be according to the mode prescribed or usual or reasonable mode.
3. Acceptance can be given orally or in writing or by conduct.
4. It must be given within the time limit specified if any time limit is given. It no time is stipulated, it must be given within a reasonable time.
5. An acceptance given without any offer made, is not deemed to be acceptance and it holds no importance. It was held in “Lalman Vs. Gauri Dutt” case, that an acceptance of the offer in ignorance of the offer is no acceptance and does not confer any right on the acceptor.
6. Acceptance must be given to the party or parties to whom the offer is made. When an offer is made to a particular person, it can be accepted by him alone. If it is accepted by any other person, there is no valid acceptance.
7. The acceptance of an offer cannot be implied from the silence of offeree or his failure to answer, unless that offeree has, by his previous conduct, indicated that his silence means that he accepts.
8. Acceptance cannot precede an offer. If it does, it is not a valid acceptance and does not result in a contract.
9. Acceptance must show an intention on the part of the acceptor to fulfill the terms of the promise.

Question 2.
What is meant by Free Consent ? Explain its importance for a contract.
Answer:
The consent of the parties is said to be free when they are of the same mind on all the material terms of the contract. The parties are said to be of the same mind when they agree about the subject matter of the contract in the same sense and at the same time.

According to Section 11 :
all the agreements are contracts if they are made by free consent of parties. Consent is said to be free and two or more persons are said to consent when they agree upon the same thing in the same sense (Sec. 13).

According to Section 14, consent is said to be free when it is not caused by :

1. Coercion,
2. undue influence,
3. fraud,
4. misrepresentation,
5. mistake.

Example: Ajay is forced to sell his Maruti car for ₹ 25,000 to Vijay at the point of pistol. In this case, Ajay sells the car but his consent is not free. Under coercion, Vijay got Ajay’s consent.

Importance of Free Consent for Contracts :
For a contract to be valid, the free consent of the parties is most important. If any of the party’s consent is not free, then that agreement is not valid on his part. Importance of free consent can be explained by following:

1. If by fraud or misrepresentation, one party has given the property to other, then the first party has the right to take it back.

Question 3.
Explain the agreements declared void by Indian Contract Act.
Answer:
Any agreement not enforeceable by law is called void agreement. Such agreements do not create any legal obligation between the parties, and are void ab initio. The Contract Act specifically declares certain agreements to be void, which are as follows :

1. Agreements between incompetent parties – minor, lunatic, idiots, persons disqualified by law, etc. (Sec. 11)
2. Agreements made under a mutual mistake of fact. (Sec. 20)
3. Agreements, the consideration or object of which in unlawful in part. (Sec. 24)
4. Agreements, the consideration or object of which is unlawful. (Sec. 23)
5. Agreements, made without consideration. (Sec. 25)
6. Agreements is restaint of marriage. (Sec. 26)
7. Agreements in restraint of trade. (Sec. 27)
8. In restraints of legal proceedings. (Sec. 28)
9. Agreements, the meaning of which is uncertain. (Sec. 29)
10. Agreements by way of wager. (Sec. 30)

Question 4.
Which special rights are available to a minor under Indian Contract Act ?
Answer:
Special rights available to a minor under Indian Contract Act are as follows:
(i) An agreement with or by a minor is void and inoperative. The privy council affirmed this view most emphatically in Mohri Bibi V/s Dharmodas Ghosh (1903) case. If in any agreement, a minor has taken the responsibility on his own or he has gained any property or money, then other party can’t enforce him to complete the responsibility or to pay back the money, whether other party knows about the minority of person or not. In the same way minor can reap the profit of the agreement, but can’t he held responsible for any loss.

(ii) A minor generally can’t enter into contract for taking loans or buying any current or fixed assets for profits, but can take loans to obtain necessities for life. Necessary goods are not restricted to those articles which are required to maintain a bare existence, but also include those articles which are reasonably necessary to the minor having regard to his standard in life. For e.g., food, cloth, travelling expenses, etc. are held to be necessities for a minor.

(iii) He can’t enter into a contract of partnership, but he may be admitted to the benefits of an already existing partnership with the consent of other partners.

(iv) He cannot be adjudged insolvent. This is because he is incapable of contracting debts.

(v) A minor can be an agent. A minor binds the principal by his acts without incurring any personal liability.

(vi) If he has received any benefit under a void agreement, he cannot be asked to compensate or pay for it according to Section 65, which provides for restriction in case of agreements discovered to be void and it does not apply to a minor.

(vii) He can always plead minority. Even if he has, by misrepresenting his age, induced the other party to contract with him, he cannot be sued either in contract or for fraud

Question 5.
What is Bailment ? Mention the duties of Bailor and Bailee.
Answer:
The word ‘bailment’ is derived from the French word ‘Bailer’, which means to deliver. Sec. 148 defines bailment as the delivery of the goods by one person to another, for some purpose upon a contract, that they shall, when the purpose is accomplished, he returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’ and person to whom they are delivered is called the ‘bailee’.

Duties of Bailor :

1. To disclose the known faults about the goods bailed.
2. To bear extraordinary expenses of bailment.
3. To receive back the goods.
4. To indemnify the bailee, if bailee suffers due to defective title of the goods or some other reason.
5. To pay agreed consideration to bailee.

Duties of Bailee :

1. To take reasonable care of the goods bailed.
2. Not to make any unauthorised use of goods.
3. Not to mix the goods with his own goods.
4. To return any accretion to the goods.
5. To return the goods at the expiry of bail.
6. To pay compensation, if goods are not returned on time.

Question 6.
What is meant by agency? Enlist the duties and rights of an Agent.
Answer:
Agency means the relationship between a principal and an agent. The essence of agency is that the principal gives authority to his agent to establish contractual relationship with other third persons. Indian Contract Act has not defined agency, but sections 182-238 deal with agency relationships only.

Rights of an Agent :
Following are the rights of an Agent:

1. Rights to receive remuneration.
2. Right of lien.
3. Right of indemnification against all consequences of all lawful acts done by him in exercise of the authority conferred upon him.
4. Right of compensation for injuries sustained by him by neglect or want of skill on the part of the principal.
5. Right of stoppage of goods in transit, in respect of his payments against the principal.

Duties of an Agent :

1. To carry out the work undertaken according to the directions given by the principal.
2. To carry out the work with reasonable care, skill and diligence.
3. To render account to his principal.
4. Not to make secret profits from the agency.
5. To communicate with principal in case of difficulty.
6. To pay sums received for or on behalf of the principal.
7. To protect and preserve the interests of principal in case of his death or insolvency.
8. To delegate his authority with the consent of his principal by appointing sub-agents.

Question 7.
Explain the essential features of contract of guarantee.
Answer:
Essential features of contract of guarantee :

1. The undertaking to be given by surety under contract of guarantee must be on the request of principal debtor.
2. The primary liability is that of the principal debtor. The liability of surety is secondary. It arises only when there is a default committed by the principal debtor.
3. For a valid contract of guarantee, it is essential that the creditor must reveal all the facts related to the principal debtor, which may effect the liability of surety, clearly.
4. The contract of guarantee may be oral or written, or both.
5. If guarantee given by surety is not at the request of principal debtor, in such a case, the contract is not taken as a valid one.
6. The liability of the surety can neither be more nor less than that of the principal debtor.
7. Liability of the surety remains same when the contract between the creditor and the principal debtor is void or voidable.
8. The lunacy of the surety will discharge him of his future liability towards the guarantee given.
9. After paying/meeting all the liabilities of the principal debtor, the surety acquires all the rights of the principal debtor against the principal debtor.
10. If any changes are made in the terms of the contract by the principal creditor and his principal debtor without informing the surety, in such case, the surety is discharged of his liability.

Question 8.
Explain the legal provisions related to end of contract and breach of contract.
Answer:
Legal Provisions Related with End of Contract :
Discharge of a contract/end of a contract means the termination of the contractual relationship between the parties. A contract is said to be discharged when the rights and obligations created by it come to an end. A contract may be discharged in the following modes :

1. By performance.
2. Discharge by agreement or consent.
3. Discharge by impossibility of performance.
4. Discharge by lapse of time.
5. Discharge by operation of law.
6. Discharge by breach of contract.

Legal Provisions Related with Breach of Contract :
When a contract is broken by one of the party to a contract, the other party can treat the contract as discharged, so that he is absolved of the performance of his part of the promise.

When there is breach of contract, the injured party who is not involved in breach has one or more of the following remedies :

1. Recision of the contract
2. Suit for damages
3. Suit upon quantum meruit
4. Suit for specific performance of the contract
5. Suit for injunction.

Question 9.
What are the legal rules regarding performance of a contract?
Answer:
Performance of a contract takes place when the parties to the contract fulfill their obligations arising under the contract within the time and in the manner prescribed. The parties to a contract must either perform or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of the contract or by any other law. If the party to the contract dies before the performance of the contract, then the other party to the contract can compel that party’s legal heir for its performance, if the performance does not require special skills or ability.

The performance of the contract can be done in two ways :

• Actual performance :
  Where a party to a contract has done what he had under-taken to do.
• Offer to perform or attempted performance or lender of performance :
  It may happen, sometimes, when the performance becomes due, the promisor offers to per-form his obligation, but the promisee refuses to accept the performance.

A contract may be performed by the promisor himself, or by his agent, representative, third person or by joint promisors. A contract need not be performed :

1. When its performance becomes impossible. When the parties to it agree to substitute a new contract for it or rescind it.
2. When the contract is illegal.

Question 10.
What do you mean by Free Consent ? When it is said to be free ? Explain its related legal provisions.
Answer:
Meaning of Free Consent :
Consent is said to be free when two or more persons are said to consent when they agree upon something in the same sense (Sec. 13). According to Sec. 11, all the agreements are considered as contracts if they are made by free consent of parties.

Consent is said to be free when it is not caused by :

1. Coercion as defined in Sec. 15.
2. Undue Influence.
3. Fraud.
4. Misrepresentation.
5. Mistake, subject to the provision of section, 20, 21 & 22.

RBSE Class 12 Business Studies Chapter 10 Additional Questions

RBSE Class 12 Business Studies Chapter 10 Objective Type Questions :

Question 1.
Proposal is also known as :
(a) Offer
(b) Acceptance
(c) Both (a) & (b)
(d) None of these
Answer:
(a) Offer.

Question 2.
Offer must always be:
(a) Negative or positive
(b) Implied or expressed
(c) Specific or general
(d) All of these
Answer:
(d) All of these.

Question 3.
“Lalman Vs. Gauri Dutt” case is related to :
(a) Acceptance
(b) Offer
(c) Both (a) & (b)
(d) None of these
Answer:
(a) Acceptance.

Question 4.
Every person is competent to contract:
(a) Who is at the age of maturity
(b) He is of sound mind
(c) Is not disqualified by law
(d) All of these
Answer:
(d) All of these.

Question 5.
‘Consent’ for a valid contract must be :
(a) Mistake
(b) Free
(c) Both (a) & (b)
(d) All of these
Answer:
(b) Free.

Question 6.
‘Consent’ is said to be free when it is not caused by :
(a) Coercion
(b) Undue Influence
(c) Fraud
(d) All of these
Answer:
(d) All of these.

Question 7.
Threats not amounting to coercion are :
(a) Threat to sue
(b) Statutory compulsions
(c) Threat to strike
(d) All of these
Answer:
(d) All of these.

Question 8.
The consideration or object is unlawful (Sec. 23) makes the agreement :
(a) Legal
(b) Illegal
(c) Both (a) & (b)
(d) None of these
Answer:
(b) Illegal.

Question 9.
Bailments are classified as :
(a) Gratuitous bailment
(b) Non-gratuitious bailment
(c) Both (a) & (b)
(d) None of these
Answer:
(c) Both (a) & (b).

Question 10.
The word ‘bailment’ is derived from _______ word Bailer, which means to deliver :
(a) French
(b) Latin
(c) American
(d) None of these
Answer:
(a) French.

RBSE Class 12 Business Studies Chapter 10 Very Short Answer Type Questions

Question 1.
How many parties are at least required for a valid offer?
Answer:
At least two parties.

Question 2.
Write any two legal provisions related with offer.
Answer:

1. There must be at least two parties for the offer.
2. The proposal/offer may be negative or positive.

Question 3.
Write two examples of invitation to offers.
Answer:

1. Quotations
2. Catalogues.

Question 4.
What do you mean by contractual capacity?
Answer:
Contractual capacity means competence of the parties to enter into a valid contract.

Question 5.
Who are declared to be incompetent to contract?
Answer:

1. Minors.
2. Person of unsound mind.
3. Person disqualified by any law.

Question 6.
Who are competent to enter into a contract?
Answer:

1. Who has attained the age of maturity.
2. Person of sound mind.
3. Is not disqualified by law.

Question 7.
What do you mean by person of unsound mind?
Answer:
“A person is said to be of unsound mind for the purpose of making a contract, if he is incapable of understanding it and of making a rational judgement as to its effect upon his interests.”

Question 8.
Who is known as a person of unsound mind?
Answer:
Lunatics, idiots, drunken or intoxicated persons are known as persons of unsound mind.

Question 9.
Write the examples of the persons disqualified by law.
Answer:

1. Alien enemy
2. Foreign sovereign
3. Convict
4. Corporation & company
5. Insolvent.

Question 10.
When is consent said to be free?
Answer:
Consent is said to be free and two or more persons are said to consent when they agree upon the same thing in the same sense (Sec. 13).

Question 11.
According to Sec. 14, when consent is said to be free?
Answer:
Consent is said to be free when it is not caused by :

1. Coercion
2. Undue influence
3. Fraud
4. Misrepresentation
5. Mistake.

Question 12.
What do you mean by coercion?
Answer:
Coercion is the committing or threatening to commit any act forbidden by the IPC or the unlawful detaining or threatening to detain any property, to the prejudice of any per-son, whatsoever, with the intention of causing any person to enter into an agreement.

Question 13.
What do you mean by fraud?
Answer:
Fraud means an act committed by a party to a contract or with his connivance or by his agent with the intent to deceive or to induce a person to enter into a contract.

Question 14.
Define Mistake.
Answer:
Mistakes may be defined as an erroneous belief about something. It is in fact, an incorrect belief, which leads one party to misunderstand other.

Question 15.
What is an absolute contract?
Answer:
An absolute contract is one in which the promisor binds himself for performance in any event without any condition.

Question 16.
When is the consideration or object unlawful ? Write two conditions.
Answer:

1. If it is forbidden by law.
2. If it is fraudulent.

Question 17.
What is a wagering agreement?
Answer:
Wagering agreement is one, 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.

Question 18.
Write any two legal provisions related with void agreements.
Answer:

1. Agreement by way of wager (Sec. 30).
2. Agreement made without consideration (Sec. 25).

Question 19.
What do you mean by misrepresentation?
Answer:
Misrepresentation is a false statement which the person making it honestly believes to be true or which he floes not know to be false.

Question 20.
What is actual performance?
Answer:
Where a party to a contract has done what he had undertaken to do is known as actual performance.

Question 21.
What is discharge of a contract?
Answer:
Discharge of a contract or end of a contract means the termination of the contractual relationship between the parties.

Question 22.
Write the two ways by which contract can be discharged.
Answer:

1. By performance.
2. Discharge by lapse of time.

Question 23.
What is a contract of guarantee?
Answer:
A contract of guarantee is a contract to perform the promise Or discharge the liability of a third person in case of his default.

Question 24.
What is contract of indemnity?
Answer:
A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself.

Question 25.
Who is indemnifier?
Answer:
The person who promises to make good the loss is called an indemnifier.

Question 26.
Who is indemnity-holder?
Answer:
The person whose loss it to be made good is called the indemnity-holder.

Question 27.
What is Pledge?
Answer:
The bailment of goods as a security for payment of a debt or performance of a promise is called “pledge”.

Question 28.
What is ‘Bailor’ also known as?
Answer:
Pledger or pawnor.

Question 29.
What is a ‘Bailee’ also known as?
Answer:
Pledgee or pawnee.

Question 30.
State any one duty of pawnor.
Answer:
To disclose known faults or facts about the goods pledged.

RBSE Class 12 Business Studies Chapter 10 Short Answer Type Questions (SA – I)

Question 1.
What do you understand by contractual capacity?
Answer:
Contractual capacity means competence of the parties to enter into a valid contract. According to Sec. 11, every person is competent to contract :

1. Who has attained the age of maturity.
2. Who is of sound mind.
3. Who is not disqualified by any law.

Question 2.
According to Sec. 11, who all are incompetent to enter into a contract?
Answer:
According to Sec. 11, the following persons are incompetent to contract :

1. Minors,
2. Persons of unsound mind,
3. Persons disqualified by any law.

Question 3.
What do you understand by agency?
Answer:
Agency is a relationship created through an agreement between a principal and an agent under which the principal gives authority to the agent to represent him before the third parties or to enter into contract with third parties on his behalf.

Question 4.
What do you understand by legal formation of contract?
Answer:
Legal formation means a contract that may be made by words spoken or written. As regards the legal effects, there is no difference between a contract in writing and a contract made by words of mouth. There are some other formalities which have to be com-plied with, in order to make a contract legally enforceable, like a contract besides being written, has to be registered, stamped, properly attested and so on.

Question 5.
When is contract is said to be void?
Answer:
The contract must not have been expressly declared void by any law in force in the country. It is declared void if any of the essential elements are missing, like free consent, lawful consideration, etc.

Question 6.
When is a person said to have made an offer?
Answer:
A person is said to have made a proposal/offer when he signifies to another, his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence. In other words, an offer is a proposal by one party to another to enter into a legally-binding agreement with him.

Question 7.
What do you understand by indemnity contract?
Answer:
A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person is called a contract of indemnity.

Question 8.
Define misrepresentation, according to Section 18.
Answer:

1. When a person positively asserts that a fact is true when his information does not warrant it to be so, though he believes it to be true.
2. When there is a breach of duty by a person which brings an advantage to the person committing it by misleading another to his prejudice.

Question 9.
What are the consequences of misrepresentation?
Answer:
The aggrieved party, in case of misrepresentation by other party can avoid or rescind the contract or accept the contract, but insist that he shall be placed in the position in which he would have been, if the representation made had been true.

Question 10.
Section 25 deals with the exception of one rule. What is it, and which type of easel are those ? Give one example.
Answer:
Section 25 deals with the exception of one rule. The rule is that the agreements are enforceable by law even though they are made without consideration. Such cases are, A written and registered agreement based on natural love and affection between near ones and relatives.

Question 11.
What is legality of objective and consideration?
Answer:
Sec. 23 declares that the ‘object’ or the ‘consideration’ of an agreement needs to be lawful. The word ‘object’ means purpose or design and ‘consideration’ means something in return, as such both object and consideration of an agreement must be lawful, otherwise the agreement is considered to be void.

Question 12.
Give an example of an agreement, the meaning of which is uncertain.
Answer:
Agreements, the meaning of which is not certain or capable of being made certain, are void (Sec. 29).
Example : ‘A’ agrees to pledge ‘B’ all the grain stored in his granary at Ramnagar. There is no certainty about what the quantity or kind or quality they are.

RBSE Class 12 Business Studies Chapter 10 Short Answer Type Questions (SA – II)

Question 1.
Which type of cases are exempted from consideration?
Answer:
The agreements are enforceable even though they are made without consideration, (according to Sec. 25). Such cases are :

1. A promise to pay for a past voluntary service is binding.
2. Promise to pay a time-bound debt.
3. No consideration is necessary to create an agency.
4. When there is contract of donation, or completed gift, no consideration is required.
5. A written and registered agreement based on natural love and affection between near relatives.

Question 2.
Write down the legal rules as to coercion.
Answer:

1. Coercion is committing or threatening to commit any act forbidden by the IPC or the unlawful detaining or threatening any property, with the intention of causing any person to enter into an agreement.
2. Threat to shoot, murder, threat to hurt, rape, theft, attempt to commit suicide, use of force, beating, causing fear of physical harm or loss, etc.
3. The intention behind applying coercion is to induce the other party to enter into a contract.
4. Coercion may move from any person and can be directed towards any person.

Question 3.
Write the legal provisions related to Fraud.
Answer:

1. The suggestion that a fact is true when it is not true and the person making the suggestion does not believe it to be true.
2. The active concealment of a fact by a person having knowledge on belief of the fact.
3. A promise made without any intention of performing it.
4. Any other act meant to deceive.
5. Any such act or omission as the law specially declares to be fraudulent.

Question 4.
What is misrepresentation, according to Sec. 18?
Answer:
Misrepresentation is a false statement which the person making it honestly believes to be true or which he does not know to be false.

According to Sec. 18, misrepresentation is :

1. When a person positively asserts that a fact is true when his information does not warrant it to be so, though he believes it to be true.
2. When there is a breach of duty by a person which brings an advantage to the person committing it by misleading another to his prejudice
3. When a party causes, however, innocently the other party to the agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

Question 5.
What are remedies for the injured party when there is a breach of contract ?
Answer:
When there is breach of contract, the injured party or the party which is not in breach has one or more of the following remedies :

1. Recision of the contract.
2. Suit for damages.
3. Suit upon quantum meruit.
4. Suit for specific performance of the contract.
5. Suit for injunction.

Question 6.
Write any five essential features of a contract of guarantee.
Answer:

1. The undertaking to be given by the surety under contract of guarantee must be on the request of the principal debtor.
2. The primary liability is that of the principal debtor and the liability of the surety is secondary. It arises only when there is a default by the principal debtor.
3. For a valid contract of guarantee, it is essential that the creditors must reveal all the facts related to the principal debtor, which may effect the liability of surety, clearly.
4. The contract of guarantee may be oral or written, or both. The guarantee given in case of hank is usually a written contract.
5. If guarantee given by the surety is not at the request of the principal debtor, in such a case, the contract is not taken as a valid one.

RBSE Class 12 Business Studies Chapter 10 Long Answer Type Questions

Question 1.
What do you mean by consideration ? Write the legal provisions related to consideration.
Answer:
Meaning of Consideration :
Consideration, in general, means ‘something in return. The agreement is legally enforceable only when supported by consideration, i.e. when both the parties give something and get something in return.

According to Pollock :
consideration is the price for which the promise of the other is bought and the promise thus, given for value is enforceable.”
Example: Anita promises Babita to guarantee payment of price of goods, which Babita sells on credit to Celine. Here, selling of goods by Babita to Celine is consideration for Anita’s promise.

Legal rules regarding to consideration :

1. It must move at the desire of the promisor. If it is done at the instance of a third party or without desire of the promisor, it will not be a good consideration.
2. It is not essential that only the promisor must gain or loose from consideration.
3. Consideration may move from the promisee or any other person.
4. Consideration can be in the form of an act or an abstinence or forebearance or it can be a return promise also.
5. It may be present, past or future.
6. Every contract must have some consideration. It should be adequate or necessarily be equal in value with something given. Consideration must however be something to which the law attaches value.
7. It must be real, competent and not illusory.
8. Consideration must be legal/lawful, and not illegal, immoral. Consideration opposed to public policy also makes a contract void.
9. It must be something which the promisor is not already bound to do.
10. The general rule is that an agreement made without consideration is void. Sec. 25 deals with the exception to this rule. In such cases, with the exception to this rule. In such cases, the agreements are enforceable even through they are made without consideration. Such cases are :
    • A promise to pay for a past voluntary service is binding.
    • Promise to pay a time-bound debt.
    • No consideration is necessary to create an agency.
    • When there is contract of donation, or completed gift, no consideration is required.

Question 2.
What do you understand by bailment ? Explain the important features of bailment.
Answer:
Meaning of Bailment :
The word ‘bailment’ is derived from the French word ‘bailer’ which means to deliver. Sec. 148 defines bailment as the delivery of the goods by one person to another for some purpose upon a contract, that they shall, when the purpose is accomplished, be returned or otherwise disposed of, according to the direction of the person delivering them. The person delivering the goods is called the ‘bailor’ and the person to whom they are delivered is called the ‘bailee’.

Important Features of Bailment :

1. The bailment is considered only with moveable goods.
2. In contract of bailment, it is only possession of the goods which passes from the bailor to the bailee and not ownership.
3. Bailment is done for some purpose.
4. It is agreed between the bailor and the bailee that as soon as the purpose is achieved, the goods shall be returned or disposed off according to the direction’s of the bailor.
5. Money deposited in a bank account is not the contract of bailment, as bank does not provide guarantee to pay the amount in the same coins / notes, but if a person keeps valuables, bonds, etc. it is a bailment contract.
6. If inspite of the bailee’s reasonable care, goods are damaged or destroyed in any way, the bailee is not liable for the loss.
7. Bailments are of two types :
   • Gratuitous bailment, where no consideration passes between the bailor or the bailee.
   • Non-gratuitous bailment, where some consideration passes between the bailor and the bailee.
8. Duties of Bailee :
   • To take reasonable care of the goods bailed,
   • Not to make any unauthorised use of goods,
   • Not to mix the goods bailed with his own goods,
   • Not to set up adverse titles,
   • To return any accretion to the goods.
9. Duties of Bailor :
   • To disclose the known faults about the goods bailed
   • To bear extraordinary expenses of bailment
   • To receive back the goods
   • To indemnify the bailee, if the bailee suffers due to defective title of the goods or some other reason
   • To pay agreed consideration to the bailee.

RBSE Solutions for Class 12 Business Studies