IGNOU| BUSINESS LAW (BCOC - 133)| SOLVED PAPER – (DEC - 2023)| B.COM| ENGLISH MEDIUM
BACHELOR OF COMMERCE (B. COM.)
Term-End Examination
December - 2023
BCOC-133
BUSINESS LAW
Time: 3 Hours
Maximum Marks: 100
Note: Answer any five questions. All questions carry equal marks.
1. (a) “Law of contract is not the whole law of agreements nor it is the whole law of obligations.” Comment. 10
Ans:- The
statement "The law of contracts is not the entire law of agreements nor is
it the entire law of obligations" highlights the difference between the
law of contracts and the broader laws of agreements and obligations. This
difference is important in understanding the scope and application of contract
law.
Law of
contracts vs. Law of agreements:-
(i) Scope of
contracts: The law of contracts deals only with agreements that create
legal obligations. This means that not all agreements are contracts. For
example, an agreement to go on a picnic or have lunch together does not create
a legal obligation and is not enforceable by law.
(ii)
Intention to create legal relations: To be considered a contract, an
agreement must demonstrate the intention of the parties to create a legal
relationship. This intention can be inferred from the terms of the agreement and
the surrounding circumstances. Social or family arrangements usually do not
intend legal consequences, whereas business agreements do.
Law of
contracts vs. Law of obligations:-
(i)
Obligations: Obligations are duties owed by one person to another. These
obligations may arise from a variety of sources, including contracts, torts,
quasi-contracts, judgments, and status obligations. Not all obligations arise
from contracts. For example, the legal obligation not to be a nuisance to
others is enforceable under the law of torts, not under contracts.
(ii) Sources
of obligations: Obligations can be classified into several types:
(a)
Contractual obligations: arise from agreements between parties, which are
enforceable by law.
(b) Tort
obligations: imposed by law, such as an obligation to make compensation for
negligence.
(c)
Quasi-contractual obligations: implied obligations, which often arise from
the conduct of the parties.
(d) Status
obligations: obligations arising from social or familial relationships,
such as between spouses.
Conclusion:-
In summary, the law of contracts is a specific subset of the broader law of
agreements and obligations. It deals with agreements that create legal
obligations, while other types of agreements and obligations are governed by different
legal frameworks. It is necessary to understand this distinction in order to
properly apply contract law and recognize the different sources of obligations.
(b)
Distinguish between the following: 10
(i) Void
agreement and voidable contract
Ans:- Void
agreement and voidable contract are two different legal concepts in the context
of contracts.
Here are the
main differences:-
(A) Void
Agreement:-
(i) Meaning:
A void agreement is one that cannot be enforced by law and has no legal
consequences. It is void ab initio and creates no legal obligations.
(ii) Reason:
Void agreements are generally caused by the absence of one or more essential
elements that are the result of a contract, such as lack of consideration,
coercion or undue influence.
(iii) Reimbursement:
In general, reimbursement is not allowed for void agreements, although the
court may award reimbursement on equitable grounds.
(iv)
Prerequisites: Void agreements do not fulfil the prerequisites of a valid
contract, making them void ab initio.
(B) Voidable
Contract:-
(i) Meaning: Voidable
contract is one that is enforceable by law but can be avoided or repudiated by
one or more parties. It is valid at the time of formation but becomes voidable
due to certain circumstances.
(ii) Reason:
Voidable contracts are usually caused by the presence of coercion, undue
influence, misrepresentation or fraud, due to which the contract may become
voidable at the option of the affected party.
(iii)
Reimbursement: In case of voidable contract, reimbursement is given to the
party who did not freely consent, as they may have suffered loss or damage due
to non-performance of the contract.
(iv)
Prerequisites: Voidable contracts fulfill all the requirements of a valid
contract but become voidable due to the absence of free consent or other legal
issues.
Key
Differences:-
(i)
Enforceability: A void contract is never enforceable, whereas a voidable
contract is initially enforceable but can be avoided by one or more parties.
(ii) Legal
consequences: A void agreement has no legal consequences, whereas a
voidable contract has legal consequences until it is voided.
(iii)
Repudiation: Repudiation is not usually allowed for void agreements, but is
allowed for voidable contracts.
In short,
a void agreement is invalid from the beginning and has no legal consequences,
whereas a voidable contract is initially valid but can be made void due to
certain circumstances. It is important to understand these differences to
navigate legal disputes and ensure that contracts are enforceable and fair to
all parties.
(ii) Void
agreement and illegal agreement
Ans:- Void
agreement and illegal agreement are two different concepts in contract law.
Here are the
key differences:-
(i) Meaning
and Consequences:-
Void
Agreement: An agreement that lacks legal enforceability is a void
agreement. It cannot be enforced by law, and the parties to the agreement do
not acquire any legal rights or obligations. Void agreements are not prohibited
by law and do not have any legal consequences.
Illegal
Agreement: An agreement that is strictly prohibited by law and the parties
to the agreement can be punished for entering into such an agreement. Illegal
agreements are void ab initio, which means they are null and void from the very
beginning. They are considered criminal offences and are punishable under the
Indian Penal Code (IPC).
(ii)
Prohibitions and Penalties:-
Void
Agreement: No void agreement is prohibited by the IPC. The parties to a
void agreement are not subjected to any legal penalties.
Illegal
Contract: Illegal contracts are prohibited by the IPC. Parties to an
illegal contract may be charged with criminal offences and punished.
(iii) Scope
and Related Contracts:-
Void
Contract: The scope of a void contract is wider because not all contracts
that are void are necessarily illegal. Collateral contracts related to a void
contract may or may not be void.
Illegal
Contract: The scope of an illegal contract is narrower. All contracts
related to an illegal contract are void ab initio, i.e. they are null and void
from the beginning.
(iv) Legal
Remedies:-
Void
Contract: Since the contract is considered invalid, there are no applicable
legal remedies. The parties can avoid the contract without facing legal
consequences.
Illegal
Contract: Since it is considered illegal and against the law, legal
remedies are possible. The parties can avoid the contract, but it may also give
rise to legal action and may be illegal.
(v) Example:-
Void Contract:
Contract signed by a minor, as minors are not considered to have the legal
capacity to engage in contracts. Contract for a service that is not illegal but
is not enforceable.
Illegal
contract: Contract for illegal drugs, because engaging in such activities
is prohibited by law. Contract to kill someone, which is criminal in nature.
Conclusion:- In
short, void contract lacks legal enforceability but is not prohibited by law,
while illegal contract is strictly prohibited by law and may result in criminal
penalties. Understanding the difference between these two types of contracts is
important to determine which contract is void and which contract is unlawful.
2. Define the term „offer‟. Discuss the legal rules for a
valid offer. 20
Ans:- An offer is a request to enter into a contract
with specific terms. It is a crucial element in the formation of a contract, as
it begins the process of creating a legally binding agreement between two
parties. The offer must be made with the intention to create a legal
relationship and must be communicated to the offeree. Here are the essential
elements and types of offer:-
Elements of
a valid offer:-
(i) Parties
involved: There must be at least two parties involved, including the
offeror and the offeree accepting it.
(ii)
Communication of offer: The offeree must be aware of the offer proposal.
The offeree must be informed before accepting the offer.
(iii) Do or
not to do: The offeror must tell the offeree whether or not they are
willing to perform the act included in the offer.
(iv) Create
legal relationship: The offer must establish a legal relationship between
the parties. It cannot be a social obligation or an invitation.
(v)
Obtaining consent: The offer must be made with the intention of obtaining the
consent of the other party.
(vi)
Specificity: The terms of the offer must be clear and definite, without any
ambiguity or vagueness.
(vii) No
impermanence in acceptance: The offer cannot negatively state that if the
acceptance is not communicated within a certain time period it will be deemed
to have been accepted.
Types of
Offers:-
(i)
Explicit Offer: An offer made through written or oral words.
(ii)
Implied Offer: An offer which arises from the conduct or situation of the
parties, such as a transport company agreeing to transport goods.
Classification
of Offers:-
(i)
Bilateral Offer: An offer involving two parties who are contractually bound
and equally committed to act in accordance with the terms.
(ii)
Unilateral Offer: An offer made by one party in exchange for the
performance of a specific act.
Legal Rules
for a Valid Offer:-
(i) Must be
explicit or implied: The offer may be made through words or conduct.
(ii) Must
create legal relations: The offer must be made with the intention to create
legal relations.
(iii) Must
be clear and definite: The terms of the offer must be clear and definite,
without any ambiguity or vagueness.
(iv) Must
not be an invitation: An offer cannot be an invitation to deal, which
merely invites the other party to make an offer.
(v) Must
not contain conditions of acceptance: An offer cannot negatively state that
it will be treated as accepted if the acceptance is not communicated within a
certain time period.
Example of
a valid offer:-
(i)
Example: Mr. X offers to sell his car to Mr. Y for Rs. 1,00,000. It is a
valid offer because it is clear, specific, and made with the intention to
create legal relations.
Example of
an invalid offer:-
(i)
Example: Mr. X tells Mr. Y that he will marry him after a year. It is not a
valid offer because it does not state any conditions or create any legal
relations.
Conclusion:-
A valid offer is essential for the formation of a contract. It must be made with
the intention to create legal relations, must be disclosed to the offeree and
must contain clear and definite terms. It is important to understand the
elements and types of offers to ensure that the contract is legally binding and
enforceable.
3. Define consideration under Indian Contract Act with
suitable example. What are the essential features (legal rules) for valid
consideration? Explain in detail. 5, 15
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