Rajasthan Board RBSE Class 12 Business Studies Chapter 9 Business Law and Contract Act
RBSE Class 12 Business Studies Chapter 9 Textbook Exercise
RBSE Class 12 Business Studies Chapter 9 Very Short Answer Type Questions
Question 1.
Is Indian Contract Act a part of commercial law?
Answer:
Yes, Indian Contract Act is a part of commercial law.
Question 2.
Give the meaning of Contract.
Answer:
Those agreements which are enforceable by law are called contracts.
Question 3.
List any four characteristics of contract.
Answer:
- Presence of two or more parties.
- Agreement between the parties.
- Capacity to come in contract of both the parties.
- Individual acceptance of the parties.
Question 4.
What are void contracts?
Answer:
A void contract is that which can’t be performed / completed at all. A contract when originally entered into may be valid, but it may subsequently become void because of sudden and unexpected events.
Question 5.
Are all agreements contracts?
Answer:
No, all agreements are not contracts.
Question 6.
What is a valid contract?
Answer:
The contract which creates legal obligation between the parties is a valid contract or an agreement which is enforceable by law is a valid contract.
Question 7.
What are non-enforceable contracts?
Answer:
These are the contracts which can’t be enforced in a court of law because of some technical defect.
Question 8.
When does an offer become a contract?
Answer:
The offer when accepted becomes an agreement and an agreement which is enforceable by law becomes a contract.
Question 9.
What is mean by quantum meruit?
Answer:
It means that in case of the breach of contract, the other party will pay for what has been done so far.
Question 10.
Give the difference between voidable and illegal contracts.
Answer:
| Voidable Contract | Illegal Contract |
| An agreement which is enforceable by law at the option of one or more parties thereto, but not at the option of the other or others. | An agreement prohibited or forbidden by law is an illegal contract. |
RBSE Class 12 Business Studies Chapter 9 Short Answer Type Questions
Question 1.
Is Indian Contract Act adequate for Indian situations?
Answer:
Indian Contract Act is formed keeping in mind Indian environment, customs, business practices and other special situations. But where Indian Contract Act has uncertain circumstances there Indian judicial court take the help from English common law.
Question 2.
Give the scope of Indian Contract Act.
Answer:
- Principles of Contract and Quasi Contract, [Sections 1 to 75].
- Sale of Goods Act repeated [Sections 76 to 123].
- Contracts of Indemnity and Guarantee related problems [Sections 124 to 147].
- Provisions related to contract of bailment & pledge [Section 148 to 181].
- Provisions related to agency contract [Section 182 to 238].
Question 3.
A contract is an agreement enforceable by law. Why?
Answer:
When any offer is given to the person and he accepts it without any pressure, then that offer becomes an agreement between two parties. Thus, agreement includes the offer and acceptance of two parties for a mutual objective. When that agreement is legally bound or has a legal obligation, it becomes a contract. If it doesn’t have a legal obligation, it will never become a contract. It will be said to be an agreement only.
For example : A husband offers his wife a weekend movie plan, his wife accepts it, but due to some official work, husband is unable to execute it, or wife refuses it or they mutually cancel the program, but in this type of agreement, both of them can’t take any legal action as it is only a social agreement between a couple, which doesn’t have any legal obligation.
Question 4.
When does an agreement become a contract?
Answer:
According to Section 10 of Indian Contract Act, 1872, an agreement, in order to become a contract, must give rise to a legal obligation which means a legal tie which imposes upon a definite person or persons the necessity of doing or abstaining from doing a definite act or acts. An agreement must give rise to a legal obligation in order to become a contract.
Question 5.
Is an agreement always legal?
Answer:
When an agreement between two parties has a legal objective, then that agreement is said to be legal, but in case the agreement between the parties doesn’t have a legal objective, or any essential elements are missing, like free consent, etc. or in any way it harms the national property or national interest, then such agreement can never be termed as a legal agreement.
RBSE Class 12 Business Studies Chapter 9 Long Answer Type Questions
Question 1.
What do you mean by Contract ? Explain briefly the essential elements of a valid contract.
Ans.
Meaning of Contract :
A contract is a voluntary, deliberate, legally-binding agreement between two or more competent parties, which defines the legal obligation and authorities of parties.
According to Pollack :
“Every agreement and promise enforceable by law is a contract”.
According to Sir William Anson :
“A legally binding agreement between two or more persons is one by which rights are acquired by one or more to act or forbearance on the part of others”.
Elements of a Valid Contract :
- Presence of Two or More Parties :
The first essential element of a valid contract is presence of at least two parties to make a contract, one party making the offer and the other party accepting it (offerer and offeree). - Agreement :
To form a contract, there must be an agreement between two parties. To form an agreement, there must be a proposal offer by one party and its acceptance by the other. - Intention to create legal relationship :
When the two parties enter into an agreement, their intention must be to create legal relationship between them. If there is no such intention on the part of the parties, there is no contract between them. For a valid contract, both the parties to a contract must bear in their mind that they will have some legal rights against each other and if any of them does not fulfill their obligation arising under the contract, then the court will make them fulfill their obligation. - Contractual capacity :
According to Section 10, an agreement becomes a contract if entered into between the parties who are competent to contract. According to Section 11, every person is competent to contract, who is not minor, not of unsound mind and not disqualified by any law which he is subject to. - Free and genuine consent :
It is essential for the creation of every contract that there must be a free and genuine consent of the parties to the agreement. 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. This is absent if the agreement is induced by coercion, undue influence, etc. - Lawful consideration :
It 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. - Lawful object :
The object of the agreement must be lawful. In other words, it must not be illegal, immoral, or opposed to public policies. If an agreement suffers from any legal law, it would not be enforceable by law. - Certainty :
Certainty is an essential element of a contract. The agreement must be certain and not vague or indefinite. If it is vague, it is not possible to ascertain its meaning. - Possibility of performance :
The terms of agreement must also be such as are capable of performance. An agreement to perform an act impossible in itself cannot be enforced. - Agreement declared void :
The agreement must not have been expressly declared void by any law enforced in the country. - Legal formation :
A contract may be made by words, spoken or written. As regards legal effects, there is no difference between a contract in writing and a contract made by words of mouth.
Question 2.
What are the sources of Indian Contract Act?
Answer:
The following are the main sources of Indian Contract Law :
(i) English common law :
Indian Mercantile law owes its origin to the English Mercantile law. The sources of English mercantile law are common law, equity law, merchant and statute law. The common law of England or the judge-made law (is the unwritten law of England that consists of Judicial decisions and customs), is the preliminary source of Indian Law.
(ii) Acts enacted by Indian Legislature :
The greater part of Indian Business / Mercantile law is legislature-enacted Acts enforced by the Indian Parliament, and these are source of law, which makes it possible to bring uniformity in Indian laws. Changes according to the demand of circumstance can be brought in Indian law effectively by legislative amendments.
(iii) Judicial decisions or Judicial precedent :
Keeping in view the present situation, the verdicts / decisions made by Supreme Court on new issues and emerging debates on them are used as examples by lower courts while taking decisions.
(iv) Customs and Trade usages :
Customs and trades become binding when certain prerequisites are fulfilled. Then the custom is recognised by courts and it becomes legal obligation. In fact, the codified law of India has given superseding powers to the customs and usages.
(v) Justice, equity and good conscience :
In absence of any rule of a statutory law or custom or personal law on a particular point arising before the courts, the courts apply the doctrine “Justice, equity and good conscience”, which means that in its substance and in circumstances, the rule of English law is applicable to Indian society and circumstances.
Question 3.
Explain briefly the following terms: offer, agreement, cross-offer, executory contract, pledge, lien, bailment, and quantum meruit.
Answer:
- Offer :
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 simple words – an offer is a proposal by one party to another to enter into a legally-binding agreement with it. - Agreement :
A proposal or offer when accepted becomes an agreement. An agreement, is an accepted proposal:
Agreement = Offer + Acceptance. - Cross-offer :
When two parties exchange identical offers in ignorance at the time-of each other’s offer. - Executory contract :
A contract in which both the parties have to still fulfill their respective promises. - Pledge :
The bailment of goods as security for payment of a debt or performance of a promise is called pledge - Lien :
Right of one person to retain possession of some goods belonging to another until some debt or claim of the person in possession is satisfied. - Bailment :
It is the delivery of 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 person delivering them. - Injunction :
When the court, by issuing an order, restrains the party in breach of a negative term of a contract from doing what he promised not to do, such order is called as injunction. - Quantum Meruit :
A right to sue on a quantum meruit arises where a contract, partly performed by one party, has became discharged by the breach of the contract by the other party, i.e. right is founded on an implied promise by the other party to pay for what has been done.
RBSE Class 12 Business Studies Chapter 9 Additional Questions
RBSE Class 12 Business Studies Chapter 9 Objective Type Questions
Question 1.
Business law includes the following :
(a) Indian Contract Act, 1872
(b) The Sale of Goods Act, 1930
(c) Carriage of Goods Law
(d) All of these
Answer:
(d) All of these.
Question 2.
When did Indian Contract Act come into existence?
(a) 1st September, 1872
(b) 14 September 1874
(c) Both (a) & (b)
(d) None of these
Answer:
(a) 1st September, 1872.
Question 3.
“Every agreement and promise enforceable by law is a contract.” Who said this ?
(a) Pollack
(b) Balmond
(c) William Anson
(d) All of these
Answer:
(a) Pollack.
Question 4.
Contract consists of two essential elements. These are :
(a) An agreement
(b) Enforceability by law
(c) Both (a) & (b)
(d) None of these
Answer:
(c) Both (a) & (b).
Question 5.
When Indian Contract Act was formed, it included_________ number of Sections :
(a)266
(b)238
(c) 242
(d) 298
Answer:
(a) 266.
Question 6.
Now, at present, Indian Contract Act has the following number of sections :
(a)266
(b)238
(c) 242
(d) 298
Answer:
(a) 238 Sections.
Question 7.
Section 2 (h) defines a contract as :
(a) An agreement enforceable by law
(b) Contract as offer and acceptance
(c) Both (a) & (b)
(d) None of these
Answer:
(a) An agreement enforceable by law.
Question 8.
An offer when accepted becomes an________
(a) Contract
(b) Agreement.
(c) Acceptance
(d) All of these
Answer:
(b) Agreement.
Question 9.
Essential elements of a valid contract are :
(a) Presence of two or more parties
(b) Agreement
(c) Contractual capacity
(d) All of these
Answer:
(d) All of these.
Question 10.
Those agreements which create legal obligations, i.e. enforceable by law are :
(a) Contract
(b) Agreement
(c) Both (a) & (b)
(d) None of these
Answer:
(a) Contract.
Question 11.
An agreement without any legal effect and which cannot be enforced in a court of law. This is known as :
(a) Void Agreement
(b) Contract
(c) Agreement
(d) All of these
Answer:
(a) Void Agreement.
Question 12.
Offer accepted on the terms and conditions other than set out by the offerer. This is called:
(a) Cross offer
(b) Counter offer
(c) Both (a) & (b)
(d) All of these
Answer:
(b) Counter offer.
RBSE Class 12 Business Studies Chapter 9 Very Short Answer Types Questions
Question 1.
What do you mean by Law?
Answer:
Law is a system or set of rules, by rules, regulations, principles, etc. prescribed or formed by local, or state, or national government.
Question 2.
What do you mean by Business Law?
Answer:
It is that branch of law which consists of laws relating to trade, industry and commerce.
Question 3.
Business Law is also known as?
Answer:
Commercial Law or Mercantile law.
Question 4.
Mention any four types of Business Law.
Answer:
- The Sale of Goods Act, 1930.
- Indian Contract Act, 1872.
- The Indian Partnership Act, 1932.
- The Companies Act, 2013.
Question 5.
“Mercantile law means that branch of law which is applicable to or concerned with trade and commerce in connection with various mercantile, or business transactions.” Who said this?
Answer:
S. R. Davar.
Question 6.
Mention the two essential elements of a contract.
Answer:
- An agreement.
- Enforceability by law.
Question 7.
Define ‘contract’ According to Section 2(h).
Answer:
A contract is an agreement enforceable by law.
Question 8.
Define contract in the words of Pollack.
Answer:
“Every agreement and promise enforceable by law is a contract.”
Question 9.
What do you mean by Bilateral Contract?
Answer:
A contract in which both the parties commit to perform their respective promises.
Question 10.
What do you mean by Executed Contract?
Answer:
A contract in which both the parties have fulfilled their obligations under the contract.
Question 11.
When is an agreement declared void?
Answer:
An agreement is declared void if any of the essential elements are missing, like free consent, lawful consideration, etc.
Question 12.
Who are the competent persons to enter into a contract?
Answer:
- One who is not a minor.
- Not of unsound mind.
- One who is not disqualified by any law which he is subject to.
Question 13.
What do you mean by lawful consideration?
Answer:
It 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.
Question 14.
What do you mean by lawful object?
Answer:
The object must be lawful, it must not be illegal, immoral or opposed to public policy.
Question 15.
What do you mean by void agreement?
Answer:
It is an agreement without any legal effect and cannot be enforced in a court of law.
Question 16.
What do you mean by free consent?
Answer:
Consent is said to be free when it is not caused by misleading misrepresentation, fraud, coercion, etc.
Question 17.
What do you mean by Agent?
Answer:
An agent is a person who is employed to do any act for another (principal) or to represent another in dealing with third persons.
Question 18.
What do you mean by possibility of performance?
Answer:
It means that the terms of agreement should be such that parties are capable of performing them. An agreement to do an act impossible in itself cannot be enforced.
Question 19.
What do you mean by obligation?
Answer:
Obligation means a legal tie, which imposes upon a definite person or persons, the necessity of doing or abstaining from doing a definite act or acts.
Question 20.
When was Information Technology Act enforced?
Answer:
In 2000.
Question 21.
When was the Companies Act reformed?
Answer:
In 2013.
Question 22.
To what does the Indian Mercantile Law owe its origin?
Answer:
English Common Law.
Question 23.
When was the Indian Partnership Act enacted?
Answer:
In 1932.
Question 24.
What are Sections 1 to 75 in Indian Contract Act related to?
Answer:
Basic Principles of Contract and Quasi Contract.
Question 25.
Agreement + Enforceability by Law =________?
Answer:
Contract.
RBSE Class 12 Business Studies Chapter 9 Short Answer Types Questions (SA – I)
Question 1.
Why is a certain system of law required in a country?
Answer:
To maintain an environment of peace and harmony, law and order, for economic, social, political, educational, religious, technical development of a nation, its government, society and other classes perform several activities through customs, traditions, law, by-laws, so that there can prevail complete peace and order and effective administration and the resources can be creatively utilized for nation’s maximum benefits. To make all these efforts systematic, effective and regulated, we need certain system of laws.
Question 2.
What do you understand by law?
Answer:
Law is a system or set of rules, by-rules, regulations, principles, etc. prescribed or formed by local government, state or nation to regulate and control human behaviour in social, economic and political areas. According to an author, law is a system of rules and principles accepted and used by the state to maintain law and order in the state.
Question 3.
What do you understand by business law?
Answer:
Business Law is the body of law that applies to the rights, relations and conduct of persons and businesses engaged in commerce, merchandising, trade and sales.
According to S. R. Davar :
“Mercantile law means that branch of law which is applicable to or concerned with trade and commerce in connection with various mercantile or business transactions”.
Question 4.
Mention the objectives of business law?
Answer:
- To control all the business/commercial activities.
- To provide guidelines for the conduct of business in the country.
- For smooth functioning of the companies in diverse situations.
- Effective administration and the resources can be creatively utilised for nation maximum benefit.
Question 5.
Write a note on English Common Law.
Answer:
Indian mercantile law owes its origin to the English mercantile law. The sources of English mercantile law are common law, equity law, merchant and statute law. The common law of England or the judge-made law (the unwritten law of England that consists of judicial decisions and customs) is the preliminary source of Indian law.
Question 6.
What do you understand by contract ? Comment.
Answer:
The word contract comes from the Latin word ‘Contractum’, which means to draw together, combine, make an agreement. Therefore, a contract is a voluntary, deliberate, legally-binding agreement between two or more competent parties, which defines the legal obligation and authorities of parties.
Question 7.
How is contract defined as per section 10 of Indian Contract Act, 1872?
Answer:
According to sec. 10 of Indian Contract Act, 1872, the juristic concept of contract consists of a proper offer and its acceptance. An agreement is every promise and every set of promises, forming consideration for each other (Section 2C). An agreement in order to become a contract, must give rise to a legal obligation which means a legal tie which imposes upon a definite person the necessity of doing or abstaining from doing a definite act or acts.
Question 8.
Write any 5 essential elements of valid contract.
Answer:
- Presence of two or more parties,
- Agreement,
- Intention to create legal relationship,
- Contractual capacity,
- Free and genuine capacity.
Question 9.
Explain ‘offer’ with a suitable example.
Answer:
A person is said to have made an 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 it.
Example : X offers Y his car for ₹ 1,50,000. Now, it is upto Y whether he accepts his offer or wants to make any changes in that.
Question 10.
What do you mean by coercion ? Explain along with an example.
Answer:
When a person is compelled to enter into a contract by the use of force with the other party or under threat or to do any act forbidden by the Indian Penal Code, coercion is said to be employed.
Example : If one person compels other person by physical violence to sign an agreement of ₹ 50,000, it is said that coercion is employed by person against other to sign an agreement.
Question 11.
What do you understand by undue influence?
Answer:
A contract is said to be induced by undue influence where the relationship subsisting between the parties is such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage upon the other.
Question 12.
What do you understand by Quasi contract?
Answer:
Quasi contracts are those contracts which are created neither by words spoken, nor written, nor by the conduct of parties, but these are created by law and legal obligation is imposed on the party who is required to perform it.
RBSE Class 12 Business Studies Chapter 9 Short Answer Type Questions (SA – II)
Question 1.
Write the the scope of business law.
Answer:
- Indian Contract Law, 1872.
- The Sale of Goods Act, 1930.
- The Indian Partnership Act, 1932.
- The Negotiable Instrument Act, 1882,
- The Arbitration Act, 1940.
- The Companies Act, 2013.
- The Banking Regulation Act, 1949.
- The Consumer Protection Act, 1986.
- The Essential Commodies Act, 1955.
- The Industrial Law.
- The Labour Act.
- The Insurance Act, 2015.
- Foreign Exchange Management Act, 1999.
- The Securities Exchange Board of India Act, 1992.
- Patent, Trademarks and Copyright Act.
- Information Technology Act, 2000.
- Carriage of Goods Law.
Question 2.
Explain the sources of Indian Business Law, English Common Law and judicial decisions.
Answer:
- English common law :
It is the preliminary source of Indian law. Indian mercantile law owes its origin to the English mercantile law. The sources of English mercantile law are common law, equity law, merchant and statute law. The common law of England or the judge-made law It is the unwritten law of England that consists of judicial decisions and customs. - Judicial decisions :
Keeping in view the present situation the verdicts/decisions made by the Supreme Court on new issues and emerging debates on them are used as examples by lower courts while taking decisions.
Question 3.
Explain the concept of contract.
Answer:
Contract is a voluntary, deliberate, legally-binding agreement between two or more competent parties which defines the legal obligation and authorities of parties.
According to Pollack :
“Every agreement and promise enforceable by law is a contract.”
According to Sir William Anson :
“A legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearance on the part of other.”
According to sec. 2 (h), a contract has these two essential elements :
- An agreement,
- Enforceability by law.
Question 4.
Write the elements of a valid contract.
Or
Write the essentials of a valid contract.
Or
Write the requisities for the contract to be valid.
Answer:
- The first essential element is the presence of two or more parties to enter into an agreement/contract.
- To form a contract, there must be an agreement between two parties.
- When the two parties enter into an agreement, their intention must be to create a legal relationship between them.
- An agreement becomes a contract if it is entered into between the parties who are competent to contract.
- It is essential for the creation of every contract that there must be a free and genuine consent of the parties.
- There should be a lawful consideration, which means ‘something in return for both the parties.
- The object of the agreement must be lawful.
- There should be certainty in a contract.
- Possibility of performance.
- Agreement shouldn’t be void.
- Legal formation should be there.
RBSE Class 12 Business Studies Chapter 9 Long Answer Type Questions
Question 1.
What is contract ? Explain the difference between a contract and an agreement.
Answer:
The word ‘contract’ has its origin from the Latin word ‘Contractum’, which means to draw together, combine, make an agreement. Contract is a voluntary, deliberate, legally-binding agreement between two or more competent parties, which defines the legal obligation and authorities of parties.
According to Sir William Anson ;
“A legally binding agreement between two or more persons by which rights are acquired by one or more to act or forbearance on the part of others.”
Section 2(h) defines a contract as an agreement enforceable by law. Contract consists of two essential elements :
- An agreement,
- Enforceability by law.
According to section 10 of Indian Contract Act, 1872, the juristic concept of contracts consists of proper offer and acceptance.
Difference between Contract and Agreement
| Basis of Difference | Contract | Agreement |
| Meaning | Contract is an agreement between two parties, that has a legal obligation and which is enforceable by law. | All the promises/offers when accepted by the other person become an agreement. |
| Nature | Only a legal agreement is known as contract. | Agreements can be legal or illegal. |
| Basis | Agreement is the basis for every contract. | Contact is not the basis of agreement. Offer and acceptance are the basis of agreement. |
| Essential elements | To be a valid contract, it should include an agreement, contractual presence of two parties, contract capacity, free consent of the parties, etc. | For an agreement, only offer made by one and its acceptance by the other is required. |