CA FOUNDATION

LAW & BCR PYQs of

CA Foundation
up to December 2023

CA CS CMA NIRAJ AGARWAL

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TABLE OF CONTENTS
TOPIC PAGE
MAY 2018 1
NOVEMBER 2018 23
MAY 2019 49
NOVEMBER 2019 71
NOVEMBER 2020 96
JANUARY 2021 122
DECEMBER 2021 167
JULY 2021 146
MAY 2022 196
NOVEMBER 2022 222
JUNE 2023 247

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAW

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) X, Y and Z are partners in a firm. They jointly promised to pay ` 3,00,000 to D. Y become
insolvent and his private assets are sufficient to pay 1/5 of his share of debts. X is
compelled to pay the whole amount to D. Examining the provisions of the Indian Contract
Act, 1872, decide the extent to which X can recover the amount from Z.
(4 Marks)
(b) Ravi Private Limited has borrowed ` 5 crores from Mudra Finance Ltd. This debt is ultra
vires to the company. Examine, whether the company is liable to pay this debt? State the
remedy if any available to Mudra Finance Ltd.? (4 Marks)
(c) What is meant by delivery of goods under the Sale of Goods Act, 1930? State various
modes of delivery. (4 Marks)
Answer
(a) As per section 43 of the Indian Contract Act, 1872, when two or more persons make a
joint promise, the promisee may, in the absence of express agreement to the contrary,
compel any one or more of such joint promisors to perform the whole of the promise.
Each of two or more joint promisors may compel every other joint promisor to contribute
equally with himself to the performance of the promise, unless a contrary intention
appears from the contract.
If any one of two or more joint promisors makes default in such contribution, the
remaining joint promisors must bear the loss arising from such default in equal shares.
In the instant case, X, Y and Z jointly promised to pay ` 3,00,000. Y become insolvent
and his private assets are sufficient to pay 1/5 of his share of debts. X is compelled to
pay the whole amount. X is entitled to receive ` 20,000 from Y’s estate, and ` 1,40,000
from Z.
(b) As per the facts given, Ravi Private Limited borrowed ` 5 crore from Mudra Finance Ltd.
This debt is ultra vires to the company, which signifies that Ravi Private Limited has
borrowed the amount beyond the expressed limit prescribed in its memorandum. This act
of the company can be said to be null and void.
In consequence, any act done or a contract made by the company which travels beyond
the powers not only of the directors but also of the company is wholly void and
inoperative in law and is therefore not binding on the company.

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2 FOUNDATION EXAMINATION: MAY, 2018

So is being the act void in nature, there being no existence of the contract between the
Ravi Private Ltd. and Mudra Finance Ltd. Therefore, the company Ravi Private Ltd. is
liable to pay this debt amount upto the limit prescribed in the memorandum.
Remedy available to the Mudra Finance Ltd.: The impact of the doctrine of ultra vires
is that a company can neither be sued on an ultra vires transaction, nor can it sue on it.
Since the memorandum is a “public document”, it is open to public inspection. Therefore,
a company which deals with the other, is deemed to know about the powers of the
company.
So, Mudra Finance Ltd. can claim for the amount within the expressed limit prescribed in
its memorandum.
(c) Delivery of goods [section 2(2) of the Sale of Goods Act, 1930]: Delivery means
voluntary transfer of possession from one person to another. As a general rule, delivery
of goods may be made by doing anything, which has the effect of putting the goods in the
possession of the buyer, or any person authorized to hold them on his behalf.
Modes of delivery: Following are the modes of delivery for transfer of possession:
(i) Actual delivery: When the goods are physically delivered to the buyer.
(ii) Constructive delivery: When it is effected without any change in the custody or
actual possession of the thing as in the case of delivery by attornment
(acknowledgement) e.g., where a warehouseman holding the goods of A agrees to
hold them on behalf of B, at A’s request.
(iii) Symbolic delivery: When there is a delivery of a thing in token of a transfer of
something else, i.e., delivery of goods in the course of transit may be made by
handing over documents of title to goods, like bill of lading or railway receipt or
delivery orders or the key of a warehouse containing the goods is handed over to
buyer.
Question 2
(a) State the exceptions to the rule "An agreement without consideration is void". (5 Marks)
(b) What are the essential elements to form a LLP in India as per the LLP Act, 2008?
(5 Marks)
(c) (i) Distinguish between wagering agreement and contract of insurance. (2 Marks)
OR
(ii) Examine with reason that the given statement is correct or incorrect "Minor is liable
to pay for the necessaries supplied to him". (2 Marks)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

Answer
(a) The general rule is that an agreement made without consideration is void (Section 25 of
the Indian Contract Act, 1872). However, the Indian Contract Act contains certain
exceptions to this rule. In the following cases, the agreement though made even without
consideration, will be valid and enforceable.
1. Natural Love and Affection: Any written and registered agreement made on
account of love and affection between the parties standing in near relationship to
each other.
2. Compensation for past voluntary services: A promise to compensate, wholly or
in part, a person who has already voluntarily done something for the promisor.
3. Promise to pay time barred debt: A promise in writing signed by the person
making it or by his authorized agent, made to pay a debt barred by limitation.
4. Agency: According to Section 185 of the Indian Contract Act, 1872, no
consideration is necessary to create an agency.
5. Completed gift: In case of completed gifts, the rule no consideration no contract
does not apply. Explanation (1) to Section 25 states “nothing in this section shall
affect the validity as between the donor and donee, of any gift actually made.” Thus,
gifts do not require any consideration.
6. Bailment: No consideration is required to effect the contract of bailment (Section
148).
7. Charity: If a promisee undertakes the liability on the promise of the person to
contribute to charity, there the contract shall be valid .
(b) Essential elements to incorporate LLP- Under the LLP Act, 2008, the following
elements are very essential to form a LLP in India:
(i) To complete and submit incorporation document in the form prescribed with the
Registrar electronically;
(ii) To have at least two partners for incorporation of LLP [Individual or body corporate];
(iii) To have registered office in India to which all communications will be made and
received;
(iv) To appoint minimum two individuals as designated partners who will be responsible
for number of duties including doing of all acts, matters and things as are required
to be done by the LLP. Atleast one of them should be resident in India.
(v) A person or nominee of body corporate intending to be appointed as designated
partner of LLP should hold a Designated Partner Identification Number (DPIN)
allotted by MCA.

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4 FOUNDATION EXAMINATION: MAY, 2018

(vi) To execute a partnership agreement between the partners inter se or between the
LLP and its partners. In the absence of any agreement the provisions as set out in
First Schedule of LLP Act, 2008 will be applied.
(vii) LLP Name.
(c) (i) Distinction between Wagering Agreement and Contract of Insurance
Basis Wagering Agreement Contracts of Insurance
1. Meaning It is a promise to pay It is a contract to
money or money’s worth indemnify the loss.
on the happening or non
happening of an uncertain
event.
2. Consideration There is no consideration The crux of insurance
between the two parties. contract is the mutual
There is just gambling for consideration (premium
money. and compensation
amount).
3. Insurable Interest There is no property in Insured party has
case of wagering insurable interest in the
agreement. life or property sought to
There is betting on other’s be insured.
life and properties.
4. Contract of Loser has to pay the fixed Except life insurance, the
Indemnity amount on the happening contract of insurance
of uncertain event. indemnifies the insured
person against loss
5. Enforceability It is void and It is valid and enforceable
unenforceable agreement.
6. Premium No such logical Calculation of premium is
calculations are required based on scientific and
in case of wagering actuarial calculation of
agreement. risks.
7. Public Welfare They have been regarded They are beneficial to the
as against the public society.
welfare.
OR
(ii) Minor is liable to pay for the necessaries supplied to him: This statement is
incorrect. The case of necessaries supplied to a minor or to any other person whom

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5

such minor is legally bound to support is governed by section 68 of the Indian

Contract Act, 1872. A claim for necessaries supplied to a minor is enforceable by
law, only against minor’s estate, if he possesses. But a minor is not liable for any
price that he may promise and never for more than the value of the necessaries.
There is no personal liability of the minor, but only his property is liable.
Question 3
(a) Distinguish between dissolution of firm and dissolution of partnership. (2 Marks)
(b) What are the consequences of Non-Registration of a Partnership Firm? Discuss.
(4 Marks)
(c) M Ltd., contract with Shanti Traders to make and deliver certain machinery to them by
30.6.2017 for ` 11.50 lakhs. Due to labour strike, M Ltd. could not manufacture and
deliver the machinery to Shanti Traders. Later, Shanti Traders procured the machinery
from another manufacturer for ` 12.75 lakhs. Due to this Shanti Traders was also
prevented from performing a contract which it had made with Zenith Traders at the time
of their contract with M Ltd. and were compelled to pay compensation for breach of
contract. Advise Shanti Traders the amount of compensation which it can claim from M
Ltd., referring to the legal provisions of the Indian Contract Act, 1872. (6 Marks)
Answer
(a) DISSOLUTION OF FIRM VS. DISSOLUTION OF PARTNERSHIP
S. Basis of Dissolution of Firm Dissolution of Partnership
No. Difference
1. Continuation of It involves discontinuation It does not affect
business of business in partnership. continuation of business. It
involves only reconstitution
of the firm.
2. Winding up It involves winding up of It involves only
the firm and requires reconstitution and requires
realization of assets and only revaluation of assets
settlement of liabilities. and liabilities of the firm.
3. Order of court A firm may be dissolved by Dissolution of partnership is
the order of the court. not ordered by the court.

4. Scope It necessarily involves It may or may not involve

dissolution of partnership. dissolution of firm.
5. Final closure of It involves final closure of It does not involve final
books books of the firm. closure of the books.

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6 FOUNDATION EXAMINATION: MAY, 2018

(b) Consequences of Non-Registration of a Partnership Firm [Section 69 of the Indian

Partnership Act, 1932]: Although registration of firms is not compulsory, yet the
consequences or disabilities of non-registration have a persuasive pressure for their
registration. These disabilities briefly are as follows:
(i) No suit in a civil court by firm or other co-partners against third party: The firm
or any other person on its behalf cannot bring an action against the third party for
breach of contract entered into by the firm, unless the firm is registered and the
persons suing are or have been shown in the register of firms as partners in the
firm.
(ii) No relief to partners for set-off of claim: If an action is brought against the firm by
a third party, then neither the firm nor the partner can claim any set-off, if the suit be
valued for more than `100 or pursue other proceedings to enforce the rights arising
from any contract.
(iii) Aggrieved partner cannot bring legal action against other partner or the firm:
A partner of an unregistered firm (or any other person on his behalf) is precluded
from bringing legal action against the firm or any person alleged to be or to have
been a partner in the firm. But, such a person may sue for dissolution of the firm or
for accounts and realization of his share in the firm’s property where the firm is
dissolved.
(iv) Third party can sue the firm: In case of an unregistered firm, an action can be
brought against the firm by a third party.
(c) Section 73 of the Indian Contract Act, 1872 provides for consequences of breach of
contract. According to it, when a contract has been broken, the party who suffers by such
breach is entitled to receive from the party who has broken the contract, compensation
for any loss or damage caused to him thereby which naturally arose in the usual course
of things from such breach or which the parties knew when they made the contract, to be
likely to result from the breach of it. Such compensation is not given for any remote and
indirect loss or damage sustained by reason of the breach. It is further provided in the
explanation to the section that in estimating the loss or damage from a breach of
contract, the means which existed of remedying the inconvenience caused by the non-
performance of the contract must be taken into account.
Applying the above principle of law to the given case, M Ltd. is obliged to compensate for
the loss of ` 1.25 lakh (i.e. ` 12.75 minus ` 11.50 = ` 1.25 lakh) which had naturally
arisen due to default in performing the contract by the specified date.
Regarding the amount of compensation which Shanti Traders were compelled to make to
Zenith Traders, it depends upon the fact whether M Ltd., knew about the contract of
Shanti Traders for supply of the contracted machinery to Zenith Traders on the specified
date. If so, M Ltd is also obliged to reimburse the compensation which Shanti Traders
had to pay to Zenith Traders for breach of contract. Otherwise M Ltd is not liable.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

Question 4
(a) What is appropriation of goods under the Sale of Goods Act, 1930? State the essentials
regarding appropriation of unascertained goods. (6 Marks)
(b) X, Y and Z are partners in a Partnership Firm. They were carrying their business
successfully for the past several years. Spouses of X and Y fought in ladies club on their
personal issue and X's wife was hurt badly. X got angry on the incident and he convinced
Z to expel Y from their partnership firm. Y was expelled from partnership without any
notice from X and Z. Considering the provisions of the Indian Partnership Act, 1932, state
whether they can expel a partner from the firm. What are the criteria for test of good faith
in such circumstances? (6 Marks)
Answer
(a) Appropriation of goods: Appropriation of goods involves selection of goods with the
intention of using them in performance of the contract and with the mutual consent of the
seller and the buyer.
The essentials regarding appropriation of unascertained goods are:
(a) There is a contract for the sale of unascertained or future goods.
(b) The goods should conform to the description and quality stated in the contract.
(c) The goods must be in a deliverable state.
(d) The goods must be unconditionally (as distinguished from an intention to
appropriate) appropriated to the contract either by delivery to the buyer or his agent
or the carrier.
(e) The appropriation must be made by:
(i) the seller with the assent of the buyer; or
(ii) the buyer with the assent of the seller.
(f) The assent may be express or implied.
(g) The assent may be given either before or after appropriation.
(b) A partner may not be expelled from a firm by a majority of partners except in exercise, in
good faith, of powers conferred by contract between the partners. It is, thus, essential
that:
(i) the power of expulsion must have existed in a contract between the partners;
(ii) the power has been exercised by a majority of the partners; and
(iii) it has been exercised in good faith.
If all these conditions are not present, the expulsion is not deemed to be in bonafide
interest of the business of the firm.

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8 FOUNDATION EXAMINATION: MAY, 2018

The test of good faith as required under Section 33(1) includes three things:
• The expulsion must be in the interest of the partnership.
• The partner to be expelled is served with a notice.
• He is given an opportunity of being heard.
If a partner is otherwise expelled, the expulsion is null and void.
Thus, according to the test of good faith as required under Section 33(1), expulsion of
Partner Y is not valid.
Question 5
(a) Mr. D sold some goods to Mr. E for ` 5,00,000 on 15 days credit. Mr. D delivered the
goods. On due date Mr. E refused to pay for it. State the position and rights of Mr. D as
per the Sale of Goods Act, 1930. (6 Marks)
(b) Define OPC (One Person Company) and state the rules regarding its membership. Can it
be converted into a non-profit company under Section 8 or a private company? (6 Marks)
Answer
(a) Position of Mr. D: Mr. D sold some goods to Mr. E for ` 5,00,000 on 15 days credit.
Mr. D delivered the goods. On due date Mr. E refused to pay for it. So, Mr. D is an unpaid
seller as according to section 45(1) of the Sale of Goods Act,1930 the seller of goods is
deemed to be an ‘Unpaid Seller’ when the whole of the price has not been paid or
tendered and the seller had an immediate right of action for the price.
Rights of Mr. D: As the goods have parted away from Mr. D, therefore, Mr. D cannot
exercise the right against the goods, he can only exercise his rights against the buyer i.e.
Mr. E which are as under:
(i) Suit for price (Section 55)
In the mentioned contract of sale, the price is payable after 15 days and Mr. E
refuses to pay such price, Mr. D may sue Mr. E for the price.
(ii) Suit for damages for non-acceptance (Section 56): Mr. D may sue Mr. E for
damages for non-acceptance if Mr. E wrongfully neglects or refuses to accept and
pay for the goods. As regards measure of damages, Section 73 of the Indian
Contract Act, 1872 applies.
(iii) Suit for interest [Section 61]: If there is no specific agreement between the Mr. D
and Mr. E as to interest on the price of the goods from the date on which payment
becomes due, Mr. D may charge interest on the price when it becomes due from
such day as he may notify to Mr. E.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 9

(b) One Person Company (OPC) [Section 2(62) of the Companies Act, 2013]: The Act
defines one person company (OPC) as a company which has only one person as a
member.
Rules regarding its membership:
• Only one person as member.
• The memorandum of OPC shall indicate the name of the other person, who shall, in
the event of the subscriber’s death or his incapacity to contract, become the member
of the company.
• The other person whose name is given in the memorandum shall give his prior
written consent in prescribed form and the same shall be filed with Registrar of
companies at the time of incorporation.
• Such other person may be given the right to withdraw his consent.
• The member of OPC may at any time change the name of such other person by
giving notice to the company and the company shall intimate the same to the
Registrar.
• Any such change in the name of the person shall not be deemed to be an alteration
of the memorandum.
• Only a natural person who is an Indian citizen and resident in India (person who has
stayed in India for a period of not less than 182 days during the immediately
preceding one calendar year)-
➢ shall be eligible to incorporate a OPC;
➢ shall be a nominee for the sole member of a OPC.
• No person shall be eligible to incorporate more than one OPC or become nominee in
more than one such company.
• No minor shall become member or nominee of the OPC or can hold share with
beneficial interest.
OPC cannot be incorporated or converted into a company under section 8 of the Act.
Though it may be converted to private or public companies in certain cases. OPC cannot
convert voluntarily into any kind of company unless two years have expired from the date
of incorporation, except where the paid up share capital is increased beyond fifty lakh
rupees or its average annual turnover during the relevant period exceeds two crore
rupees.
Question 6
(a) Define Fraud. Whether "mere silence will amount to fraud" as per the Indian Contract Act,
1872? (5 Marks)

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10 FOUNDATION EXAMINATION: MAY, 2018

(b) What is the conclusive evidence of partnership? State the circumstances when
partnership is not considered between two or more parties. (4 Marks)
(c) State the limitations of the doctrine of indoor management under the Companies Act,
2013. (3 Marks)
Answer
(a) Definition of Fraud under Section 17: 'Fraud' means and includes any of the
following acts committed by a party to a contract, or with his connivance, or by his agent,
with an intent to deceive another party thereto or his agent, or to induce him to enter into
the contract:
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to
be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Mere silence will amount to fraud: This statement is incorrect as per the Indian
Contract Act, 1872. A party to the contract is under no obligation to disclose the whole
truth to the other party. ‘Caveat Emptor’ i.e. let the purchaser beware is the rule
applicable to contracts. There is no duty to speak in such cases and silence does not
amount to fraud. Similarly, there is no duty to disclose facts which are within the
knowledge of both the parties.
(b) Conclusive evidence of partnership: Existence of Mutual Agency which is the cardinal
principle of partnership law is very much helpful in reaching a conclusion with respect to
determination of existence of partnership. Each partner carrying on the business is the
principal as well as an agent of other partners. So, the act of one partner done on behalf
of firm, binds all the partners. If the element of mutual agency relationship exists between
the parties constituting a group formed with a view to earn profits by running a business,
a partnership may be deemed to exist.
Circumstances when partnership is not considered between two or more parties:
Various judicial pronouncements have laid to the following factors leading to no
partnership between the parties:
(i) Parties have not retained any record of terms and conditions of partnership.
(ii) Partnership business has maintained no accounts of its own, which would be open
to inspection by both parties
(iii) No account of the partnership was opened with any bank

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 11

(iv) No written intimation was conveyed to the Deputy Director of Procurement with
respect to the newly created partnership.
(c) The doctrine of Indoor Management has limitations of its own. That is to say, it is
inapplicable to the following cases, namely:
(i) Actual or constructive knowledge of irregularity: The rule does not protect any
person when the person dealing with the company has notice, whether actual or
constructive, of the irregularity.
(ii) Suspicion of Irregularity: The doctrine in no way, rewards those who behave
negligently. Where the person dealing with the company is put upon an inquiry, for
example, where the transaction is unusual or not in the ordinary course of business,
it is the duty of the outsider to make the necessary enquiry.
(iii) Forgery: The doctrine of indoor management applies only to irregularities which
might otherwise affect a transaction, but it cannot apply to forgery which must be
regarded as nullity.

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12 FOUNDATION EXAMINATION: MAY, 2018

SECTION B – BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.
Attempt any three questions from the remaining four questions.

Question 7
(a) Read the passage carefully and answer the questions given below:
A life of action and danger moderates the dread of death. It not only gives us fortitude to
bear pain, but teaches us at every step the precarious tenure on which we hold our
present being. Sedentary and studious men are the most apprehensive on this score. Dr.
Johnson was an instance in point. A few years seemed to him soon over, compared with
those sweeping contemplations on time and infinity with which he had been used to pose
himself. In the still life of a man of Ietters there was no obvious reason for a change. He
might sit in an arm chair and pour out cups of tea to all eternity would it had been
possible for him to do so. The most rational cure after all for the inordinate fear of death
is to set a just value on life. If we mere wish to continue on the scene to indulge our
head-strong humour and tormenting passions, we had better be gone at once; and if we
only cherish a fondness for existence according to the good we desire from it, the pang
we feel at parting it will not be very server.
(i) What type of people are afraid of death and Why? (1 Mark)
(ii) How can we get rid of fear of death? (1 Mark)
(iii) What idea do you form about Dr. Johnson from this passage? (1 Mark)
(iv) Write Summary of the Passage. (2 Marks)
(b) Read the passage:
(i) Make Notes, using headings, sub headings, and abbreviations whenever necessary.
(3 Marks)
(ii) Write Summary. (2 Marks)
(I) Anything printed and bound in a book size can be called a book, but the quality
or mind distinguishes the value of it.
What is a book? This is' how Anatole France describes it:" A series of little
printed signs essentially only that. It is for the reader to supply himself the
forms and colors and sentiments to which these signs correspond. It will
depend on him whether the book be dull or brilliant, hot with passion or cold as
ice. Or if you prefer to put it otherwise each word in a book is a magic finger
that sets a fibre of our brain vibrating like a hard string and so evokes a note
from the sounding board of our soul No matter how skilful, how inspired the
artist's hand, the sound it makes depends on the quality of the strings within
ourselves"

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 13

Until recently books were the preserve of a small section ______ the urban
upper classes. Some, even today, make it a point to call themselves
intellectuals. It would be a pity if books were meant only for intellectuals and
not for housewives, farmers, factory workers, artisans and, so on.
In India there are first generation learners, whose parents might have been
illiterate. This poses special challenges to our authors and to those who are
entrusted with the task of disseminating knowledge. We need much more
research in the use of language and the development of techniques by which
know ledge can be transferred to these people without transmission loss.
Publishers should initiate campaigns to persuade people that a good book
makes a beautiful present and that reading a good book can be the most
relaxing as well as absorbing of pastimes. We should aim at books of quality
no less than at quantitative expansion in production and sale. Unless one is
constantly exposed to the best, one cannot develop a taste for the good.
(2 Marks)
Answer
(a) Reading comprehension
People who have a sedentary lifestyle and are too much into writing/litera ture are afraid
of death.
We can get rid of the fear of death by following a life of action and danger and also by
setting a value on life.
Dr. Johnson, being a man of letters seemed to have a sedentary life style. He feared
death because of his monotonous life.
A life that is full of action and danger would not fear death. One needs to be active and
avoid a sedentary life full of contemplation. One must cherish what one has and enjoy
moments as they come, rather than brood over the past and future. Dr. Johnson is a
good example of a case where death was severely dreaded.
(b) (i) A. Value of bks. acc. to Anatole France
(1) not merely printed signs
(2) reader gives
(i) colours
(ii) forms
(iii) sentiments
a. brilliant or boring
b. touches our souls

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14 FOUNDATION EXAMINATION: MAY, 2018

B. Bks. are meant for diff. sections of society

(1) until recently bks. were read by only intellect.
(2) meant for all housewives, farmers, artisans, etc.
C. Bks. for 1st gen. learners
(1) challenge for authors
(2) need more research in use of lang.
(3) need for dev. of teaching tech. a. knowledge transfer w/o transmsn loss
D. Publisher’s role
(1) campaigns to persuade
a. bks make good presents
b. rdng – a relaxing pastime
Key
1. acc. - according
2. 1st - first
3. bks. - books
4. gen. - generation
5. diff. – different
6. lang. - language
7. intellect. - intellectuals
8. dev. – development
9. w/o – without
10. transmsn - transmission
Summary
A book can be defined as anything that is bound and printed. However, there can be
factors of quality and the mind applied to it that distinguish a book. According to
Anatole France, a reader has powers to convert the book into magic; using his brain
connect with the words printed in it. No matter how good an author is, the content
becomes interesting only if the reader wishes to make it so. Apparently, books have
always been associated with the urban sector. One must try to spread the reach to
a wider audience, emphasizing the fact that good techniques and language can
make book reading the most enjoyable of all pass times.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

Question 8
(a) Define visual communication. (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
Perpetual
(1) General
(2) Emotional
(3) Stubborn
(4) Continuous (1 Mark)
(ii) Select a suitable antonym for the word given in question:
Disparage
(1) Eulogise
(2) Belittle
(3) Alert
(4) Defame
(iii) Change the following sentence to indirect speech:
The policeman said to the stranger who are you. (1 Mark)
(c) Write a precis and give appropriate title to the passage given below:
Teaching is the noblest of professions. A teacher has a scared duty to perform. It is he
on whom rests the responsibility of moulding the character of young children. Apart from
developing their intellect, he can inculcate in them qualities of good citizenship,
remaining neat and clean, talking decently and sitting properly. These virtues are not
easy to be imbibed. Only he who himself leads a life of simplicity, purity and rigid
discipline can successfully cultivate these habits in his pupils.
Besides a teacher always remain young. He may grow old in age, but not in spite.
Perpetual contact with budding youths keeps him happy and cheerful These are
moments when domestic worries weigh heavily on his mind, but the delightful company of
innocent children makes him overcome his transient moods of despair. (5 Marks)
Answer
(a) Visual communication
Communication that happens through visual aids such as signs, graphic designs, colour,
illustrations etc is visual communication. It is a powerful medium these days, especially
for office presentations. Visuals can also include pie charts, graphs, or any other
colourful representation. It adds value to the content and forms a major part of audio
visual ppt’s.

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16 FOUNDATION EXAMINATION: MAY, 2018

(b) (i) (4) continuous

(ii) (1) eulogize
(iii) Indirect speech: the policeman asked the stranger who he was.
(c) Precis writing
Possible Titles: A teacher remains immortal
A Teacher never grows old
Teaching: a selfless and noble profession
Teaching is constant learning and practicing
Teaching is a selfless job which goes on even when the teacher gets old. He/she is
constantly learning, no matter how old one grows. From imparting education to discipline
to mannerisms, a teacher is a role model. He leads a simple life, of virtues and morals
and inculcates the same in his students. The pleasant company of students removes a
teacher’s personal worries and refreshes his mind.
Question 9
(a) Write any four barriers to effective communication? (2 Marks)
(b) Choose the word which best expresses the meaning of the given word:
(i) Despot
(1) Tyrant
(2) Storage
(3) Hot meal
(4) Against (1 Mark)
(ii) Illicit
(1) Storage
(2) Emotional
(3) Unlawful
(4) Grand (1 Mark)
(iii) Change the following sentence into indirect speech:
The Shopkeeper says, "prices are shooting up alarmingly. (1 Mark)
(c) Write circular addressing to the employees regarding office timings. (5 Marks)
Answer
(a) Four barriers to Effective communication

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(1) Physical barriers: include noise, old technology, technical disturbances, distant
locations, lack of appropriate infrastructure.
(2) Organizational structural barriers: Lack of a proper chain of command in office,
gaps in the hierarchy creates problems in communication
(3) Language barriers: Language creates problems in communication. Difficult words,
unclear jargon, different community having different languages
(4) Cultural barriers: Cultures have different customs and can lead to
miscommunication.
(5) Emotional barriers: One of the chief barriers to open and free communications is
the emotional barrier. Anger, fear of criticism or ridicule, mistrust of person,
suspicion of intentions, jealousy, anxiety and many more feelings and sentiments
we carry within us, affect our communication ability and quality. A person who is
upset and disturbed cannot pass on or receive information appropriately and
objectively. His emotions will colour his perception and assessment of the
communication.
(6) Attitude barriers: Personal attitudes of employees can affect communication within
the organization.
(7) Perception Barriers: Each one of us perceives the world differently and this
causes problems in communicating.
(8) Physiological barriers: Ill health, poor eyesight, hearing difficulties or any other
physiological problems can be hurdles in effective interaction with others.
(9) Technology barriers: Anyone who is not tech friendly struggles to communicate
effectively via the medium.
(10) Gender barriers: Due to traditional mindsets, many men find it difficult to take
orders from, or provide information to women.
(b) (i) 1. Tyrant
(ii) 3. Unlawful
(iii) The shopkeeper said that prices were shooting up alarmingly.
(c) Circular Writing Sample 1: Employees working as per flexible office timings
Circular No. XV 14th May, 2018
Office Timings
For all employees
This is an official communication about the office timings to be followed by all employees.
As per flexible timings approved by the management, working hours/timings are as
under:

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18 FOUNDATION EXAMINATION: MAY, 2018

9:30 am to 5:30 pm
10:00 am to 6:30 pm
10:30 am to 7:00 pm
For Housekeeping staff:
Shift-1: 8:00 am to 4:00 pm
Shift-2: 2:00 pm to 8:00 pm
Saturday and Sunday is a holiday for all employees.
Strict action will be taken against defaulters. In case of any emergency, please inform
your respective heads/managers.

XYZ
HR manager
Circular Writing Sample 2: Employees working for different foreign clients
Circular No. XV 14th May, 2018
Office Timings
For employees
This is an official communication about the office timings to be followed by employees
working for foreign clients. With regard to the time zone based on the geography of the client
country, the working hours/timings are as under:
Employees for US client: working hours will be 6 am to 2 pm.
Employees for UK client: working hours will be 1:30 pm to 9:30 pm
Employees for Indian client: working hours will be 9: 30 am to 5:30 pm
For Housekeeping staff
Shift-1: 8:00 am to 4:00 pm
Shift-2: 2:00 pm to 8:00 pm
Saturday and Sunday is a holiday for all employees.
Strict action will be taken against defaulters. In case of any emergency, please inform your
respective heads/managers.

XYZ
HR manager

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Question 10
(a) (i) What are the characteristics of effective communication? (2 Marks)
OR
(ii) What is diagonal communication? (2 Marks)
(b) (i) Complete the expression by supplying a suitable preposition or adverb particle. Choose
your answer from the options given in brackets.
We will take __________ this issue when we meet next week. (up/on/over) (1 Mark)
(ii) Rewrite the following sentence in Passive Voice
The customer should receive the delivery by Friday. (1 Mark)
(iii) Rewrite the following sentence in Active Voice.
He will be given a ticket for over speeding by the police officer. (1 Mark)
(c) Write an article of about 250 words on the topic "Global warming". (5 Marks)
Answer
(a) Characteristics of effective communication
1. Clear: Any spoken or written communication should state the purpose of message
clearly.
2. Concise: Brevity is the essence of business communication.
3. Concrete: The content of your communiqué should be tangible. Base it on facts
and figures.
4. Coherent: Coherence is sequentially organized and logically presented information
which is easily understood.
5. Complete: A complete communication conveys all facts and information required by
the recipient.
6. Courteous: Courtesy implies that the sender is polite, considerate, respectful, open
and honest with the receiver.
7. Listening for Understanding: Focus on the individual and his agenda. A
perceptive listener is able to provide information as per the needs of the client
8. Focus and Attention: Everyday work environment Paying attention to the
pertinent details is imperative for effective communication.
9. Emotional Awareness and Control: Managing your own and others emotions and
communicating keeping in mind the emotional state of others helps in smooth
interaction and breakdown of the communication process.
OR

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20 FOUNDATION EXAMINATION: MAY, 2018

Diagonal Communication.
It is part of the formal communication section. It refers to the cross functional
communication between different levels of employees in an organization. It is commonly
found in large organization. Diagonal communication is recommended as it reduces the
gaps between communication and encourages direct talks with the third party. For
example a junior engineer directly reporting to the General Manager about the progress
of a project.
(b) (i) We will take up this issue when we meet next week.
(ii) The delivery would be received by the customer by Friday (Passive voice)
(iii) The police officer will give him a ticket for over speeding (Active voice)
(c) Global Warming
The retention of extra heat by the Earth is known as Global warming. It is basically an
increase in the amount of greenhouse gases in the air that results in more heat being
trapped in the atmosphere. The green houses gases include carbon dioxide, methane,
water vapour and ozone. This leads to an overall rise in the surface temperature of the
Earth.
The temperature of the Earth has increase by about 1-2 degree Fahrenheit in the last
100 years and is continuing to increase further. The warming has led to the decrease of
cold nights and increase in warm/summer days. Melting glaciers is also a result of global
warming.
The amount of carbon di oxide in air has been increasing at an alarming rate. The main
cause of this increase being burning of fossil fuels and deforestation. Production,
distribution and combustion of fossil fuel also results in the emission of methane gas.
As responsible citizens of the Earth, we must take measures to curb the problem of
global warming and save the environment. Use of renewable sources of energy, like
solar energy should be promoted. Solar heater, solar cooker, solar coolers are some
devices that run on the energy captured from the Sun. Farmers should be encouraged to
use natural fertilizers that provide better yields and are environment friendly. Children in
school should participate in ‘plant a tree’ campaigns. Afforestation is an easy and simple
step towards saving our environment. Air pollution should be checked, probably by
making catalytic inverters compulsory for all vehicles.
If the above measures are followed and every individual pledges to keep the environment
clean, problems like global warming can be under control. Let us all pledge to GO
GREEN
Question 11
(a) What are the main steps in the process of communication? (2 Marks)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

(b) Select the correct meaning of idioms / phrases given below:

(i) Storm in tea cup
(1) Crave for something
(2) Drink tea often
(3) Get into quarrel
(4) Making a big issue out of a small thing. (1 Mark)
(ii) To grease the palm
(1) Treat suffer
(2) To offer bribe
(3) To swim in deep sea
(4) To be in deep thought. (1 Mark)
(iii) Rewrite the following sentences in the active voice:
The entire district was destroyed by cyclone. (1 Mark)
(c) Write a memo letter informing the employees of all branches about the suspension order
of Mr. Z, cashier, on charge of misappropriation of fund of the same office. (5 Marks)
Answer
(a) Steps in the process of communication
(i) The purpose or reason
(ii) The content or message
(iii) The medium used for conveying the message (internet, written text, speech etc)
(iv) Transmitting the message
(v) Messages are often misinterpreted due to external disturbances. These factors
disrupt communication
(vi) Receiving the message
(vii) Deciphering/decoding the message
(viii) Interpreting and figuring out what the real message is.
(b) (i) 4. Making a big issue out of a small thing
(ii) 2. To offer bribe
(iii) The cyclone destroyed the entire district. (Active voice)

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22 FOUNDATION EXAMINATION: MAY, 2018

(c) Memo (suspension order of cashier)

XYZ Bank
36, NOIDA, Uttar Pradesh
Interoffice memo

Date: 14/05/2018
To: All employees of branch
From: Ms. ABC, General Manager
Reference: 44L/T2
Subject: Suspension order
This is to inform you that Mr. Z, cashier of XYZ bank, Noida, UP branch has been
suspended on charge of misappropriation of funds. All concerned are requested to refrain
from any transaction with him. If not, the bank authorities would not be held responsible.

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAW

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) Mr. X and Mr. Y entered into a contract on 1st August, 2018, by which. Mr. X had to
supply 50 tons of sugar to Mr. Y at a certain price strictly within a period of 10 days of
the contract. Mr. Y also paid an amount of ` 50,000 towards advance as per the terms
of the above contract. The mode of transportation available between their places is
roadway only. Severe flood came on 2 nd August, 2018 and the only road connecting
their places was damaged and could not be repaired within fifteen days. Mr. X offered
to supply sugar on 20th August, 2018 for which Mr. Y did not agree. On 1st September,
2018, Mr. X claimed compensation of ` 10,000 from Mr. Y for refusing to accept the
supply of sugar, which was not there within the purview of the contract. On the other
hand, Mr. Y claimed for refund of ` 50.000 which he had paid as advance in terms of
the contract. Analyse the above situation in terms of the provisions of the Indian
Contract Act, 1872 and decide on Y's contention. (4 Marks)
(b) A company registered under section 8 of the Companies Act, 2013, earned huge profit
during the financial year ended on 31st March, 2018 due to some favorable policies
declared by the Government of India and implemented by the company. Considering
the development, some members of the company wanted the company to distribute
dividends to the members of the company. They approached you to advise them about
the maximum amount of dividend that can be declared by the company as per the
provisions of the Companies Act, 2013. Examine the relevant provisions of the
Companies Act, 2013 and advise the members accordingly. (4 Marks)
(c) Differentiate between Ascertained and Unascertained Goods with example. (4 Marks)
Answer
(a) Subsequent or Supervening impossibility (Becomes impossible after entering
into contract): When performance of promise become impossible or illegal by
occurrence of an unexpected event or a change of circumstances beyond the
contemplation of parties, the contract becomes void e.g. change in law etc.
Also, according to section 65 of the Indian Contract Act, 1872, when an agreement is
discovered to be void or when a contract becomes void, any person who has received
any advantage under such agreement or contract is bound to restore it, or to make
compensation for it to the person from whom he received it.

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2 FOUNDATION EXAMINATION: NOVEMBER, 2018

In the given question, after Mr. X and Mr. Y have entered into the contract to supply 50
tons of sugar, the event of flood occurred which made it impossible to deliver the sugar
within the stipulated time. Thus, the promise in question became void. Further, Mr. X
has to pay back the amount of ` 50,000 that he received from Mr. Y as an advance for
the supply of sugar within the stipulated time. Hence, the contention of Mr. Y is correct.
(b) A company that is registered under section 8 of the Companies Act, 2013, is prohibited
from the payment of any dividend to its members.
The company in question is a section 8 company and hence it cannot declare dividend.
Thus, the contention of members is incorrect.
(c) Ascertained Goods are those goods which are identified in accordance with the
agreement after the contract of sale is made. This term is not defined in the Act but has
been judicially interpreted. In actual practice the term 'ascertained goods' is used in the
same sense as 'specific goods.' When from a lot or out of large quantity of
unascertained goods, the number or quantity contracted for is identified, such identified
goods are called ascertained goods.
Unascertained goods: The goods which are not specifically identified or ascertained
at the time of making of the contract are known as 'unascertained goods'. They are
indicated or defined only by description or sample.
Question 2
(a) What is Contingent Contract? Discuss the essentials of Contingent Contract as per the
Indian Contract Act, 1872. (7 Marks)
(b) Explain the essential elements to incorporate a Limited Liability Partnership and the
steps involved therein under the LLP Act, 2008. (5 Marks)
Answer
(a) According to section 31 of the Indian Contract Act, 1872, contingent contract means a
contract to do or not to do something, if some event, collateral to such contract, does
or does not happen.
Example: Contracts of Insurance, indemnity and guarantee.
Essentials of a contingent contract
(a) The performance of a contingent contract would depend upon the happening
or non-happening of some event or condition. The condition may be precedent
or subsequent.
(b) The event referred to, is collateral to the contract. The event is not part of the
contract. The event should be neither performance promised nor a consideration
for a promise.
(c) The contingent event should not be a mere ‘will’ of the promisor. The event

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

should be contingent in addition to being the will of the promisor.

(d) The event must be uncertain. Where the event is certain or bound to happen,
the contract is due to be performed, then it is a not contingent contract.
(b) Essential elements to incorporate Limited Liability Partnership (LLP)- Under the
LLP Act, 2008, the following elements are very essential to form a LLP in India:
(i) To complete and submit incorporation document in the form prescribed with the
Registrar electronically;
(ii) To have at least two partners for incorporation of LLP [Individual or body
corporate];
(iii) To have registered office in India to which all communications will be made and
received;
(iv) To appoint minimum two individuals as designated partners who will be
responsible for number of duties including doing of all acts, matters and things as
are required to be done by the LLP. Atleast one of them should be resident in
India.
(v) A person or nominee of body corporate intending to be appointed as designated
partner of LLP should hold a Designated Partner Identification Number (DPIN)
allotted by Ministry of Corporate Affairs.
(vi) To execute a partnership agreement between the partners inter se or between the
LLP and its partners. In the absence of any agreement the provisions as set out
in First Schedule of LLP Act, 2008 will be applied.
(vii) LLP Name.
Steps to incorporate LLP:
1. Name reservation:
▪ The first step to incorporate Limited Liability Partnership (LLP) is reservation
of name of LLP.
▪ Applicant has to file e-Form 1, for ascertaining availability and reservation of
the name of a LLP business.
2. Incorporate LLP:
▪ After reserving a name, user has to file e- Form 2 for incorporating a new
Limited Liability Partnership (LLP).
▪ e-Form 2 contains the details of LLP proposed to be incorporated, partners’/
designated partners’ details and consent of the partners/designated partners
to act as partners/ designated partners

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4 FOUNDATION EXAMINATION: NOVEMBER, 2018

3. LLP Agreement
▪ Execution of LLP Agreement is mandatory as per Section 23 of the Act.
▪ LLP Agreement is required to be filed with the registrar in e-Form 3 within 30
days of incorporation of LLP.
Question 3
(a) “Though a minor cannot be a partner in a firm, he can nonetheless be admitted to the
benefits of partnership."
(I) Referring to the previsions of the Indian Partnership Act, 1932, state the rights
which can be enjoyed by a minor partner. (4 Marks)
(II) A. State the liabilities of a minor partner both:
(i) Before attaining majority and
(ii) After attaining majority. (2 Marks)
OR
B. State the legal position of a minor partner after attaining majority:
(i) When he opts to become a partner of the same firm.
(ii) When he decide not to become a partner. (2 Marks)
(b) (i) Mr. Ramesh promised to pay ` 50,000 to his wife Mrs. Lali so that she can spend
the sum on her 30th birthday. Mrs. Lali insisted her husband to make a written
agreement if he really loved her. Mr. Ramesh made a written agreement and the
agreement was registered under the law. Mr. Ramesh failed to pay the specified
amount to his wife Mrs. Lali. Mrs. Lali wants to file a suit against Mr. Ramesh and
recover the promised amount. Referring to the applicable provisions of the
Contract Act, 1872, advise whether Mrs. Lali will succeed. (3 Marks)
(ii) A shop-keeper displayed a pair of dress in the show-room and a price tag of
` 2,000 was attached to the dress. Ms. Lovely looked to the tag and rushed to the
cash counter. Then she asked the shop-keeper to receive the payment and pack
up the dress. The shop-keeper refused to hand-over the dress to Ms. Lovely in
consideration of the price stated in the price tag attached to the Ms. Lovely seeks
your advice whether she can sue the shop-keeper for the above cause under the
Indian Contract Act, 1872. (3 Marks)
Answer
(a) (I) Rights which can be enjoyed by a minor partner:
(i) A minor partner has a right to his agreed share of the profits and of the firm.
(ii) He can have access to, inspect and copy the accounts of the firm.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5

(iii) He can sue the partners for accounts or for payment of his share but only
when severing his connection with the firm, and not otherwise.
(iv) On attaining majority, he may within 6 months elect to become a partner or
not to become a partner. If he elects to become a partner, then he is entitled
to the share to which he was entitled as a minor. If he does not, then his
share is not liable for any acts of the firm after the date of the public notice
served to that effect.
(II) A. (i) Liabilities of a minor partner before attaining majority:
(a) The liability of the minor is confined only to the extent of his share
in the profits and the property of the firm.
(b) Minor has no personal liability for the debts of the firm incurred
during his minority.
(c) Minor cannot be declared insolvent, but if the firm is declared
insolvent his share in the firm vests in the Official Receiver/
Assignee.
(ii) Liabilities of a minor partner after attaining majority:
Within 6 months of his attaining majority or on his obtaining knowledge
that he had been admitted to the benefits of partnership, whichever date
is later, the minor partner has to decide whether he shall remain a
partner or leave the firm.
Where he has elected not to become partner he may give public notice
that he has elected not to become partner and such notice shall
determine his position as regards the firm. If he fails to give such notice
he shall become a partner in the firm on the expiry of the said six
months.
OR

B. (i) When he becomes partner: If the minor becomes a partner on his own
willingness or by his failure to give the public notice within specified
time, his rights and liabilities as given in Section 30(7) of the Indian
Partnership Act, 1932, are as follows:
(a) He becomes personally liable to third parties for all acts of the firm
done since he was admitted to the benefits of partnership.
(b) His share in the property and the profits of the firm remains the
same to which he was entitled as a minor.
(ii) When he elects not to become a partner:
(a) His rights and liabilities continue to be those of a minor up to the

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6 FOUNDATION EXAMINATION: NOVEMBER, 2018

date of giving public notice.

(b) His share shall not be liable for any acts of the firm done after the
date of the notice.
(c) He shall be entitled to sue the partners for his share of the property
and profits. It may be noted that such minor shall give notice to the
Registrar that he has or has not become a partner.
(b) (i) Parties must intend to create legal obligations: There must be an intention on
the part of the parties to create legal relationship between them. Social or domestic
type of agreements are not enforceable in court of law and hence they do not
result into contracts.
In the given question, Mr. Ramesh promised to pay ` 50,000 to his wife so that
she can spend the same on her birthday. However, subsequently, Mr. Ramesh
failed to fulfil the promise, for which Mrs. Lali wants to file a suit against
Mr. Ramesh. Here, in the given circumstance wife will not be able to recover the
amount as it was a social agreement and the parties did not intend to create any
legal relations.
(ii) The offer should be distinguished from an invitation to offer. An offer is definite
and capable of converting an intention in to a contract. Whereas an invitation to
an offer is only a circulation of an offer, it is an attempt to induce offers and
precedes a definite offer. Where a party, without expressing his final willingness,
proposes certain terms on which he is willing to negotiate, he does not make an
offer, but invites only the other party to make an offer on those terms. This is the
basic distinction between offer and invitation to offer.
The display of articles with a price in it in a self-service shop is merely an invitation
to offer. It is in no sense an offer for sale, the acceptance of which constitutes a
contract. In this case, Ms. Lovely by selecting the dress and approaching the
shopkeeper for payment simply made an offer to buy the dress selected by her. If
the shopkeeper does not accept the price, the interested buyer cannot compel him
to sell.
Question 4
(a) What is the Doctrine of "Caveat Emptor”? What are the exceptions to the Doctrine of
"Caveat Emptor”? (6 Marks)
(b) (i) Mr. A. Mr. B and Mr. C were partners in a partnership firm M/s ABC & Co., which
is engaged in the business of trading of branded furniture. The name of the
partners was clearly written along with the firm name in front of the head office of
the firm as well as on letter-head of the firm. On 1st October, 2018, Mr. C passed
away. His name was neither removed from the list of partners as stated in front of

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

the head office nor from the letter-heads of the firm. As per the terms of
partnership, the firm continued its operations with Mr. A and Mr. B as partners.
The accounts of the firm were settled and the amount due to the legal heirs of
Mr. C was also determined on 10th October, 2018. But the same was not paid to
the legal heirs of Mr. C. On 16th October, 2018, Mr. X, a supplier supplied furniture
worth ` 20,00,000 to M/s ABC & Co. M/s ABC & Co. could not repay the amount
due to heavy losses. Mr. X wants to recover the amount not only from M/s ABC &
Co., but also from the legal heirs of Mr. C.
Analyses the above situation in terms of the provisions of the Indian Partnership
Act, 1932 and decide whether the legal heirs of Mr. C can also be held liable for
the dues towards Mr. X. (3 Marks)
(ii) Mr. M, Mr. N and Mr. P were partners in a firm, which was dealing in refrigerators.
On 1st October, 2018, Mr. P retired from partnership, but failed to give public notice
of his retirement. After his retirement, Mr. M, Mr. N and Mr. P visited a trade
fair and enquired about some refrigerators with latest techniques. Mr. X, who was
exhibiting his refrigerators with the new techniques was impressed with the
interactions of Mr. P and requested for the visiting card of the firm. The visiting
card also included the name of Mr. P as a partner even though he had already
retired. Mr. X. supplied some refrigerators to the firm and could not recover his
dues from the firm. Now, Mr. X wants to recover the dues not only from the firm,
but also from Mr. P.
Analyse the above case in terms of the provisions of the Indian Partnership Act,
1932 and decide whether Mr. P is liable in this situation. (3 Marks)
Answer
(a) Caveat Emptor
In case of sale of goods, the doctrine ‘Caveat Emptor’ means ‘let the buyer beware’.
When sellers display their goods in the open market, it is for the buyers to make a
proper selection or choice of the goods. If the goods turn out to be defective, he cannot
hold the seller liable. The seller is in no way responsible for the bad selection of the
buyer. The seller is not bound to disclose the defects in the goods which he is selling.
Exceptions: Following are the exceptions to the doctrine of Caveat Emptor:
1. Fitness as to quality or use: Where the buyer makes known to the seller the
particular purpose for which the goods are required, so as to show that he relies
on the seller’s skill or judgment and the goods are of a description which is in the
course of seller’s business to supply, it is the duty of the seller to supply such
goods as are reasonably fit for that purpose [Section 16 (1) of the Sales of Goods
Act, 1930].

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2. Goods purchased under patent or brand name: In case where the goods are
purchased under its patent name or brand name, there is no implied condition that
the goods shall be fit for any particular purpose [Section 16(1)].
3. Goods sold by description: Where the goods are sold by description there is an
implied condition that the goods shall correspond with the description [Section 15].
If it is not so then seller is responsible.
4. Goods of Merchantable Quality: Where the goods are bought by description
from a seller who deals in goods of that description there is an implied condition
that the goods shall be of merchantable quality. The rule of Caveat Emptor is not
applicable. But where the buyer has examined the goods this rule shall apply if
the defects were such which ought to have not been revealed by ordinary
examination [Section 16(2)].
5. Sale by sample: Where the goods are bought by sample, this rule of Caveat
Emptor does not apply if the bulk does not correspond with the sample [Section
17].
6. Goods by sample as well as description: Where the goods are bought by
sample as well as description, the rule of Caveat Emptor is not applicable in case
the goods do not correspond with both the sample and description or either of the
condition [Section 15].
7. Trade Usage: An implied warranty or condition as to quality or fitness for a
particular purpose may be annexed by the usage of trade and if the seller deviates
from that, this rule of Caveat Emptor is not applicable [Section 16(3)].
8. Seller actively conceals a defect or is guilty of fraud: Where the seller sells
the goods by making some misrepresentation or fraud and the buyer relies on it
or when the seller actively conceals some defect in the goods so that the same
could not be discovered by the buyer on a reasonable examination, then the rule
of Caveat Emptor will not apply. In such a case the buyer has a right to avoid the
contract and claim damages.
(b) (i) Generally, the effect of the death of a partner is the dissolution of the partnership,
but the rule in regard to the dissolution of the partnership, by death of partner, is
subject to a contract between the parties and the partners are competent to agree
that the death of one will not have the effect of dissolving the partnership as
regards the surviving partners unless the firm consists of only two partners. In
order that the estate of the deceased partner may be absolved from liability for the
future obligations of the firm, it is not necessary to give any notice either to the
public or the persons having dealings with the firm.
In the light of the provisions of the Act and the facts of the question, Mr. X (creditor)
can have only a personal decree against the surviving partners (Mr. A and Mr. B)
and a decree against the partnership assets in the hands of those partners. A suit

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 9

for goods sold and delivered would not lie against the representatives of the
deceased partner. Hence, the legal heirs of Mr. C cannot be held liable for the
dues towards Mr. X.
(ii) A retiring partner continues to be liable to third party for acts of the firm after his
retirement until public notice of his retirement has been given either by himself or
by any other partner. But the retired partner will not be liable to any third party if
the latter deals with the firm without knowing that the former was partner.
Also, if the partnership is at will, the partner by giving notice in writing to all the
other partners of his intention to retire will be deemed to be relieved as a partner
without giving a public notice to this effect.
Also, as per section 28 of the Indian Partnership Act, 1932, where a man holds
himself out as a partner, or allows others to do it, he is then stopped from denying
the character he has assumed and upon the faith of which creditors may be
presumed to have acted.
In the light of the provisions of the Act and facts of the case, Mr. P is also liable to
Mr. X.
Question 5
(a) Mr. G sold some goods to Mr. H for certain price by issue of an invoice, but payment in
respect of the same was not received on that day. The goods were packed and lying in
the godown of Mr. G. The goods were inspected by H's agent and were found to be in
order. Later on, the dues of the goods were settled in cash. Just after receiving cash,
Mr. G asked Mr. H that goods should be taken away from his godown to enable him to
store other goods purchased by him. After one day, since Mr. H did not take delivery of
the goods, Mr. G kept the goods out of the godown in an open space. Due to rain, some
goods were damaged.
Referring to the provisions of the Sale of Goods Act, 1930, analyse the above situation
and decide who will be held responsible for the above damage. Will your answer be
different, if the dues were not settled in cash and are still pending? (6 Marks)
(b) There are cases where company law disregards the principle of corporate personality
or the principle that the company is a legal entity distinct from its shareholders or
members. Elucidate. (6 Marks)
Answer
(a) 1. According to section 44 of the Sales of Goods Act, 1932, when the seller is ready
and willing to deliver the goods and requests the buyer to take delivery, and the
buyer does not within a reasonable time after such request take delivery of the
goods, he is liable to the seller for any loss occasioned by his neglect or refusal
to take delivery and also for a reasonable charge for the care and custody of the
goods.

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The property in the goods or beneficial right in the goods passes to the buyer at
appoint of time depending upon ascertainment, appropriation and delivery of
goods. Risk of loss of goods prima facie follows the passing of property in goods.
Goods remain at the seller's risk unless the property there in is transferred to the
buyer, but after transfer of property therein to the buyer the goods are at the
buyer's risk whether delivery has been made or not.
In the given case, since Mr. G has already intimated Mr. H, that he wanted to store
some other goods and thus Mr. H should take the delivery of goods kept in the
godown of Mr. G, the loss of goods damaged should be borne by Mr. H.
2. If the price of the goods would not have settled in cash and some amount would
have been pending then Mr. G will be treated as an unpaid seller and he can
enforce the following rights against the goods as well as against the buyer
personally:
(a) Where under a contract of sale the property in the goods has passed to the
buyer and the buyer wrongfully neglects or refuses to pay for the goods
according to the terms of the contract, the seller may sue him for the price of
the goods. [Section 55(1) of the Sales of Goods Act, 1930]
(b) Where under a contract of sale the price is payable on a day certain
irrespective of delivery and the buyer wrongfully neglects or refuses to pay
such price, the seller may sue him for the price although the property in the
goods has not passed and the goods have not been appropriated to the
contract. [Section 55(2) of the Sales of Goods Act, 1930].
(b) Corporate Veil refers to a legal concept whereby the company is identified separately
from the members of the company.
However, this veil can be lifted which means looking behind the company as a legal
person, i.e., disregarding the corporate entity and paying regard, instead, to the realities
behind the legal facade. Where the Courts ignore the company, and concern
themselves directly with the members or managers, the corporate veil may be said to
have been lifted. Only in appropriate circumstances, the Courts are willing to lift the
corporate veil and that too, when questions of control are involved rather than merely a
question of ownership.
Lifting of Corporate Veil
The following are the cases where company law disregards the principle of corporate
personality or the principle that the company is a legal entity distinct and separate from
its shareholders or members:
▪ Trading with enemy: If the public interest is likely to be in jeopardy, the Court
may be willing to crack the corporate shell
▪ Where corporate entity is used to evade or circumvent tax, the corporate veil may

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 11

be lifted
▪ Where companies form other companies as their subsidiaries to act as their agent
▪ Company is formed to circumvent welfare of employees
▪ Where the device of incorporation is adopted for some illegal or improper
purpose: Where the device of incorporation is adopted for some illegal or
improper purpose, e.g., to defeat or circumvent law, to defraud creditors or to avoid
legal obligations.
Question 6
(a) Explain the modes of revocation of an offer as per the Indian Contract Act, 1872.
(5 Marks)

(b) State any four grounds on which Court may dissolve a partnership firm in case any
partner files a suit for the same. (4 Marks)
(c) Mr. X had purchased some goods from M/s ABC Limited on credit. A credit period of
one month was allowed to Mr. X. Before the due date Mr. X went to the company and
wanted to repay the amount due from him. He found only Mr. Z there, who was the
factory supervisor of the company. Mr. Z told Mr. X that the accountant and the cashier
were on leave, he is in-charge of receiving money and he may pay the amount to him.
Mr. Z issued a money receipt under his signature. After two months M/s ABC Limited
issued a notice to Mr. X for non-payment of the dues within the stipulated period. Mr. X
informed the company that he had already cleared the dues and he is no more
responsible for the same. He also contended that Mr. Z is an employee of the company
to whom he had made the payment and being an outsider, he trusted the words of
Mr. Z as duty distribution is a job of the internal management of the company.
Analyse the situation and decide whether Mr. X is free from his liability. (3 Marks)
Answer
(a) Modes of revocation of Offer
(i) By notice of revocation
(ii) By lapse of time: The time for acceptance can lapse if the acceptance is not given
within the specified time and where no time is specified, then within a reasonable
time.
(iii) By non-fulfillment of condition precedent: Where the acceptor fails to fulfill a
condition precedent to acceptance the proposal gets revoked.
(iv) By death or insanity: Death or insanity of the proposer would result in automatic
revocation of the proposal but only if the fact of death or insanity comes to the
knowledge of the acceptor.

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(v) By counter offer

(vi) By the non- acceptance of the offer according to the prescribed or usual mode
(vii) By subsequent illegality
(b) Dissolution by the Court (Section 44 of the Indian Partnership Act, 1932):
Court may, at the suit of the partner, dissolve a firm on any of the following ground:
(1) Insanity/unsound mind: Where a partner (not a sleeping partner) has become of
unsound mind, the court may dissolve the firm on a suit of the other partners or by
the next friend of the insane partner.
(2) Permanent incapacity: When a partner, other than the partner suing, has become
in any way permanently incapable of performing his duties as partner, then the
court may dissolve the firm. Such permanent incapacity may result from physical
disability or illness etc.
(3) Misconduct: Where a partner, other than the partner suing, is guilty of conduct
which is likely to affect prejudicially the carrying on of business, the court may
order for dissolution of the firm, by giving regard to the nature of business.
(4) Persistent breach of agreement: Where a partner other than the partner suing,
wilfully or persistently commits breach of agreements relating to the management
of the affairs of the firm or the conduct of its business, or otherwise so conduct
himself in matters relating to the business that it is not reasonably practicable for
other partners to carry on the business in partnership with him, then the court may
dissolve the firm at the instance of any of the partners. Following comes in to
category of breach of contract:
• Embezzlement,
• Keeping erroneous accounts
• Holding more cash than allowed
• Refusal to show accounts despite repeated request etc.
(5) Transfer of interest: Where a partner other than the partner suing, has
transferred the whole of his interest in the firm to a third party or has allowed his
share to be charged or sold by the court, in the recovery of arrears of land revenue,
the court may dissolve the firm at the instance of any other partner.
(6) Continuous/Perpetual losses: Where the business of the firm cannot be carried
on except at a loss in future also, the court may order for its dissolution.
(7) Just and equitable grounds: Where the court considers any other ground to be
just and equitable for the dissolution of the firm, it may dissolve a firm. The
following are the cases for the just and equitable grounds-
(i) Deadlock in the management.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 13

(ii) Where the partners are not in talking terms between them.
(iii) Loss of substratum.
(iv) Gambling by a partner on a stock exchange.
(c) Doctrine of Indoor Management: The Doctrine of Indoor Management is the
exception to the doctrine of constructive notice. The doctrine of constructive notice does
not mean that outsiders are deemed to have notice of the internal affairs of the
company. For instance, if an act is authorised by the articles or memorandum, an
outsider is entitled to assume that all the detailed formalities for doing that act have
been observed.
The doctrine of Indoor Management is important to persons dealing with a company
through its directors or other persons. They are entitled to assume that the acts of the
directors or other officers of the company are validly performed, if they are within the
scope of their apparent authority. So long as an act is valid under the articles, if done
in a particular manner, an outsider dealing with the company is entitled to assume that
it has been done in the manner required.
In the given question, Mr. X has made payment to Mr. Z and he (Mr. Z) gave to receipt
of the same to Mr. X. Thus, it will be rightful on part of Mr. X to assume that Mr. Z was
also authorised to receive money on behalf of the company. Hence, Mr. X will be free
from liability for payment of goods purchased from M/s ABC Limited, as he has paid
amount due to an employee of the company.

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SECTION-B : BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.

Answer any three questions from the remaining four questions.
All candidates(including those who have opted for Hindi Medium) are required to answer the
questions in Section B, in English only.
Question 7
(a) Read the passage carefully and answer the questions given below :
"Your room is so ugly that no one can enter your room except yourself, son. Please take
care of yourself at least. "Harish's mother was simply shouting at Harish. It was a beautiful
Sunday morning and. Harish was in no mood to get up from bed even it was already 9.00
A.M. His mother had completed cleaning the whole house except Harish's Room. Harish
got up and finished his daily routine. Still, he was only at the receiving end. "All your friends
have finished morning walk, breakfast and completed their weekly homework given in the
college. Just clean your room and take the whole garbage and throw outside.” Harish was
surprised. What is mom speaking about? Yesterday only his mom was teaching him about
"Swachh Bharat Abhiyan" and today asking him to throw the garbage outside ! "What's this
Mom? You advised me so much and today asking to throw garbage outside?" Harish had
two options, either to follow his mother's last night advice or to follow her present order.
He decided to follow the first and raised objection. His Mom said, "It was just a book son,
I was teaching from that only. "Harish still objected and threw the garbage inside a dustbin,
located around 200 metres away from his house.
Is it only a matter of reading only? Is really cleanliness not, necessary? Is it a duty of the
politicians and Government servants? Harish asked himself all the questions to himself
and decided to do what he thought to be proper. If all of us with a little effort try it in our
daily life, slowly, but surely we can clean our environment. Only we are responsible for all
this non-sense. Therefore we have to act. We have to avoid the use of polythene bags to
save our environment; we have to give up our habit of throwing garbage and used plastic
bags and bottles here and there. Otherwise day will come, when we and our future
generation will be struggling to find a clean road to walk. Think seriously and act
accordingly.
(i) What was the subject matter of the book, which Harish's mother was teaching him
last night? (1 Mark)
(ii) Who has to act properly to ensure a clean environment? (1 Mark)
(iii) Who will suffer if we do not ensure clean environment? (1 Mark)
(iv) Write a summary of the above paragraph. (2 Marks)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

Read the passage :

(i) Make notes, using headings, sub-headings and abbreviations wherever necessary.
(3 Marks)
(ii) Write Summary.
A good business letter is one that gets results. The best way to get results is to
develop a letter that in its appearance, style and content, conveys information
efficiently. To perform this function, a business. letter should be concise, clear and
courteous. The business letter must be concise, don't waste words. Little introduction
or preliminary chat is necessary. Get to the point, make the point, and leave it. It is
safe to assume that your letter is being read by a very busy person with all kinds of
papers to deal with. Re-read and revise your message until the words and sentences
you have used are precise. This takes time, but is a necessary part of a good business
letter. A short business letter that makes its point quickly has much more impact on
a reader than a long- winded, rambling exercise in creative writing. This does not
mean that there is no place for style and even, on occasion, humour in the business
letter. While it conveys a message in its contents, the letter also provides the reader
with an impression of you, its author, the medium is part of the message. The
business letter must be clear. You should have a very firm idea of what you want to
say, and you should let the reader know it. Use the structure of the letter — the
paragraphs, topic sentences, introduction and conclusion- to guide the reader point
by point from your thesis, through your reasoning, to your conclusion. Paragraph
often, to break up the page and to lend an air of organization to the letter. Use an
accepted business letter format. Re-read what you have written from the point of view
of someone who is seeing it for the first time, and be sure that all explanations are
adequate, all information provided (including reference numbers, dates and other
identification). A clear message, clearly delivered, is the essence of business
communication. The business letter must be courteous. Sarcasm and insults are
ineffective and can often work against you. If you are sure you are right, point that
out as politely as possible, explain why you are right, and outline what the reader is
expected to do about it. Another form of courtesy is taking care in your writing and
typing of business letter. Grammatical and spelling errors (even if you call them typing
errors) tell a reader that you don’t think enough of him or can lower the reader's
opinion of your personality faster than anything you say, no matter how idiotic. There
are excuses for ignorance; there are no excuses for sloppiness. The business letter
is your custom-made representative. It speaks for you and is a permanent record of
your message. It can pay big dividends on the time you invest in giving it a concise
message, a clear structure, and a courteous tone. (2 Marks)

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16 FOUNDATION EXAMINATION: NOVEMBER, 2018

Answer
(a) Reading comprehension
(i) The subject matter of the book was “Swacch Bharat Abhiyan”
(ii) We the citizens have to act properly to ensure a clean environment.
(iii) Our future generations will suffer if we do not ensure clean environment.
(iv) Harish’s mother scolded him for not cleaning his room, asked him to clean his room
and to throw the garbage out as he got up on a Sunday morning. He got confused as
previous night his mother was teaching him about “Swacch Bharat Abhiyan” and this
morning asked him to throw the garbage recklessly on the road. He acted responsibly,
after cleaning his room; he disposed the garbage in a dustbin away from his house.
Every citizen is responsible for cleanliness, not just people in the government. With a
little effort, we can keep our environment clean and tidy. We must avoid using
polythene bags and littering else, our future generations will struggle for a clean
environment.
(b) (i) Note Making
Business Letter
(i) Rprsnts the athr
(ii) Gives an idea about the athr’s nature
(ii) Is a prmnt rcrd
A. Good Business Letter
(i) Gets results
(ii) Cnvys infrmtn effcntly
(iii) Characteristics:
(a) Concise
• Brief Intro.
• To the point
• Precise words
(b) Clear
• Cnvys a firm idea
• Has a structure/format with
➢ Subject line
➢ Intro

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 17

➢ Main Para
➢ Cnclsn
• Adqt Info like
➢ Ref. No.
➢ Date
➢ Other idntfctn
(c) Courteous
• Be polite
• Mention reason for your stance
• Specify action to be taken
• Avoid grmtcl/splng errors
Key:
Abbreviations:
Rprsnts: Represents
Athr: Author
Prmnt: Permanent
Rrcrd: Record
Cnvys: Conveys
Infrmtn: Information
Effcntly: Efficiently
Intro: Introduction
Para: Paragraph
Cnclsn: Conclusion
Adqt: Adequate
Ref. No: Reference Number
Idntfctn: Indentification
Grmtcl: Grammatical
Splng: Spelling

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18 FOUNDATION EXAMINATION: NOVEMBER, 2018

(ii) Summary
A business letter represents the sender, gives an idea about the author’s nature and
creates a permanent record. A good business letter is one that conveys information
efficiently. It must be:
Concise: Should briefly introduce the intent then explain the main point precisely. It
saves reader’s precious time and is much more impactful.
Clear: It must convey the idea firmly. It has a structure: subject/topic line, introduction,
main paragraph and conclusion. The details mentioned viz. Reference number, dates,
other identifications should be sufficient for the reader to make out the letter’s
intent/essence.
Courteous: Be polite while justifying your stance and specify action to be taken by
the reader. Avoid grammatical and spelling mistakes.
Question 8
(a) Describe the term "paralanguage', a mode of communication. (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
Proficient
(1) Regular (2) Expert
(3) Weak (4) Reserve (1 Mark)
(ii) Select a suitable antonym for the following word:
Support
(1) Disturb (2) Attend
(3) Oppose (4) Attack (1 Mark)
(iii) Change the following sentence into indirect speech:
Suchi asked Sunil, "Are you interested to visit the temple?" (1 Mark)
(c) Write a précis and give appropriate title to the passage given below :
Trees give shade for the benefit of others, and while they themselves stand in the sun and
endure the scorching heat, they produce the fruit of which others profit. The character of
good men is like that of trees. What is the use of this perishable body if no use is made of
it for the benefit of mankind? Sandalwood, the more it is rubbed, the more scent dies it
yield. Sugarcane, the more it is peeled and cut up into pieces, the more jui ce dies it
produce. The men who are noble at heart do not lose their qualities even in losing their
lives. What matters whether men praise them or not? What difference does it make whether
they die at this moment or whether lives are prolonged? Happen what may, those who
tread in the right path will not set foot in any other. Life itself is unprofitable to a man who
does not live for others. To live for the mere sake of living one's life is to live the life of

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 19

dogs and crows. Those who lay down their lives for the sake of others will assuredly dwell
forever in a world of bliss. (5 Marks)
Answer
(a) Paralanguage
It refers to the way you say something rather than the actual words used, the voice quality,
intonation, pitch, stress, emotion and style of speaking communicates approval, interest or
lack of it. Research estimates that tone accounts for 38 percent of communication.
(b) i. (2)
Expert
ii. (3) Oppose
iii. Indirect speech: Suchi asked Sunil if he was interested to visit the temple.
(Objective questions, hence either right or wrong)
(c) Precis writing
Possible Titles: Good/Great Men/Souls never die
Good/Great Men/Souls live forever
Good men like trees, live for others. As trees, who face the heat of the sun themselves but
bear fruits for others, good men serve others. They do not lose their character, even if they
have to lose their lives. They are not bothered whether they are praised or not, or whether
they live long or are short lived. They live forever in eternal bliss.
Question 9
(a) (i) Discuss “Cultural barrier in communication. (2 Marks)
OR
(ii) What do you mean by (A) Vertical and (B) Horizontal formal communication?
(2 Marks)
(b) Choose the word which best expresses the meaning of the given word:
(i) Fiction
(1) Fantasy (2) Story
(3) Fact (4) Reality (1 Mark)
(ii) Demote
(1) Rise (2) Upgrade
(3) Decline (4) Downgrade (1 Mark)

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20 FOUNDATION EXAMINATION: NOVEMBER, 2018

(iii) Change the following sentence into indirect speech :

Shalini gave order to her younger sister, "Go home immediately." (1 Mark)
(c) Write a circular addressing to the employees regarding re-organization of manpower and
their responsibility in finance department of the company. (5 Marks)
Answer
(a) (i) Cultural barriers: Understanding cultural aspects of communication refers to having
knowledge of different cultures in order to communicate effectively with cross culture
people. Understanding various cultures in this era of globalization is an absolute
necessity as the existence of cultural differences between people from various
countries, regions tribes and, religions, where words and symbols may be interpreted
differently can result in communication barriers and miscommunications.
Multinational companies offer special courses and documents to familiarize their staff
with the culture of the country where they are based for work.
(ii) Formal communication: Formal communication, both oral and written, follows
certain rules, principles and conventions in conveying the message. The hierarchy in
the organization has to be followed. Formal format, style and language have to be
used. The communication pattern can be vertical, horizontal or diagonal.
Vertical: Information can flow upwards or downwards in the organization. Data that
is collected flows up to the top levels of management for review and decision making,
while instructions and orders are passed down from the management/ seniors to the
subordinates for implementation.
Horizontal: Horizontal communication that involves communication between two
parts of the organization at the same level. For example, the managers of a project
in a company may hold a regular daily, weekly or monthly meeting to discuss the
progress of the project.
(b) i. 1. Fantasy
ii. 4. Downgrade
iii. Shalini ordered her younger sister to go home immediately.
(Objective type answers; either right or wrong)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

(c) Circular
Circular No. XV 13th Nov, 2018
Office Circular
Due to urgent work requirements in the Finance department, the following employees are
temporarily shifted to the department for a period of 2 months (60 days) w.e.f Nov 14,
2018.

Name Designation Department Current Responsibility

(Finance Department)
Mr. WER Upper Division Clerk Accounts Clerk
Mr. XYZ Junior Accountant Accounts Accounts Assistant
Ms. PRT Senior Accountant Accounts Accounts Officer
Ms. SDF Project Manager Information Technology Technical Support Manager
Mr. LMN Network Engineer Information Technology Engineer
Mr. RST Office Assistant Sales and Marketing Office Assistant
The above employees are directed to report to Mr. X (Head Finance) at 10 AM tomorrow,
Nov 14, 2018.
Office timings will be from 10 AM till 7PM
Saturday will be a working day; Sunday is a holiday.

JKL
Manager, HR
Question 10
(a) How do Technology barriers effects communication? Explain. (2 Marks)
(b) (i) Fill up the blank with the most suitable preposition or adverb given in the brackets.
He apologized ______ his teacher for his misbehaviour. (to /from / with / against)
(1 Mark)
(ii) Rewrite the following sentence in Passive Voice.
Sunita said, "Please give me a glass of water." (1 Mark)
(iii) Rewrite the following sentence in Active Voice.
The case should be handled by you carefully since it is critical in nature. (1 Mark)

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22 FOUNDATION EXAMINATION: NOVEMBER, 2018

(c) Write a Newspaper Report in 250 words on the topic:

"Daughter of Gardener Tops Board Exams." (5 Marks)
Answer
(a) In the present world, communication modes are primarily technology driven. The
communication technology is being constantly upgraded or new formats emerge ever so
frequently. Anyone who is not abreast with these struggles to communicate effectively via
the medium.
An individual is swamped with huge amount of information every day in the form of emails,
texts and social updates. Multitasking is the norm these days. The information overload
and trying to accomplish too many things together can result in gaps in communication and
miscommunications.
(b) i. He apologized to his teacher for his misbehaviour.
ii. Sunita said, “A glass of water be kindly given to me”/ Sunita requested that a glass
of water be given to her.
iii. You should handle the case carefully since it is critical in nature.
(c) Report
“Daughter of a Gardener Tops Board Exams”
Monday June 25, 2018
Sitting in a dingy servant quarters of a sprawling government bungalow in Lodhi Estate,
Priya Kumari cannot stop smiling. Priya, daughter of a gardener Mr. Ram Swaroop, a class
IV government employee has topped the class XII CBSE Board Examination in the
humanities stream. She secured 98.8% marks. A student of Rajkiya Kanya Pratibha
Vidyalaya, Sardar Patel Marg, is visibly elated. Eldest of the three siblings, she has always
been a bright student, remarked her mother who prepared her daughter’s favourite laddoos
as the news broke. Her father is proud at her achievement and wants her to become an
IAS officer.
Just a month into class XII, she had taken seriously ill with Meningitis that kept her bed
ridden for two months. Her Principal granted her medical leave and allowed her to file her
exam forms from the hospital. After resuming classes, she completed her pending
assignments with the help of her teachers in a month and soon caught up with her peers.
“we were confident that she would top in the region(Northern) but topping the Board exams
nation-wide, came as a pleasant surprise”, quipped one of her teachers. Talking about her
daily regimen, she said “I studied regularly for about 5 hours daily after school and often
stayed back to study at the school library.” She attributes her success to her unflinching
spirit , hard work and support of her parents, teachers and principal. Priya plans to pursue
English Honours from Lady Sriram College and aspires to fulfil her father’s dream by
becoming an IAS officer. With her relentless efforts and spirit of steel, she certainly will!
(Staff correspondent)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 23

Question 11
(a) Non-verbal is also one of the Broad Categories of Communication? Explain. (2 Marks)
(b) Select the correct meaning of the following idioms/phrases among the alternatives given below
(i) Out of the blue
(1) Something happens that was unexpected.
(2) Something happens that was very much expected.
(3) From the sky
(4) From the Ocean (1 Mark)
(ii) Day in and day out
(1) Coming and returning in day time
(2) The day of importance.
(3) Continuously
(4) Within a day (1 Mark)
(iii) Rewrite the following sentence in the Active Voice :
The deer was trapped by the cunning fox. (1 Mark)
(c) Mr. Mohit Agarwal, a resident of Meerut, have recently come across an advertisement, for
a job vacancy in a leading TV Channel for the post of journalist, in The Times of India dated
August 1, 2018.
Draft a Resume alongwith a cover letter in response to the advertisement. (5 Marks)
Answer
(a) Nonverbal Communication: Nonverbal communication is the process of communicating
by sending and receiving wordless messages. These messages can aid verbal
communication, convey thoughts and feelings contrary to the spoken words or express
ideas and emotions on their own. Some of the functions of nonverbal communication in
humans are to complement and illustrate, to reinforce and emphasize, to replace and
substitute, to control and regulate, and to contradict the denoted message
Physical nonverbal communication: An individual’s body language that is, facial
expressions, stance, gestures, tone of voice, touch, and other physical signals constitute
this type of communication. For example, leaning forward may mean friendliness,
acceptance and interest, while crossing arms can be interpreted as antagonistic or
defensive posture.
Research estimates that physical, non-verbal communication accounts for 55 percent of
all communication. Smiles, frowns, pursing of lips, clenching of hands etc. transmit
emotions which are not expressed through verbal communication.

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24 FOUNDATION EXAMINATION: NOVEMBER, 2018

Paralanguage: The way you say something, more than the actual words used, reveal the
intent of the message. The voice quality, intonation, pitch, stress, emotion, tone, and style
of speaking, communicates approval, interest or the lack of it. Research estimates that
tone of the voice accounts for 38 percent of all communications .
Aesthetic communication: Art forms such as dancing, painting, sculptor, music are also
means of communication. They distinctly convey the ideas and thoughts of the artist.
Appearance: Appearance is usually the first thing noticed about a person. A well dressed
and groomed person is presumed to be organized and methodical, whereas a sloppy or
shabby person fails to make a favourable impression. Therefore, dressing appropriately in
all formal interactions is emphasized.
The dress code in office is generally formal. It constitutes of formal suits, trousers with
plain white or light coloured shirts and leather shoes. Bright colours, jeans, T - shirts,
especially with slogans and other informal wear are frowned upon. For women formal two-
piece trouser or skirt sets or formal ethnic wear like sarees, is permissible.
Symbols such as religious, status, or ego-building symbols
(b) i. 1. Something happens that was unexpected.
ii. 3. Continuously
iii. The cunning fox trapped the deer.
(c) Cover Letter
To Date: Nov 13, 2018
Manager(HR)
ABC TV
FGH Media Pvt Ltd
Mandi House
New Delhi.
Sir,
Subject: Application for the post of Journalist
Greetings for the day ! I am writing this letter to express my interest in the position of
Journalist as advertised in the SDF national daily, Careers sec tion dated August 1, 2018.
I fulfil all the educational and professional requirements as specified in the advert. I am a
post graduate in Media Studies from ASD University and interned at renowned media

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 25

houses (print and TV) I have two years of relevant experience. Currently I am heading the
regional news section at XYZ TV at their Meerut office.
My detailed resume is appended herewith for your perusal. Looking forward for a positive
response.
Best Regards,
Mohit Agarwal
36, Civil Lines,
Meerut.
UP.
Resume
Mohit Agarwal
36, Civil Lines
Meerut,UP
Phone: 98XXXXXXXX
Email: [email protected]
OBJECTIVE:
To be associated with an organisation that offers tremendous opportunities for growth and
autonomy, providing a challenging environment to harness my creative streak, innovative
ideas and utilise my experience as a media correspondent to the maximum.
SUMMARY:
• One year of experience as a staff correspondent in CVB TV.
• Two years of experience as Head Regional News XYZ TV
• Proven skills in content planning, selection and presentation.
• Excellent Reporting skills in English and Hindi.
EXPERIENCE:
2016 – PRESENT Head Regional News XYZ TV Meerut
• Planning and deployment of staff correspondents
• Sponsorship Planning from corporate and medis houses
• Staff selection and Training
• Media Planning for regional corporate houses

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26 FOUNDATION EXAMINATION: NOVEMBER, 2018

2015– 2016 Staff Correspondent CVB TV

• Capturing Events
• Conceptualising stories
• Presenter for “Khufia” section of Daily News
EDUCATION:
2014 Masters in Mass Comm, ASD University, New Delhi
2012 English(H), ASD University, New Delhi
INTERNSHIPS:
2014 Two month at World Journalists Association (Articles Section)
2013 4 months at CNN TV in News production and planning
SKILLS
• Well versed with Media Softwares
• Meticulous Planning and Execution skills with an eye for detail
PERSONAL DETAILS
Date of Birth 15 June, 1992
Marital Status Unmarried
Languages Known English, Hindi
DECLARATION
I solemnly declare that all the above information is correct to the best of my knowledge
and belief.

Date: Nov 13, 2018

Place: Meerut (Mohit Agarwal)

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAW

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) Mr. Sohanlal sold 10 acres of his agricultural land to Mr. Mohanlal on 25 th September
2018 for ` 25 Lakhs. The Property papers mentioned a condition, amongst other details,
that whosoever purchases the land is free to use 9 acres as per his choice but the
remaining 1 acre has to be allowed to be used by Mr. Chotelal, son of the seller for
carrying out farming or other activity of his choice. On 12th October, 2018, Mr. Sohanlal
died leaving behind his son and life. On 15th October, 2018 purchaser started
construction of an auditorium on the whole 10 acres of land and denied any land to the
son.
Now Mr. Chotelal wants to file a case against the purchaser and get a suitable
redressed. Discuss the above in light of provisions of Indian Contract Act, 1872 and
decide upon Mr. Chotelal's plan of action? (4 Marks)
(b) Sound Syndicate Ltd., a public company, its articles of association empowers the
managing agents to borrow both short and long term loans on behalf of the company, Mr.
Liddle, the director of the company, approached Easy Finance Ltd., a non banking
finance company for a loan of ` 25,00,000 in name of the company.
The Lender agreed and provided the above said loan. Later on, Sound Syndicate Ltd.
refused to repay the money borrowed on the pretext that no resolution authorizing such
loan have been actually passed by the company and the lender should have enquired
about the same prior providing such loan hence company not liable to pay such loan.
Analyse the above situation in terms of the provisions of Doctrine of Indoor Management
under the Companies Act, 2013 and examine whether the contention of Sound Syndicate
Ltd. is correct or not? (4 Marks)
(c) Discuss the various types of implied warranties as per the Sales of Goods Act, 1930?
(4 Marks)
Answer
(a) Problem as asked in the question is based on the provisions of the Indian Contract Act,
1872 as contained in section 2(d) and on the principle ‘privity of consideration’.
Consideration is one of the essential elements to make a contract valid and it can fl ow
from the promisee or any other person. In view of the clear language used in definition of
‘consideration’ in Section 2(d), it is not necessary that consideration should be furnished
by the promisee only. A promise is enforceable if there is some consideration for it and it

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2 FOUNDATION EXAMINATION: MAY, 2019

is quite immaterial whether it moves from the promisee or any other person. The leading
authority in the decision of the Chinnaya Vs. Ramayya, held that the consideration can
legitimately move from a third party and it is an accepted principle of law in India.
In the given problem, Mr. Sohanlal has entered into a contract with Mr. Mohanlal, but Mr.
Chotelal has not given any consideration to Mr. Mohanlal but the consideration did flow
from Mr. Sohanlal to Mr. Mohanlal on the behalf of Mr. Chotelal and such consideration
from third party is sufficient to enforce the promise of Mr. Mohanlal to allow Mr. Chotelal
to use 1 acre of land. Further the deed of sale and the promise made by Mr. Mohanlal to
Mr. Chotelal to allow the use of 1 acre of land were executed simultaneously and
therefore they should be regarded as one transaction and there was sufficient
consideration for it.
Moreover, it is provided in the law that “in case covenant running with the land, where a
person purchases land with notice that the owner of the land is bound by certain duties
affecting land, the covenant affecting the land may be enforced by the successor of the
seller.”
In such a case, third party to a contract can file the suit although it has not moved the
consideration.
Hence, Mr. Chotelal is entitled to file a petition against Mr. Mohanlal for execution of
contract.
(b) Doctrine of Indoor Management
According to this doctrine, persons dealing with the company need not inquire whether
internal proceedings relating to the contract are followed correctly, once they are
satisfied that the transaction is in accordance with the memorandum and articles of
association.
Stakeholders need not enquire whether the necessary meeting was convened and held
properly or whether necessary resolution was passed properly. They are entitled to take
it for granted that the company had gone through all these proceedings in a regular
manner.
The doctrine helps protect external members from the company and states that the
people are entitled to presume that internal proceedings are as per documents submitted
with the Registrar of Companies.
Thus,
1. What happens internal to a company is not a matter of public knowledge. An
outsider can only presume the intentions of a company, but do not know the
information he/she is not privy to.
2. If not for the doctrine, the company could escape creditors by denying the authority
of officials to act on its behalf.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

In the given question, Easy Finance Ltd. being external to the company, need not
enquire whether the necessary resolution was passed properly. Even if the
company claim that no resolution authorizing the loan was passed, the company is
bound to pay the loan to Easy Finance Ltd.
(c) Various types of implied warranties
1. Warranty as to undisturbed possession [Section 14(b) of the Sales of Goods
Act, 1930]: An implied warranty that the buyer shall have and enjoy quiet
possession of the goods. That is to say, if the buyer having got possession of the
goods, is later on disturbed in his possession, he is entitled to sue the seller for the
breach of the warranty.
2. Warranty as to non-existence of encumbrances [Section 14(c)]: An implied
warranty that the goods shall be free from any charge or encumbrance in favour of
any third party not declared or known to the buyer before or at the time the contract
is entered into.
3. Warranty as to quality or fitnessby usage of trade [Section 16(3)]: An implied warranty
as to quality or fitness for a particular purpose may be annexed or attached by the
usage of trade.
4. Disclosure of dangerous nature of goods: Where the goods are dangerous in
nature and the buyer is ignorant of the danger, the seller must warn the buyer of the
probable danger. If there is a breach of warranty, the seller may be liable in
damages.
Question 2
(a) "Mere silence is not fraud" but there are some circumstances where the "silence is
fraud". Explain the circumstances as per the provision of Indian Contract Act, 1872?
(7 Marks)
(b) "LLP is an alternative corporate business form that gives the benefits of limited liability of
a company and the flexibility of a partnership". Explain. (5 Marks)
Answer
(a) Mere silence is not fraud
Mere silence as to facts likely to affect the willingness of a person to enter into a contract
is not fraud, unless the circumstances of the case are such that, regard being had to
them, it is the duty of the person keeping silence to speak, or unless his silence is, in
itself, equivalent to speech.
It is a rule of law that mere silence does not amount to fraud. A contracting party is not
duty bound to disclose the whole truth to the other party or to give him the whole
information in his possession affecting the subject matter of the contract.

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4 FOUNDATION EXAMINATION: MAY, 2019

The rule is contained in explanation to Section 17 of the Indian Contract Act which clearly
states the position that mere silence as to facts likely to affect the willingness of a person
to enter into a contract is not fraud.
Silence is fraud:
1. Duty of person to speak: Where the circumstances of the case are such that it is
the duty of the person observing silence to speak.
Following contracts come within this category:
(a) Fiduciary Relationship: Here, the person in whom confidence is reposed is
under a duty to act with utmost good faith and make full disclosure of all
material facts concerning the agreement, known to him.
(b) Contracts of Insurance: In contracts of marine, fire and life insurance, there
is an implied condition that full disclosure of material facts shall be made,
otherwise the insurer is entitled to avoid the contract.
(c) Contracts of marriage: Every material fact must be disclosed by the parties to
a contract of marriage.
(d) Contracts of family settlement: These contracts also require full disclosure
of material facts within the knowledge of the parties.
(e) Share Allotment contracts: Persons issuing ‘Prospectus’ at the time of public
issue of shares/debentures by a joint stock company have to disclose all
material facts within their knowledge.
2. Where the silence itself is equivalent to speech: For example, A says to B “If you
do not deny it, I shall assume that the horse is sound.” A says nothing. His silence
amounts to speech.
(b) LLP is an alternative corporate business form that gives the benefits of limited
liability of a company and the flexibility of a partnership
Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the
agent of the LLP, but not of other partners (Section 26 of the LLP Act, 2008). The liab ility
of the partners will be limited to their agreed contribution in the LLP, while the LLP itself
will be liable for the full extent of its assets.
Flexibility of a partnership: The LLP allows its members the flexibility of organizing
their internal structure as a partnership based on a mutually arrived agreement. The LLP
form enables entrepreneurs, professionals and enterprises providing services of any kind
or engaged in scientific and technical disciplines, to form commercially efficient vehicles
suited to their requirements. Owing to flexibility in its structure and operation, the LLP is
a suitable vehicle for small enterprises and for investment by venture capital.

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Question 3
(a) (i) What is the provision related to the effect of notice to an acting partner of the firm as per
the Indian Partnership Act, 1932? (2 Marks)
OR
(ii) Discuss the provisions regarding personal profits earned by a partner under the
Indian Partnership Act, 1932? (2 Marks)
(b) "Whether a group of persons is or is not a firm, or whether a person is or not a partner in
a firm." Explain the mode of determining existence of partnership as per the Indian
Partnership Act, 1932? (4 Marks)
(c) Mr. Rich aspired to get a self-portrait made by an artist. He went to the workshop of Mr.
C an artist and asked whether he could sketch the former's portrait on oil painting
canvass. Mr. C agreed to the offer and asked for ` 50,000 as full advance payment for
the above creative work. Mr. C clarified that the painting shall be completed in 10 sittings
and shall take 3 months.
On reaching to the workshop for the 6th sitting, Mr. Rich was informed that Mr. C became
paralyzed and would not be able to paint for near future. Mr. C had a son Mr. K who was
still pursuing his studies and had not taken up his father’s profession yet?
Discuss in light of the Indian Contract Act, 1872?
(i) Can Mr. Rich ask Mr. K to complete the artistic work in lieu of his father?
(ii) Could Mr. Rich ask Mr. K for refund of money paid in advance to his father?
(6 Marks)
Answer
(a) (i) Effect of notice to an acting partner of the firm
According to Section 24 of the Indian Partnership Act, 1932, notice to a partner who
habitually acts in the business of the firm of any matter relating to the affairs of the
firm operates as notice to the firm, except in the case of a fraud on the firm
committed by or with the consent of that partner.
Thus, the notice to one is equivalent to the notice to the rest of the partners of the
firm, just as a notice to an agent is notice to his principal. This notice must be actual
and not constructive. It must further relate to the firm’s business. Only then it would
constitute a notice to the firm.
OR
(ii) Personal Profit earned by Partners (Section 16 of the Indian Partnership Act,
1932)
According to section 16, subject to contract between the partners:

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6 FOUNDATION EXAMINATION: MAY, 2019

(a) If a partner derives any profit for himself from any transaction of the firm, or from the
use of the property or business connection of the firm or the firm name, he shall
account for that profit and pay it to the firm;
(b) If a partner carries on any business of the same nature and competing with that of
the firm, he shall account for and pay to the firm all profits made by him in that
business.
(b) Mode of determining existence of partnership (Section 6 of the Indian Partnership
Act, 1932): In determining whether a group of persons is or is not a firm, or whether a
person is or not a partner in a firm, regard shall be had to the real relation between the
parties, as shown by all relevant facts taken together.
For determining the existence of partnership, it must be proved.
1. There was an agreement between all the persons concerned
2. The agreement was to share the profits of a business and
3. the business was carried on by all or any of them acting for all.
1. Agreement: Partnership is created by agreement and not by status (Section 5). The
relation of partnership arises from contract and not from status; and in particular,
the members of a Hindu Undivided family carrying on a family business as such are
not partners in such business.
2. Sharing of Profit: Sharing of profit is an essential element to constitute a
partnership. But, it is only a prima facie evidence and not conclusive evidence, in
that regard. The sharing of profits or of gross returns accruing from property by
persons holding joint or common interest in the property would not by itself make
such persons partners. Although the right to participate in profits is a strong test of
partnership, and there may be cases where, upon a simple participation in profits,
there is a partnership, yet whether the relation does or does not exist must depend
upon the whole contract between the parties.
3. Agency: Existence of Mutual Agency which is the cardinal principle of partnership
law, is very much helpful in reaching a conclusion in this regard. Each partner
carrying on the business is the principal as well as an agent of other partners. So,
the act of one partner done on behalf of firm, binds all the partners. If the elements
of mutual agency relationship exist between the parties constituting a group formed
with a view to earn profits by running a business, a partnership may be deemed to
exist.
(c) A contract which involves the use of personal skill or is founded on personal
consideration comes to an end on the death of the promisor. As regards any other
contract the legal representatives of the deceased promisor are bound to perform it
unless a contrary intention appears from the contract (Section 37 of the Indian Contract

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

Act, 1872). But their liability under a contract is limited to the value of the property they
inherit from the deceased.
(i) In the instant case, since painting involves the use of personal skill and on
becoming Mr. C paralyzed, Mr. Rich cannot ask Mr. K to complete the artistic work
in lieu of his father Mr. C.
(ii) According to section 65 of the Indian Contract Act, 1872, when an agreement is
discovered to be void or when a contract becomes void, any person who has
received any advantage under such agreement or contract is bound to restore it, or
to make compensation for it to the person from whom he received it.
Hence, in the instant case, the agreement between Mr. Rich and Mr. C has become
void because of paralysis to Mr. C. So, Mr. Rich can ask Mr. K for refund of money
paid in advance to his father, Mr. C.
Question 4
(a) “A non-owner can convey better title to the bonafide purchaser of goods for value.”
Discuss the cases when a person other than the owner can transfer title in goods as per
the provisions of the Sales of Goods Act, 1930? (6 Marks)
(b) M/s XYZ & Associates, a partnership firm with X, Y, Z as senior partners were engaged
in the business of carpet manufacturing and exporting to foreign countries. On 25th
August, 2016, they inducted Mr. G, an expert in the field of carpet manufacturing as their
partner. On 10th January 2018, Mr. G was blamed for unauthorized activities and thus
expelled from the partnership by united approval of rest of the partners.
(i) Examine whether action by the partners was justified or not?
(ii) What should have the factors to be kept in mind prior expelling a partner from the
firm by other partners according to the provisions of the Indian Partnership Act,
1932? (6 Marks)
Answer
(a) In the following cases, a non-owner can convey better title to the bona fide purchaser of
goods for value:
(1) Sale by a Mercantile Agent: A sale made by a mercantile agent of the goods for
document of title to goods would pass a good title to the buyer in the following
circumstances; namely;
(a) If he was in possession of the goods or documents with the consent of the
owner;
(b) If the sale was made by him when acting in the ordinary course of
business as a mercantile agent; and

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8 FOUNDATION EXAMINATION: MAY, 2019

(c) If the buyer had acted in good faith and has at the time of the contract of sale, no
notice of the fact that the seller had no authority to sell (Proviso to Section 27
of the Sale of Goods Act, 1930).
(2) Sale by one of the joint owners (Section 28): If one of several joint owners of
goods has the sole possession of them by permission of the co-owners, the
property in the goods is transferred to any person who buys them of such joint
owner in good faith and has not at the time of the contract of sale notice that the
seller has no authority to sell.
(3) Sale by a person in possession under voidable contract: A buyer would acquire
a good title to the goods sold to him by a seller who had obtained possession of the
goods under a contract voidable on the ground of coercion, fraud, misrepresentation
or undue influence provided that the contract had not been rescinded until the time
of the sale (Section 29).
(4) Sale by one who has already sold the goods but continues in possession
thereof: If a person has sold goods but continues to be in possession of them or of the
documents of title to them, he may sell them to a third person, and if such person
obtains the delivery thereof in good faith and without notice of the previous sale, he
would have good title to them, although the property in the goods had passed to the
first buyer earlier. [Section 30(1)]
(5) Sale by buyer obtaining possession before the property in the goods has
vested in him: Where a buyer with the consent of the seller obtains possession of
the goods before the property in them has passed to him, he may sell, pledge or
otherwise dispose of the goods to a third person, and if such person obtains
delivery of the goods in good faith and without notice of the lien or other right of the
original seller in respect of the goods, he would get a good title to them [Section
30(2)].
(6) Effect of Estoppel: Where the owner is estopped by the conduct from denying the
seller’s authority to sell, the transferee will get a good title as against the true
owner. But before a good title by estoppel can be made, it must be shown that the
true owner had actively suffered or held out the other person in question as the true
owner or as a person authorized to sell the goods.
(7) Sale by an unpaid seller: Where an unpaid seller who had exercised his right of
lien or stoppage in transit resells the goods, the buyer acquires a good title to the
goods as against the original buyer [Section 54 (3)].
(8) Sale under the provisions of other Acts:
(i) Sale by an Official Receiver or Liquidator of the Company will give the
purchaser a valid title.
(ii) Purchase of goods from a finder of goods will get a valid title under
circumstances [Section 169 of the Indian Contract Act, 1872]

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 9

(iii) A sale by pawnee can convey a good title to the buyer [Section 176 of the
Indian Contract Act, 1872]
(b) Expulsion of a Partner (Section 33 of the Indian Partnership Act, 1932):
A partner may not be expelled from a firm by a majority of partners except in exercise, in
good faith, of powers conferred by contract between the partners.
The test of good faith as required under Section 33(1) includes three things:
• The expulsion must be in the interest of the partnership.
• The partner to be expelled is served with a notice.
• He is given an opportunity of being heard.
If a partner is otherwise expelled, the expulsion is null and void.
(i) Action by the partners of M/s XYZ & Associates, a partnership firm to expel Mr. G
from the partnership was justified as he was expelled by united approval of the
partners exercised in good faith to protect the interest of the partnership against the
unauthorized activities charged against Mr. G. A proper notice and opportunity of
being heard has to be given to Mr. G.
(ii) The following are the factors to be kept in mind prior expelling a partner from the
firm by other partners:
(a) the power of expulsion must have existed in a contract between the partners;
(b) the power has been exercised by a majority of the partners; and
(c) it has been exercised in good faith.
Question 5
(a) M/s Woodworth & Associates, a firm dealing with the wholesale and retail buying and
selling of various kinds of wooden logs, customized as per the requirement of the
customers. They dealt with Rose wood, Mango wood, Teak wood, Burma wood etc.
Mr. Das, a customer came to the shop and asked for wooden logs measuring 4 inches
broad and 8 feet long as required by the carpenter. Mr. Das specifically mentioned
that he required the wood which would be best suited for the purpose of making
wooden doors and window frames. The Shop owner agreed and arranged the wooden
pieces cut into as per the buyers requirements.
The carpenter visited Mr. Das's house next day, and he found that the seller has
supplied Mango Tree wood which would most unsuitable for the purpose. The:
carpenter asked Mr. Das to return the wooden logs as it would not meet his
requirements.
The Shop owner refused to return the wooden logs on the plea that logs were cut to
specific requirements of Mr. Das and hence could not be resold.

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10 FOUNDATION EXAMINATION: MAY, 2019

(i) Explain the duty of the buyer as well as the seller according to the doctrine of
“Caveat Emptor”.
(ii) Whether Mr. Das would be able to get the money back or the right kind of wood as
required serving his purpose? (6 Marks)
(b) What do you mean by "Companies with charitable purpose" (section 8) under the
Companies Act, 2013? Mention the conditions of the issue and revocation of the licence
of such company by the government. (6 Marks)
Answer
(a) (i) Duty of the buyer according to the doctrine of “Caveat Emptor”: In case of sale of
goods, the doctrine ‘Caveat Emptor’ means ‘let thebuyer beware’. When sellers display
their goods in the open market, it is for the buyers to make a proper selection or choice of
the goods. If the goods turn out to be defective he cannothold the seller liable. The seller
is in no way responsible for the bad selection of the buyer. The seller is not bound to
disclose the defects in the goods which he is selling.
Duty of the seller according to the doctrine of “Caveat Emptor”: The following
exceptions to the Caveat Emptor are the duties of the seller:
1. Fitness as to quality or use
2. Goods purchased under patent or brand name
3. Goods sold by description
4. Goods of Merchantable Quality
5. Sale by sample
6. Goods by sample as well as description
7. Trade usage
8. Seller actively conceals a defect or is guilty of fraud
(ii) As Mr. Das has specifically mentioned that he required the wood which would be
best suited for the purpose of making wooden doors and window frames but the
seller supplied Mango tree wood which is most unsuitable for the purpose. Mr. Das
is entitled to get the money back or the right kind of wood as required serving his
purpose. It is the duty of the seller to supply such goods as are reasonably fit for the
purpose mentioned by buyer. [Section 16(1) of the Sale of Goods Act, 1930]
(b) Formation of companies with charitable purpose etc. (Section 8 company):
Section 8 of the Companies Act, 2013 deals with the formation of companies which are
formed to
• promote the charitable objects of commerce, art, science, sports, education,
research, social welfare, religion, charity, protection of environment etc.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 11

Such company intends to apply its profit in

• promoting its objects and
• prohibiting the payment of any dividend to its members.
Examples of section 8 companies are FICCI, ASSOCHAM, National Sports Club of India,
CII etc.
Power of Central government to issue the license–
(i) Section 8 allows the Central Government to register such person or association of
persons as a company with limited liability without the addition of words ‘Limited’ or
‘Private limited’ to its name, by issuing licence on such conditions as it deems fit.
(ii) The registrar shall on application register such person or association of persons as
a company under this section.
(iii) On registration the company shall enjoy same privileges and obligations as of a
limited company.
Revocation of license: The Central Government may by order revoke the licence of the
company where the company contravenes any of the requirements or the conditions of
this sections subject to which a licence is issued or where the affairs of the company are
conducted fraudulently, or violative of the objects of the company or prejudicial to public
interest, and on revocation the Registrar shall put ‘Limited’ or ‘Private Limited’ against
the company’s name in the register. But before such revocation, the Central Government
must give it a written notice of its intention to revoke the licence and opportunity to be
heard in the matter.
Question 6
(a) Discuss the essentials of Undue Influence as per the Indian Contract Act, 1872. (5 Marks)
(b) “Indian Partnership Act does not make the registration of firms compulsory nor does it
impose any penalty for non-registration." Explain. Discuss the various disabilities or
disadvantages that a non-registered partnership firm can face in brief? (4 Marks)
(c) Popular Products Ltd. is company incorporated in India, having a total Share Capital of
` 20 Crores. The Share capital comprises of 12 Lakh equity shares of ` 100 each and 8
Lakhs Preference Shares of ` 100 each. Delight Products Ltd. and Happy Products Ltd.
hold 2,50,000 and 3,50,000 shares respectively in Popular Products Ltd. Another
company Cheerful Products Ltd. holds 2,50,000 shares in Popular Products Ltd. Jovial
Ltd. is the holding company for all above three companies namely Delight Products Ltd;
Happy Products Ltd.; Cheerful Products Ltd. Can Jovial Ltd. be termed as subsidiary
company of Popular products. Ltd., if it. Controls composition of directors of Popular
Products Ltd. State the related provision in the favour of your answer. (3 Marks)

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12 FOUNDATION EXAMINATION: MAY, 2019

Answer
(a) The essentials of Undue Influence as per the Indian Contract Act, 1872 are the following:
(1) Relation between the parties: A person can be influenced by the other when a
near relation between the two exists.
(2) Position to dominate the will: Relation between the parties exist in such a manner
that one of them is in a position to dominate the will of the other. A person is
deemed to be in such position in the following circumstances:
(a) Real and apparent authority: Where a person holds a real authority over the
other as in the case of master and servant, doctor and patient and etc.
(b) Fiduciary relationship: Where relation of trust and confidence exists between
the parties to a contract. Such type of relationship exists between father and
son, solicitor and client, husband and wife, creditor and debtor, etc.
(c) Mental distress: An undue influence can be used against a person to get his
consent on a contract where the mental capacity of the person is temporarily
or permanently affected by the reason of mental or bodily distress, illness or of
old age.
(d) Unconscionable bargains: Where one of the parties to a contract is in a
position to dominate the will of the other and the contract is apparently
unconscionable i.e., unfair, it is presumed by law that consent must have been
obtained by undue influence. Unconscionable bargains are witnessed mostly in
money lending transactions and in gifts.
(3) The object must be to take undue advantage: Where the person is in a position
to influence the will of the other in getting consent, must have the object to take
advantage of the other.
(4) Burden of proof: The burden of proving the absence of the use of the dominant
position to obtain the unfair advantage will lie on the party who is in a position to
dominate the will of the other.
(b) Under the English Law, the registration of firms is compulsory. Therefore, there is a
penalty for non-registration of firms. But the Indian Partnership Act, 1932 does not make
the registration of firms compulsory nor does it impose any penalty for non-registration.
The registration of a partnership is optional and one partner cannot compel another
partner to join in the registration of the firm. It is not essential that the firm should be
registered from the very beginning.
However, under Section 69, non-registration of partnership gives rise to a number of
disabilities which are as follows:
(i) No suit in a civil court by firm or other co-partners against third party: The firm or
any other person on its behalf cannot bring an action against the third party for

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 13

breach of contract entered into by the firm, unless the firm is registered and the
persons suing are or have been shown in the register of firms as partners in the firm.
(ii) No relief to partners for set-off of claim: If an action is brought against the firm
by a third party, then neither the firm nor the partner can claim any set-off, if the suit be
valued for more than ` 100 or pursue other proceedings to enforce the rights arising
from any contract.
(iii) Aggrieved partner cannot bring legal action against other partner or the firm: A
partner of an unregistered firm (or any other person on his behalf) is precluded from
bringing legal action against the firm or any person alleged to be or to have been a
partner in the firm.
(iv) Third party can sue the firm: In case of an unregistered firm, an action can be
brought against the firm by a third party.
(c) In the present case, the total share capital of Popular Products Ltd. is ` 20 crores
comprised of 12 Lakh equity shares and 8 Lakhs preference shares.
Delight Products Ltd., Happy Products Ltd. and Cheerful Products Ltd together hold
8,50,000 shares (2,50,000+3,50,000+2,50,000) in Popular Products Ltd. Jovial Ltd. is the
holding company of all above three companies. So, Jovial Ltd. along with its subsidiaries
hold 8,50,000 shares in Popular Products Ltd. which amounts to less than one-half of its
total share capital. Hence, Jovial Ltd. by virtue of share holding is not a holding company
of Popular Products Ltd.
Secondly, it is given that Jovial Ltd. controls the composition of directors of Popular
Products Ltd., hence, Jovial Ltd. is a holding company of Popular Products Ltd. and not a
subsidiary company. [Section 2(87) of the Companies Act, 2013]

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SECTION-B : BUSINESS CORRESPONDENCE AND REPORTING
Question No. 7 is compulsory.
Answer any three questions from the remaining four questions.
All candidates (including those who have opted for Hindi Medium) are required to answer the
questions in Section B, in English only.
Question 7
(a) Read the passage carefully and answer the questions given below:
Coral reefs are one of the most fragile, biologically complex, and diverse marine
ecosystems on Earth. This ecosystem is one of the fascinating paradoxes of the
biosphere. Found along the sea coasts they are formed in various shapes and sizes.
They constitute as one of the beautiful creations of nature. Symbiotic cells of algae
known as zooxanthellae carry out photosynthesis using the metabolic wastes of the coral
thereby producing food for themselves; for their corals, hosts, and even for other
members of the reef community. This symbiotic process allows organisms in the reef
community to use sparse nutrient resources efficiently.
Unfortunately for coral reefs, however, a variety of human activities are causing
worldwide degradation of shallow marine habitats by adding nutrients to the water.
Agriculture, slash-and-burn·1 and clearing, sewage disposal and' manufacturing that
create waste by-products all increase nutrient loads in these waters. Typical symptoms of
reef decline are destabilized herbivore populations and an increasing abundance of algae
and filter-feeding animals. Declines in reef communities are consistent with observations
that nutrient input is increasing in direct proportion to growing human populations,
thereby threatening reef communities sensitive to subtle changes in nutrient input to their
waters.
(i) What are the indicators of reef decay? (1 Mark)
(ii) How does Algae carry out the process of photosynthesis? (1 Mark)
(iii) How is man responsible for destruction of Natural Reef? (1 Mark)
(iv) Write a Summary of the above Passage. (2 Marks)
(b) Read the passage :
(i) Make Notes, using Headings, Sub headings and abbreviations whenever necessary.
(3 Marks)
(ii) Write Summary,
In most sectors of the economy, it is the seller who attempts to attract' a potential
buyer with various inducements of price, quality arid utility and it is the buyer who
makes the decision. Where circumstances permit the buyer no choice because

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

there is effectively only one seller and the product is relatively essential,
government usually asserts monopoly and places the industry under price and other
regulations. Neither of these conditions prevails in most of the health-care industry;
In the health-care industry, the doctor-patient relationship is the mirror image of the
ordinary relationship between producer and consumer. Once an individual his
chosen to see a physician and even then there may be real choice-it is the
physician who usually makes all significant purchasing decisions whether the
patient sho1:1ld. Return "next Wednesday;" whether X-rays are needed, whether
drugs should be prescribed, etc. It is a rare and sophisticated patie11: who will
challenge such professional decisions or raise in advance questions about price,
especially when the ailment is regarded as serious.
This is particularly significant m relation to hospital care. The physician must certify
the need for hospitalization, determine what procedures will be performed and
announce when the patient may be discharged. The patient may be consulted
about some of these decisions; but in the main it is the doctor's judgment that are
final. Little wonder then that in the eyes of the hospital it is the physician who is the
real "consumer." As a consequence, the medical staff represents the "power centre"
in hospital policy and decision-making, not the administration;
Although usually there are in this situation four identifiable participants the
physician, the hospital, the patient, and the payer the physician makes the essential
decisions for all of them. The hospital becomes a extension of the physician; the
payer generally meets most of the bonafide, a bill generated by the
physician/hospital; and for the most part the patient plans a passive role. In routine
or minor illnesses, or just plain worries, the patient's options are, of course, much
greater with respect to use and price. In illnesses that are of some significance,
however, such choices tend to evaporate or away: DISAPPEAR "my despair
evaporated J. F. Wharton", and it is for these illnesses that the bulk of the health-
care dollar, is spent. We estimate that about 75-80 percent of health-care
expenditures are determined by physicians, not patients; For this reason, economy
measures directed at patients or the general publics are relatively ineffective.
(2 Marks)
Answer
(a) (i) Indicators of reef decay include destabilized herbivore populations and an
increasing abundance of algae and filter-feeding animals.
(ii) Algae carry out the process of photosynthesis by using the metabolic wastes of the
coral thereby producing food for themselves, for their corals, hosts, and even for
other members of the reef community.

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16 FOUNDATION EXAMINATION: MAY, 2019

(iii) Man is responsible for decay of reef because activities such as agriculture, slash-
and- burn land clearing, sewage disposal and manufacturing that create waste by-
products all increase nutrient loads in these waters that cause degradation of reef.
(iv) Summary of the above passage-
Coral reefs are one of the most fragile and complex, marine ecosystem on Earth.
Cells of algae known as zooxanthellae carry out photosynthesis using the metabolic
wastes of the coral thereby producing food for themselves, for their corals, and for
other members of the reef community. Man on other hand is destroying the coral
reefs by carrying out agriculture, slash-and- burn land clearing etc. Thus the reef
communities are in decline.
(b) (i) Notes, using Headings, Sub-headings and Abbreviations-
MONOPOLY IN HEALTH CARE INDUSTRY
A. Govt. regulates industry.
a. In Economics: the seller attracts buyers
b. In Monopoly: Govt. puts price/other curbs against industry.
c. but in HC Industry Govt. fails to put such curbs.
B. HC Industry.
a. Dr.- Pt. relationship = Producer-Consumer.
b. It’s the Dr. who decides everything i.e. Pt. visit; test types;
c. Rarely the Dr.’s decision is questioned.
C. Hospital Care.
a. Dr. decides hospitalization need; procedures to be performed; discharge
period.
b. Dr. decision final.
D. Participants.
a. Four participants - Dr. Hospital; Pt.; payer.
b. Payer pays bills as decided by hospital; dr.
c. Pt. is passive.
d. Health care expenses determined by physicians.
Key
1. Dr. = Doctor
2. Pt. = patient
3. HC = health care
4. Govt. –Government.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 17

(ii) Summary-
The health care industry has four participants namely the physician; the hospital’
the patient; and the payer. The physician and hospitals are at the commanding
position. They dominate over the patient and the payers with regard to type of
medication and test needed. The medical staff is the power centre; the hospital
comes secondary. Unlike other sector where the government puts checks to curb
monopoly of the industry over the customers, restrictions do not work for the health
care industry and hence any progressive measures started by the government
towards patients and public becomes ineffective.
Question 8
(a) Define V~1·tical & Chain Network under network in communication? (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word.
Crooked
(1) Straight (2) Tapering (3) Twisted (4) Circle
(1 Mark)
(ii) Select a suitable antonym for the word given under:
Predicament
(1) Injury (2) Ease (3) Accident (4) Horrifying
(1 Mark)
(iii) Change the following sentence to indirect speech:
Pari said to me "I have been living in London since last December" (1 Mark)
(c) Write a precis and give appropriate title to the 'passage given below:
India has witnessed great expansion of educational opportunities since the attainment of
independence. However, the disabled children have not yet benefited in any substantial
manner from the growth in educational facilities.
Education of handicapped children, ultimately become more dependent and non
productive. It is therefore believed that scarce national resources should not be
wasted on them. Further, it has been our misconceived notion that the education of
handicapped children requires highly specialized people and as such, it must essentially
be very costly. Maybe, precisely for these wrong notions we have not been able to
involve clinical and educational specialization programmers of training and education
exclusively 'meant 'for handicapped children. It is encouraging to note that the new
National Policy on Education has recommended the placement of such children in
Regular schools so as to provide them integrated education along with normal students.
The integrated education will take care of the different needs of various categories arid
types of disabled children. The objective is to place the disabled children in ordinary

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18 FOUNDATION EXAMINATION: MAY, 2019

schools for imparting education in the help of special teachers, aids and other resources.
For fulfilling this objective an array, of the necessary infrastructure by way of training of
teachers, provision of equipment and book etc. are some of the basic pre-requisition.
Hopefully, the parents and their handicapped children will be greatly relieved when the
latter are transferred to regular schools. (5 Marks)
Answer
(a) Vertical and Chain Network
Vertical network: The vertical network is a formal network. It is usually between a higher
ranking employee and a subordinate. This is a two-way communication in which
immediate feedback is possible.
Chain Network: The communication pattern that follows the chain of command from the
senior to junior is called the chain network. Communication starts at the top, like from a
CEO, and works its way down to the different levels of employees.
(b) (i) Crooked = Twisted
(ii) Predicament = Ease
(iii) Pari told me she had been living in London since last December.
(c) Précis
Education for handicapped children
Education opportunities for handicapped children are sparse as compared to the normal
children. Expenditure on their education is treated as a wastage and rather non-
productive. The view that education for handicapped requires higher costs and
specialized people has led to discouragement towards development of measures towards
the same. The National Education Policy recommends integrating the education for
handicapped with the normal children with the help of specialized teachers and other
aids. Training of teachers and necessary infrastructure shall help the handicapped
children and shall relieve their parents regarding worries about their education.
Question 9
(a) (i) Discuss the "Gender Barrier" in communication. (2 Marks)
Or
(ii) What do you mean by Informal Communication? (2 Marks)
(b) Choose the word which best expresses the meaning of the-given word:
(i) Reckless
(1) Cautious (2) Clear (3) Careless (4) Fearless
(1 Mark)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 19

(ii) Humongous
(1) Minute (2) Huge (3) Hungry (4) Hassel
(1 Mark)
(iii) Change the following sentence into indirect speech.
She said "I am watching a' television show" (1 Mark)
(c) Draft Newspaper Report on "Six Lane highway connecting two states inaugurated" to be
published in a national newspaper. (5 Marks)
Answer
(a) (i) Gender barriers may be defined as the communication gap created due to the different
ways of inherent mindsets of men and women as given by nature. Men talk in linier,
logical and compartmentalized manner whereas the women use both logic and emotion,
and are more verbose. This may be cause of communication problem in an office where
both men and women work side by side. Men can be held guilty of providing insufficient
information, while women maybe blamed for providing too much detail.
OR
(ii) Informal communication is the casual, friendly and unofficial. It is spontaneous
conversation and exchange of information between two or more persons without
conforming to the prescribed official rules, processes, systems, formalities, and
chain of command. Informal communication is between family, friends, neighbours,
members of community and other social relations that are based on common
interests, tastes and dispositions. Information can flow from any source in any
direction.
(b) (i) Reckless = Careless
(i) Humongous = Huge
(ii) She said that she was watching a television show.
(c) Six Lane Highway Connecting Two States Inaugurated
Indian Express
Anpara (UP), Feb 01, 2019.
The honourable Chief Minister of the Uttar Pradesh Mr. XY inaugurated the all new six
lane highway between the States of Uttar Pradesh and Madhya Pradesh on 01 st Feb,
2019. The six lane highway ranging 65 kilometers has been completed by Highway
Authority of India at a record period of 24 months. The Highway will connect Anpara
(U.P.) with Satna (M.P.).
The chief Minister in his inaugural speech said “the need that was being felt for the
several years for a highway that shall connect the bordering areas of the two biggest

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20 FOUNDATION EXAMINATION: MAY, 2019

States of India. I personal thank the local people who have given their land for
construction of the highway”.
The Highway has been constructed with an approved width of 43.6 Meters with speed
limit indicators; caution indicators at every 6 Kilometers of the route. Energy saving LED
lights have been put up at both sides of the Lanes so that perfect visibility of the road can
be ensured at nights. The Toll Plaza has been set-up at 35 kilometers from Anapara near
Shakti Nagar (U.P.)
The Six Lane Highway shall encourage the journey of the local people by road, thus
reducing the traffic load on railways. The communication of commercial traffic shall be
facilitated which will significantly reduce the time required earlier for the above purpose.
Source: PTI
Question 10
(a) "The listener has to be objective, practical and control his emotions" Explain with
reference to importance of listening in communication? (2 Marks)
(b) (i) Change the sentence from Active to Passive Voice.
The teacher always answers the students' questions. (1 Mark)
(ii) Change the sentence from Passive to Active Voice;
Every night the office is vacuumed and dusted by the cleaning crew. (1 Mark)
(iii) Change the following sentence to indirect speech.
She said "My Father came yesterday". (1 Mark)
(c) Write an article of about 250 words on the topic ''The Fearless Indian Army": (5 Marks)
Answer
(a) A good listener does not only listen to the spoken words, but observes carefully the non-
verbal cues to understand the complete message. He absorbs the given information,
processes it, understands its context and meaning and forms an accurate, reasoned,
intelligent response. The listener has to be objective, practical and in control of his
emotions. Often the understanding of a listener is coloured by his own emotions
judgements, opinions, and reactions to what is being said.
(b) (i) The student questions are always answered by the teacher.
(ii) The cleaning crew vacuums and dusts the office every night.
(iii) She said that her father had come the day before.
(c) The Fearless Indian Army
The Indian army is undoubtedly one of the finest armies in the world. Since prehistoric to
modern times the Indian soldiers are one of bravest, fighting both for homeland as well
as for ensuing peace even on foreign lands such as peace keeping force in Sri Lanka.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

Our soldiers never surrendered before enemies. Their motto has always been ‘do or die’.
During Indo- china war of October – November, 1962 and later on in the Indo-Pak war of
September 1965, one Indian Soldier killed many soldiers of enemy armies on various
fronts. During the World war II the Indian soldiers proved their mettle on the foreign land
of Europe’ Africa and the Korea on various missions.
The Indian army has proved their superiority whenever the neighboring country Pakistan
challenged us. The Kargil war In 1999 was triggered by the spring and summer incursion
of Pakistan backed armed forces into territory on the Indian side of the LOC around
Kargil in State of Jammu & Kashmir. The Indian forces were prepared for a major high
altitude offensive against Pakistani posts along the border in the Kashmir region. India
had to move five infantry divisions, five independent brigades and 44 battalions of
paramilitary troops to Kashmir. The total Indian army troop strength in the region reached
to 7,30,000. The build-up included the deployment of around 60 frontline aircraft. The
Indian army campaign to repel the intrusion left 524 Indian soldiers dead and 1,363
wounded, as per the data released by then Indian defence minister Shri George
Fernandez on December 01, 1999.
Question 11
(a) Define the importance of Para language Hi Non Verbal Communication.
(b) Select the correct meaning of idioms/phrases given below:
(i) Cry over spilled milk
(1) Drain milk
(2) Complain about something that cannot be rectified
(3) Get into altercation with someone
(4) Misbehave with someone (1 Mark)
(ii) Judge a book by its cover.
(1) Reading a book
(2) To detect a fraud
(3) Rely on outward appearances
(4) To be intimated by appearances · (1 Mark)
(iii) Change the sentence into Active Voice: The Grand Canyon is visited by thousands
of tourists every year. (1 Mark)
(iv) Cheese the word which best expresses the meaning of the given word:
Mesmerized
(1) Enthrall (2) Gruesome (3) Scary (4) Harmony
(1 Mark)

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22 FOUNDATION EXAMINATION: MAY, 2019

(c) Write a Formal E Mail: 'Mail is written by the Manager to the employees about the
changed dress code for Republic day function including time and venue of function.
(4 Marks)
Answer
(a) Paralanguage may be defined as the way a person says something. It reveals more than
the actual words used, the intent of the message. The voice quality, intonation, pitch,
stress, emotion, tone and style of speaking, communicants’ approval, interest or the lack
of it are depicted through paralanguage. Research estimates that tone of the voice
accounts for 38 percent of all communications.
(b) (i) Complain about something that cannot be rectified.
(ii) Rely on outward appearances.
(iii) Thousands of tourists visit the Grand Canyon every year.
(iii) Enthrall
(c) To: Mr. A; Mr. B; Mr. c …………….
Subject: Dress code for Republic Day Function as on 26th January, 2019
Dear sir/madam,
Greetings of the day.
As you all be aware that the Republic day is round the corner. Your company is
organsing a flag hoisting followed by cultural program and traditional get together of all
the rank and file of the organization including the executive heads.
The ceremony shall be held at 9.00 A.M. sharp at the ground in front of company’s gate.
The company has decided a mandatory dress code for the occasion for all participants
as-
For Men- White Kurta- Payjama
For Women- Saree preferably of white colour.
Dress code is mandatory.
Hope that all our esteemed employees and executives will grace the function by their
benign presence at the time and venue in the prescribed dress code.
Thanks & Regards.
Sd/-
Company secretary,
XWZ Ltd.

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAWS

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) X found a wallet in a restaurant. He enquired of all the customers present there but the
true owner could not be found. He handed over the same to the manager of the
restaurant to keep till the true owner is found. After a week he went back to the
restaurant to enquire about the wallet. The manager refused to return it back to X, saying
that it did not belong to him.
In the light of the Indian Contract Act, 1872, can X recover it from the Manager?
(4 Marks)
(b) Mr. Anil formed a One Person Company (OPC) on 16th April, 2018 for manufacturing
electric cars. The turnover of the OPC for the financial year ended 31 st March, 2019 was
about ` 2.25 Crores. His friend Sunil wanted to invest in his OPC, so they decided to
convert it voluntarily into a private limited company. Can Anil do so? (4 Marks)
(c) State the various essential elements involved in the sale of unascertained goods and its
appropriation as per the Sale of Goods Act, 1930. (4 Marks)
Answer
(a) Responsibility of finder of goods (Section 71 of the Indian Contract Act, 1872): A
person who finds goods belonging to another and takes them into his custody is subject
to same responsibility as if he were a bailee.
Thus, a finder of lost goods has:
(i) to take proper care of the property as man of ordinary prudence would take
(ii) no right to appropriate the goods and
(iii) to restore the goods if the owner is found.
In the light of the above provisions, the manager must return the wallet to X, since X is
entitled to retain the wallet found against everybody except the true owner.
(b) As per the provisions of Sub-Rule (7) of Rule 3 of the Companies (Incorporation) Rules,
2014, an OPC cannot convert voluntarily into any kind of company unless two years have
expired from the date of its incorporation, except threshold limit (paid up share capital) is
increased beyond fifty lakh rupees or its average annual turnover during the relevant
period exceeds two crore rupees.

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2 FOUNDATION EXAMINATION: NOVEMBER, 2019

In the instant case, Mr. Anil formed an OPC on 16th April, 2018 and its turnover for the
financial year ended 31st March, 2019 was Rs. 2.25 Crores. Even though two years have
not expired from the date of its incorporation, since its average annual turnover during
the period starting from 16th April, 2018 to 31st March, 2019 has exceeded Rs. 2 Crores,
Mr. Anil can convert the OPC into a private limited company along with Sunil.
(c) Sale of unascertained goods and Appropriation (Section 23 of the Sale of Goods
Act, 1930): Appropriation of goods involves selection of goods with the intention of using
them in performance of the contract and with the mutual consent of the seller and the
buyer.
The essentials are:
(a) There is a contract for the sale of unascertained or future goods.
(b) The goods should conform to the description and quality stated in the contract.
(c) The goods must be in a deliverable state.
(d) The goods must be unconditionally appropriated to the contract either by delivery to
the buyer or his agent or the carrier.
(e) The appropriation must be made by:
(i) the seller with the assent of the buyer; or
(ii) the buyer with the assent of the seller.
(f) The assent may be express or implied.
(g) The assent may be given either before or after appropriation.
Question 2
(a) Define consideration. What are the legal rules regarding consideration under the Indian
Contract Act, 1872? (7 Marks)
(b) Discuss the conditions under which LLP will be liable and not liable for the acts of the
partner. (5 Marks)
Answer
(a) Consideration [Section 2(d) of the Indian Contract Act, 1872]: When at the desire of
the promisor, the promisee 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 an
act or abstinence or promise is called consideration for the promise.
Legal Rules Regarding Consideration
(i) Consideration must move at the desire of the promisor: Consideration must be
offered by the promisee or the third party at the desire or request of the promisor.
This implies “return” element of consideration.

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 3

(ii) Consideration may move from promisee or any other person: In India,
consideration may proceed from the promisee or any other person who is not a
party to the contract. In other words, there can be a stranger to a consideration but
not stranger to a contract.
(iii) Executed and executory consideration: A consideration which consists in the
performance of an act is said to be executed. When it consists in a promise, it is
said to be executory. The promise by one party may be the consideration for an act
by some other party, and vice versa.
(iv) Consideration may be past, present or future: It is a general principle that
consideration is given and accepted in exchange for the promise. The
consideration, if past, may be the motive but cannot be the real consideration of a
subsequent promise. But in the event of the services being rendered in the past at
the request or the desire of the promisor, the subsequent promise is regarded as an
admission that the past consideration was not gratuitous.
(v) Consideration need not be adequate: Consideration need not to be of any
particular value. It need not be approximately of equal value with the promise for
which it is exchanged but it must be something which the law would regard as
having some value.
(vi) Performance of what one is legally bound to perform: The performance of an
act by a person who is legally bound to perform the same cannot be consideration
for a contract. Hence, a promise to pay money to a witness is void, for it is without
consideration. Hence such a contract is void for want of consideration.
But where a person promises to do more that he is legally bound to do, such a
promise provided it is not opposed to public policy, is a good consideration. It
should not be vague or uncertain.
(vii) Consideration must be real and not illusory: Consideration must be real and
must not be illusory. It must be something to which the law attaches some value. If
it is legally or physically impossible it is not considered valid consideration.
(viii) Consideration must not be unlawful, immoral, or opposed to public policy.
Only presence of consideration is not sufficient it must be lawful. Anything which is
immoral or opposed to public policy also cannot be valued as valid consideration.
(b) Conditions under which LLP will be liable [Section 27(2) of the LLP Act, 2008]
The LLP is liable if a partner of a LLP is liable to any person as a result of a wrongful act
or omission on his part in the course of the business of the LLP or with its authority.
Conditions under which LLP will not be liable [Section 27(1) of the LLP Act, 2008]
A LLP is not bound by anything done by a partner in dealing with a person if—
(a) the partner in fact has no authority to act for the LLP in doing a particular act; and

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4 FOUNDATION EXAMINATION: NOVEMBER, 2019

(b) the person knows that he has no authority or does not know or believe him to be a
partner of the LLP.
Question 3
(a) (i) When the continuing guarantee can be revoked under the Indian Partnership Act, 1932?
(2 Marks)
OR
(ii) What do you mean by Goodwill as per the provisions of Indian Partnership
Act,1932? (2 Marks)
(b) With reference to the provisions of Indian partnership Act, 1932 explain the various
effects of insolvency of a partner. (4 Marks)
(c) Mr. Sonumal a wealthy individual provided a loan of ` 80,000 to Mr. Datumal on
26.02.2019. The borrower Mr. Datumal asked for a further loan of ` 1,50,000.
Mr. Sonumal agreed but provided the loan in parts at different dates. He provided
` 1,00,000 on 28.02.2019 and remaining ` 50,000 on 03.03.2019.
On 10.03.2019 Mr. Datumal while paying off part ` 75,000 to Mr. Sonumal insisted that
the lender should adjusted ` 50,000 towards the loan taken on·03.03.2019 and balance
as against the loan on 26.02.2019.
Mr. Sonumal objected to this arrangement and asked the borrower to adjust in the order
of date of borrowal of funds.
Now you decide:
(i) Whether the contention of Mr. Datumal correct or otherwise as per the provisions of
the Indian Contract Act, 1872?
(ii) What would be the answer in case the borrower does not insist on such order of
adjustment of repayment?
(iii) What would the mode of adjustment/appropriation of such part payment in case
neither Mr. Sonumal nor Mr. Datumal insist any order of adjustment on their part?
(6 Marks)
Answer
(a) (i) Revocation of continuing guarantee (Section 38 of the Indian Partnership Act,
1932)
According to section 38, a continuing guarantee given to a firm or to third party in
respect of the transaction of a firm is, in the absence of an agreement to the
contrary, revoked as to future transactions from the date of any change in the
constitution of the firm. Such change may occur by the death, or retirement of a
partner, or by introduction of a new partner.

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 5

OR
(ii) Goodwill: The term “Goodwill” has not been defined under the Indian Partnership
Act, 1932. Section 14 of the Act lays down that goodwill of a business is to be
regarded as a property of the firm.
Goodwill may be defined as the value of the reputation of a business house in
respect of profits expected in future over and above the normal level of profits
earned by undertaking belonging to the same class of business.
(b) Effects of insolvency of a partner (Section 34 of the Indian Partnership Act, 1932):
(i) The insolvent partner cannot be continued as a partner.
(ii) He will be ceased to be a partner from the very date on which the order of
adjudication is made.
(iii) The estate of the insolvent partner is not liable for the acts of the firm done after the
date of order of adjudication.
(iv) The firm is also not liable for any act of the insolvent partner after the date of the
order of adjudication,
(v) Ordinarily, the insolvency of a partner results in dissolution of a firm; but the
partners are competent to agree among themselves that the adjudication of a
partner as an insolvent will not give rise to dissolution of the firm.
(c) Appropriation of Payments: In case where a debtor owes several debts to the same
creditor and makes payment which is not sufficient to discharge all the debts, the
payment shall be appropriated (i.e. adjusted against the debts) as per the provisions of
Section 59 to 61 of the Indian Contract Act, 1872.
(i) As per the provisions of 59 of the Act, where a debtor owing several distinct debts
to one person, makes a payment to him either with express intimation or under
circumstances implying that the payment is to be applied to the discharge of some
particular debt, the payment, if accepted, must be applied accordingly.
Therefore, the contention of Mr. Datumal is correct and he can specify the manner
of appropriation of repayment of debt.
(ii) As per the provisions of 60 of the Act, where the debtor has omitted to intimate and
there are no other circumstances indicating to which debt the payment is to be
applied, the creditor may apply it at his discretion to any lawful debt actually due
and payable to him from the debtor, where its recovery is or is not barred by the law
in force for the time being as to the limitation of suits.

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6 FOUNDATION EXAMINATION: NOVEMBER, 2019

Hence in case where Mr. Datumal fails to specify the manner of appropriation of
debt on part repayment, Mr. Sonumal the creditor, can appropriate the payment as
per his choice.
(iii) As per the provisions of 61 of the Act, where neither party makes any appropriation,
the payment shall be applied in discharge of the debts in order of time, whether they
are or are not barred by the law in force for the time being as to the limitation of
suits. If the debts are of equal standing, the payments shall be applied in discharge
of each proportionately.
Hence in case where neither Mr. Datumal nor Mr. Sonumal specifies the manner of
appropriation of debt on part repayment, the appropriation can be made in
proportion of debts.
Question 4
(a) What are the rights of an unpaid seller against goods under the Sale of Goods Act,
1930? (6 Marks)
(b) Master X was introduced to the benefits of partnership of M/s ABC & Co. with the
consent of all partners. After attaining majority, more than six months elapsed and he
failed to give a public notice as to whether he elected to become or not to become a
partner in the firm. Later on, Mr. L, a supplier of material to M/s ABC & Co., filed a suit
against M/s ABC & Co. for recovery of the debt due.
In the light of the Indian Partnership Act, 1932, explain:
(i) To what extent X will be liable if he failed to give public notice after attaining
majority?
(ii) Can Mr. L recover his debt from X? (6 Marks)
Answer
(a) Rights of an unpaid seller against the goods: As per the provisions of Section 46 of
the Sale of Goods Act, 1930, notwithstanding that the property in the goods may have
passed to the buyer, the unpaid seller of goods, as such, has by implication of law-
(a) a lien on the goods for the price while he is in possession of them;
(b) in case of the insolvency of the buyer, a right of stopping the goods in transit after
he has parted with the possession of them;
(c) a right of re-sale as limited by this Act. [Sub-section (1)]
Where the property in goods has not passed to the buyer, the unpaid seller has, in
addition to his other remedies, a right of withholding delivery similar to and co-extensive
with his rights of lien and stoppage in transit where the property has passed to the buyer.
[Sub-section (2)]

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 7

These rights can be exercised by the unpaid seller in the following circumstances:
(i) Right of lien (Section 47): According to sub-section (1), the unpaid seller of goods
who is in possession of them is entitled to retain possession of them until payment
or tender of the price in the following cases, namely:-
(a) where the goods have been sold without any stipulation as to credit;
(b) where the goods have been sold on credit, but the term of credit has expired;
(c) where the buyer becomes insolvent.
(ii) Right of stoppage in transit (Section 50): When the buyer of goods becomes
insolvent, the unpaid seller who has parted with the possession of the goods has
the right of stopping them in transit, that is to say, he may resume possession of the
goods as long as they are in the course of transit, and may retain them until paid or
tendered price of the goods.
(iii) Right to re-sell the goods (Section 54): The unpaid seller can exercise the right to
re-sell the goods under the following conditions:
1. Where the goods are of a perishable nature
2. Where he gives notice to the buyer of his intention to re-sell the goods
3. Where an unpaid seller who has exercised his right of lien or stoppage in
transit resells the goods
4. A re-sale by the seller where a right of re-sale is expressly reserved in a
contract of sale
5. Where the property in goods has not passed to the buyer
(b) As per the provisions of Section 30(5) of the Indian Partnership Act, 1932, at any time
within six months of his attaining majority, or of his obtaining knowledge that he had been
admitted to the benefits of partnership, whichever date is later, such person may give
public notice that he has elected to become or that he has elected not to become a
partner in the firm, and such notice shall determine his position as regards the firm.
However, if he fails to give such notice, he shall become a partner in the firm on
the expiry of the said six months.
If the minor becomes a partner by his failure to give the public notice within specified
time, his rights and liabilities as given in Section 30(7) are as follows:
(A) He becomes personally liable to third parties for all acts of the firm done since he
was admitted to the benefits of partnership.
(B) His share in the property and the profits of the firm remains the same to which he
was entitled as a minor.

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8 FOUNDATION EXAMINATION: NOVEMBER, 2019

(i) In the instant case, since, X has failed to give a public notice, he shall become
a partner in the M/s ABC & Co. and becomes personally liable to Mr. L, a third
party.
(ii) In the light of the provisions of Section 30(7) read with Section 30(5) of the
Indian Partnership Act, 1932, since X has failed to give public notice that he
has not elected to not to become a partner within six months, he will be
deemed to be a partner after the period of the above six months and therefore,
Mr. L can recover his debt from him also in the same way as he can recover
from any other partner.
Question 5
(a) Mrs. Geeta went to the local rice and wheat wholesale shop and asked for 100 kgs of
Basmati rice. The Shopkeeper quoted the price of the same as ` 125 per kg to which
she agreed. Mrs. Geeta insisted that she would like to see the sample of what will be
provided to her by the shopkeeper before she agreed upon such purchase.
The shopkeeper showed her a bowl of rice as sample. The sample exactly corresponded
to the entire lot.
The buyer examined the sample casually without noticing the fact that even though the
sample was that of Basmati Rice but it contained a mix of long and short grains.
The cook on opening the bags complained that the dish if prepared with the rice would
not taste the same as the quality of rice was not as per requirement of the dish.
Now Mrs. Geeta wants to file a suit of fraud against the seller alleging him of selling mix
of good and cheap quality rice. Will she be successful?
Explain the basic law on sale by sample under Sale of Goods Act 1930?
Decide the fate of the case and options open to the buyer for grievance redressal as per
the provisions of Sale of Goods Act 1930?
What would be your answer in case Mrs. Geeta specified her exact requirement as to
length of rice? (6 Marks)
(b) "The Memorandum of Association is a charter of a company". Discuss. Also explain in
brief the contents of Memorandum of Association. (6 Marks)
Answer
(a) (i) As per the provisions of Sub-Section (2) of Section 17 of the Sale of Goods Act,
1930, in a contract of sale by sample, there is an implied condition that:
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing the bulk with the
sample.

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 9

In the instant case, in the light of the provisions of Sub-Clause (b) of Sub-Section
(1) of Section 17 of the Act, Mrs. Geeta will not be successful as she casually
examined the sample of rice (which exactly corresponded to the entire lot) without
noticing the fact that even though the sample was that of Basmati Rice but it
contained a mix of long and short grains.
(ii) Sale by Sample: (Section 17 of the Sale of Goods Act, 1930): As per the
provisions of Sub-Section (1) of section 17 of the Sale of Goods Act, 1930, a
contract of sale is a contract for sale by sample where there is a term in the
contract, express or implied, to that effect.
As per the provisions of Sub-Section (2) of section 17 of the Sale of Goods Act,
1930, in a contract of sale by sample, there is an implied condition that:
(a) that the bulk shall correspond with the sample in quality;
(b) that the buyer shall have a reasonable opportunity of comparing the bulk with
the sample.
(c) that the goods shall be free from any defect, rendering them unmerchantable,
which would not be apparent on reasonable examination of the sample.
(iii) In the instant case, the buyer does not have any option available to him for
grievance redressal.
(iv) In case Mrs. Geeta specified her exact requirement as to length of rice, then there
is an implied condition that the goods shall correspond with the description. If it is
not so, the seller will be held liable.
(b) The Memorandum of Association of company is in fact its charter; it defines its
constitution and the scope of the powers of the company with which it has been
established under the Act. It is the very foundation on which the whole edifice of the
company is built.
Object of registering a memorandum of association:
• It contains the object for which the company is formed and therefore identifies the
possible scope of its operations beyond which its actions cannot go.
• It enables shareholders, creditors and all those who deal with company to know
what its powers are and what activities it can engage in.
A memorandum is a public document under Section 399 of the Companies Act,
2013. Consequently, every person entering into a contract with the company is
presumed to have the knowledge of the conditions contained therein.
• The shareholders must know the purposes for which his money can be used by the
company and what risks he is taking in making the investment.

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10 FOUNDATION EXAMINATION: NOVEMBER, 2019

A company cannot depart from the provisions contained in the memorandum however
imperative may be the necessity for the departure. It cannot enter into a contract or
engage in any trade or business, which is beyond the power confessed on it by the
memorandum. If it does so, it would be ultra vires the company and void.
Contents of the memorandum: The memorandum of a company shall state—
(a) the name of the company (Name Clause) with the last word “Limited” in the case of
a public limited company, or the last words “Private Limited” in the case of a private
limited company. This clause is not applicable on the companies formed under
section 8 of the Act.
(b) the State in which the registered office of the company (Registered Office clause) is
to be situated;
(c) the objects for which the company is proposed to be incorporated and any matter
considered necessary in furtherance thereof (Object clause);
(d) the liability of members of the company (Liability clause), whether limited or
unlimited
(e) the amount of authorized capital (Capital Clause) divided into share of fixed
amounts and the number of shares with the subscribers to the memorandum have
agreed to take, indicated opposite their names, which shall not be less than one
share. A company not having share capital need not have this clause.
(f) the desire of the subscribers to be formed into a company. The Memorandum shall
conclude with the association clause. Every subscriber to the Memorandum shall
take at least one share, and shall write against his name, the number of shares
taken by him.
Question 6
(a) Explain the term 'Coercion" and what are the effects of coercion under Indian Contract
Act, 1872. (5 Marks)
(b) "Dissolution of a firm is different from dissolution of Partnership". Discuss. (4 Marks)
(c) A, an assessee, had large income in the form of dividend and interest. In order to reduce
his tax liability, he formed four private limited company and transferred his investments to
them in exchange of their shares. The income earned by the companies was taken back
by him as pretended loan. Can A be regarded as separate from the private limited
company he formed? (3 Marks)
Answer
(a) Coercion (Section 15 of the Indian Contract Act, 1872): “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 whatever,
with the intention of causing any person to enter into an agreement.”

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 11

Effects of coercion under section 19 of Indian Contract Act, 1872

(i) Contract induced by coercion is voidable at the option of the party whose consent
was so obtained.
(ii) As to the consequences of the rescission of voidable contract, the party rescinding
a void contract should, if he has received any benefit, thereunder from the other
party to the contract, restore such benefit so far as may be applicable, to the person
from whom it was received.
(iii) A person to whom money has been paid or anything delivered under coercion must
repay or return it.
(b) DISSOLUTION OF FIRM VS. DISSOLUTION OF PARTNERSHIP
S. BASIS OF DISSOLUTION OF DISSOLUTION OF PARTNERSHIP
NO. DIFFERENCE FIRM
1. Continuation of It involves It does not affect continuation of
business discontinuation of business. It involves only
business in reconstitution of the firm.
partnership.
2. Winding up It involves winding up It involves only reconstitution and
of the firm and requires only revaluation of assets
requires realization of and liabilities of the firm.
assets and
settlement of
liabilities.
3. Order of court A firm may be Dissolution of partnership is not
dissolved by the ordered by the court.
order of the court.
4. Scope It necessarily It may or may not involve dissolution
involves dissolution of firm.
of partnership.
5. Final closure of It involves final It does not involve final closure of the
books closure of books of books.
the firm.
(c) The House of Lords in Salomon Vs Salomon & Co. Ltd. laid down that a company is a
person distinct and separate from its members, and therefore, has an independent
separate legal existence from its members who have constituted the company. But under
certain circumstances the separate entity of the company may be ignored by the courts.
When that happens, the courts ignore the corporate entity of the company and look
behind the corporate façade and hold the persons in control of the management of its

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12 FOUNDATION EXAMINATION: NOVEMBER, 2019

affairs liable for the acts of the company. Where a company is incorporated and formed
by certain persons only for the purpose of evading taxes, the courts have discretion to
disregard the corporate entity and tax the income in the hands of the appropriate
assesse.
In Dinshaw Maneckjee Petit case it was held that the company was not a genuine
company at all but merely the assessee himself disguised that the legal entity of a limited
company. The assessee earned huge income by way of dividends and interest. So, he
opened some companies and purchased their shares in exchange of his income by way
of dividend and interest. This income was transferred back to assessee by way of loan.
The court decided that the private companies were a sham and the corporate veil was
lifted to decide the real owner of the income.
In the instant case, the four private limited companies were formed by A, the assesse,
purely and simply as a means of avoiding tax and the companies were nothing more than
the façade of the assesse himself. Therefore, the whole idea of Mr. A was simply to split
his income into four parts with a view to evade tax. No other business was done by the
company.
Hence, A cannot be regarded as separate from the private limited companies he formed.

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SECTION-B : BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.
Answer any three questions from the remaining four questions.
All candidates(including those who have opted for Hindi Medium) are required to answer the
questions in Section B, in English only.
Question 7
(a) Read the passage carefully and answer the questions given below:
Being the daughter of a physics professor, Marie who was born in 1867 in Warsaw,
Poland, was greatly influenced by the wonders of Science and technology. Since an early
age, she displayed a blithe personality. Her fascination for learning prompted her to
continue with her studies even after school. She become disgruntled, however, when she
learned that the university in Warsaw was closed for women. Determined to complete
higher education, she defiantly left Poland and in 1891 entered the Sorbonne, a French
university, where she completed her doctorate in physics.
Marie met Pierre Curie at the Sorbonne along with some of the other greatest scientists
of her day. Marie and Pierre were married in 1895 and spent many productive years
working together in the physics laboratory. A short time after they discovered radium,
Pierre was killed by a horse-drawn wagon in 1906. For Marie it was an horrible
misfortune and heartbreaking event. Despondently she recalled their close relationship
and the joy that they had shared in scientific research. The fact that she had two young
daughters to raise by herself greatly increased her distress.
Curie's feeling of desolation finally began to fade when she was asked to succeed her
husband as a physics professor at the Sorbonne. She was the first woman to be given a
professorship at the world-famous university. In 1911 she received the Nobel Prize in
physics for isolating radium. Although Marie Curie eventually suffered a fatal illness from
her long exposure to radium, she never became disillusioned about her work. Regardless
of the consequences, she had dedicated herself to science and to revealing the
mysteries of the physical world.
(i) What did Marie did not like about the Warsaw University? (1 Mark)
(ii) What was first step that Marie took towards her becoming a scientist? (1 Mark)
(iii) How did Marie deal with the desolation caused by her husband’s death? (1 Mark)
(iv) Write a Summary of the above Passage. (2 Marks)
(b) Read the Passage:
(i) Make Notes, using Headings, Subheadings and abbreviations whenever necessary.
(3 Marks)
(ii) Write summary

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2 FOUNDATION EXAMINATION: NOVEMBER, 2019

People do not always do the things we want them to do. No matter' how reasonable
or minimal our expectations may be, there are times when we are let down.
Naturally, we feel upset and hurt when our expectations are not met. We dread
confrontations because they are unpleasant and can damage relationships.
Yet not confronting a person does not solve the problem because unresolved issues
also affect relationships in an adverse way. Actually, the real problem lies in our
style of confrontation, not in the issue.
Typically, we use character-based confrontations. They help in venting our
ange4rand hurt, but that is the only thing they do. They lead to angry show downs
and bring all discussions to a grinding halt. It is important to remember that self-
image is the most important possession of all human beings.
It is the way we view and regard ourselves in our own eyes and in the eyes of
others. As self-conscious beings, we are actually aware of our· image and
constantly work towards protecting it from any damage.
We also seek approval from others about our own self-image. We feel distraught if
we sense that there. is even a slight threat to our self image, because our character
is the essence of our lives. To ensure a rational dialogue over dashed expectations,
we need to deploy issued based confrontations. They involve an explanation of.
which actions have bothered us, in what manner and what changes we would like
from the other person. (2 Marks)
Answer
(a) (i) Marie did not like the fact that University in Warsaw was closed for women.
(ii) Marie left Poland in 1891 and joined Sorbonne University, France, where she
completed her doctorate in Physics.
(iii) She got over her desolation when she became the first woman to join as a professor
of Physics at the world renowned University of Sorbonne, France.
(iv) Summary:
Marie, daughter of a physics professor was born in 1867 in Warsaw, Poland.
Disappointed at not being allowed to join University in Warsaw, she left Poland in
1891 to enter the University of Sorbonne, France and completed her doctorate in
Physics.
In 1895, Marie married Pierre Curie a great scientist at Sorbonne. Having spent
many years together in research, shortly after they discovered Radium, Pierre Curie
was killed in 1906.
She got over her desolation when she became the first woman to join as a professor
of Physics at the world-renowned University of Sorbonne. In 1911, she received the

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

Nobel Prize in Physics for isolating Radium. Being overexposed to radium, she
developed a fatal illness. She dedicated herself to the cause of science.
(b) (i) Human Nature
1. Hmn Ntr
1.1 Expctns
1.1.1 hurt when not met
1.2 Cnfrntns
1.2.1 are avoided by hmns
1.2.2 are unplsnt
1.2.3 dmgrlstnsps
1.2.4 Styles of cnfrntns:
1.2.4.1 Chrctrbsd
1.2.4.1.1 Help vent anger
1.2.4.1.2 Cse angry shwdns
1.2.4.1.3 Halt dscssns
1.2.4.1.4 Dtrmntl to slf-img
1.2.4.2 Issue bsd
1.2.4.2.1 Lead to rtnldlg
1.2.4.2.2 Help anls:
1.2.4.2.2.1 Prblm
1.2.4.2.2.2 Cses
1.2.4.2.2.3 Chngrqd in othrprsn
1.3 Slf-img
1.3.1 Is how we prcv ourselves
1.3.2 How othrsprcv us
1.3.3 We try avdngdmg
1.3.4 Seek aprvlfrmothrs
1.3.5 Bldschrctr
Key:
Hmn: Human/s
Ntr: Nature

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4 FOUNDATION EXAMINATION: NOVEMBER, 2019

Expctns: Expectations
cnfrntns: confrontations
unplsnt: unpleasant
dmg: damage
rlstnsps: relationships
chrctr: character
bsd: based
cse: cause
shwdns: showdowns
dscssns: discussions
dtrmntl: detrimental
slf-img: self-image
rtnl:rational
dlg: dialogue
anls: analyse
prblm:problem
chng:change
rqd: required
othr:other
prsn:person
prcv: perceive
othr: other/s
avdng: avoiding
aprvl: approval
blds: builds
(ii) Summary
We feel hurt when our expectations from others are not met. We avoid
confrontations, as they are displeasing and can affect relations. More often, it is the
style of confrontation that causes problems rather than the underlying issue. We
generally indulge in character-based confrontations, letting out our anger. Our
image is important as it builds our character. Therefore, we must indulge in issue-

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5

based confrontations where we analyze our disagreements and identify the actions
in others that bother us and to resolve the issue.
Candidates who have given abbreviations as below or any other suitable
abbreviations, should also be given due credit. For Example:
Confrontation - Confront
Expectation - Expat
Self-Image - Selfina
Problem - Probe
Question 8
(a) Discuss the process of communication.
(b) (i) Choose the word which best expresses the meaning of the given word :
Abundant
(1) Plentiful
(2) Sufficient
(3) Enough
(4) Many (1 Mark)
(ii) Select a suitable antonym for the word given under:
Adumbrate
(1) Elaborate
(2) Summarize
(3) Angry
(4) Happy (1 Marks)
(iii) Change the following sentence to indirect speech:
Reena said, "Nobody can solve the problem on the earth". (1 Mark)
(c) Write a Precis and give appropriate title to the passage given below:
DNA degrades quickly· after an: animal dies, so researchers once believed it impossible
to find ancient genetic material. The search for primeval vestiges of DNA took off in the
late 1980s after the. development of a technique called polymerase chain reaction
(PCR), which copies minute quantities of DNA. Armed with PCR, scientists could look for
tiny fragments of DNA that might have weathered the millennia unharmed.
In recent years, researchers have isolated DNA from 20-million-year-old magnolia leaves
and extracted DNA from a 135-million-year-old weevil found in amber. Recently, a team

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6 FOUNDATION EXAMINATION: NOVEMBER, 2019

extracts DNA from bone dating back millions of years for the first time. In the frenzied
hunt for ancient DNA, microbiologist Scott R. Woodward may have bagged the biggest
quarry. Drawing on lessons learned while growing up among the fossil-rich rocks of
eastern Utah, Woodward and his team became the first people to find genetic material
belonging to a dinosaur.
Woodward, whose grandfather was a coal miner, knew that mines in the area often
contained dinosaur traces. After six months of looking Woodward pulled two bone
fragments from a Cretaceous siltstone layer directly a top a coal seam. Impeded by an
unstable mine roof) Woodward's team could not recover any more bone samples.
The siltstone apparently inhibited fossilization and preserved much of the original cell
structure in the bone. Researchers isolated strands of DNA from both fragments and
used-PCR to copy a segment that codes for a protein called cytochrome b. Once they
had made many copies, they ·could determine the DNA sequence.
Throughout their work, the biologists took precautions to avoid contaminating the
samples with modern DNA or ancient material found within the coal. According to
Woodward, circumstantial evidence indicates that the bone fragments belong to one or
two species of dinosaurs. Dinosaur tracks are abundant in this 'coal formation, and the
bones visible in the mine were larger than those of a crocodile the biggest non-dinosaur
known in these rocks. (5 Marks)
Answer
(a) The process of communication entails :
1. The purpose or reason for the communication.
2. The framing of the content of the message
3. The medium used for conveying the message. (For example, internet, written text,
speech, pictures, gestures and so on).
4. Transmitting the formulated message.
5. Messages are often misinterpreted due to external disturbances such as noise created
by humans, traffic and natural forces. These factors can result in miscommunication.
6. Receiving the message.
7. Deciphering and making sense of the message. decode
8. Interpreting and figuring out what the receiver thinks is the real message.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

Encoding

Channel Message
Barrier

Feedback Noise Channel

Receiver
Decoding

(b) (i) (1) Plentiful

(ii) (1) Elaborate
(iii) Reena commented/said that nobody could solve the problem on the earth.
(c) Précis’:
Exploring ancient DNA: Innovations and Findings
Contrary to their earlier belief, in the late 1980s, scientists/researchers could search for
remnants of DNA that existed in the primitive era/times after the development of the PCR
technique (Polymerase Chain Reaction) that could copy minute quantities of DNA.
More recently, researchers have isolated DNA from 20-million-year-old magnolia leaves
and successfully extracted DNA from a 135-million-year-old weevil found in amber.
Microbiologist Scoot R. Woodward with his team were the first to find genetic material
belonging to a dinosaur. He pulled two bone fragments from a Cretaceous siltstone layer
from the top of a coal seam from which researchers isolated strands of DNA and used
PCR to copy a segment that codes for a protein called Cytochrome b. DNA sequence
was determined from the copies. Due care was taken to avoid contamination of samples
with modern DNA. Evidence indicated that the samples found belonged to one or two
dinosaur species.

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8 FOUNDATION EXAMINATION: NOVEMBER, 2019

Question 9
(a) (i) Discuss the term "Virtual Communication" in communication. (2 Marks)
OR
(ii) What do you mean by an "Attitude Barrier"? (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
Relevant
(1) Related
(2) Important
(3) Pertinent
(4) Common (1 Mark)
(ii) Choose the word which best. expresses the meaning of the given word:
Unabashed
(1) Not fast
(2) Not Finding
(3) Not Embarrassed
(4) Not Angry (1 Mark)
(iii) Change the following sentence to indirect speech:
He said, "Will you all come for the meeting?" (1 Mark)
(c) Draft Newspaper Report on "Flood. situation grim in· southern, western states" to be
published in a National newspaper. (5 Marks)
Answer
(a) (i) Visual communication through visual aids such as signs, typography, drawing, graphic
design, illustration, color and other electronic resources usually reinforces written
communication. Sometimes, it may replace written communication altogether. Visual
communication is powerful medium. It is the reason that the print and audio-visual
media makes effective use of visuals to convey their message. Visuals like graphs, pie
charts and other diagrammatic presentations convey clearly and concisely a great deal
of information. They are an essential part of official presentations these days.
(ii) Attitude barriers refer to personal attitudes of employees that can affect
communication within the organization. A proactive, motivated worker will facilitate
the communication process, whereas a dissatisfied, disgruntled, shy, introvert or
lazy employee can delay, hesitate in taking the initiative, or refuse to communicate.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 9

Attitude problems can be addressed by good management, periodic training and

regular interaction with staff members.
(b) (i) (3) Pertinent
(ii) (3) Not Embarrassed
(iii) He asked if everyone would come for the meeting.
(c) Flood situation grim in Western, Southern Indian states: With heavy downpours, up
to 330 mm, the flood situation continues to worsen particularly in the western and
southern states of Maharashtra, Gujarat, Karnataka and Kerala. Over 500 people have
died in landslide, deluge related incidents, thousands have gone missing, as many as 40
lakh people have been displaced and over 8 lakh people have been moved to relief
camps in these states. Almost half a metre of rain fell in Vadodara alone in the last 24
hours, disrupting railways and air routes. Major rivers viz. Krishna and Tungabhadra are
flowing at record high levels creating severe to extreme flood situation in the states. Red
alert has been issued in most of these areas. The recent floods have damaged crops
over 10 lakh hectares of land in Maharashtra, Karnataka and Kerala making survival
even more difficult. According to the meteorological department, the situation is likely to
improve in the days to come with meager or intermittent rains.
Union Home Minister has carried out an aerial survey of the worst affected areas and the
Prime Minister has declared immediate monetary relief to these states. Campaigns are
being carried out to appeal to masses in other states to contribute to the mass relief
operations. Several NGOs and non profit agencies have join hands with the army in
carrying out immediate relief operations in worst hit areas. Their volunteers are
propagating the message through social media to collect clothes, food and funds for
those stranded after deluge. To contribute to the Prime Minister’s Disaster Relief Fund
you may directly transfer funds through
NEFT details are as under:
Favour of: PM’s Relief Fund
Account No.:
IFSC code::
Source: Press Trust of India.
Question 10
(a) Explain how emotional awareness and control helps in communication? (2 Marks)
(b) (i) Change the sentence from Active to Passive Voice.
The audience loudly cheered the Prime Minister's speech. (1 Mark)
(ii) Change the sentence from Passive to Active Voice
The Bird was killed by a cruel boy. (1 Mark)

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10 FOUNDATION EXAMINATION: NOVEMBER, 2019

(iii) Change the following sentence to indirect speech.

He said, "My Mother is writing letters". (1 Mark)
(c) Write an article of about 250 words on the topic, "The Importance of water conservation".
(5 Marks)
Answer
(a) Emotions play a major role in our interactions with other people. They are a powerful
force that affect our perception of reality regardless of how hard we try to be unbiased . In
fact, intense emotions can undermine a person’s capacity for rational decision-making,
even when the individual is aware of the need to make careful decisions.
Emotional awareness is a necessary element of good communication. While interacting
with another person or a group, it is important to understand the emotions you and he/
she/ they are bringing to the discussion. Managing your own and others emotions and
communicating keeping in mind the emotional state of others helps in smooth interaction
avoiding conflict resulting in successful completion of the communication process.
(b) (i) The Prime Minister’s speech was cheered loudly by the audience.
(ii) A cruel boy killed the bird.
(iii) He told that his mother was writing letters.
(c) Article: The Importance of Water Conservation

-By ….. (Writer’s name)

Water is one of the three basic resources for the survival of human kind besides air and
food. More than 90 percent of human body is composed of water. Though water is
abundantly available on our planet, with 2/3rd of earth covered by water, still fresh, clean
water is a limited resource. Rivers, fresh water lakes, waterfalls, natural springs, ground
water and rain are the natural resources of fresh water.
With indiscriminate rise in human population worldwide, the pressure on these natural
resources has increased manifold. In many developing countries, due to incessant
industrialization leading to exponential rise in migration to big cities/townships,
contamination of ground water and rivers has not only led to scarcity of pure drinking
water but also emerged as a serious health hazard.
Over reliance on ground water and rivers for construction/infrastructure development
projects in urban areas and little or no awareness about water conservation has led to
fast depletion of these natural resources. It is about time we realized the importance of
clean water as water tables are fast declining, rivers and lakes are drying or being
polluted/contaminated especially in thickly populated urban areas such as New Delhi,

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 11

Hyderabad and Bangalore. According to a study these urban areas will have little or no
ground water left that will lead to a drought like situation in a few years time.
As progressive citizens, we must take immediate measures to not only restrict our water
consumption but also devise innovative conservation methods to provide sustainable
sources of clean drinking water. While Rain water harvesting and reducing water
consumption are effective methods of water conservation in urban areas, construct ion of
small dams to provide huge water reservoirs holds the key to effective water
conservation in rural areas.
Question 11
(a) Define the areas where chain network of communication is found in an organization.
(2 Marks)
(b) Select the correct meaning of Idioms/Phrases given below:
(i) Takes Two to Tango
(1) Two people are required for dancing
(2) Two people are required for creating mischief.
(3) Two people required to clean floor.
(4) Two people required to help others. (1 Mark)
(ii) Storm in a teacup
(1) Crave for something
(2) Least importance
(3) Emergency situation
(4) Make a big issue out of a small thing. (1 Mark)
(iii) Change the sentence into Active Voice;
They will be given a ticket for over speeding by the police inspector. (1 Mark)
(iv) Choose the word which best expresses the meaning of the given word.
Myriad
(1) Dramatic
(2) To Fetch
(3) Many
(4) Confusion (1 Mark)
(c) Write a letter to a bank requesting them to stop payment of a cheque which has been
reported lost. (4 Mark)

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12 FOUNDATION EXAMINATION: NOVEMBER, 2019

Answer
(a) Communication pattern that follows the chain of command from the senior to the junior is
called the chain network. Communication starts at the top, like from a CEO, and works its
way down to the different levels of employees. The supervisor/ manager/ CEO g ives
commands or instructions to those working under him/her in the organization.
B, C, D and E, F, G are the subordinates to A in the organizational hierarchy and receive
commands from ‘A’ as shown in the diagram. The chain network often takes up time, and
communication may not be clear.

E B

F C

G D

Chain of Command

(b) (i) (2) Two people are required for creating mischief.
(ii) (4) Make a big issue out of a small thing.
(iii) The police inspector will give them a ticket for over speeding.
(iv) (3) Many

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 13

(c) Letter:
From:
ABC Private Limited,
Nariman Point, Mumbai

November 13, 2019

XYZ Bank
106 Millenum Tower
Prashant Lok
Mumbai-02

Sir/Madam,
Subject: Request to Stop Payment of the Cheque No. xxxxxx
On behalf of ABC Pvt Ltd, I request you to stop payment of the cheque number xxxxxx
issued against our company Bank Account Number 123-456-789 maintained by your
branch. This cheque was issued to our vendor PQR Ltd amounting to ` 3 Lakh dated
XX/XX/XXXX and has been misplaced as reported by their accounts department. We will
issue a new cheque after your response.

Thanks for your cooperation.

Regards,
ASD
Senior Manager, Accounts

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAW

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) Mr. X a businessman has been fighting a long drawn litigation with Mr. Y an industrialist.
To support his legal campaign he enlists the services of Mr. C a Judicial officer stating
that the amount of `10 lakhs would be paid to him if he does not take up the brief of
Mr. Y.
Mr. C agrees but, at the end of the litigation Mr. X refuses to pay to Mr. C. Decide
whether Mr. C can recover the amount promised by Mr. X under the provisions of the
Indian Contract Act, 1872? (4 Marks)
(b) ABC Limited has allotted equity shares with voting rights to XYZ Limited worth ` 15
Crores and issued Non-Convertible Debentures worth ` 40 Crores during the Financial
Year 2019-20. After that total Paid-up Equity Share Capital of the company is ` 100
Crores and Non-Convertible Debentures stands at ` 120 Crores.
Define the Meaning of Associate Company and comment on whether ABC Limited and
XYZ Limited would be called Associate Company as per the provisions of the Companies
Act, 2013? (4 Marks)
(c) Write any four exceptions to the doctrine of Caveat Emptor as per the Sale of Goods Act,
1930. (4 Marks)
Answer
(a) The problem as asked in the question is based on Section 10 of the Indian Contract Act,
1872. This Section says that all agreements are contracts if they are made by the free
consent of the parties competent to contract, for a lawful consideration and with a lawful
object and are not expressly declared to be void. Further, Section 23 also states that
every agreement of which the object is unlawful is void.
Accordingly, one of the essential elements of a valid contract in the light of the said
provision is that the agreement entered into must not be which the law declares to be
either illegal or void. An illegal agreement is an agreement expressly or impliedly
prohibited by law. A void agreement is one without any legal effects.
The given instance is a case of interference with the course of justice and results as
opposed to public policy. This can also be called as an agreement in restraint of legal
proceedings. This agreement restricts one’s right to enforce his legal rights. Such an
agreement has been expressly declared to be void under section 28 of the Indian

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2 FOUNDATION EXAMINATION: NOVEMBER, 2020

Contract Act, 1872. Hence, Mr. C in the given case cannot recover the amount of ` 10
lakh promised by Mr. X because it is a void agreement and cannot be enforced by law.
(b) As per Section 2(6) of the Companies Act, 2013, an Associate Company in relation to
another company, means a company in which that other company has a significant
influence, but which is not a subsidiary company of the company having such influence
and includes a joint venture company.
The term “significant influence” means control of at least 20% of total share capital, or
control of business decisions under an agreement.
The term “Total Share Capital”, means the aggregate of the -
(a) Paid-up equity share capital; and
(b) Convertible preference share capital.
In the given case, as ABC Ltd. has allotted equity shares with voting rights to XYZ
Limited of ` 15 crore, which is less than requisite control of 20% of total share capital
(i.e. 100 crore) to have a significant influence of XYZ Ltd. Since the said requirement is
not complied, therefore ABC Ltd. and XYZ Ltd. are not associate companies as per the
Companies Act, 2013. Holding/allotment of non-convertible debentures has no relevance
for ascertaining significant influence.
(c) The doctrine of Caveat Emptor given under the Sale of Goods Act, 1930 is subject to the
following exceptions:
1. Fitness as to quality or use: Where the buyer makes known to the seller the
particular purpose for which the goods are required, it is the duty of the seller to
supply such goods as are reasonably fit for that purpose [Section 16 (1)].
2. Goods purchased under patent or brand name: In case where the goods are
purchased under its patent name or brand name, there is no implied condition that
the goods shall be fit for any particular purpose [Section 16(1)].
3. Goods sold by description: Where the goods are sold by description there is an
implied condition that the goods shall correspond with the description [Section 15].
If it is not so, then seller is responsible.
4. Goods of Merchantable Quality: Where the goods are bought by description from
a seller who deals in goods of that description there is an implied condition that the
goods shall be of merchantable quality. The rule of Caveat Emptor is not applicable.
[Section 16(2)].
5. Sale by sample: Where the goods are bought by sample, this rule of Caveat
Emptor does not apply if the bulk does not correspond with the sample [Section 17].
6. Goods by sample as well as description: Where the goods are bought by sample
as well as description, the rule of Caveat Emptor is not applicable in case the goods

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

do not correspond with both the sample and description or either of the condition
[Section 15].
7. Trade Usage: An implied warranty or condition as to quality or fitness for a
particular purpose may be annexed by the usage of trade and if the seller deviates
from that, this rule of Caveat Emptor is not applicable [Section 16(3)].
8. Seller actively conceals a defect or is guilty of fraud: Where the seller sells the
goods by making some misrepresentation or fraud and the buyer relies on it or when
the seller actively conceals some defect in the goods so that the same could not be
discovered by the buyer on a reasonable examination, then the rule of Caveat
Emptor will not apply.
Question 2
(a) Define Misrepresentation and Fraud. Explain the difference between Fraud and
Misrepresentation as per the Indian Contract Act, 1872. (7 Marks)
(b) State the circumstances under which LLP may be wound up by the Tribunal under the
Limited Liability Partnership Act, 2008. (5 Marks)
Answer
(a) Definition of Fraud under Section 17 of the Indian Contract Act, 1872:
'Fraud' means and includes any of the following acts committed by a party to a contract,
or with his connivance, or by his agent, with an intent to deceive another party thereto or
his agent, or to induce him to enter into the contract:
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to
be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact ;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
As per Section 18 of the Indian Contract Act, 1872, misrepresentation means and
includes-
(1) the positive assertion, in a manner not warranted by the information of the person
making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the
person committing it, or anyone claiming under him; by misleading another to his
prejudice or to the prejudice of anyone claiming under him;
(3) causing, however, innocently, a party to an agreement to make a mistake as to the
substance of the thing which is the subject of the agreement.

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4 FOUNDATION EXAMINATION: NOVEMBER, 2020

Distinction between fraud and misrepresentation:

Basis of difference Fraud Misrepresentation
Intention To deceive the other There is no such intention to
party by hiding the truth. deceive the other party.
Knowledge of truth The person making the The person making the
suggestion believes that statement believes it to be true,
the statement as untrue. although it is not true.
Rescission of the The injured party can The injured party is entitled to
contract and claim repudiate the contract repudiate the contract or sue
for damages and claim damages. for restitution but cannot claim
the damages.
Means to discover The party using the Party can always plead that the
the truth fraudulent act cannot injured party had the means to
secure or protect himself discover the truth.
by saying that the injured
party had means to
discover the truth.
(b) Section 64 of the Limited Liability Partnership Act, 2008 states circumstances in which
limited liability partnership (LLP) may be wound up by Tribunal.
(a) if the limited liability partnership decides that limited liability partnership be wound
up by the Tribunal;
(b) if, for a period of more than six months, the number of partners of the limited liability
partnership is reduced below two;
(c) if the LLP is unable to pay its debts;
(d) if the limited liability partnership has acted against the interests of the sovereignty
and integrity of India, the security of the State or public order;
(e) if the limited liability partnership has made a default in filing with the Registrar the
Statement of Account and Solvency or annual return for any five consecutive
financial years; or
(f) if the Tribunal is of the opinion that it is just and equitable that the limited liability
partnership be wound up.
Question 3
(a) (i) What do you mean by 'Partnership at will' as per the Indian Partnership Act, 1932?
(2 Marks)
OR

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5

(ii) Comment on 'the right to expel partner must be exercised in good faith' under the
Indian Partnership Act, 1932. (2 Marks)
(b) Referring to the Provisions of the Indian Partnership Act, 1932, answer the following:
(i) What are the consequences of Non-Registration of Partnership firm?
(ii) What are the rights which won't be affected by Non-Registration of Partnership firm?
(4 Marks)
(c) In light of provisions of the Indian Contract Act, 1872 answer the following:
(i) Mr. S and Mr. R made contract wherein Mr. S agreed to deliver paper cup
manufacture machine to Mr. R and to receive payment on delivery. On the delivery
date, Mr. R didn't pay the agreed price. Decide whether Mr. S is bound to fulfil his
promise at the time of delivery?
(ii) Mr. Y given loan to Mr. G of INR 30,00,000. Mr. G defaulted the loan on due date
and debt became time barred. After the time barred debt, Mr. G agreed to settle the
full amount to Mr. Y. Whether acceptance of time barred debt Contract is
enforceable in law?
(iii) A & B entered into a contract to supply unique item, alternate of which is not
available in the market. A refused to supply the agreed unique item to B. What
directions could be given by the court for breach of such contract? (6 Marks)
Answer
(a) (i) Partnership at will under the Partnership Act, 1932
According to Section 7 of the Act, partnership at will is a partnership when:
1. no fixed period has been agreed upon for the duration of the partnership; and
2. there is no provision made as to the determination of the partnership.
Where a partnership entered into for a fixed term is continued after the expiry of
such term, it is to be treated as having become a partnership at will.
OR
(ii) A partner may not be expelled from a firm by a majority of partners except in exercise, in
good faith, of powers conferred by contract between the partners. It is, thus,
essential that:
(i) the power of expulsion must have existed in a contract between the partners;
(ii) the power has been exercised by a majority of the partners; and
(iii) it has been exercised in good faith.
If all these conditions are not present, the expulsion is not deemed to be in bona fide
interest of the business of the firm.

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(b) (i) Consequences of Non-registration of partnership firm:

Under Section 69 of the Indian Partnership Act, 1932 non-registration of partnership
gives rise to a number of disabilities. Though registration of firms is not compulsory,
yet the consequences or disabilities of non-registration have a persuasive pressure
for their registration. Following are the consequences:
(a) No suit in a civil court by firm or other co-partners against third party: The
firm or any other person on its behalf cannot bring an action against the third
party for breach of contract entered into by the firm.
(b) No relief to partners for set-off of claim: If an action is brought against the
firm by a third party, then neither the firm nor the partner can claim any set-off, if the
suit be valued for more than ` 100 or pursue other proceedings to enforce the rights
arising from any contract.
(c) Aggrieved partner cannot bring legal action against other partner or the
firm: A partner of an unregistered firm (or any other person on his behalf) is
precluded from bringing legal action against the firm or any person alleged to
be or to have been a partner in the firm.
(d) Third-party can sue the firm: In case of an unregistered firm, an action can
be brought against the firm by a third party.
(ii) Non-registration of a firm does not, however, affect the following rights:
1. The right of third parties to sue the firm or any partner.
2. The right of partners to sue for the dissolution of the firm or for the settlement of the
accounts of a dissolved firm, or for realization of the property of a dissolved
firm.
3. The power of an Official Assignees, Receiver of Court to release the property of the
insolvent partner and to bring an action.
4. The right to sue or claim a set-off if the value of suit does not exceed ` 100 in
value.
(c) (i) As per Section 51 of the Indian Contract Act, 1872, when a contract consists of
reciprocal promises to be simultaneously performed, no promisor needs to perform his
promise unless the promisee is ready and willing to perform his reciprocal promise.
Such promises constitute concurrent conditions and the performance of one of the
promise is conditional on the performance of the other. If one of the promises is not
performed, the other too need not be performed.
Referring to the above provisions, in the given case, Mr. S is not bound to deliver
goods to Mr. R since payment was not made by him at the time of delivery of goods.
(ii) Promise to pay time-barred debts - Section 25 (3): Where there is an agreement,
made in writing and signed by the debtor or by his agent, to pay wholly or in part a

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

time barred debt, the agreement is valid and binding even though there is no
consideration.
In the given case, the loan given by Mr. Y to Mr. G has become time barred.
Thereafter, Mr. G agreed to make payment of full amount to Mr. Y.
Referring to above provisions of the Indian Contract Act, 1872 contract entered
between parties post time barred debt is valid so, Mr. G is bound to pay the agreed
amount to Mr. Y provided the above mentioned conditions of section 25 (3) are
fulfilled.
(iii) Where there is a breach of contract for supply of a unique item, mere monetary
damages may not be an adequate remedy for the other party. In such a case, the
court may give order for specific performance and direct the party in breach to carry
out his promise according to the terms of contract. Here, in this case, the court may
direct A to supply the item to B because the refusal to supply the agreed unique
item cannot be compensated through money.
Question 4
(a) Explain any six circumstances in detail in which non-owner can convey better title to
Bona fide purchaser of goods for value as per the Sale of Goods Act, 1930. (6 Marks)
(b) P, Q, R and S are the partners in M/S PQRS & Co., a partnership firm which deals in
trading of Washing Machines of various brands.
Due to the conflict of views between partners, P & Q decided to leave the partnership
firm and started competitive business on 31st July, 2019, in the name of M/S PQ & Co.
Meanwhile, R & S have continued using the property in the name of M/S PQRS & Co. in
which P & Q also has a share.
Based on the above facts, explain in detail the rights of outgoing partners as per the
Indian Partnership Act, 1932 and comment on the following:
(i) Rights of P & Q to start a competitive business.
(ii) Rights of P & Q regarding their share in property of M/S PQRS & Co. (6 Marks)
Answer
(a) In the following cases, a non-owner can convey better title to the bona fide purchaser of
goods for value.
(1) Sale by a Mercantile Agent: A sale made by a mercantile agent of the goods for
document of title to goods would pass a good title to the buyer in the following
circumstances; namely;
(a) If he was in possession of the goods or documents with the consent of the
owner;

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8 FOUNDATION EXAMINATION: NOVEMBER, 2020

(b) If the sale was made by him when acting in the ordinary course of
business as a mercantile agent; and
(c) If the buyer had acted in good faith and has at the time of the contract of sale, no
notice of the fact that the seller had no authority to sell (Proviso to Section 27
of the Sale of Goods Act, 1930).
(2) Sale by one of the joint owners (Section 28): If one of several joint owners of goods
has the sole possession of them by permission of the co-owners, the property in the goods
is transferred to any person who buys them of such joint owner in good faith and has not
at the time of the contract of sale notice that the seller has no authority to sell.
(3) Sale by a person in possession under voidable contract: A buyer would acquire
a good title to the goods sold to him by a seller who had obtained possession of the
goods under a contract voidable on the ground of coercion, fraud, misrepresentation
or undue influence provided that the contract had not been rescinded until the time
of the sale (Section 29).
(4) Sale by one who has already sold the goods but continues in possession
thereof: If a person has sold goods but continues to be in possession of them or of the
documents of title to them, he may sell them to a third person, and if such person
obtains the delivery thereof in good faith and without notice of the previous sale, he
would have good title to them, although the property in the goods had passed to the
first buyer earlier. A pledge or other disposition of the goods or documents of title by
the seller in possession are equally valid [Section 30(1)].
(5) Sale by buyer obtaining possession before the property in the goods has
vested in him: Where a buyer with the consent of the seller obtains possession of
the goods before the property in them has passed to him, he may sell, pledge or
otherwise dispose of the goods to a third person, and if such person obtains
delivery of the goods in good faith and without notice of the lien or other right of the
original seller in respect of the goods, he would get a good title to them [Section
30(2)].
However, a person in possession of goods under a ‘hire-purchase’ agreement which
gives him only an option to buy is not covered within the section unless it amounts
to a sale.
(6) Effect of Estoppel: Where the owner is estopped by the conduct from denying the
seller’s authority to sell, the transferee will get a good title as against the true
owner. But before a good title by estoppel can be made, it must be shown that the
true owner had actively suffered or held out the other person in question as the true
owner or as a person authorized to sell the goods.
(7) Sale by an unpaid seller: Where an unpaid seller who had exercised his right of
lien or stoppage in transit resells the goods, the buyer acquires a good title to the
goods as against the original buyer [Section 54 (3)].

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 9

(8) Sale under the provisions of other Acts:

(i) Sale by an Official Receiver or Liquidator of the Company will give the
purchaser a valid title.
(ii) Purchase of goods from a finder of goods will get a valid title under
circumstances [Section 169 of the Indian Contract Act, 1872]
(iii) A sale by pawnee can convey a good title to the buyer [Section 176 of the
Indian Contract Act, 1872]
(b) (i) Rights of outgoing partner to carry on competing business (Section 36 of the
Indian Partnership Act, 1932)
(1) An outgoing partner may carry on business competing with that of the firm and
he may advertise such business, but subject to contract to the contrary, he
may not,-
(a) use the firm name,
(b) represent himself as carrying on the business of the firm or
(c) solicit the custom of persons who were dealing with the firm before he
ceased to be a partner.
(2) Although this provision has imposed some restrictions on an outgoing partner,
it effectively permits him to carry on a business competing with that of the firm.
However, the partner may agree with his partners that on his ceasing to be so,
he will not carry on a business similar to that of the firm within a specified
period or within specified local limits. Such an agreement will not be in restraint
of trade if the restraint is reasonable [Section 36 (2)]
From the above, we can infer that P & Q can start competitive business in the
name of M/S PQ & Co after following above conditions in the absence of any
agreement.
(ii) Right of outgoing partner in certain cases to share subsequent profits
(Section 37 of the Indian Partnership Act, 1932)
According to Section 37, where any member of a firm has died or otherwise ceased
to be partner, and the surviving or continuing partners carry on the business of the
firm with the property of the firm without any final settlement of accounts as
between them and the outgoing partner or his estate, then, in the absence of a
contract to the contrary, the outgoing partner or his estate is entitled at the option of
himself or his representatives to such share of the profits made since he ceased to
be a partner as may be attributable to the use of his share of the property of the f irm
or to interest at the rate of six per cent per annum on the amount of his share in the
property of the firm.

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10 FOUNDATION EXAMINATION: NOVEMBER, 2020

In the instant case, P & Q can share in property of M/s PQRS & Co. keeping in view
of the above provisions.
Question 5
(a) Ms. R owns a Two Wheeler which she handed over to her friend Ms. K on sale or return
basis. Even after a week, Ms. K neither returned the vehicle nor made payment for it.
She instead pledged the vehicle to Mr. A to obtain a loan. Ms. R now wants to claim the
Two Wheeler from Mr. A. Will she succeed?
(i) Examine with reference to the provisions of the Sale of Goods Act, 1930, what
recourse is available to Ms. R?
(ii) Would your answer be different if it had been expressly provided that the vehicle
would remain the property of Ms. R until the price has been paid? (6 Marks)
(b) What are the significant points of Section 8 Company which are not applicable for
other companies? Briefly explain with reference to provisions of the Companies Act,
2013. (6 Marks)
Answer
(a) As per the provisions of Section 24 of the Sale of Goods Act, 1930, when goods are
delivered to the buyer on approval or “on sale or return" or other similar terms, the
property therein passes to the buyer-
(a) when the buyer signifies his approval or acceptance to the seller or does any other
act adopting the transaction;
(b) if he does not signify his approval or acceptance to the seller but retains the goods
without giving notice of rejection, then, if a time has been fixed for the return of the
goods, on the expiration of such time, and, if no time has been fixed, on the
expiration of a reasonable time; or
(c) he does something to the good which is equivalent to accepting the goods e.g. he
pledges or sells the goods.
Referring to the above provisions, we can analyse the situation given in the question.
(i) In the instant case, Ms. K, who had taken delivery of the two wheeler on Sale or
Return basis pledged the two wheeler to Mr. A, has attracted the third condition that
she has done something to the good which is equivalent to accepting the goods e.g.
she pledges or sells the goods. Therefore, the property therein (Two wheeler)
passes to Mr. A. Now in this situation, Ms. R cannot claim back her two wheeler
from Mr. A, but she can claim the price of the two wheeler from Ms. K only.
(ii) It may be noted that where the goods have been delivered by a person on “sa le or
return” on the terms that the goods were to remain the property of the seller till they

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 11

are paid for, the property therein does not pass to the buyer until the terms are
complied with, i.e., price is paid for.
Hence, in this case, it is held that at the time of pledge, the ownership was not
transferred to Ms. K. Thus, the pledge was not valid and Ms. R could recover the
two wheeler from Mr. A.
(b) Section 8 Company- Significant points
 Formed for the promotion of commerce, art, science, religion, charity, protection of
the environment, sports, etc.
 Requirement of minimum share capital does not apply.
 Uses its profits for the promotion of the objective for which formed.
 Does not declare dividend to members.
 Operates under a special licence from the Central Government.
 Need not use the word Ltd./ Pvt. Ltd. in its name and adopt a more suitable name
such as club, chambers of commerce etc.
 Licence revoked if conditions contravened.
 On revocation, the Central Government may direct it to
– Converts its status and change its name
– Wind – up
– Amalgamate with another company having similar object.
 Can call its general meeting by giving a clear 14 days notice instead of 21 days.
 Requirement of minimum number of directors, independent directors etc. does not
apply.
 Need not constitute Nomination and Remuneration Committee and Shareholders
Relationship Committee.
 A partnership firm can be a member of Section 8 company.
Question 6
(a) Enumerate the differences between 'Wagering Agreements' and 'Contract of Insurance'
with reference to provision of the Indian Contract Act, 1872. (5 Marks)
(b) Explain in detail the circumstances which lead to liability of firm for misapplication by
partners as per provisions of the Indian Partnership Act, 1932. (4 Marks)
(c) Mike Limited company incorporated in India having Liaison office at Singapore. Explain in
detail meaning of Foreign Company and analysis., on whether Mike Limited would be

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12 FOUNDATION EXAMINATION: NOVEMBER, 2020

called as Foreign Company as it established a Liaison office at Singapore as per the

provisions of the Companies Act, 2013? (3 Marks)
Answer
(a) Distinction between Wagering Agreement and Contract of Insurance
Basis Wagering Agreement Contract of Insurance
1. Meaning It is a promise to pay It is a contract to indemnify
money or money’s worth the loss.
on the happening or non
happening of an uncertain
event.
2. Consideration There is no consideration The crux of the insurance
between the two parties. contract is the mutual
There is just gambling for consideration (premium and
money. compensation amount).
3. Insurable Interest There is no property in Insured party has an
case of wagering insurable interest in the life
agreement. or property sought to be
There is betting on other’s insured.
life and properties.
4. Contract of Loser has to pay the fixed Except for life insurance,
Indemnity amount on the happening the contract of insurance
of an uncertain event. indemnifies the insured
person against loss
5. Enforceability It is void and It is valid and enforceable
unenforceable agreement.
6. Premium No such logical Calculation of premium is
calculations are required based on scientific and
in case of wagering actuarial calculation of risks.
agreement.
7. Public Welfare They have been regarded They are beneficial to the
as against the public society.
welfare.
(b) Liability of Firm for Misapplication by Partners (Section 27 of Indian Partnership
Act, 1932): Where-
(a) a partner acting within his apparent authority receives money or property from a
third party and misapplies it, or

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 13

(b) a firm in the course of its business receives money or property from a third party,
and the money or property is misapplied by any of the partners while it is in the
custody of the firm, the firm is liable to make good the loss.
Analysis of section 27:
It may be observed that the workings of the two clauses of Section 27 are designed to
bring out clearly an important point of distinction between the two categories of cases of
misapplication of money by partners.
Clause (a) covers the case where a partner acts within his authority and due to his
authority as a partner, he receives money or property belonging to a third party and
misapplies that money or property. For this provision to be attracted, it is not necessary
that the money should have actually come into the custody of the firm.
On the other hand, the provision of clause (b) would be attracted when such money or
property has come into the custody of the firm and it is misapplied by any of the partners.
The firm would be liable in both the cases.
(c) Foreign Company [Section 2(42) of the Companies Act, 2013]: It means any company
or body corporate incorporated outside India which—
(i) has a place of business in India whether by itself or through an agent, physically or
through electronic mode; and
(ii) conducts any business activity in India in any other manner.
Since Mike Limited is a company incorporated in India, hence, it cannot be called as a
foreign company. Even though, Liaison was officially established at Singapore, it would
not be called as a foreign company as per the provisions of the Companies Act, 2013.

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14 FOUNDATION EXAMINATION: NOVEMBER, 2020

SECTION B – BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.
Attempt any three questions from the remaining four questions.
Question 7
(a) Mr. Ramesh, the HR Head of ABC Insurance Co. Ltd., who is having charge of training
and development also, during his twelve years with the Company. He had the experience
of training and developing numerous employees, only to see many of them leave the firm
after getting their advanced degrees. The Company has a Policy of reimbursement of
90% of the cost incurred on tuition fee, books etc. for acquiring such qualifications. Only
those employees who have taken prior permission of HR before enrolment in such
program/degree and completed three years of service are eligible for seeking the
reimbursement. A proof of its popularity was that most of the junior and middle level
managers had availed this facility to advance their qualifications.
Mr. Kumar, a Sales Executive, who had joined the Company just three years ago had
also availed the aforesaid facility for pursuing a course in Business Management and had
recently competed his master's degree in business management' and submitted the
same to the Company for seeking reimbursement and recording additional qualifications
acquired in official records.
Mr. Ramesh congratulated him and added the additional qualifications acquired by him
in the Company records and assured him to consider him for higher position keeping in
view his qualifications in near future and of course subject to availability of vacancy as
per the approved Organisation Chart. Further Mr. Ramesh allowed reimbursement of
90% of the cost incurred as per the Policy. Mr. Kumar on his achievement when he came
to see and thank HR
Head, but was strongly taken aback when he expressed his intention to leave the
Company in favour of a competitor because he did not see any future for himself in ABC
Insurance Co. Ltd. Head HR was annoyed as this had happened so many times in the
past. He immediately rushed to see the Marketing Director to seek support for reviewing
and discontinuing the Policy of educational reimbursement with immediate effect or to put
a condition that all those employees who acquired such qualifications and reimbursed
90% of the expenses shall at least serve the Company for a minimum of 3 years after
seeking such reimbursement.
(i) What could be the possible reasons behind employees quitting the Company after
acquiring higher qualifications? (2 Marks)
(ii) Is there any need to amend or abandon the Policy of educational reimbursement?
(1 Marks)
(iii) What measures do you suggest for overcoming high employee attrition problem?

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

(2 Marks)
(b) Read the Passage :
(i) Make Notes, using Headings, Subheadings and abbreviations whenever necessary.
(3 Marks)
(ii) Write Summary Recycling is simply the process of reusing the items from which
utility can still be derived. It is important to recycle waste so that we can at least
conserve some. of our natural resources for the generations to come. Many
products such as paper, cardboards, and cups come from trees. In fact trees are
our natural assets; you can conserve trees by recycling the paper products as by
doing so we can minimize the number of trees cut down a year. This is one form of
waste recycling.
Recycling waste will not only save our natural resources but will also help save energy.
By simply recycling an item or making a basic fix to it, we can save all the energy that
would have been consumed in the process of making it. The same example can be taken
with plastic items. A large amount of energy can be saved by simply reusing the plastic
items. To recycle waste is to simply reduce pollution. By recycling plastic material, we
can reduce air pollution as well as water pollution. Plastic factories produce a large
amount of smoke while producing plastic material at the same time; if we don't have a
proper waste disposal system then those waste emissions will cause water pollution.
Recycling helps reduce pollution too.
In simple words, recycling waste is essential for both the natural environment and
humans. To sum up, recycling minimizes the need for raw materials so that the
rainforests can be preserved. Great amounts of energy are used when making
products from raw materials. Recycling requires much less energy and therefore
helps to preserve natural resources. One needs to know the importance of
recycling; at the same time being earth friendly can help make our planet a better
place to live in. (2 Marks)
Answer
(a) (i) The employees after acquiring higher qualifications expect a sizeable salary increment
and career growth commensurate with their current qualifications. In absence of a
concrete incentive or promotion policy aligned with qualification enhancement scheme,
the employees start looking for better opportunities with other companies in the sector
and quit the job as soon as they get it.
(ii) The policy needs to be amended. Abandoning the policy will be demoralizing for the
employees.
(iii) Attrition can be contained in this organization by amending the current
reimbursement policy. Here are a few recommended changes:

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16 FOUNDATION EXAMINATION: NOVEMBER, 2020

1. The policy needs to be aligned with a concrete incentive/promotion policy, with

lucrative perks such as fully paid family holidays once a year.
2. The policy should be offered to only the top 20% of employees who have been
performing consistently for the last 3 years.
3. The employees availing the policy should be bound by a commitment to serve the
company for a stipulated period or pay double the amount, by making them sign a
bond.
4. The cost of qualification enhancement should be paid in 36 equal monthly
instalments to make them stay at least for the next three years.
a. by the company
b. by the employee as an interest free loan
5. Periodically benchmarking salary structure and perks vis-a-vis other organisations
in the sector to ensure employee satisfaction.
6. Adopting a robust periodically reviewed appraisal policy to ensure the inclusion of
the deserving employees
7. Providing fast-track career growth options, to the selected employees on the basis
of their performance
8. Ensuring a conducive, cordial and harmonious work environment, where team
spirit is strongly inculcated and encouraged
9. Establishing a strong ethical leadership that encourage employees to voice their
grievances and initiate discussions and resolve their issues/predicaments
objectively.
10. Sponsoring and conducting periodic short and long term training programs
/courses to enable employees to upgrade knowledge and enrich their skills.
(b) (i) Note Making, Recycle, Reuse, Reduce
• Recylg,
1.1 Prcsng. /reusing waste, create utility items
1.2 Examples
1.2.1 Prcsng. used paper, cups and cardboards
1.2.1.1 Bnfts.
1.2.1.1.1 Cnsrvs. envrmt.
1.2.1.1.2 Mnmzs. Ctng. of trees
1.2.2 Reusing plastic

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 17

1.2.2.1 Bnfts.
1.2.2.1.1 Rdcs. air poltn.
1.2.2.1.2 Rdcs. water poltn.
1.3 Bnfts.
1.3.1 Cnsrvs. natural resources
1.3.2 Cnsrvs. energy
1.3.3 Rdcs. poltn.
1.3.4 Mnmzs. the need for raw material
1.3.5 Eco-friendly
1.3.6 Helps create better lvng. cndtns.
Key to Abbreviations:
1. Recyclg.- recycling
2. Prcsng. -processing
3. Bnfts.-benefits
4. Cnsrvs.-conserve
5. Envrmt..-environment
6. Mnmzs.-minimizes
7. Ctng.-cutting
8. Rdcs.-reduces
9. Poltn.-pollution
10. Lvng.-living
11. Cndtns.-conditions
(ii) Summary
Recycling can be termed as processing or reusing waste to create new utility items.
For example, used paper, cardboards and paper cups can be recycled to create
new ones. This helps in conserving the environment by minimizing cutting of trees.
Plastic can be reused thus, reducing air and water pollution. Recycling has many
benefits including conservation of natural resources and energy, reducing pollution,
minimizing the need for raw material, helping to create better living conditions on
our planet earth.

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18 FOUNDATION EXAMINATION: NOVEMBER, 2020

Question 8
(a) Body language speaks the truth while speaker may play with words to hide the truth,
comment? (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
SCINTILLATING
(1) Smouldering
(2) Glittering
(3) Touching
(4) Warming (1 Marks)
(ii) Select a suitable antonym for the word given under:
Fidelity
(1) Commitment
(2) Inconstancy
(3) Ambitious
(4) Devotion
(iii) Change the following sentence to indirect speech Varun Said, "Every Kid should
learn coding". (1 Marks)
(c) Write a precis and give an appropriate title to the passage given below:
These days, it is not unusual to see people listening to music or using their electronic
gadgets while crossing busy roads or travelling on public transport, regardless of the
risks involved. I have often wondered why they take such risks, is it because they want a
sense of independence, or is it that they want to tell everybody to stop bothering them ?
Or is it that they just want to show how cool they are? Whether it is a workman or an
executive, earphones have become an inseparable part of our lives, sometimes even
leading to tragicomic situations.
The other day, an electrician had come to our home to repair iron. We told him in detail
what the fault was and needed to be done. But after he left, I found that the man had
done almost nothing and iron was not working even after repair. It later turned out that he
could not hear our directions clearly because he had an earphone on. Many of such
earphones addicts commute by the Metro every day. While one should not be grudge
anyone their moments of privacy or their love for music, the fact is 'iPod oblivion' can
sometimes be very dangerous.
Recently, I was travelling with my wife on the Metro. Since the train was approaching the
last station, there weren't too many passengers. In our compartment, other than us,

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 19

there were only two women sitting on the other side of the aisle. And then suddenly, I
spotted a duffel bag. The bomb scare lasted for several minutes. Then suddenly, a youth
emerged from nowhere and picked up the bag. When we tried to stop him, he looked at
us, surprised. Then he took off his earpieces, lifted the bag, and told us that the bag
belonged to him and that he was going to get off at the next station.
We were stunned but recovered in time to ask him where he was all this while. His
answer was that in the compartment, leaning against the door totally involved in the
music. He had no clue about what was going on around him. When he got off, earplugs
in his hand, we could hear strains of the song. (5 Marks)
Answer
(a) In most cases the body language comprising facial expressions, gesticulation and
posture genuinely convey the speaker’s intent which might not match with his speech.
However, seasoned fraudsters and criminals can control their body language to match
their words, hiding their true intent.
(b) (i) Glittering
(ii) Inconstancy
(iii) Varun suggested/said/advised that every kid should learn coding.
(c) Precis
Title: Ubiquitous Earphones and Probable Risks / Risks of Earphone
People are hooked to gadgets so much so that they use them while travelling and even
crossing roads. Possible reasons are that they do not want to be bothered or they want
to project themselves as being tech-savvy. Almost everybody is seen with earphones on,
busy in their own virtual world, oblivious to the real world around. This leads to
unexpected and serious events occurring in the most mundane situations. Skilled labour
like electricians with the earphones on, do not pay heed to instructions thus do not
deliver as per expectations, wasting precious man-hours and efforts. In public transport
such as Metro, carefree passengers recklessly keep their luggage in any random corner.
While they are engrossed in music, comfortably dozing off during travel, their unattended
luggage sometimes leads to alarming situations such as bomb hoax causing an
unnecessary ruckus and severe inconvenience to other commuters.
Question 9
(a) What is formal communication, explain. (2 Marks)
OR
Encoding the matter is an important element of communication, comments? (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:

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20 FOUNDATION EXAMINATION: NOVEMBER, 2020

Concise
(1) Brief
(2) Better
(3) Important
(4) Interesting (1 Marks)
(ii) Choose the word which best expresses the meaning of the given word:
Cryptic
(1) Pertinent
(2) Common
(3) Mysterious
(4) Loyalty (1 Marks)
(iii) · Change the following sentence to indirect speech:
"Do you suppose you know better than your own father?" jeered his angry mother.
(1 Marks)
(c) Draft Newspaper Report on "Project to interconnect rivers in India" to be published in a
national newspaper. (5 Marks)
Answer
(a) Formal communication, both oral and written, follows certain rules, principles and
conventions in conveying the message. The hierarchy in the organization has to be
followed. Formal format, style and language have to be used. The communication pattern
can be vertical, horizontal or diagonal.
• Vertical: Information can flow upwards or downwards in the organization. Data that is
collected flows up to the top levels of management for review and decision making,
while instructions and orders are passed down from the management/ seniors to the
subordinates for implementation.
• Horizontal: Horizontal communication that involves communication between two parts of
the organization at the same level. For example, the managers of a project in a
company may hold a regular daily, weekly or monthly meeting to discuss the progress of
the project.
• Diagonal: Cross-functional communication between employees at different levels of the
organizational hierarchy is described as diagonal communication. Diagonal
communication is increasingly common in larger organizations. It reduces the chances
of distortion or misinterpretation by encouraging direct communication between the

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

relevant parties. For example, a junior engineer reports directly to the General Manager
regarding the progress on the project.
OR
Encoding is an important step in the process of communication as it
converts/envelopes the message contents into a format/version that is amenable to
be sent through the medium. It adds certain specific details to the message so that
it can be easily sent across the medium and can be easily interpreted by the
receiver at the other end of the medium. This step is built-in or rendered by the
medium. For example for a message to be sent through an e-mail, it requires us to
compose a message and then copy the contents of the message into the given
interface. Without this step, the message cannot be sent. Likewise, if we want to
send a message through postal service we need to enclose the message into an
envelope with postal stamps in order to send it. In verbal communication, we add
diction, tone, modulation, gestures and facial expressions to make the
communication more effective.
(b) (i) Brief
(ii) Mysterious
(iii) His angry mother jeered and asked (jeeringly asked) the son whether (if) he
supposed he knew better than his father.
(c) Project to interconnect rivers in India
By XXX
India is bestowed with abundant natural water resources in the form of a network of
perennial and seasonal rivers flowing across the length and breadth of its l andscape. But
the lack of homogeneity of water resources has led to large scale research and
implementation for water resources development in India in order to boost agricultural
production, improve domestic water supply, and address the energy crisis.
The interlinking of rivers in India is an ambitious mega-project in engineering called
the National River Linking Project (NRLP). It is in the planning stage that aims to connect
Indian rivers through a network of reservoirs canals and dams. This would facilitate
transfer of water from surplus regions in the north-east with major rivers i.e. the Ganges
and the Brahmaputra, to the water scarce areas of western and southern India. It will
connect 37 rivers and will have 3,000 storages.
The project will substantially increase the utilizable water resource and hydropower
potential. Other major advantages include prevention of floods striking every year in the
Ganga and Brahmaputra region, saving human lives, livelihood, preventing huge material
losses and devastation. This will also provide water throughout the year to farmers who

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22 FOUNDATION EXAMINATION: NOVEMBER, 2020

will not be dependent on monsoon. The land under irrigation will increase by about 15%.
The inland waterway transportation for nearly 15,000 km will be developed.
However, the mammoth mega-project poses a lot of challenges. Apart from an exorbitant
cost estimate and the time required, there are various environmental and socio-economic
and political challenges and concerns attributed with the project. Clearing the fo rest and
adjoining land earmarked for reservoirs will change the landscape and environment
drastically causing irreversible climate changes in the area. Local inhabitants including a
sizeable tribal population will have to be rehabilitated, which might be faced with a strong
backlash from their leaders and various NGOs. These concerns need to be diligently
studied, researched and addressed before the project is embarked upon.
Source: National Water Planning Institute (NWPI)
Question 10
(a) Explain how listening for Understanding helps in communication. (2Marks)
(b) (i) Change the sentence from Active to Passive Voice.
Question - The crew cleaned the entire stretch of highway. (1 Marks)
(ii) Change the sentence from Passive to Active Voice.
Question - The house was remodelled by the homeowners to help it sell. (1 Marks)
(iii) Change the following sentence to indirect speech.
Question - Socrates said, "Virtue is its own reward." (1 Marks)
(c) Write an article of about 250 words on the topic, "The Pros and cons of online education
in India". (5 Marks)
Answer
(a) As we ‘hear’ conversations, news, gossip and many other forms of speech, we do not
listen to it carefully and therefore are not able to understand or partially understand or
misunderstand the message. A good listener does not only listen to the spoken words,
but observes carefully the nonverbal cues to understand the complete message. He
absorbs the given information, processes it, understands its context and meaning to form
an accurate, reasoned, intelligent response. The listener has to be objective, practical
and in control of his emotions. Often the understanding of a listener is coloured by his
own emotions, judgments, opinions, and reactions to what is being said. While listening
for understanding, we focus on the individual and his agenda. A perceptive listener is
able to satisfy a customer and suggest solutions as per the needs of the client.
(b) (i) The entire stretch of the highway was cleaned by the crew.
(ii) The homeowners remodelled the house to sell it. / The homeowners remodelled the
house to help it sell.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 23

(iii) Socrates said that virtue is its own reward.

(c) The Pros and Cons of online education in India
By S. Kumar

Online education in India, though not a new concept in higher education has become an
inevitable reality for learners across the board at all levels including school colleges and
universities. The recent paradigm shift in knowledge delivery from a physical classroom
to a virtual one due to the sudden onslaught of COVID-19 pandemic has raised many a
debate about the efficacy of online learning and credibility of courses offered.
There are many advantages of online learning, foremost is the flexibility and convenience
of time and place. One can pursue course contents anytime, anywhere just using their
smart devices. Short term courses can be pursued by enthusiastic learners ranging from
enhancing their skills in communication, team dynamics and leadership to learning new
languages, IT programming, online accounting software solutions and many others.
These courses are much more cost effective as compared to regular class-room courses
thus economically viable to a large spectrum of learners. Such courses inculcate
discipline, responsibility, commitment and focus.
Before signing up for one, accreditation, relevance and contents of these courses must
be duly verified and checked. Since there is little or no one-on-one interaction with the
teachers, it may lead to learning gaps. With hardly any stipulation or protocol, most
learners may lose interest or focus, may quit the course before completion or defer the
end term exam, defeating the purpose of joining.
Online learning poses many constraints for young school children. They are not able to
develop many skills that they would in a physical classroom such as interaction with
peers and following instructions. Practical experiments which are integral to the senior
school curriculum are difficult to demonstrate and explain. Therefore, online education is
an effective mode of learning for mature and conscientious learners only.
(Source ................ )
Question 11
(a) Explain Wheel & Spoke network in communication. (2 Marks)
(b) Select the correct meaning of Idioms/Phrases given below:
(i) To be a mastermind
(1) To be a pioneer
(2) To. be an entrepreneur
(3) To be an amateur

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24 FOUNDATION EXAMINATION: NOVEMBER, 2020

(4) To be a villain (1 Marks)

(ii) At wit's end
(1) Impoverished
(2) Drained
(3) Completed
(4) Perplexed (1 Marks)
(iii) Change the sentence into Passive voice:
Question - Will you tell me a story? (1 Marks)
(iv) Choose the word which best expresses the meaning of the given word:
COMBAT
(1) Conflict
(2) Quarrel
(3) Feud
(4) Fight (1 Marks)
(c) Write a letter to an applicant informing him about the postponement of his interview date.
(4 Marks)
Answer
(a) In Wheel and Spoke network in communication there is a single controlling authority who
gives instructions and orders to all employees working under him/her. All employees get
instructions directly from the leader and report back to him/her. It is direct and efficient
for a small business/company, but an inappropriate way of communication in a large
organization with many people. A company with many employees needs a complete
hierarchy of decision makers. In a big organisation, this network will fail if the central
figure is not competent.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 25

(b) (i) To be a pioneer

(ii) Perplexed
(iii) Will a story be told to me by you?
(iv) Fight
(c) Letter
ABC Consultants Pvt. Ltd,
21, Spearhead Arcade,
Eastern Avenue Road,
Jackson Heights,
New Delhi xx00xx.} Sender’s address
To Date: Dec 10, 20xx
Mr. XYZ,
45-A, BSD Enclave,
DFG Lane,
Begumpur,
New Delhi xx00xx
Dear Mr. XYZ,

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26 FOUNDATION EXAMINATION: NOVEMBER, 2020

Subject: Postponement of personal interaction to be held on Dec 15, 20xx

Greetings! We hereby inform that your personal interaction with the HR team for the
position of Senior Manager Finance scheduled to be held on Dec 15, 20xx has been
postponed. The same has been rescheduled for Monday, Dec 21, 20xx at 10 a.m.
We regret any inconvenience caused and look forward to discussing your prospective
role in context with the recent changes brought about by our management in the finance
team.
Best Regards,
S. Kumar
Manager, HR
ABC Consultants Pvt. Ltd.

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PAPER – 2: BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAWS

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) Mr. S aged 58 years was employed in a Government Department. He was going to retire
after two years. Mr. D made a proposal to Mr. S to apply for voluntary retirement from
his post so that Mr. D can be appointed in his place. Mr. D offered a sum of `10 Lakhs as
consideration to Mr. S in order to induce him to retire.
Mr. S refused at first instance but when he evaluated the amount offered as
consideration is just double of his cumulative remuneration to be received during the
tenure of two years of employment, he agreed to receive the consideration and accepted
the above agreement to receive money to retire from his office.
Whether the above agreement is valid? Explain with reference to provision of Indian
Contract Act, 1872. (4 Marks)
(b) ABC Limited was registered as a public company. There were 245 members in the
company. Their details are as follows:
Directors and their relatives 190
Employees 15
Ex-employees
(shares were allotted when they were employees) 20
Others 20
(Including 10 joint holders holding shares jointly in the name of father and son)
The Board of directors of the company propose to convert it into a private company.
Advice whether reduction in the number of members is necessary for conversion.
(4 Marks)
(c) What are the rules which regulate the Sale by Auction under the Sale of Goods Act,
1930? (4 Marks)
Answer
(a) Section 10 of the Indian Contract Act, 1872 provides for the legality of consideration and
objects thereto. Section 23 of the said Act also states that every agreement of which the
object or consideration is unlawful is void.

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2 FOUNDATION EXAMINATION: JANUARY, 2021

The given problem talks about entering into an agreement for traffic relating to public
office, which is opposed to public policy. Public policy requires that there should be no
money consideration for the appointment to an office in which the public is interested.
Such consideration paid, being opposed to public policy, is unlawful.
In the given case, Mr. S, who was going to be retired after two years was proposed by
Mr. D, to apply for voluntary retirement from his post, in order that he can be appointed in
his place. In lieu of that Mr. D offered Mr. S a sum of ` 10 lakh as consideration. Mr. S
refused initially but later accepted the said offer to receive money to retire from his office.
Here, Mr. S’s promise of sale for Mr. D, an employment in the public services is the
consideration for Mr. D’s promise to pay `10 lakh. Therefore, in terms of the above
provisions of the Indian Contract Act, the said agreement is not valid. It is void, as the
consideration being opposed to public policy, is unlawful.
(b) In the given case, ABC Limited was having 245 members in the company. The Board of
Directors of said company proposes to convert it into private company. In lines with
Section 2 (68) of the Companies Act, 2013, a private company by its Articles, limits the
number of its members to 200.
Provided that, where two or more persons hold one or more shares in a company jointly,
they shall, for the purposes of this clause, be treated as a single member.
It is further provided that, following persons shall not be included in the number of
members-
(i) Persons who are in the employment of the company; and
(ii) Persons, who, having been formerly in the employment of the company, were
members of the company while in that employment and have continued to be
members after the employment ceased.
As per the facts, ABC Limited has members constituting of Directors & their relatives,
employees, Ex-employees and others including 10 joint holders. In line with the
requirement for being a private company, following shall be restricted to be as members
i.e., Directors & their relatives & joint holders holding shares jointly constituting 200
members (190+10).
Accordingly, ABC Limited when converted to private company shall not be required to
reduce the number of members as the number of members as per requirement of a
private company, is fulfilled that is of maximum 200 members.
(c) Rules of Auction sale: Section 64 of the Sale of Goods Act, 1930 provides following
rules to regulate the sale by auction:
(i) Where goods are sold in lots: Where goods are put up for sale in lots, each lot is
prima facie deemed to be subject of a separate contract of sale.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

(ii) Completion of the contract of sale: The sale is complete when the auctioneer
announces its completion by the fall of hammer or in any other customary manner
and until such announcement is made, any bidder may retract from his bid.
(iii) Right to bid may be reserved: Right to bid may be reserved expressly by or on
behalf of the seller and where such a right is expressly reserved, but not otherwise,
the seller or any one person on his behalf may bid at the auction.
(iv) Where the sale is not notified by the seller: Where the sale is not notified to be
subject to a right to bid on behalf of the seller, it shall not be lawful for the se ller to
bid himself or to employ any person to bid at such sale, or for the auctioneer
knowingly to take any bid from the seller or any such person; and any sale
contravening this rule may be treated as fraudulent by the buyer.
(v) Reserved price: The reserved price is the lowest price at which a seller is willing to
sell an item. The auction sale may be notified to be subject to a reserve or upset
price; and
(vi) Pretended bidding: If the seller makes use of pretended bidding to raise the price,
the sale is voidable at the option of the buyer.
Question 2
(a) Define the term acceptance under the Indian Contract Act, 1872. Explain the legal rules
regarding a valid acceptance. (7 Marks)
(b) State the circumstances under which a LLP and its partners may face unlimited liability
under the Limited Liability Partnership Act, 2008. (5 Marks)
Answer
(a) Definition of Acceptance: In terms of Section 2(b) of the Indian Contract Act, 1872 the
term acceptance is defined as “When the person to whom the proposal is made signifies
his assent thereto, proposal is said to be accepted. The proposal, when accepted,
becomes a promise”.
Legal Rules regarding a valid acceptance
(1) Acceptance can be given only by the person to whom offer is made. In case of
a specific offer, it can be accepted only by the person to whom it is made. In case of
a general offer, it can be accepted by any person who has the knowledge of the
offer.
(2) Acceptance must be absolute and unqualified: As per section 7 of the Act,
acceptance is valid only when it is absolute and unqualified and is also expressed in
some usual and reasonable manner unless the proposal prescribes the manner in
which it must be accepted. If the proposal prescribes the manner in which it must be
accepted, then it must be accepted accordingly.

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4 FOUNDATION EXAMINATION: JANUARY, 2021

(3) The acceptance must be communicated: To conclude a contract between the

parties, the acceptance must be communicated in some perceptible form. Further
when a proposal is accepted, the offeree must have the knowledge of the offer
made to him. If he does not have the knowledge, there can be no acceptance. The
acceptance must relate specifically to the offer made. Then only it can materialize
into a contract.
(4) Acceptance must be in the prescribed mode: Where the mode of acceptance is
prescribed in the proposal, it must be accepted in that manner. But if the proposer
does not insist on the proposal being accepted in the manner prescribed after it has
been accepted otherwise, i.e., not in the prescribed manner, the proposer is
presumed to have consented to the acceptance.
(5) Time: Acceptance must be given within the specified time limit, if any, and if no time
is stipulated, acceptance must be given within the reasonable time and before the
offer lapses.
(6) Mere silence is not acceptance: The acceptance of an offer cannot be implied
from the silence of the offeree or his failure to answer, unless the offeree has in any
previous conduct indicated that his silence is the evidence of acceptance.
(7) Acceptance by conduct/ Implied Acceptance: Section 8 of the Act lays down that
“the performance of the conditions of a proposal, or the acceptance of any
consideration for a reciprocal promise which may be offered with a proposal,
constitutes an acceptance of the proposal. This section provides the acceptance of
the proposal by conduct as against other modes of acceptance i.e. verbal or written
communication.
Therefore, when a person performs the act intended by the proposer as the
consideration for the promise offered by him, the performance of the act constitutes
acceptance.
(b) As per Section 30 of the Limited Liability Partnership Act, 2008, LLP and its Par tners may
face unlimited liability in case of fraud. According to this section, the liability arises, in the
event of an act carried out by an LLP or any of its partners -
• with intent to defraud creditors of the LLP,
• or any other person, or
• for any fraudulent purpose.
The liability of the LLP and partners who acted with intent to defraud creditors or for any
fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the
LLP. However, in case any such act is carried out by a partner, the LLP is liable to the
same extent as the partner unless it is established by the LLP that such act was without
the knowledge or the authority of the LLP.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5

Where LLP, Partner or employee of LLP has conducted the affairs of the LLP in
fraudulent manner, then without prejudice to any criminal proceedings which may arise
under any law for the time being in force, the LLP and any such partner or employee
shall be liable to pay compensation to any such person who has suffered any loss by
reason of such conduct.
Question 3
(a) (i) What do you mean by "Particular Partnership" under the Indian Partnership Act, 1932?
(2 Marks)
OR
(ii) Who is a nominal partner under the Indian Partnership Act, 1932 ? What are his
liabilities? (2 Marks)
(b) "Business carried on by all or any of them acting for all." Discuss the statement under the
Indian Partnership Act, 1932. (4 Marks)
(c) Mr. B makes a proposal to Mr. S by post to sell his house for ` 10 lakhs and posted the
letter on 10th April 2020 and the letter reaches to Mr. S on 12th April 2020. He reads the
letter on 13th April 2020.
Mr. S sends his letter of acceptance on 16th April 2020 and the letter reaches Mr. B on
20th April 2020. On 17th April Mr. S changed his mind and sends a telegram withdrawing
his acceptance. Telegram reaches to Mr. B on 19th April 2020.
Examine with reference to the Indian Contract Act, 1872:
(i) On which date, the offer made by Mr. B will complete?
(ii) Discuss the validity of acceptance.
(iii) What would be validity of acceptance if letter of revocation and letter of acceptance
reached together? (6 Marks)
Answer
(a) (i) Particular partnership: A partnership may be organized for the prosecution of a single
adventure as well as for the conduct of a continuous business. Where a person
becomes a partner with another person in any particular adventure or undertaking, the
partnership is called ‘particular partnership’.
A partnership, constituted for a single adventure or undertaking is, subject to any
agreement, dissolved by the completion of the adventure or undertaking.
OR
(ii) Nominal Partner: A person who lends his name to the firm, without having any real
interest in it, is called a nominal partner.

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6 FOUNDATION EXAMINATION: JANUARY, 2021

Liabilities: He is not entitled to share the profits of the firm. Neither he invests in
the firm nor takes part in the conduct of the business. He is, however liable to third
parties for all acts of the firm.
(b) Business carried on by all or any of them acting for all: The business must be carried
on by all the partners or by anyone or more of the partners acting for all. In other words,
there should be a binding contract of mutual agency between the partners.
An act of one partner in the course of the business of the firm is in fact an act of all
partners. Each partner carrying on the business is the principal as well as the agent for
all the other partners. He is an agent in so far as he can bind the other partners by his
acts and he is a principal to the extent that he is bound by the act of other partners.
It may be noted that the true test of partnership is mutual agency. If the element of
mutual agency is absent, then there will be no partner ship.
In KD Kamath & Co., the Supreme Court has held that the two essential conditions to be
satisfied are that:
(1) there should be an agreement to share the profits as well as the losses of business;
and
(2) the business must be carried on by all or any of them acting for all, within the
meaning of the definition of ‘partnership’ under section 4.
The fact that the exclusive power and control, by agreement of the parties, is vested in
one partner or the further circumstance that only one partner can operate the bank
accounts or borrow on behalf of the firm are not destructive of the theory of partnership
provided the two essential conditions, mentioned earlier, are satisfied.
(c) (i) According to Section 4 of the Indian Contract Act, 1872, “the communication of offer is
complete when it comes to the knowledge of the person to whom it is made”.
When a proposal is made by post, its communication will be complete when the
letter containing the proposal reaches the person to whom it is made. Further, mere
receiving of the letter is not sufficient, he must receive or read the message
contained in the letter.
In the given question, Mr. B makes a proposal by post to Mr. S to sell his house.
The letter was posted on 10th April 2020 and the letter reaches to Mr. S on 12 th April
2020 but he reads the letter on 13th April 2020.
Thus, the offer made by Mr. B will complete on the day when Mr. S reads the letter,
i.e. 13th April 2020.
(ii) When communication of acceptance is complete: Where a proposal is accepted
by a letter sent by the post, in terms of Section 4 of the Act, the communication of
acceptance will be complete as against the proposer when the letter of acceptance
is posted and as against the acceptor when the letter reaches the proposer.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

Revocation of Acceptance: The acceptor can revoke his acceptance any time
before the letter of acceptance reaches the offeror, if the revocation telegram
arrives before or at the same time with the letter of acceptance, the revocation is
absolute.
In the given question, when Mr. S accepts Mr. B’s proposal and sends his
acceptance by post on 16th April 2020, the communication of acceptance as against
Mr. B is complete on 16th April 2020, when the letter is posted. As against Mr. S
acceptance will be complete, when the letter reaches Mr. B i.e. 20 th April 2020.
Whereas, acceptor, will be bound by his acceptance only when the letter of
acceptance has reached the proposer.
The telegram for revocation of acceptance reached Mr. B on 19 th April 2020 i.e.
before the letter of acceptance of offer (20th April 2020). Hence, the revocation is
absolute. Therefore, acceptance to an offer is invalid.
(iii) It will not make any difference even if the telegram of revocation and letter of
acceptance would have reached on the same day, i.e. the revocation then also
would have been absolute. As per law, acceptance can be revoked anytime before
the communication of acceptance is complete. Since revocation was made before
the communication of acceptance was complete and communication can be
considered as complete only when the letter of acceptance reaches the proposer
i.e. Mr. B.
Question 4
(a) What are the differences between a 'Condition' and 'Warranty' in a contract of sale? Also
explain, when shall a 'breach of condition' be treated as 'breach of warranty' under
provisions of the Sale of Goods Act, 1930? (6 Marks)
(b) M, N and P were partners in a firm. The firm ordered JR Limited to supply the furniture. P
dies, and M and N continues the business in the firm's name. The firm did not give any
notice about P's death to the public or the persons dealing with the firm. The furn iture
was delivered to the firm after P's death, fact about his death was known to them at the
time of delivery. Afterwards the firm became insolvent and failed to pay the price of
furniture to JR Limited.
Explain with reasons:
(i) Whether P's private estate is liable for the price of furniture purchased by the firm?
(ii) Whether does it make any difference if JR Limited supplied the furniture to the firm
believing that all the three partners are alive? (6 Marks)

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Answer
(a) Difference between conditions and warranties:
The following are important differences between conditions and warranties.
Point of differences Condition Warranty
Meaning A condition is essential to It is only collateral to the
the main purpose of the main purpose of the
contract. contract.
Right in case of breach The aggrieved party can The aggrieved party can
repudiate the contract or claim only damages in
claim damages or both in case of breach of
the case of breach of warranty.
condition.
Conversion of stipulations A breach of condition may A breach of warranty
be treated as a breach of cannot be treated as a
warranty. breach of condition.
Breach of condition be treated as a breach of warranty
Section 13 of the Sales of Goods Act, 1930, specifies cases where a breach of condition
be treated as a breach of warranty. As a result of which the buyer loses his right to
rescind the contract and can claim for damages only.
In the following cases, a contract is not avoided even on account of a breach of a
condition:
(i) Where the buyer altogether waives the performance of the condition. A party may
for his own benefit, waive a stipulation.
(ii) Where the buyer elects to treat the breach of the conditions, as one of a warranty.
That is to say, he may claim only damages instead of repudiating the contract.
(iii) Where the contract is non-severable and the buyer has accepted either the whole
goods or any part thereof.
(iv) Where the fulfilment of any condition or warranty is excused by law by reason of
impossibility or otherwise.
(b) According to Section 35 of the Indian Partnership Act, 1932, where under a contract
between the partners the firm is not dissolved by the death of a partner, the estate of a
deceased partner is not liable for any act of the firm done after his death.
Further, in order that the estate of the deceased partner may be absolved from liability
for the future obligations of the firm, it is not necessary to give any notice either to the
public or the persons having dealings with the firm.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 9

In the given question, JR Limited has supplied furniture to the partnership firm, after P’s
death. The firm did not give notice about P’s death to public or people dealing with the
firm. Afterwards, the firm became insolvent and could not pay JR Limited.
In the light of the facts of the case and provisions of law:
(i) Since the delivery of furniture was made after P’s death, his estate would not be
liable for the debt of the firm. A suit for goods sold and delivered would not lie
against the representatives of the deceased partner. This is because there was no
debt due in respect of the goods in P’s lifetime.
(ii) It will not make any difference even if JR Limited supplied furniture to the firm
believing that all the three partners are alive, as it is not necessary to give any
notice either to the public or the persons having dealings with the firm, so the estate
of the deceased partner may be absolved from liability for the future obligations of
the firm.
Question 5
(a) Mr. T was a retail trader of fans of various kinds. Mr. M came to his shop and asked for
an exhaust fan for kitchen. Mr. T showed him different brands and Mr. M approved of a
particular brand and paid for it. Fan was delivered at Mr. M's house; at the time of
opening the packet he found that it was a table fan. He informed Mr. T about the delivery
of the wrong fan. Mr. T refused to exchange the same, saying that the contract was
complete after the delivery of the fan and payment of price.
(i) Discuss whether Mr. T is right in refusing to exchange as per provisions of Sale of
Goods Act, 1930?
(ii) What is the remedy available to Mr. M? (6 Marks)
(b) Explain Doctrine of 'Indoor Management' under the Companies Act, 2013. Also state the
circumstances where the outsider cannot claim relief on the ground of 'Indoor
Management'. (6 Marks)
Answer
(a) (i) According to Section 15 of the Sale of Goods Act, 1930, where the goods are sold
by sample as well as by description, the implied condition is that the goods supplied
shall correspond to both with the sample and the description. In case, the goods do not
correspond with the sample or with description or vice versa or both, the buyer can
repudiate the contract.
Further, as per Section 16(l) of the Sales of Goods Act, 1930, when the buyer
makes known to the seller the particular purpose for which the goods are required
and he relies on the judgment or skill of the seller, it is the duty of the seller to
supply such goods as are reasonably fit for that purpose.

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10 FOUNDATION EXAMINATION: JANUARY, 2021

In the given case, Mr. M had revealed Mr. T that he wanted the exhaust fan for the
kitchen. Since the table fan delivered by Mr. T was unfit for the purpose for which
Mr. M wanted the fan, therefore, T cannot refuse to exchange the fan.
(ii) When one party does not fulfill his obligation according to the agreed terms, the
other party may treat the contract as repudiated or can insist for performance as per
the original contract. Accordingly, the remedy available to Mr. M is that he can
either rescind the contract or claim refund of the price paid by him or he may require
Mr. T to replace it with the fan he wanted.
(b) Doctrine of Indoor Management (The Companies Act, 2013): According to the
“doctrine of indoor management” the outsiders, dealing with the company though are
supposed to have satisfied themselves regarding the competence of the company to
enter into the proposed contracts are also entitled to assume that as far as the internal
compliance to procedures and regulations by the company is concerned, everything has
been done properly. They are bound to examine the registered documents of the
company and ensure that the proposed dealing is not inconsistent therewith, but they are
not bound to do more. They are fully entitled to presume regularity and compliance by
the company with the internal procedures as required by the Memorandum and the
Articles. This doctrine is a limitation of the doctrine of “constructive notice” and popularly
known as the rule laid down in the celebrated case of Royal British Bank v. Turquand.
Thus, the doctrine of indoor management aims to protect outsiders against the company.
The above mentioned doctrine of Indoor Management or Turquand Rule has limitations
of its own. That is to say, it is inapplicable to the following cases, namely:
(a) Actual or constructive knowledge of irregularity: The rule does not protect any
person when the person dealing with the company has notice, whether actual or
constructive, of the irregularity.
(b) Suspicion of Irregularity: The doctrine in no way, rewards those who behave
negligently. Where the person dealing with the company is put upon an inquiry, for
example, where the transaction is unusual or not in the ordinary course of business,
it is the duty of the outsider to make the necessary enquiry.
(c) Forgery: The doctrine of indoor management applies only to irregularities which
might otherwise affect a transaction but it cannot apply to forgery which must be
regarded as nullity.
Question 6
(a) The general rule is that an agreement without consideration is void. Discuss the cases
where the agreement though made without consideration will be valid and enforceable as
per Indian Contract Act, 1872. (5 Marks)
(b) Discuss the liability of a partner for the act of the firm and liability of firm for act of a
partner to third parties as per Indian Partnership Act, 1932. (4 Marks)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 11

(c) SK Infrastructure Limited has a paid-up share capital divided into 6,00,000 equity shares
of INR 100 each. 2,00,000 equity shares of the company are held by Central Government
and 1,20,000 equity shares are held by Government of Maharashtra. Explain with
reference to relevant provisions of the Companies Act, 2013, whether SK Infrastructure
Limited can be treated as Government Company. (3 Marks)
Answer
(a) The general rule is that an agreement made without consideration is void (Section 25 of
the Indian Contract Act, 1872). In every valid contract, consideration is very important. A
contract may only be enforceable when consideration is there. However, the Indian
Contract Act contains certain exceptions to this rule.
In the following cases, the agreement though made without consideration, will be valid
and enforceable.
1. Natural Love and Affection: Conditions to be fulfilled under section 25(1)
(i) It must be made out of natural love and affection between the parties.
(ii) Parties must stand in near relationship to each other.
(iii) It must be in writing.
(iv) It must also be registered under the law.
A written and registered agreement based on natural love and affection between the
parties standing in near relation (e.g., husband and wife) to each other is
enforceable even without consideration.
2. Compensation for past voluntary services: A promise to compensate, wholly or
in part, a person who has already voluntarily done something for the promisor, is
enforceable under Section 25(2). In order that a promise to pay for the past
voluntary services be binding, the following essential factors must exist:
(i) The services should have been rendered voluntarily.
(ii) The services must have been rendered for the promisor.
(iii) The promisor must be in existence at the time when services were rendered.
(iv) The promisor must have intended to compensate the promisee.
3. Promise to pay time barred debt: Where a promise in writing signed by the person
making it or by his authorised agent, is made to pay a debt barred by limitation it is
valid without consideration [Section 25(3)].
4. Agency: According to Section 185 of the Indian Contract Act, 1872, no
consideration is necessary to create an agency.
5. Completed gift: In case of completed gift i.e. when gift is made by a donor and
accepted by the donee, the rule, no consideration no contract does not apply.

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12 FOUNDATION EXAMINATION: JANUARY, 2021

6. Bailment: In case, the delivery of goods is made by one person to another for a
particular purpose, without transfer of ownership, no consideration is required.
7. Charity: If a promisee undertakes the liability on the promise of another person to
contribute to charity, the contract shall be valid without consideration.
(b) Liability of a partner for acts of the firm (Section 25 of the Indian Partnership Act,
1932): Every partner is liable, jointly with all the other partners and also severally, for all
acts of the firm done while he is a partner. The partners are jointly and severally
responsible to third parties for all acts which come under the scope of their express or
implied authority. This is because that all the acts done within the scope of authority are
the acts done towards the business of the firm.
The expression ‘act of firm’ connotes any act or omission by all the partners or by any
partner or agent of the firm, which gives rise to a right enforceable by or against the firm.
Again in order to bring a case under Section 25, it is necessary that the act of the firm, in
respect of which liability is brought to be enforced against a party, must have been done
while he was a partner.
Liability of the firm for wrongful acts of a partner and for misapplication by
partners (Sections 26 & 27 of the Indian Partnership Act, 1932): Where, -
by the wrongful act or omission of a partner in the ordinary course of the business of a
firm, or with the authority of his partners, loss or injury is caused to any third party, or any
penalty is incurred, the firm is liable therefor to the same extent as the partner.
a partner acting within his apparent authority receives money or property from a third
party and misapplies it, or a firm in the course of its business receives money or property
from a third party, and the money or property is misapplied by any of the partners while it
is in the custody of the firm, the firm is liable to make good the loss.
(c) Government Company [Section 2(45) of the Companies Act, 2013]: Government
Company means any company in which not less than 51% of the paid-up share capital is
held by-
(i) The Central Government, or
(ii) By any State Government or Governments, or
(iii) Partly by the Central Government and partly by one or more State Governments,
and the section includes a company which is a subsidiary company of such a
Government company.
In the instant case, paid up share capital of SK Infrastructure Limited is 6,00,000 equity
shares of ` 100 each. 200,000 equity shares are held by Central government and 1,20,000
equity shares are held by Government of Maharashtra. The holding of equity shares by
both government is 3,20,000 which is more than 51% of total paid up equity shares.
Hence, SK Infrastructure Limited is a Government company.

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SECTION B – BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.
Attempt any three questions from the remaining four questions.

Question 7
(a) Read the passage carefully and answer the questions given below:
Success of any organization depends on offering quality products at competitive prices.
All over the world, it is being realized that quality control be ensured through inspection
and test alone. Every department and individual has a contribution to make in the
achievement of quality. Quality product at competitive prices is the most significant factor
in determining the long - run success of any organization. High quality of products can
give a competitive edge to an organization. On the other hand, good quality generates
satisfied customers who reward the organization with continued patronage and
favourable word of mouth advertising.
Growth in consumer quality awareness has put a greater strain on businesses.
Consumer demand and dynamic technological changes have opened up new and highly
competitive markets. The quality of goods and services can no longer be taken for
granted.
The rapid growth of the service sector has also introduced new p erceptions of quality
management. Institutions, such as the Government, banks and hospitals do not produce
tangible goods. The interaction between employees and customers is much more critical
in such organizations. As a result, the skills, attitudes and training of service personnel
affect the quality of the services delivered. Information processing represents a large
component of the work done by service organizations and poses special quality
considerations. Errors in computer billing, or airline and hotel reservations are the results
of poor quality control of computer software and data input systems.
In View of globalization of markets, Governments have begun to realize that quality is
essential to international trade and the national economy. Therefore, public purchasing
authorities have been instructed to buy goods that conform to the quality standards.
(i) In what manner good quality products give rewards to organizations? (1 Mark)
(ii) Most significant factor which determines the long run success of an organization ?
(1 Mark)
(iii) Quality of goods and services cannot be compromised by organizations, give
reasons. (1 Mark)
(iv) Write the summary of the above passage. (2 Mark)

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14 FOUNDATION EXAMINATION: NOVEMBER, 2020

(b) Read the Passage :

Whether one runs a large business, or is starting out with a new venture, or works as a
corporate professional, chances are that at some point, one would be required to make a
business presentation. Whether you are selling a product to a client, sharing your vision
with your employees, or looking for new investors for your business, your presentation
will always matter.
Making a good business presentation can be intimidating - you want to capture as much
information as possible to answer any prospective questions from your audience, yet you
want to keep your audience constantly engaged and interested. So, what makes a good
presentation?
It is important to connect with your audience with a story. And no, it doesn't mean your
presentation needs to be the most exciting work of fiction. Take your audience on a
journey. When trying to convince potential investors, make them see the success you are
striving for and what it will do for you and for them. To win over your employees with your
new staff policy, take them through the journey of why you are introducing a new policy
and how does it benefit them. Tell personal stories, give analogies and cite examples.
Get your audience emotionally involved and you will be more likely to get them to side
with you.
You want to keep your audience engaged at all times. Do not overwhelm them with a lot
of information. Settle on three to five key messages that you want them to absorb and
stick with them. You do not want to include everything. Instead, choose out powerful
points that you want to make. It is important to keep your presentation as straightforward
and concise as possible.
At the same time, you need to know your content extremely well. While you keep your
presentation short and to the point, it is no excuse for you to not have more detailed
information regarding the subject of your presentation. It is likely you would need to
answer questions from your audience at the end of the presentation. You must review all
pertinent information and key facts and figures before your presentation. Not only will it
help you answer questions later, but it will also give you more confidence during your
presentation, so you refer to your notes less and connect with your audience more.
In the end, a business presentation is about selling ideas. Do your researches well,
describe your ideas crisply, weave them into an interesting story and you are more likely
to succeed.
(i) Make notes, using headings, sub - headings and abbreviations whenever
necessary.
(ii) Write Summary.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

Answer
(a) (i) Good quality products can give reward to organization in following ways:
It gives long term success to any organization.
It can give competitive edge i.e., higher profit and increased market share.
It leads to satisfied customers thus playing a significant role in increasing the
customer base.
(ii) Providing quality products at competitive prices is the most significant factor that
determines the success of the organization in the long run.
(iii) Increased awareness amongst customers regarding quality has led organizations to
constantly improve the quality of products and services by adopting new
technologies which satisfies the customer’s demands to remain competitive. Thus,
businesses cannot ignore this aspect, if they intend to sustain longer in the market.
(iv) Organizations across the world whether in the manufacturing or service sectors pin
their success on offering quality products and services at competitive prices. This is
the mantra for long-term sustainable growth of any business. With growing
consumer awareness about quality, markets have become highly competitive and
more and more businesses embracing new technologies. In critical service sectors
viz. healthcare, government and many online data/information process ing services,
quality relies on skilled and trained workforce. International trade and economy can
grow only if stringent quality standards are maintained.
(b) (i) Note Making
Business Presentation
1. Essen. for
1.1 Large Bsns, startups & prfs.to
1. sell product to clients
2. share vision
1.1.2.1 new staff policy and benefits
3. find new investors
1. discuss mutual benefits
2. Objectives
2.1 Engage the aud.
2.2 Tell a story
2.3 Give prsnlegs./anlgs.

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16 FOUNDATION EXAMINATION: NOVEMBER, 2020

3. Do’s and Don’ts

3.1 research well
1. cap. det. info.
2. Do not prt. excess info.
3. Prt. 3-5 pts.
4. Expln. Briefly &prcly.
5. Prep. Cont. well
1. Rvw. Imp. Info.
2. Facts & data
Key:
• Bsns.: businesses
• Prfs.: professionals
• Aud.: audience
• Prsnl.: personal
• Egs.: examples
• Anlgs.: analogies
• Cap.: capture
• Det.:detailed
• Info.: information
• Prt.: present
• Expln.: explain
• Prcly.: precisely
• Prep.: prepare
• Cont.: content
• Rvw.: review
• Imp.: important
(ii) Summary
Preparation and presentation of Business Presentations are essential skills for
owner of a large business, startup or a working professional alike. It is a useful tool
to provide product details to clients, to share your ideas and vision with employees

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 17

about new policies and their benefits or to find investors to expand or diversify. The
objective is to engage the target audience by spawning a story around your ideas by
narrating personal anecdotes. For a good presentation you must research the
subject in detail, do not swarm the audience with too much information. You must
stick to 3-5 points and explain them with brevity and precision. Prepare the subject
well and review important facts, figures and data.
Question 8
(a) Emotional barriers affect communication, discuss. (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
Repulsive
(1) Attractive
(2) Normal
(3) Disgusting
(4) Confused
(1 Mark)
(ii) Select a suitable antonym for the word given under:
Gratify
(1) Frustrate
(2) Depress
(3) Discourage
(4) Distress
(1 Mark)
(iii) Change the following sentence to indirect speech:
He said, "The horse died in the night". (1 Mark)
(c) Write a precis and give appropriate title to the passage given below:
Gratitude implies thankfulness or an appreciation of benefits conferred together with a
desire, when practicable, to return those benefits. It should be distinguished from thanks,
which is too often a matter of words and not accompanied by a feeling of thankfulness or
by those actions which indicate a grateful mind. The grateful man feels joy at the
kindness of his benefactor and cultivates a respect that is akin to love.
In almost all the relations of ordinary life the feelings of gratitude should be aroused. The
child owes thanks to his parents for food, clothes, education and tender care; the scholar
to his teachers for the training of his intelligence; personal friends to one another for
mutual services.

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18 FOUNDATION EXAMINATION: NOVEMBER, 2020

The frequent use of the phrase, "Thank you," though often not more than a polite
convention, nevertheless shows the universal belief in the necessity for cultivating a
grateful attitude towards those who do something for us, however small that service be.
As Citizens, there are few who have no cause to be grateful. Great generals who have
given devoted service gratuitously, statesmen, poets and philosophers, all those who
have stood for right, justice and freedom of thought, have conferred inestimable benefits
upon their countrymen.
When deeds are impossible, the expression of thanks is the best that can be done. The
inscriptions on the tombs and monuments erected by a nation to its great men are an
expression of thanks in words. As for deeds, an old story will serve as an excellent
illustration. An old man was found planting fruit trees by a friend who came to him and
said, "Why do you plant trees, the fruit of which I enjoy. I now plant trees that those who
come after may enjoy fruit." '
In conclusion, no good man wishes to give pain, especially to those who have done him
good. The ungrateful man hurts the feelings of his benefactor and cannot, therefore, be a
good man. (5 Marks)
Answer
(a) One of the chief barriers to open and free communications is the emotional barrier.
Anger, fear of criticism or ridicule, mistrust of person, suspicion of intentions, jealousy,
anxiety and many more feelings and sentiments we carry within us, affect our
communication ability and quality. A person who is upset and disturbed cannot pass on
or receive information appropriately and objectively. His/her emotions will colour his
perception and assessment of the communication.
(b) (i) (3) Disgusting
(ii) (1) Frustrate
(iii) He said that the horse had died in the night.
(c) Precis
Title: Attitude of Gratitude
Gratitude means being genuinely thankful or showing heartfelt appreciation for those who
have helped you in need and readiness to reciprocate the kindness. Conventionally,
‘Thank You’ is used frequently to show politeness. Yet a grateful attitude should be
cultivated towards those who do even a small service for us. There are many army
Generals, statesmen, poets and philosophers who have selflessly contributed their
services. As a token of gratitude, monuments and inscriptions are erected to
commemorate their service. Practically, one can plant trees so that the later generations
can enjoy the benefits. A conscientious individual would always wish well for everyone
without any expectations.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 19

NOTE: Precis should be one third of the given text.

Question 9
(a) (i) Define circuit and star network under network in communication. (2 Marks)
OR
(ii) Discuss the term "physical non-verbal communication" In communication. (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
Nostalgic
(1) Sharp
(2) Painful
(3) Delighted
(4) Homesick (1 Marks)
(ii) Choose the word which best expresses the meaning of the given word:
Economise
(1) Reduce
(2) Save
(3) Minimise
(4) Accumulate (1 Marks)
(iii) Change the following sentence into indirect speech:
He said to him, "Please wait here till I return." (1 Marks)
(c) Draft a circular to warn the employees of Packing Department not to participate in strik e.
(5 Marks)
Answer
(a) Circuit Network:
When two persons communicate with each other sending messages and feedbacks, they
form a communication circuit. Therefore, it is known as circuit network. The two people
interacting can be colleagues placed at the same hierarchical level in the organizatio n.

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20 FOUNDATION EXAMINATION: NOVEMBER, 2020

Circuit Network
Star Network:
The star network communication has multiple channels of communication open between
all members. This network propagates group communication and is essential where
teamwork is involved. The members communicate and exchange information with each
other freely and without hindrance or hesitation.

G B

D C

Star Network

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

OR
Physical Non-verbal Communication
An individual’s body language that is, facial expressions, stances, gestures, touches,
and other physical signals constitute this type of communication. For example, leaning
forward may mean friendliness, acceptance and interest, while crossing arms can be
interpreted as antagonistic or defensive posture.
Research estimates that physical, non-verbal communication accounts for 55 percent of
all communication. Smiles, frowns, pursing of lips, clenching of hands etc. transmit
emotions which are not expressed through verbal communication.
(b) (i) (4) Homesick
(ii) (2) Save
(iii) He requested him to wait there till he returned.
(c) XXX Ltd
CIRCULAR
No.: xxx/xxx/xxx Date: xx-xx-xxxx
To: All Employees of Packing Department
It has been reported that a section of employees working in the Packing Department of
the Company are proposing to go on strike on xx-xx-xxxx (date) to fulfil some unusual
demands. It is hereby made known to all concerned employees that the proposed strike
is illegal and unlawful and employees whosoever participate in such a strike shall be
subjected to disciplinary action as per the company’s service rules and other applicable
laws.
Sd/-
XYZ
Manager, HR
Question 10
(a) How do organizational structure barriers affect communication? (2 Marks)
(b) (i) Change the sentence from Active to Passive Voice.
Rama was making a kite. (1 Marks)
(ii) Change the sentence from Passive to Active Voice.
The lion was shot by the hunter. (1 Marks)
(iii) Change the following sentence to indirect speech.
Father said to his son, "Work hard for success in life". (1 Marks)

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22 FOUNDATION EXAMINATION: NOVEMBER, 2020

(c) Write an article of about 250 words on the topic. "The Pleasures of reading". (5 Marks)
Answer
(a) Communication problems occur when the systems, structures and processes in the
organization are not clear or have gaps in them. If the chain of command is unclear, a
person may not know whom to contact for a particular issue. Inappropriate information
transmission systems, lack of supervision, and unclear role and responsibility
demarcations lead to confusion and inefficiency.
(b) (i) A kite was being made by Rama.
(ii) The hunter shot the lion.
(iii) Father advised/said to/told his son to work hard for success in life.
(c) The Pleasures of Reading
By: XYZ
Ever since humankind invented the printed word, reading has been a learning exercise
for some, pastime for many others. Undoubtedly, reading whets our quest for knowledge,
our imagination and evokes a spectrum of emotions, thus offering instant gratification
and pleasure.
Few can deny the joy of reading the daily newspaper while enjoying a cup of tea in the
mornings, an ultimate start to a great day. It’s a daily ritual we would not like to miss for
anything. Who doesn’t get glued to the highpoint or climax of a novel.It transcends us
into a surreal world, away from the harsh realities where we slip into our favorite
character etched out straight from the novel and become a part of the narrative, going
through the whole gamut of emotions from respect to affection, pain to joy, despair to
hope, failure to success and fulfillment. It induces heightened feelings of fear, suspense
and adventure raising the adrenaline rush. The sheer delight of reading a piece of poetry
laden with eloquence, rhythm and soul stirring emotions makes us feel high. While
reading informative articles, journals and technical books develop our intellectual
capability by enriching our knowledge and enhancing our analytical skills and critical
thinking, creative and descriptive pieces enhance our vocabulary, expression and
creative writing skills. On the lighter note, reading satire and comic pieces tickle our ribs
and relieves stress.
Reading makes us aware of our emotional self and sensitizes us to appreciate feelings of
others. It enlightens our mind and soul and makes us a better human being. We must
inculcate the habit of reading everyday.
Question 11
(a) What do you mean by diagonal communication? (2 Marks)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 23

(b) Select the correct meaning of Idioms/Phrases given below:

(i) Pen and Ink
(1) Modern day technology
(2) Extensively
(3) Wastage
(4) In writing (1 Marks)
(ii) A snake in the grass
(1) Unforeseen happening
(2) Secret or hidden enemy
(3) Unreliable person
(4) Unrecognizable danger (1 Marks)
(iii) Change the sentence into Active Voice
Twenty runs were scored by him. (1 Marks)
(iv) Choose the word which best expresses the meaning of the given word.
Applaud
(1) Flatter
(2) Praise
(3) Pray
(4) Request (1 Marks)
(c) Mr. ABC is an IT manager in Quick Software Solutions Private
Limited. Write a mail on behalf of Mr. ABC to Mr. MNJ, dealer of HP Laptops seeking
quotation for 100 new laptops of model HP - 610. The laptops are required for new
branch of Quick Software Solutions Private Limited. (4 Marks)
Answer
(a) Cross-functional communication between employees at different levels of the
organizational hierarchy is described as diagonal communication. Diagonal
communication is increasingly common in larger organizations. It reduces the chances of
distortion or misinterpretation by encouraging direct communication between the relevant
parties. For example, a junior engineer reports directly to the General Manager regardin g
the progress on the project.

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24 FOUNDATION EXAMINATION: NOVEMBER, 2020

(b) (i) (4) In writing

(ii) (2) Secret or hidden enemy/ (4) Unrecognizable danger
(iii) He scored twenty runs.
(iv) (2) Praise
(c) To [email protected]
Subject: Quotation for 100 new HP-60 laptops
Dear Mr. MNJ
Greetings! We at Quick Software Solutions Private Limited require the aforementioned
laptops for our new branch at Noida, UP. The machines must have the latest malware for
virus protection and anti-glare screens. Kindly send detailed quotation including:
Warranty
Insurance
Yearly Maintenance
After sales service charges
Looking forward to an earliest response.
Regards,
ABC
IT Manager,
Quick Software Solutions

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAW

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) State with reason(s) whether the following agreements are valid or void:
(i) A clause in a contract provided that no action should be brought upon in case of
breach.
(ii) Where two courts have jurisdiction to try a suit, an agreement between the parties
that the suit should be filed in one of those courts alone and not in the other.
(iii) X offers to sell his Maruti car to Y. Y believes that X has only Wagon R Car but
agrees to buy it.
(iv) X, a physician and surgeon, employs Y as an assistant on a salary of ` 75,000 per
month for a term of two years and Y agrees not to practice as a surgeon and
physician during these two years. (4 Marks)
(b) Y incorporated a "One Person Company (OPC)" making his sister Z as nominee. Z is
leaving India permanently due to her marriage abroad. Due to this fact, she is
withdrawing her consent of nomination in the said OPC. Taking into considerations the
provisions of the Companies Act, 2013 answer the questions given below:
(i) Is it mandatory for Z to withdraw her nomination in the said OPC, if she is leaving
India permanently?
(ii) Can Z continue her nomination in the said OPC, if she maintained the status of
Resident of India after her marriage? (4 Marks)
(c) "Risk Prima Facie passes with property." Elaborate in the context of the Sales of Goods
Act, 1930. (4 Marks)
Answer
(a) (i) The given agreement is void.
Reason: As per Section 28 of the Indian Contract Act, 1872, this clause is in
restraint of legal proceedings because it restricts both the parties from enforcing
their legal rights.
Note: Alternatively, as per Section 23 of the Indian Contract Act, 1872, this clause
in the agreement defeats the provision of law and therefore, being unlawful, is
treated as void.
(ii) The given agreement is valid.

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2 FOUNDATION EXAMINATION: JULY, 2021

Reason: An agreement in restraint of legal proceeding is the one by which any

party thereto is restricted absolutely from enforcing his rights under a contract
through a Court. A contract of this nature is void. However, in the given statement,
no absolute restriction is marked on parties on filing of suit. As per the agreement
suit may be filed in one of the courts having jurisdiction.
(iii) The said agreement is void.
Reason: This agreement is void as the two parties are thinking about different
subject matters so that there is no real consent and the agreement may be treated
as void because of mistake of fact as well as absence of consensus.
(iv) The said agreement is valid.
Reason: An agreement by which any person is restrained from exercising a lawful
profession, trade or business of any kind, is to that extent void. But, as an
exception, agreement of service by which an employee binds himself, during the
term of his agreement, not to compete with his employer is not in restraint of trade.
(b) (i) Yes, it is mandatory for Z to withdraw her nomination in the said OPC as she is leaving
India permanently as only a natural person who is an Indian citizen and resident in India
shall be a nominee in OPC.
(ii) Yes, Z can continue her nomination in the said OPC, if she maintained the status of
Resident of India after her marriage by staying in India for a period of not less than
182 days during the immediately preceding financial year.
(c) Risk prima facie passes with property (Section 26 of the Sales of Goods Act, 1930)
According to Section 26, unless otherwise agreed, the goods remain at the seller’s risk
until the property therein is transferred to the buyer, but when the property therein is
transferred to the buyer, the goods are at the buyer’s risk whether delivery has been
made or not.
It is provided that, where delivery has been delayed because of the fault of either buyer
or seller, the goods are at the risk of the party in fault as regards any loss which might
not have occurred but for such fault.
Provided also that nothing in this section shall affect the duties or liabilities of either
seller or buyer as bailee of the goods of the other party.
Question 2
(a) Explain the term Contingent Contract with reference to the Indian Contract Act, 1872 with
the help of an example. Also discuss the rules relating to enforcement of a contingent
contract. (7 Marks)
(b) Limited Liability Partnership (LLP) gives the benefits of limited liability of a company on
one hand and the flexibility of a partnership on the other. Discuss. (5 Marks)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

Answer
(a) Definition of ‘Contingent Contract’ (Section 31 of the Indian Contract Act, 1872): A
contract to do or not to do something, if some event, collateral to such contract, does or
does not happen.
Example: A contracts to pay B ` 1,00,000 if B’s house is burnt. This is a contingent
contract.
Rules Relating to Enforcement: The rules relating to enforcement of a contingent
contract are laid down in sections 32, 33, 34, 35 and 36 of the Act.
(a) Enforcement of contracts contingent on an event happening: Where a contract
identifies happening of a future contingent event, the contract cannot be enforced
until and unless the event ‘happens’. If the happening of the event becomes
impossible, then the contingent contract is void.
(b) Enforcement of contracts contingent on an event not happening: Where a
contingent contract is made contingent on non-happening of an event, it can be
enforced only when its happening becomes impossible.
(c) A contract would cease to be enforceable if it is contingent upon the conduct
of a living person when that living person does something to make the ‘event’
or ‘conduct’ as impossible of happening.
(d) Contingent on happening of specified event within the fixed time: Section 35
says that Contingent contracts to do or not to do anything, if a specified uncertain
event happens within a fixed time, becomes void if, at the expiration of time fixed,
such event has not happened, or if, before the time fixed, such event becomes
impossible.
(e) Contingent on specified event not happening within fixed time: Section 35 also
says that - “Contingent contracts to do or not to do anything, if a specified uncertain
event does not happen within a fixed time, may be enforced by law when the time
fixed has expired, and such event has not happened or before the time fixed has
expired, if it becomes certain that such event will not happen”.
(f) Contingent on an impossible event (Section 36): Contingent agreements to do or
not to do anything, if an impossible event happens are void, whether the
impossibility of the event is known or not to the parties to the agreement at the time
when it is made.
(b) LLP gives the benefits of limited liability of a company and the flexibility of a
partnership
Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the
agent of the LLP, but not of other partners (Section 26 of the LLP Act, 2008). The liability

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4 FOUNDATION EXAMINATION: JULY, 2021

of the partners will be limited to their agreed contribution in the LLP, while the LLP it self
will be liable for the full extent of its assets.
Flexibility of a partnership: The LLP allows its members the flexibility of organizing
their internal structure as a partnership based on a mutually arrived agreement. The LLP
form enables entrepreneurs, professionals and enterprises providing services of any kind
or engaged in scientific and technical disciplines, to form commercially efficient vehicles
suited to their requirements. Owing to flexibility in its structure and operation, the LLP is
a suitable vehicle for small enterprises and for investment by venture capital.
Question 3
(a) Define Implied Authority. In the absence of any usage or custom of trade to the contrary,
the implied authority of a partner does not empower him to do certain acts. State the acts
which are beyond the implied authority of a partner under the provisions of the Indian
Partnership Act, 1932? (6 Marks)
(b) X, Y and Z jointly borrowed ` 90,000 from L. Decide each of the following in the light of
the Indian Contract Act, 1872:
(i) Whether L can compel only Y to pay the entire loan of ` 90,000?
(ii) Whether L can compel only the legal representatives of Y to pay the loan of
` 90,000, if X, Y and Z died?
(iii) Whether Y and Z are released from their liability to L and X is released from his
liability to Y and Z for contribution, if L releases X from his liability and sues Y and Z
for payment? (6 Marks)
Answer
(a) According to Section 19 of the Indian Partnership Act, 1932, subject to the provisions of
Section 22, the act of a partner which is done to carry on, in the usual way, business of
the kind carried on by the firm, binds the firm.
The authority of a partner to bind the firm conferred by this section is called his “implied
authority”.
In the absence of any usage or custom of trade to the contrary, the implied authority of a
partner does not empower him to-
(a) submit a dispute relating to the business of the firm to arbitration;
(b) open a banking account on behalf of the firm in his own name;
(c) compromise or relinquish any claim or portion of a claim by the firm;
(d) withdraw a suit or proceedings filed on behalf of the firm;
(e) admit any liability in a suit or proceedings against the firm;
(f) acquire immovable property on behalf of the firm;

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5

(g) transfer immovable property belonging to the firm; and

(h) enter into partnership on behalf of the firm.
(b) (i) Yes, L can compel only Y to pay ` 90,000/- since as per Section 43 of the Indian
Contract Act, 1872, in the absence of express agreement to the contrary, the promisee
may compel any one or more of the joint promisors to perform the whole of the promise.
(ii) As per Section 42, when two or more persons have made a joint promise, then,
unless a contrary intention appears by the contract, all such persons, during their
joint lives and after the death of any of them, his representative jointly with the
survivor or survivors and after the death of last survivor, the representatives of all
jointly must fulfill the promise.
In the instant case, if X, Y and Z died then the legal representatives of all (i.e. X, Y
and Z) shall be liable to pay the loan jointly. L cannot compel only the legal
representatives of Y to pay the loan of ` 90,000.
(iii) According to Section 44, where two or more persons have made a joint promise, a
release of one of such joint promisors by the promisee does not discharge the other
joint promisor or joint promisors, neither does it free the joint promisors so released
from responsibility to the other joint promisor or promisors.
In this case, the release of X does not discharge Y and Z from their liability. Y and Z
remain liable to pay the entire amount of ` 90,000 to L. And though X is not liable to
pay to L, but he remains liable to pay to Y and Z i.e. he is liable to make the
contribution to the other joint promisors.
Question 4
(a) Discuss the rights of an unpaid seller against the buyer under the Sales of Goods Act,
1930. (6 Marks)
(b) Mr. M is one of the four partners in M/s XY Enterprises. He owes a sum of ` 6 crore to
his friend Mr. Z which he is unable to pay on due time. So, he wants to sell his share in
the firm to Mr. Z for settling the amount.
In the light of the provisions of the Indian Partnership Act, 1932, discuss each of the
following:
(i) Can Mr. M validly transfer his interest in the firm by way of sale?
(ii) What would be the rights of the transferee (Mr. Z) in case Mr. M wants to retire from
the firm after a period of 6 months from the date of transfer? (6 Marks)

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6 FOUNDATION EXAMINATION: JULY, 2021

Answer
(a) The right against the buyer are as follows:
1. Suit for price (Section 55 of the Sale of Goods Act, 1930)
(a) Where under a contract of sale, the property in the goods has passed to the
buyer and the buyer wrongfully neglects or refuses to pay for the goods
according to the terms of the contract, the seller may sue him for the price of
the goods. [Section 55(1)]
(b) Where under a contract of sale, the price is payable on a certain day
irrespective of delivery and the buyer wrongfully neglects or refuses to pay
such price, the seller may sue him for the price although the property in the
goods has not passed and the goods have not been appropriated to the
contract. [Section 55(2)].
2. Suit for damages for non-acceptance (Section 56): Where the buyer wrongfully
neglects or refuses to accept and pay for the goods, the seller may sue him for
damages for non-acceptance.
3. Repudiation of contract before due date (Section 60): Where the buyer
repudiates the contract before the date of delivery, the seller may treat the contract
as rescinded and sue damages for the breach. This is known as the ‘rule of
anticipatory breach of contract’.
4. Suit for interest [Section 61]: Where there is specific agreement between the
seller and the buyer as to interest on the price of the goods from the date on which
payment becomes due, the seller may recover interest from the buyer. If, however,
there is no specific agreement to this effect, the seller may charge interest on the
price when it becomes due from such day as he may notify to the buyer.
In the absence of a contract to the contrary, the Court may award interest to the
seller in a suit by him at such rate as it thinks fit on the amount of the price from the
date of the tender of the goods or from the date on which the price was payable.
(b) According to Section 29 of the Indian Partnership Act, 1932,
(1) A transfer by a partner of his interest in the firm, either absolute or by mortgage, or
by the creation by him of a charge on such interest, does not entitle the transferee,
during the continuance of the firm, to interfere in the conduct of business, or to
require accounts, or to inspect the books of the firm, but entitles the transferee only
to receive the share of profits of the transferring partner, and the t ransferee shall
accept the account of profits agreed to by the partners.
(2) If the firm is dissolved or if the transferring partner ceases to be a partner, the
transferee is entitled as against the remaining partners to receive the share of the
assets of the firm to which the transferring partner is entitled, and, for the purpose
of ascertaining that share, to an account as from the date of the dissolution.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

In the light of facts of the question and provision of law:

(i) Yes, Mr. M can validly transfer his interest in the firm by way of sale.
(ii) On the retirement of the transferring partner (Mr. M), the transferee (Mr. Z) will be
entitled, against the remaining partners:
(a) to receive the share of the assets of the firm to which the transferring partner
was entitled, and
(b) for the purpose of ascertaining the share,
he is entitled to an account as from the date of the dissolution.
So, in this case on Mr. M’s retirement, Mr. Z would be entitled to receive the value
of Mr. M’s share to the extent of ` 6 crore in the firm’s assets.
Question 5
(a) Mr. Das, a general store owner went to purchase 200 kg of Basmati Rice of specific
length from a whole seller. He saw the samples of rice and agreed to buy the one for
which the price was quoted as ` 150 per kg. While examining the sample Mr. Das failed
to notice that the rice contained a mix of long and short grain of rice.
The whole seller supplied the required quantity exactly the same as shown in the sample.
However, when Mr. Das sold the rice to one of his regular customers she complained
that the rice contained two different qualities of rice and returned the rice.
With reference to the provisions of the Sales of Goods Act, 1930, discuss the options
open to Mr. Das for grievance redressal. What would be your answer in case Mr. Das
specified his exact requirement as to length of rice? (6 Marks)
(b) Explain the classification of the companies on the basis of control as per the Companies
Act, 2013. (6 Marks)
Answer
(a) As per the provisions of Sub-Section (2) of Section 17 of the Sale of Goods Act, 1930, in
a contract of sale by sample, there is an implied condition that:
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing the bulk with the
sample.
In the instant case, Mr. Das on examination of the sample on which he agreed to buy,
failed to notice that it contained a mix of long and short grain of rice.
In the light of the provisions of Sub-Clause (b) of Sub-Section (2) of Section 17 of the
Act, Mr. Das will not be successful as he examined the sample of Basmati rice (which
exactly corresponded to the entire lot) without noticing the fact that even though the
sample was that of Basmati Rice but it contained a mix of long and short grains. It could

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8 FOUNDATION EXAMINATION: JULY, 2021

have been discovered by Mr. Das, by an ordinary examination of the goods that it
contained a mix of long and short grains. This reflects lack of due diligence on part of Mr.
Das.
Therefore, Mr. Das, the buyer does not have any option available to him for grievance
redressal.
In case Mr. Das specified his exact requirement as to length of rice, then there is an
implied condition that the goods shall correspond with the description. If it is not so, then
in such case, seller will be held liable.
(b) In line with the Companies Act, 2013, following are the classification of the
Companies on the basis of control:
(a) Holding and subsidiary companies: ‘Holding and subsidiary’ companies are
relative terms.
A company is a holding company in relation to one or more other companies, means
a company of which such companies are subsidiary companies. [Section 2(46)]
For the purposes of this clause, the expression “company" includes any body
corporate.
Whereas section 2(87) defines “subsidiary company” in relation to any other
company (that is to say the holding company), means a company in which the
holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power either at its
own or together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed
shall not have layers of subsidiaries beyond such numbers as may be prescribed.
For the purposes of this section —
(I) a company shall be deemed to be a subsidiary company of the holding
company even if the control referred to in sub-clause (i) or sub-clause (ii) is of
another subsidiary company of the holding company;
(II) the composition of a company’s Board of Directors shall be deemed to be
controlled by another company if that other company by exercise of some
power exercisable by it at its discretion can appoint or remove all or a majority
of the directors;
(III) the expression “company” includes anybody corporate;
(IV) “layer” in relation to a holding company means its subsidiary or subsidiaries.

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(b) Associate company [Section 2(6)]: In relation to another company, means a company
in which that other company has a significant influence, but which is not a subsidiary
company of the company having such influence and includes a joint venture company.
Explanation. — For the purpose of this clause —
(i) the expression “significant influence” means control of at least twenty per cent of
total voting power, or control of or participation in business decisions under an
agreement;
(ii) the expression “joint venture’’ means a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets of the
arrangement.
The term “Total Share Capital”, means the aggregate of the -
(1) Paid-up equity share capital; and
(2) Convertible preference share capital.
Question 6
(a) Explain what is meant by 'Supervening Impossibility' as per the Indian Contract Act, 1872
with the help of an example. What is the effect of such impossibility? (5 Marks)
(b) Subject to agreement by partners, state the rules that should be observed by the
partners in settling the accounts of the firm after dissolution under the provisions of the
Indian Partnership Act, 1932. (4 Marks)
(c) What is the main difference between a Guarantee Company and a Company having
Share Capital? (3 Marks)
Answer
(a) According to Section 56 of the Indian Contract Act, 1872, the impossibility of
performance may be of the two types, namely (a) initial impossibility, and (b) subsequent
impossibility.
Subsequent impossibility is also known as Supervening impossibility i.e. becomes
impossible after entering into contract. When performance of promise become
impossible or illegal by occurrence of an unexpected event or a change of circumstances
beyond the contemplation of parties, the contract becomes void e.g. change in law etc. In
other words, sometimes, the performance of a contract is quite possible when it is made.
But subsequently, some event happens which renders the performance impossible or
unlawful. Such impossibility is called the subsequent or supervening. It is also
called the post-contractual impossibility.
Example: ‘A’ and ‘B’ contracted to marry each other. Before the time fixed for the
marriage, ‘A’ became mad. In this case, the contract becomes void due to subsequent
impossibility, and thus discharged.

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Effect of impossibility: The effect of such impossibility is that it makes the contract
void, and the parties are discharged from further performance of the contract.
(b) Mode of Settlement of partnership accounts: As per Section 48 of the Indian
Partnership Act, 1932, in settling the accounts of a firm after dissolution, the following
rules shall, subject to agreement by the partners, be observed:-
(i) Losses, including deficiencies of capital, shall be paid first out of profits, next out of
capital, and, lastly, if necessary, by the partners individually in the proportions in
which they were entitled to share profits;
(ii) The assets of the firm, including any sums contributed by the partners to make up
deficiencies of capital, must be applied in the following manner and order:
(a) in paying the debts of the firm to third parties;
(b) in paying to each partner rateably what is due to him from capital;
(c) in paying to each partner rateably what is due to him on account of capital; and
(d) the residue, if any, shall be divided among the partners in the proportions in
which they were entitled to share profits.
(c) Difference between Guarantee Company [Section 2(21) of the Companies Act, 2013]
and a Company having share capital [Section 2(22)].
In case of guarantee company, the members may be called upon to discharge their
liability only after commencement of the winding up and only subject to certain
conditions; whereas in the case of company having share capital, members may be
called upon to discharge their liability at any time, either during the company’s life -time or
during its winding up.
It is clear from the definition of the guarantee company that it does not ra ise its initial
working funds from its members. Therefore, such a company may be useful only where
no working funds are needed or where these funds can be held from other sources like
endowment, fees, charges, donations, etc.
In Narendra Kumar Agarwal vs. Saroj Maloo, the Supreme Court has laid down that
the right of a guarantee company to refuse to accept the transfer by a member of his
interest in the company is on a different footing than that of a company limited by shares.
The membership of a guarantee company may carry privileges much different from those
of ordinary shareholders.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 11

SECTION-B : BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.
Answer any three questions from the remaining four questions.
All candidates (including those who have opted for Hindi Medium) are required to answer the
questions in Section B, in English only.
Question 7
(a) The employee turnover rate in an Organisation refers to the proportion of employees who
leave the Organization during a certain time period. Almost every Organisation is facing
the acute problem of high employee attrition. To every Organization, high employee
turnover is undesirable and can have a significant adverse impact. A high employee
turnover rate results in an unfavourable effect on the morale of the remaining employees.
Existing employees may face additional stress, resulting in lower productivity. In addition
lower productivity of the existing employees due to a decline in morale, additional
productivity is lost as existing employees must guide new incumbent how to adapt to the
organizational culture and the new position.
To address the problem, it should be compared to the average within the industry. It
should not be compared across industries, as the turnover rate differs significantly in
various industries. It is in the best interest of the Organization to reduce it as it is
detrimental to the Organization When an employee leaves the Organization, the
Organization incurs costs to find a replacement, recruitment costs, advertising costs,
administration costs, background check costs, and interviewing costs. In addition, there
are costs of lost productivity. when the employee is attending a training program. Second
important aspect is Organizations with a high employee turnover rate may suffer from an
unfavourable public image. For example, working in the call centre is seen as
undesirable due to its turnover rates.
To overcome such problem, Organizations have to hire right manpower for the right
position. Second important aspect is to have competitive pay structure matching with the
industry. However, providing employees with a higher salary is not enough. It is important
to understand the benefits that employees wants and to take that into consideration when
determining an employee's pay structure. Employees need to be acknowledged and
given praise when due. Another important aspect is career path; Employees want to
progress in their careers. A career path should be provided to employees to give them a
sense of direction and what they can attain if they stay with the Organization. Last but
not the least way to offer flexibility, a flexible work schedule is highly desirable. In fact,
studies have shown that a flexible work arrangement has a positive impact on employee
retention. Allowing employees to choose their work time and providing a flexible work
schedule gives them the ability to balance their work and personal life and, hence,
improves employee satisfaction.
(i) What do you understand by employee attrition rate? (1 Mark)

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12 FOUNDATION EXAMINATION: JULY, 2021

(ii) Explain the ways to reduce high employee attrition? (2 Marks)

(iii) What.is the importance of employee turnover in an Organisation? (1 Mark)
(iv) How, does employee turnover rate affect brand image of an Organisation ? (1 Mark)
Read the passage :
(i) Make Notes, using Headings, subheadings and abbreviations wherever necessary.
(3 Marks)
(ii) Write Summary by giving a suitable title. (2 Marks)
Artificial intelligence (AI) is making a difference as to how legal work is done, but it isn't
the threat it is made out to be. AI is making impressive progress and shaking up things all
over the world today. The assumption that advancements in technology and artificial
intelligence will render any profession defunct is just that, an assumption and a false one.
The only purpose this assumption serves is creating mass panic and hostility towards
embracing technology that is meant to make our lives easier.
Introducing AI to this profession will primarily be for the purpose of automating mundane,
tedious tasks that require negligible human intelligence. The kind of artifi cial intelligence
that is employed by industries in the current scene, when extended to the law will enable
quicker services at a lower price. AI is meant to automate a number of tasks that take up
precious working hours lawyers could be devoted to tasks that require discerning,
empathy, and trust-qualities that cannot be replicated by even the most sophisticated
form. of AI. The legal profession is one of the oldest professions in the world. Thriving
over 1000 years; trust, judgment, and diligence are the pillars of this profession. The
most important pillar is the relationship of trust· between a lawyer and clients, which can
only be achieved through human connection and interaction.
While artificial intelligence can be useful in a number of ways in legal field like translation
of documents in other languages, mining of data pertaining to cases for analyses helping
decision making; scanning and. organizing documents pertaining to a case, it cannot
perform higher-'level tasks such as sharp' decision making, relationship-building with
valuable clients and writing legal briefs, advising clients, and appearing in court. These
are over and above the realm of computerization.
Answer
(a) (i) The proportion of employees who leave the organization during a certain period is called
employee attrition rate in an organization.
(ii) Various measures can be taken to prevent high attrition. Some of them are:
1. Hiring appropriately skilled people for different profiles.
2. Paying them salaries with benefits as per industry norms/benchmarked with the
competitors.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 13

3. Acknowledging and appreciating their work.

4. Providing career growth opportunities by promoting them periodically.
5. Offering flexible timings/schedules to enable them to maintain work-life balance.
(iii) Employee turnover rate is important as it directly impacts the business of an
organization by affecting the morale of the employees and their productivity. It also
affects public image of the organization and can escalate the cost of hiring, in case
the employee turnover is high.
(iv) Employee turnover rate affects brand image of an Organization. Today is the world
of social media; anything good or bad spreads very fast. Organizations with a high
employee turnover rate may suffer from an unfavourable public image. New
employees would be hesitant to join such Organizations where the employee
turnover rate is high.
(b) (i) Note Making
Artificial Intelligence: To aid, not replace lawyers/ Artificial Intelligence: Not a Threat
1. False Assumption
1.1 will replace prof.
1.2 Objective
1.2.1 create panic
1.2.2 prvt. tech. prlftn.
2. App. in Law
2.1 Areas
2.1.1 atmtg. Routine & tedious tasks with min. I.
2.1.2 trltn. of docs. In other langs.
2.1.3 data mining
2.1.4 helping to Anlz cases for dsn. mkg.
2.1.5 scng.& org. docs
2.2 Benefits
2.2.1 quick service at low price
2.2.2 free the lawyers for tasks reqg. human connect & interaction :
2.2.2.1 rlshp. bldg

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14 FOUNDATION EXAMINATION: JULY, 2021

2.2.2.2 empathy & trust bldng

3. Cannot perform
3.1 sharpdsn. mkg.
3.2 rlshp. bldg. with clts
3.3 wrt. legal briefs
3.4 adv. clts
Key
AI.: Artificial Intelligence
Min.: Minimum
Prvt.: preventing
Tech.: technology
Prlftn.: proliferation
App.: application
Atmtg: automating
Trltn: translation
Docs.: documents
Langs.: languages
Anlz: analyze
Dsn decision
Mkg.: making
Scng:scanning
Org.:organizing
Reqg.: requiring
Rlshp.:relationship
Bldg.: building
Clts.: clients
Wrt.: writing
Adv.: advising

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

(b) (ii) Artificial Intelligence: Not a Threat

There are many false assumptions doing the rounds pertaining to Artificial
Intelligence, foremost being that it will replace professionals. The objective is to
create panic and prevent proliferation of technology. AI can be applied in the legal
profession for automating routine and tedious tasks requiring minimum intelligence,
translation of case documents in other languages, data mining, helping to analyze
cases for decision making, scanning and organizing legal and case documents.
Major benefits will be that lawyers will not only be readily available at low price, but
will also save their precious time that can be utilized in tasks requiring human
connect and interaction such as relationship, empathy and trust building. It is clear
that AI cannot perform tasks like sharp decision making, relationship building with
clients, writing legal briefs and advising clients. Therefore it can never replace the
lawyers.
Question 8
(a) Physical barriers are a result of our surroundings. Discuss. (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
ADHERE
(a) separate
(b) split
(c) humility
(d) fasten (1 Mark)
(ii) Select a suitable antonym for the word given under :
CANDID
(a) deceptive
(b) frank
(c) sincere'
(d) subordinate (1 Mark)
(iii) Change the following sentence to indirect speech :
He said to me, "It would be nice if I could see you again." (1 Mark)
(c) Write a precis and give an appropriate title to the passage given below :
Naval architects-never claim that a ship is unsinkable, but the sinking of the passenger-
and-car ferry Estonia in the Baltic surely should have never happened. It was well
designed and carefully maintained. It carried the proper number of lifeboats. It had been
thoroughly inspected on the day of the voyage. Yet, hours later, the Estonia rolled over

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16 FOUNDATION EXAMINATION: JULY, 2021

and sank in the cold, stormy night. It went down so quickly that most of those on board,
caught in the dark, flooding cabins had no chance to save themselves: Of those who
managed to scramble overboard, only 139 survived. The rest died of hypothermia before
the rescuers could pluck them from the cold sea. The final death toll amounted to 912
Souls. However, there were an unpleasant number of questions about why Estonia sank
and why so many survivors were men in the prime of life, while most of the dead were
woman, children and the elderly. (5 Marks)
Answer
(a) Physical barriers are caused due to obstructions/factors in the immediate environment or
surroundings, often leading to problems in transmission of message. These factors are
noise, technical disturbances, outdated equipment, distant locations, office doors,
separate areas for people, large office spaces, old technologies and lack of appropriate
infrastructure.
(b) (i) d - fasten
(ii) a - deceptive
(iii) He said/said to me/told me that it would be nice if he could see me again.
(c) Sinking of Estonia/ The Deadly Voyage
The passenger-and-car ferry Estonia sank in the Baltic. Despite being well designed,
carrying enough lifeboats and being duly inspected on the fateful day of the voyage, it
went down quickly in the cold and stormy night. Only 139 people largely men in the prime
of their life survived, while 912 people majority being women, children and the elderly
died of hypothermia.
Question 9
(a) Distinguish between General English and Business English. (2 Marks)
OR
(a) Focus and Attention is an important characteristic of effective communication. Explain.
(2 Marks)
(b) (i) Change the sentence from Active to Passive Voice.
Bring the culprit. (1 Mark)
(ii) Change the sentence from Passive to Active Voice.
Three cleanliness campaigns will be launched by the authorities in the park.(1 Mark)
(iii) Change the following sentence to indirect speech.
The group shouted, "Honesty is the best policy". (1 Mark)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 17

(c) Draft a Newspaper Report on the "Government's decision to open multiplexes after
almost a year" to be published in a national newspaper. (5 Marks)
Answer
(a) The approach of General English leans more on the basic, conversational, day-to-day
use of words that are colloquial in nature usually used in informal settings. Whereas
Business English is specifically used in formal settings like work places or offices for
business communication. It entails the usage of specific vocabulary, tonality and
language constructs that are complex in nature.
OR

(a) Everyday work environment has multiple activities going on simultaneously that disturb
our focus and attention. The ringing of a phone, an incoming email, or a number of tasks
that require immediate attention. Apart from routine work, anxiety related to work,
emotional distress etc. can also cause distractions. These are detrimental to the
communication process with an individual or a group of people. Due to these
distractions/disturbances, important points or subtle cues are either ignored or
completely missed. In order to interpret the message correctly, being focused and
attentive is important for effective communication.
(b) (i) Let the culprit be brought / brought in.
(ii) The authorities will launch three cleanliness campaigns in the park.
(iii) The Group shouted that honesty is the best policy.
(c) Newspaper Report:
Government’s Decision to open multiplexes after almost a year
By Mr. FGH, Staff Correspondent

Monday xx,xxxx. The state government has allowed single-screen theatres and
multiplexes to open at 50% occupancy provided that they follow and strictly adhere to
Covid Safety protocols. After almost a year of dry run, the cinema theatres get ready
for bustling activity in and around the premises. Cinema Operators who have been out of
business for a year, welcomed the decision. Even small businesses in the vicinity heaved
a sigh of relief.
Mr. XYZ, President of the Cinema Operators and Exhibitors Association, congratulated
the government. He further remarked, “We have suffered huge losses due to lack of
business, we were eagerly awaiting the decision.” He assured that all the safety
protocols with regard to Covid would be strictly followed. Discussing about the
preparedness of theatres he informed, “We have already directed the cinema owners to
get their staff vaccinated and most of them already have their staff inoculated at least
with the first dose. Theatres, canteen facility and public conveniences will be fumigated

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18 FOUNDATION EXAMINATION: JULY, 2021

between shows. Thermal screening and sanitizing to be available at all entry and exit
gates.”
The cinema owners/operators are optimistic about part recovery of their losses banking
on big film releases lined up in the next two months. Avid cinema buffs are equally
excited to see their favourite stars on the big screen after a long hiatus . They are also
seeking relaxation in night curfew so that late night shows can be allowed. The popular
multiplex chain in the city ABC has even offered 5-10 % discount for the audience who
have been inoculated with both the doses. However, with the third wave of Covid-19 still
looming, how long will the euphoria last, time will only tell.
Source: State Government Official Gazette
Question 10
(a) Write essentials of oral communication. (2 Marks)
(b) (i) Change the sentence from Active to Passive Voice.
Did they like paintings in the exhibition ? (1 Mark)
(ii) Change the sentence from Passive to Active Voice.
Food from roadside vendor should not be eaten during Covid pandemic as a safety
precaution. (1 Mark)
(iii) Change the following sentence to indirect speech.
Mr. X to the Cashier: "Do you have change for five hundred rupees?" (1 Mark)
(c) Write an article of about 250 words on the topic 'Covid' Certificate must for attending.
Parliamentary session. (5 Marks)
Answer
(a) Essentials of oral communication are:
(a) Pronunciation when wrong or unclear can lead to lack of clarity and
miscommunication.
(b) Listening & conversation: The tonality, accent and diction convey the emotion,
urgency and seriousness of the communication.
(c) Spoken grammar: Using the grammar correctly while speaking helps in correct
interpretation of the message.
(d) Vocabulary: Colloquial words should be used; difficult words should be avoided
unless the listener is proficient in the language.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 19

(b) (i) Were the paintings in the exhibition liked by them?

(ii) As a safety precaution during Covid pandemic, we should not eat food from
roadside vendor. / We should not eat food from the roadside vendor as a safety
precaution during Covid pandemic.
(iii) Mr. X asked the cashier whether / if he had (the) change for five hundred rupees.
(c) Covid Negative Certificate must for attending Parliamentary Session
By Mr./Ms. BNM
Covid -19 has adversely affected institutions, industries and businesses across the board
from schools to colleges/universities, from recreation to travel and hospitality, from
manufacturing to services. The business of the parliament is no exception. It is all the
more important rather critical to keep the Parliament running as issues of paramount
significance ranging from economy to public welfare to national security are discussed,
debated and decided. Moreover, each day of the Parliament costs the exchequer a huge
amount.
In order to prevent the disruption of Parliamentary sessions, certain safety protocols have
been stipulated keeping in mind the health condition of the Members, Visitors and the
Press covering the sessions.
All Members/attendees will need to have a COVID-19 negative certificate vide
notification xx/xx/xxxx to enter the premises in the current and subsequent sessions till
further change in notification. The test needs to be done 72 hours before the
commencement of the session. Those Members/attendees who have been unable to
undertake the test will be required to do so on the day they arrive at the Parliament’s
reception. They will be allowed to enter only if their Rapid antigen test comes out
negative. In case staff or family of a member tests positive, the member will have to self-
quarantine for 14 days. The members will have to wear masks at all times, even during
discussions/debates and maintain social distancing. Members/attendees should avoid
going out of the Parliament during the course of a day’s proceedings unless necessary.
Parliamentary papers will be circulated digitally; hard copies have been discontinued.
Members have been requested to avoid calling visitors unless necessary. The Parliament
canteen would offer only packed meals, tea and coffee during the course of the session.
(Source…….)

Question 11
(a) Define the term communication. When the communication is supposed to be effective ?
(2 Marks)
(b) Select the correct meaning of Idioms/Phrases/words given below:
(i) Storm in a tea cup

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20 FOUNDATION EXAMINATION: JULY, 2021

(a) Crave for something

(b) Something fishy
(c) Make a big issue out of a small thing
(d) Get into quarrels (1 Mark)
(ii) Core Competency
(a) Decision taken by a competent authority
(b) Head of a department or a company authorised to take decision
(c) Basic strength of a group or company
(d) Minimum skill/professional qualification· (1 Marks)
(iii) Change the sentence into Active Voice.
Who were not liked by you at the party ? (1 Mark)
(iv) Choose the word which best expresses the meaning of the given word.
FIASCO
(a) Shock
(b) Win
(c) Leaming
(d) Failure (1 Mark)
(c) Write a letter to your landlord requesting him to reduce rent in the light of 'Covid 19'
pandemic. (4 Marks)
Answer
(a) Communication is a process of exchanging information, ideas, thoughts, feelings and
emotions through speech, signal, writing, or behaviour. In communication process, a
sender (encoder) encodes a message and then using a medium/channel sends it to the
receiver (decoder) who decodes the message and after processing in formation sends
back appropriate feedback/reply using a medium/channel.
The communication is supposed to be complete or effective only when the listener
responds relevantly and appropriately.
(b) (i) c / Make a big issue out of a small thing.
(ii) c / Basic strength of a group or company.
(iii) Whom/who did you not like at the party?
(iv) d / Failure

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

(c) Letter
From:
XYZ
Vasant Vihar Enclave
Gurugram, Harayana-xxxxxx Dated: 30.06.2021
To
Mr. ABC
House No. 21/3,
Ram Nagar Colony,
New Delhi xxxxxx

Dear Mr. ABC / Dear Sir,

Subject: Request to reduce the monthly rent amount.
Greetings! As you know that I have been living in the rented apartment premises owned
by you for the last 5 years. In all these years, I have paid for the yearly maintenance of
the apartment and always paid the rent on time.
Due to unprecedented circumstances owing to Covid-19 pandemic, the factory where I
worked was shut down leaving me jobless. I am already neck deep in a financial mess.
Though I am looking for a job and am hopeful of getting one very soon, I request you to
reduce the monthly rent amount by half for the next 3 months and support me to get over
the present situation.
I assure you that I shall pay the amount as per contract after 3 months. I shall look
forward to a positive response.
Thanks and Regards,
Yours Faithfully / Sincerely,
XYZ
Tenant

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAW

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) A, B, C and D are the four partners in a firm. They jointly promised to pay ` 6,00,000 to
F. B and C have become insolvent. B was unable to pay any amount and C could pay
only ` 50,000. A is compelled to pay the whole amount to F. Decide the extent to which
A can recover the amount from D with reference to the provisions of the Indian Contract
Act, 1872. (4 Marks)
(b) AK Private Limited has borrowed ` 36 crores from BK Finance Limited. However, as per
memorandum of AK Private Limited the maximum borrowing power of the company is
` 30 crores. Examine, whether AK Private Limited is liable to pay this debt? State the
remedy, if any available to BK Finance Limited. (4 Marks)
(c) "A breach of condition can be treated as a breach of warranty". Explain this statement as
per relevant provisions of the Sale of Goods Act, 1930. (4 Marks)
Answer
(a) Joint promisors (Section 42 of the Indian Contract Act, 1872)
When two or more persons have made a joint promise, then unless a contrary intention
appears by the contract, all such persons must jointly fulfil the promise.
Any one of joint promisors may be compelled to perform (Section 43)
As per Section 43 of the Indian Contract Act, 1872, when two or more persons make a
joint promise, the promisee may, in the absence of express agreement to the contrary,
compel any one or more of such joint promisors to perform the whole of the promise.
If any one of two or more joint promisors makes default in such contribution, the
remaining joint promisors must bear the loss arising from such default in equal shares.
In the instant case, A, B, C and D have jointly promised to pay ` 6,00,000 to F. B and C
become insolvent. B was unable to pay any amount and C could pay only ` 50,000. A is
compelled to pay the whole amount to F.
Hence, A is entitled to receive ` 50,000 from C and ` 2,75,000 from D, as worked out
below:
From C ` 50,000= (C’s Liability ` 1,50,000 Less: Amount he could not pay
` 1,00,000).

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2 FOUNDATION EXAMINATION: DECEMBER, 2021

From D ` 2,75,000= (D’s Liability `1,50,000+1/2 of liability of B (Loss) (1,50,000*1/2) i.e.

` 75,000+1/2 of C’s liability (Loss) (1,00,000*1/2) i.e., ` 50,000) In other words, equal
proportion i.e., ` 5,50,000 (i.e.`6,00,000-`50,000) / 2.
Thus, total amount A can receive from C and D comes to `3,25,000 (50,000+2,75,000)
(b) This case is governed by the ‘Doctrine of Ultra Vires’. According to this doctrine, any act
done or a contract made by the company which travels beyond the powers of the
company conferred upon it by its Memorandum of Association is wholly void and
inoperative in law and is therefore not binding on the company. This is because, the
Memorandum of Association of the company is, in fact, its charter; it defines its
constitution and the scope of the powers of the company. Hence, a company cannot
depart from the provisions contained in the memorandum however imperative may be the
necessity for the departure. Hence, any agreement ultra vires the company shall be null
and void.
(i) Whether AK Private Limited is liable to pay the debt?
As per the facts given, AK Private Limited borrowed ` 36 crores from BK Finance
Limited which is beyond its borrowing power of ` 30 crores.
Hence, contract for borrowing of ` 36 crores, being ultra vires the memorandum of
association and thereby ultra vires the company, is void. AK Private Limited is not,
therefore, liable to pay the debt.
(ii) Remedy available to BK Finance Limited:
In light of the legal position explained above, BK Finance Limited cannot enforce the
said transaction and thus has no remedy against the company for recovery of the
money lent. BK Finance limited may take action against the directors of AK Private
Limited as it is the personal liability of its directors to restore the borrowed funds.
Besides, BK Finance Limited may take recourse to the remedy by means of
‘Injunction’, if feasible.
(c) Section 13 of the Sale of Goods Act, 1930 specifies cases where a breach of condition
be treated as a breach of warranty. As a result of which the buyer loses his right to
rescind the contract and can claim damages only.
In the following cases, a contract is not avoided even on account of a breach of a
condition:
(i) Where the buyer altogether waives the performance of the condition. A party may
for his own benefit, waive a stipulation. It should be a voluntary waiver by buyer.
(ii) Where the buyer elects to treat the breach of the conditions, as one of a warranty.
That is to say, he may claim only damages instead of repudiating the contract.
Here, the buyer has not waived the condition but decided to treat it as a warranty.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

(iii) Where the contract is non-severable and the buyer has accepted either the whole
goods or any part thereof. Acceptance means acceptance as envisaged in Section
72 of the Indian Contract Act, 1872.
(iv) Where the fulfilment of any condition or warranty is excused by law by reason of
impossibility or otherwise.
Question 2
(a) Explain any five circumstances under which contracts need not be performed with the
consent of both the parties. (7 Marks)
(b) State the rules regarding registered office of a Limited Liability Partnership (LLP) and
change therein as per provisions of the Limited Liability Partnership Act, 2008. (5 Marks)
Answer
(a) Under following circumstances, the contracts need not be performed with the consent of
both the parties:
(i) Novation: Where the parties to a contract substitute a new contract for the old, it is
called novation. A contract in existence may be substituted by a new contract either
between the same parties or between different parties the consideration mutually
being the discharge of old contract. Novation can take place only by mutual
agreement between the parties. On novation, the old contract is discharged and
consequently it need not be performed. (Section 62 of the Indian Contract Act,
1872)
(ii) Rescission: A contract is also discharged by recission. When the parties to a
contract agree to rescind it, the contract need not be performed. (Section 62)
(iii) Alteration: Where the parties to a contract agree to alter it, the original contract is
rescinded, with the result that it need not be performed. In other words, a contract is
also discharged by alteration. (Section 62)
(iv) Remission: Every promisee may dispense with or remit, wholly or in part, the
performance of the promise made to him, or may extend the time for such
performance or may accept instead of it any satisfaction which he thinks fit. In other
words, a contract is discharged by remission. (Section 63)
(v) Rescinds voidable contract: When a person at whose option a contract is
voidable rescinds it, the other party thereto need not perform any promise therein
contained in which he is the promisor.
(vi) Neglect of promisee: If any promisee neglects or refuses to afford the promisor
reasonable facilities for the performance of his promise, the promisor is excused by
such neglect or refusal as to any non-performance caused thereby. (Section 67)

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4 FOUNDATION EXAMINATION: DECEMBER, 2021

(b) Registered office of LLP and Change therein (Section 13 of the Limited Liability
Partnership Act, 2008)
(i) Every LLP shall have a registered office to which all communications and notices
may be addressed and where they shall be received.
(ii) A document may be served on a LLP or a partner or designated partner thereof by
sending it by post under a certificate of posting or by registered post or by any other
manner, as may be prescribed, at the registered office and any other address
specifically declared by the LLP for the purpose in such form and manner as may be
prescribed.
(iii) A LLP may change the place of its registered office and file the notice of such
change with the Registrar in such form and manner and subject to such conditions
as may be prescribed and any such change shall take effect only upon such filing.
(iv) If the LLP contravenes any provisions of this section, the LLP and its every partner
shall be punishable with fine which shall not be less than ` 2000, but which may
extend to ` 25000.
Question 3
(a) Define partnership and name the essential elements for the existence of a partnership as
per the Indian Partnership Act, 1932. Explain any two such elements in detail.
(3 + 3 = 6 Marks)
(b) Examine the validity of the following contracts as per the Indian Contract Act, 1872 giving
reasons.
(i) X aged 16 years borrowed a loan of ` 50,000 for his personal purposes. Few
months later he had become major and could not pay back the amount borrowed,
on due date. The lender wants to file a suit against X.
(ii) J contracts to take in cargo for K at a foreign port. J's government afterwards
declares war against the country in which the port is situated and therefore the
contract could not be fulfilled. K wants to file a suit against J. (6 Marks)
Answer

(a) (i) Definition of Partnership: 'Partnership' is the relation between persons who have
agreed to share the profits of a business carried on by all or any of them acting for
all. (Section 4 of the Indian Partnership Act, 1932)
The definition of the partnership contains the following five elements which must co-
exist before a partnership can come into existence:
1. Association of two or more persons
2. Agreement

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5

3. Business
4. Agreement to share Profits
5. Business carried on by all or any of them acting for all
(ii) ELEMENTS OF PARTNERSHIP
The definition of the partnership contains the following five elements which must co-
exist before a partnership can come into existence:
1. Association of two or more persons: Partnership is an association of 2 or
more persons. Again, only persons recognized by law can enter into an
agreement of partnership. Therefore, a firm, since it is not a person recognized
in the eyes of law cannot be a partner. Again, a minor cannot be a partner in a
firm, but with the consent of all the partners, may be admitted to the benefits of
partnership.
The Partnership Act is silent about the maximum number of partners but
Section 464 of the Companies Act, 2013 read with the relevant Rules has now
put a limit of 50 partners in any association / partnership firm.
2. Agreement: It may be observed that partnership must be the result of an
agreement between two or more persons. There must be an agreement
entered into by all the persons concerned. This element relates to voluntary
contractual nature of partnership. Thus, the nature of the partnership is
voluntary and contractual. An agreement from which relationship of
Partnership arises may be express. It may also be implied from the act done
by partners and from a consistent course of conduct being followed, showing
mutual understanding between them. It may be oral or in writing.
3. Business: In this context, we will consider two propositions. First, there must
exist a business. For the purpose, the term 'business' includes every trade,
occupation and profession. The existence of business is essential. Secondly,
the motive of the business is the "acquisition of gains" which leads to the
formation of partnership. Therefore, there can be no partnership where there is
no intention to carry on the business and to share the profit thereof.
4. Agreement to share profits: The sharing of profits is an essential feature of
partnership. There can be no partnership where only one of the partners is
entitled to the whole of the profits of the business. Partners must agree to
share the profits in any manner they choose. But an agreement to share losses
is not an essential element. It is open to one or more partners to agree to
share all the losses. However, in the event of losses, unless agreed otherwise,
these must be borne in the profit-sharing ratio.
5. Business carried on by all or any of them acting for all: The business must
be carried on by all the partners or by anyone or more of the partners acting

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6 FOUNDATION EXAMINATION: DECEMBER, 2021

for all. This is the cardinal principle of the partnership Law. In other words,
there should be a binding contract of mutual agency between the partners. An
act of one partner in the course of the business of the firm is in fact an act of
all partners. Each partner carrying on the business is the principal as well as
the agent for all the other partners. He is an agent in so far as he can bind the
other partners by his acts and he is a principal to the extent that he is bound
by the act of other partners. It may be noted that the true test of partnership is
mutual agency rather than sharing of profits. If the element of mutual agency is
absent, then there will be no partnership.
(b) (i) According to Section 11 of the Indian Contract Act, 1872, every person is competent
to contract who is of the age of majority according to the law to which he is subject
and therefore, a minor is not competent to contract and any agreement with or by a
minor is void from the very beginning. A minor cannot ratify it on attaining the
majority as the original agreement is void ab initio.
According to Section 68 of the Act, a claim for necessaries supplied to a minor is
enforceable by law.
Necessaries mean those things that are essentially needed by a minor. They cannot
include luxuries or costly or unnecessary articles.
In the present case, X, the borrower, was minor at the time of taking the loan,
therefore, the agreement was void ab initio. Attaining majority thereafter will not
validate the contract nor X can ratify it. The loan was for personal purposes and not
for necessaries supplied to him. Hence, the lender cannot file a suit against X for
recovery of the loan as it is not enforceable by law.
(ii) As per Section 56 of the Indian Contract Act, 1872 the subsequent or supervening
impossibility renders the contract void. Supervening impossibility may take place
owing to various circumstances as contemplated under that section, one of which is
the declaration of war subsequent to the contract made. In the instant case the
contract when made between J and K was valid but afterwards J’s government
declares war against the country in which the port is situated as a result of which
the contract becomes void. Hence, K cannot file a suit against J for performance of
the contract.
Question 4
(a) Distinguish between 'Sale' and 'Hire Purchase' under the Sale of Goods Act, 1930.
(6 Marks)
(b) State whether the following are partnerships:
(i) A and B jointly own a car which they used personally on Sundays and holidays and
let it on hire as taxi on other days and equally divide the earnings.
(ii) Two firms each having 12 partners combine by an agreement into one firm.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

(iii) A and B, co-owners, agree to conduct the business in common for profit.
(iv) Some individuals form an association to which each individual contributes ` 500
annually. The objective of the association is to produce clothes and distribute the
clothes free to the war widows.
(v) A and B, co-owners share between themselves the rent derived from a piece of
land.
(vi) A and B buy commodity X and agree to sell t e commodity with sharing the profits
equally. (6 Marks)
Answer
(a) The main points of distinction between the 'Sale' and 'Hire-Purchase' are as follows:
Sr. Basis of Sale Hire-Purchase
No. difference
1 Time of passing Property in the goods is Property in goods passes to
property transferred to the buyer the hirer upon payment of the
immediately at the time of last installment.
the contract
2 Position of the The position of the buyer The position of the hirer is
property is that of the owner of the that of a bailee till he pays
goods the last installment.
3 Termination of The buyer cannot The hirer may, if he so likes,
contract terminate the contract and terminate the contract by
is bound to pay the price returning the goods to its
of the goods owner without any liability to
pay the remaining
installments.
4 Burden of Risk of The seller takes the risk The owner takes no such
Insolvency of the of any loss resulting from risk, for if the hirer fails to
buyer the insolvency of the pay an installment, the owner
buyer has right to take back the
goods.
5 Transfer of title The buyer can pass a The hirer cannot pass any
good title to a bona fide title even to a bona fide
purchaser from him purchaser.
6 Resale The buyer in sale can The hire purchaser cannot
resell the goods resell unless he has paid all
the installments.

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8 FOUNDATION EXAMINATION: DECEMBER, 2021

(b) (i) No, this is not a case of partnership because the sharing of profits or of gross
returns accruing from property holding joint or common interest in the property
would not by itself make such persons partners.
Alternatively, this part can also be answered as below:
Yes, this is a case of partnership, as the car is used personally only on Sundays
and holidays and used for most of the days as a Taxi. Hence, it is inferred that the
main purpose of owning the car is to let it for business purpose. Also, there is an
agreement for equally dividing the earnings.
(ii) Yes, this is a case of partnership because there is an agreement between two firms
to combine into one firm.
(iii) Yes, this is a case of partnership because A & B, co-owners, have agreed to
conduct a business in common for profit.
(iv) No, this is not a case of partnership as no charitable association can be floated in
partnership.
(v) No, this is not a case of partnership as they are co-owners and not the partners.
Further, there exist no business.
(vi) Yes, this is a case of partnership as there exist the element of doing business and
sharing of profits equally.
Question 5
(a) (i) TK ordered timber of 1 inch thickness for being made into drums. The seller agreed
to supply the required timber of 1 inch. However, the timber supplied by the seller
varies in thickness from 1 inch to 1.4 inches. The timber is commercially fit for the
purpose for which it was ordered. TK rejects the timber. Explain with relevant
provisions of the Sale of Goods Act, 1930 whether TK can reject the timber.
(3 Marks)
(ii) AB sold 500 bags of wheat to CD. Each bag contains 50 Kilograms of wheat. AB
sent 450 bags by road transport and CD himself took remaining 50 bags. Before CD
receives delivery of 450 bags sent by road transport, he becomes bankrupt. AB
being still unpaid, stops the bags in transit. The official receiver, on CD's insolvency
claims the bags. Decide the case with reference to the provisions of the Sale of
Goods Act, 1930. (3 Marks)
(b) What do you mean by the term Capital? Describe its classification in the domain of
Company Law. (1 + 5 = 6 Marks)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 9

Answer
(a) (i) Condition as to quality or fitness [Section 16(1) of the Sale of Goods Act, 1930]:
The condition as to the reasonable fitness of goods for a particular purpose may be
implied if the buyer had made known to the seller the purpose of his purchase and
relied upon the skill and judgment of the seller to select the best goods and the
seller has ordinarily been dealing in those goods.
There is implied condition on the part of the seller that the goods supplied shall be
reasonably fit for the purpose for which the buyer wants them, provided the
following conditions are fulfilled:
(a) The buyer should have made known to the seller the particular purpose for
which goods are required.
(b) The buyer should rely on the skill and judgement of the seller.
(c) The goods must be of a description dealt in by the seller, whether he be a
manufacturer or not.
In the instant case, as the timber supplied by the seller is commercially fit for the
purposes for which it was ordered, it means the implied condition on the part of the
seller is fulfilled.
Hence, TK cannot reject the timber.
Alternatively, the above answer can also be provided as under:
According to Section 15 of the Sale of Goods Act, 1930 where there is a contract for
the sale of goods by description, there is an implied condition that the goods shall
correspond with the description. The buyer is not bound to accept and pay for the
goods which are not in accordance with the description of goods.
Thus, it has to be determined whether the buyer has undertaken to purchase the
goods by their description, i.e., whether the description was essential for identifying
the goods where the buyer had agreed to purchase. If that is required and the
goods tendered do not correspond with the description, it would be breach of
condition entitling the buyer to reject the goods.
In the instant case, as the timber supplied by seller varies in thickness from 1 inch
to 1.4 inches, it does not correspond with the description ordered by TK i.e. of 1
inch, TK may reject the timber.
(ii) Right of stoppage in transit (Section 50 of the Sale of Goods Act, 1930):
Subject to the provisions of this Act, when the buyer of goods becomes insolvent,
the unpaid seller who has parted with the possession of the goods has the right of
stopping them in transit, that is to say, he may resume possession of the goods as
long as they are in the course of transit and may retain them until paid or tendered
price of the goods.

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10 FOUNDATION EXAMINATION: DECEMBER, 2021

When the unpaid seller has parted with the goods to a carrier and the buyer has
become insolvent, he can exercise this right of asking the carrier to return the goods
back, or not to deliver the goods to the buyer.
In the instant case, CD, the buyer becomes insolvent, and 450 bags are in transit.
AB, the seller, can stop the goods in transit by giving a notice of it to CD. The
official receiver, on CD’s insolvency cannot claim the bags.
(b) (i) Meaning of capital: The term capital has variety of meanings. But in relation to a
company limited by shares, the term 'capital' means 'share capital'. Share capital means
capital of the company expressed in terms of rupees divided into shares of fixed
amount.
(ii) Classification of capital: In the domain of Company Law, the term capital can be
classified as follows:
(a) Nominal or authorised or registered capital:
This expression means such capital as is authorised by memorandum of a
company to be the maximum amount of share capital of the company.
(b) Issued capital: It means such capital as the company issues from time to time
for subscription.
(c) Subscribed capital: As such part of the capital which is for the time being
subscribed by the members of a company.
(d) Called up capital: As such part of the capital which has been called for
payment. It is the total amount called up on the shares issued.
(e) Paid-up capital: It is the total amount paid or credited as paid up on shares
issued. It is equal to called up capital less calls in arrears.
Question 6
(a) What is meant by 'Quasi-Contract'? State any three salient features of a quasi-contract
as per the Indian Contract Act, 1872. (5 Marks)
(b) “Sharing in the profits is not conclusive evidence in the creation of partnership”.
Comment. (4 Marks)
(c) BC Private Limited and its subsidiary KL Private Limited are holding 90,000 and 70,000
shares respectively in PQ Private Limited. The paid-up share capital of PQ Private
Limited is ` 30 Lakhs (3 Lakhs equity shares of ` 10 each fully paid). Analyse with
reference to provisions of the Companies Act, 2013 whether PQ Private Limited is a
subsidiary of BC Private Limited. What would be your answer if KL Private Limited is
holding 1,60,000 shares in PQ Private Limited and no shares are held by BC Private
Limited in PQ Private Limited? (3 Marks)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 11

Answer
(a) Meaning of ‘Quasi Contract’: Under certain special circumstances obligation
resembling those created by a contract is imposed by law although the parties have
never entered into a contract. Such obligations imposed by law are referred to as 'Quasi
Contracts'. Such a contract resembles with a contract so far as result or effect is
concerned but it has little or no affinity with a contract in respect of mode of creation.
These contracts are based on the doctrine that a person shall not be allowed to enrich
himself unjustly at the expense of another.
The salient features of Quasi-contract:
1. It does not arise from any agreement of the parties concerned but it is imposed by
law.
2. The right under it is always a right to money and generally though not always to a
liquidated sum of money.
3. It is a right which is available not against all the world, but against a particular
person or persons only, so that in this respect it resembles a contractual right.
(b) “Sharing in the profits is not conclusive evidence in the creation of partnership”
Sharing of profit is an essential element to constitute a partnership. But it is only a prima
facie evidence and not conclusive evidence, in that regard. The sharing of profits or of
gross returns accruing from property by persons holding joint or common interest in the
property would not by itself make such persons partners. Although the right to participate
in profits is a strong test of partnership, and there may be cases where, upon a simple
participation in profits, there is a partnership, yet whether the relation does or does not
exist must depend upon the whole contract between the parties.
Where there is an express agreement between partners to share the profit of a business
and the business is being carried on by all or any of them acting for all , there will be no
difficulty in the light of provisions of Section 4, in determining the existence or otherwise
of partnership.
But the task becomes difficult when either there is no specific agreement or the
agreement is such as does not specifically speak of partnership. In such a case for
testing the existence or otherwise of partnership relation, Section 6 has to be referred.
According to Section 6, regard must be had to the real relation between the parties as
shown by all relevant facts taken together. The rule is easily stated and is clear but its
application is difficult. Cumulative effect of all relevant facts such as written or verbal
agreement, real intention and conduct of the parties, other surrounding circumstances
etc., are to be considered while deciding the relationship between the parties and
ascertaining the existence of partnership.

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12 FOUNDATION EXAMINATION: DECEMBER, 2021

Hence, the statement is true / correct that mere sharing in the profits is not conclusive
evidence.
(c) Section 2(87) defines “subsidiary company” in relation to any other company (that is to
say the holding company), means a company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power either at its own
or together with one or more of its subsidiary companies:
For the purposes of this section —
(I) a company shall be deemed to be a subsidiary company of the holding
company even if the control referred to in sub-clause (i) or sub-clause (ii) is of
another subsidiary company of the holding company;
(II) “layer” in relation to a holding company means its subsidiary or subsidiaries.
In the instant case, BC Private Limited together with its subsidiary KL Private
Limited is holding 1,60,000 shares (90,000+70,000 respectively) which is more than
one half in nominal value of the Equity Share Capital of PQ Private Limited. Hence,
PQ Private Limited is subsidiary of BC Private Limited.
(ii) In the second case, the answer will remain the same. KL Private Limited is a
holding 1,60,000 shares i.e., more than one half in nominal value of the Equity
Share Capital of PQ Private Limited (i.e., holding more than one half of voting
power). Hence, KL Private Limited is holding company of PQ Private Company and
BC Private Limited is a holding company of KL Private Limited.
Hence, by virtue of Chain relationship, BC Private Limited becomes the holding
company of PQ Private Limited.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 13

SECTION-B : BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.
Answer any three questions from the remaining four questions.
All candidates(including those who have opted for Hindi Medium) are required to answer the
questions in Section B, in English only.
Question 7
(a) Read the passage given below and answer the questions that follows:
Academics has always been an essential part of human development. It prepares us to
survive in the outside world and establish an identity of our own. In India, from an early
age, we have been taught that education is limited to the boundaries of academics only;
the idea of getting out into the field, for gaining practical experience, is always
considered a hoax. This has hindered students' development. But, the truth is that
education represents a considerably broader field than we know of it. Our teaching, from
the basics, has been focused on getting good grades and job offers, rather than being
creative and unique.
In the 21st century, the pure academic type of education is slowly paving way for a whole
new type. The paradigm shift in the whole education system is evident. People have now
come to understand that education is a 360 degree activity that should focus on students'
overall development, rather than restricting him/her to the classroom. Cc-curricular
activities that take place outside the classroom but reinforce or supplement classroom
curriculum, in some ways, have become a point of focus today. Participating in such
activities helps youngsters grow mentally, socially and individually. Intellectual
development of a student is developed in the classroom, but for the aesthetic
development such as team-building, character building, and physical growth, students
must step out into the outside world.
Similarly, in colleges and institutions, there is a need for practical exposure so that the
students can experience the actual working of an industry: Catering to this change, most
professional colleges including B schools have started providing practical exposure to
students through regular guest lectures, industrial visits, conferences, seminars, cultural
festivals, and so on. With industry visits, students are able to better identify their
prospective areas of work in the overall organizational function.
Through such events, students are made to participate and coordinate different events
wherein, they get to know how exactly things are managed. Co-curricular or extra-
curricular activities provide practical exposure and opportunities to implement what
students learn in the classroom. This helps in developing the overall personality of the

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14 FOUNDATION EXAMINATION: DECEMBER, 2021

students, inculcating various soft-skills in them, which otherwise are difficult to teach.
Clearly, life beyond academics creates creative and empowered professionals.
(i) What has not been the focus of education from earlier times? (1 Mark)
(ii) Where should students go for aesthetic development? (1 Mark)
(iii) What kind of co-curricular activities have become points of focus today? (1 Mark)
(iv) What will give children a better insight into industry? (1 Mark)
(v) Why are soft skills difficult to teach in the classroom? (1 Mark)
(b) Read the Passage:
(i) Make notes, using headings, sub-headings and abbreviation wherever necessary
giving a suitable title. (3 Marks)
(ii) Write a summary. (2 Marks)
Keeping cities clean, free of any kind of pollution, is essential for keeping their
residents healthy. Our health depends not just on personal hygiene and nutrition,
but critically also on how clean we keep our cities and their surroundings. The
spread of dengue, chikungunya and corona virus are intimately linked to the
deteriorating state of public health conditions in our cities as well.
The waste management to keep cities clean is now getting attention through the
Swachh Bharat Mission. People are now more aware of the importance of
cleanliness and necessary safety precautions to be observed on day to day basis.
However, much of the attention begins and stops with the brooms and the dustbins,
extending at most to the collection and transportation of the mixed waste to some
distant or not so distant place, preferably out of sight. The challenge of processing
and treating the different streams of solid waste, and safe disposal of the residuals
in scientific landfills, has received much less attention in municipal solid waste
management than is expected from a health point of view. One of the problems is
that instead of focusing on waste management for health, we have got sidetracked
into "waste for energy". If only we were to begin by not mixing the biodegradable
component of solid waste (close to 60 percent of the total) in our cities with the dry
waste, and instead use this stream of waste for composting and producing a gas
called methane.
Answer
(a) (i) From earlier times, the focus has not been on getting out into the field for gaining
hands on experience thus curbing the creativity, innovation and uniqueness of
young professionals. In short, being creative and unique has not been the focus of

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

education from earlier times.

(ii) Students must / should step out into the outside world for aesthetic development.
(iii) In present times, co-curricular activities taking place outside the classroom that
reinforce or supplement classroom curriculum are becoming the focal point.
(iv) Students gain valuable exposure into their prospective areas of work in industry
through industry visits. They acquire essential people skills through regular guest
lectures, conferences, seminars and cultural festivals.
(v) Soft-skills cannot be taught in the classroom as they require students to confront
case scenarios/studies that give them the opportunity to implement concepts learnt
in classrooms to real life issues/challenges and deal with them effectively. Thus,
Soft skills are developed only through practical exposure and opportunities to
implement what they have learnt in classroom.
(b) (i) Note Making
Title: Pollution & Public Health / Waste Management
1. Pb. Hlth. depends upon
1.1 Per. Hygn
1.2 Ntrtn
1.3 Clnlns of cities
2. Poor Pb. Hlth causes
2.1 Dengue
2.2 Chikangunya
2.3 Corona
3. Swacch Bharat Mission is
3.1 adrsg. waste mgmt.
3.2 gnrtng. awrns. about
3.2.3 clnlns.
3.2.4 safety prctns.
3.3 ltd. to
3.3.1 placing dustbins
3.3.2 cln. & trnsptn. Of waste
4. Waste mgmt..
4.1 challenges

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16 FOUNDATION EXAMINATION: DECEMBER, 2021

4.1.1 prcng. & trtng. Solid waste

4.1.2 safe disposal of residuals
4.2 Focus
4.2.1 is waste for energy
4.2.2 should be for hlth.
5. Plausible Solution
5.1 seg. Bio-deg. Waste for
5.1.1 composting
5.1.2 producing methane
Key to Abbreviations
1. Pb.: public
2. Hlth.: health
3. &: and
4. Per.: personal
5. Hyg.: hygiene
6. Ntrtn.: nutrition
7. Clnlns.: cleanliness
8. Adrsg.: addressing
9. Mgmt.: management
10. gnrtng.: generating
11. awrns.: awareness
12. prctns.: precautions
13. cln.: collection
14. trnsptn.: trAnswerportation
15. prcng. : processing
16. trtng.: treating
17. seg.:segregating
18. deg.: degradable

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 17

(ii) Summary
Public health largely depends upon personal hygiene, nutrition and cleanliness
around cities. Poor public health causes widely transmissible diseases such as
dengue, chikangunya and corona. Swacch Bharat Mission is not only addressing
the issue of waste management but also spreading awareness about cleanliness
and safety precautions related to the issue but it is limited to placing dustbins and
collection as well as transportation of waste. Its focus is waste for energy rather
than health. Possible solution entails segregating bio-degradable waste to produce
compost and methane.
Question 8
(a) Completeness is an important characteristic of effective communication. Comment.
(2 Marks)
(b) (i) Choose the word that best expresses the meaning of the given word:
Sloppy
(1) Drunk
(2) Careless
(3) Tired
(4) Untrustworthy (1 Mark)
(ii) Select a suitable antonym for the given word:
Fallacy
(1) Truth
(2) Liberal
(3) Tolerant
(4) Persist (1 Mark)
(iii) Change the following sentence to indirect: speech:
Alex said, "I am working day and night". (1 Mark)
(c) Write precis and give appropriate title to the passage given below:
The most alarming of man's assaults upon the environment is the contamination of air,
earth, rivers and sea with lethal materials. This pollution is for the most part irrevocable;
the chain of evil it initiates is for the most part irreversible. In this contamination of the
environment, chemicals are the sinister partners of radiation in changing the very nature
of the world; radiation released through nuclear explosions into the air, comes to the
earth in rain, lodges into the soil, enters-the grass or wheat grown there and reaches the
bones of a human being, there to remain until his death. Similarly, chemicals sprayed on

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18 FOUNDATION EXAMINATION: DECEMBER, 2021

crops lie long in soil, entering living organisms, passing from one to another in a chain of
poisoning and death. Or they pass by underground streams until they emerge and
combine into new forms that kill vegetation, sicken cattle, and harm those who drink from
once pure wells.
It took hundreds of millions of years to produce the life that now inhabits the earth and
reached a state of adjustment and balance with its surroundings. The environment
contained elements that were hostile as well as supporting. Even within the light of the
sun, there were short-wave radiations with power to injure. Given time, life has adjusted
and a balance reached. For time is the essential ingredient, but in the modern world
there is no time.
The rapidity of change and the speed with which new situations are created follow the
heedless pace of man rather than the deliberate pace of nature. Radiation is no longer
the bombardment of cosmic rays: it is now the unnatural creation of man's tampering with
the atom. The chemicals to which life is asked to make adjustments are no longer merely
calcium and silica and copper and all the rest of the minerals washed out of the rocks
and carried in the rivers to the sea; they are the synthetic creations of man's inventive
mind, brewed in his laboratories, and having no counterparts in nature. (5 Marks)
Answer
(a) A complete communication conveys all the facts and information necessary and sufficient
about the subject required by the recipient. It keeps in mind the receiver’s intellect and
attitude and conveys the message accordingly. Lack of relevant information leads to
ambiguity, leaving room for assumptions and defeating the principal objective of the
intended communication. Hence, completeness is an important characteristic of effective
communication.
(b) (i) (2) / Careless
(ii) (1) / Truth
(iii) Alex said that he / she had been working day and night.
(c) Précis
Title: Mankind: The destroyer of nature’s balance/legacy / Chemicals: Boon or Bane for
environment / Chemicals: Threat to Mankind
Mankind has polluted air, water and earth with life threatening materials. The irreversible
damage caused to the environment is due to chemicals that find their way into the soil
and vegetation through acid rain led by nuclear explosions. Chemicals sprayed on crops
seep through into the underground water streams and wells, causing deadly diseases in
cattle and humans alike. As humans we must realize that the evolution of life in its
current form that is in perfect sync with nature took millions of years. Man is destroying

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 19

this natural balance at a frantic pace by polluting nature with radiations and toxic
synthetic materials that are non-biodegradable.
Question 9
(a) What is the informal communication? (2 Marks)
OR
State the common networks used in organisations. (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
Defray
(1) Sudden
(2) Rash
(3) Disclaim
(4) Spend (1 Mark)
(ii) Choose the word which best expresses the meaning of the given word:
Immaculate
(1) Spotless
(2) Tarnished
(3) Defiled
(4) Pleasing (1 Mark)
(iii) Change the following sentence to indirect speech:
He said to her, "Are you coming to the party? (1 Mark)
(c) You are a student of Mother's Global Institute. Your institute celebrated the annual day
on 30th November 2021. Draft a report on annual day celebration to be included in your
institute's annual magazine. (5 Marks)
Answer
(a) Informal Communication is casual, friendly and unofficial. It can be between family,
friends, neighbours, members of the community and people working together in an
organization. It is spontaneous conversation and exchange of information between two or
more persons without conforming to the prescribed official rules, processes, systems,
formalities and chain of command.
OR
The most common networks followed in organisations are the following:

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20 FOUNDATION EXAMINATION: DECEMBER, 2021

(i) Vertical network: The vertical network is a formal network. It is usually between a
higher ranking employee and a subordinate. In this two-way communication,
immediate feedback is possible.
(ii) Circuit network: When two persons communicate with each other sending
messages and feedback, they form a communication circuit. Therefore it is known
as circuit network.
(iii) Chain network: The communication pattern that follows the chain of command from
the senior to the junior is called the chain network.
(iv) Wheel and spoke network: This is an organization where there is a single
controlling authority who gives instructions and orders to all employees working
under him/her and getting back the report from them.
(v) Star network: The star communication network has multiple channels of
communication open between all members. This network propagates group
communication and is essential where teamwork is involved.
The usefulness of all networks depends on the structure and size of the company, and
the manner of communication between the employees.
The above said network may be explained by diagram as below:
1. Vertical Network:

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

2. Circuit Network:

3. Chain Network:

Chain of Command

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22 FOUNDATION EXAMINATION: DECEMBER, 2021

4. Wheel & Spoke Network:

5. Star Network:

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 23

(b) (i) (4) / Spend

(ii) (1) / Spotless
(iii) He asked / enquired of her if / whether she was coming to the party.
(c) Report
Annual Day Celebrations: A gala event / Annual Day Celebrations
Our beloved alma mater / Mother's Global Institute celebrated its 20th Annual Day on
November 30, 2021 at the school auditorium with great fanfare. As many as 1000 guests
comprising students, parents and alumni attended the event. The programme
commenced at 10 AM with the Chief Guest, Municipal Councill or Sh. XYZ lighting the
ceremonial lamp with Director, Dr. ABC, in presence of senior staff members followed by
Saraswati Vandana rendered by the middle school choir. The Chief Guest addressed the
large audience, motivating the students to concentrate on holistic personality
development. He congratulated the school teaching staff, students and authorities for
delivering excellent results in the grade X and XII consecutively for 3 years despite the
sudden onslaught of the pandemic.
It was then time for a cultural extravaganza based on the theme ‘Unity in Diversity’. The
junior school students (grade II to IV)) highlighted their dancing skills, captivating the
audience with a dance parody based on folk dances of India from Bhangra to Bihu and
Ghoomer to Garba. The stage came alive with their colourful costumes and vibrant
moves. The middle school choir enthralled the audience with soulful renditions of the
popular patriotic numbers ‘Jai Ho’ and ‘Suno Gaur se duniya walon’ and ‘India Wale’.
Audience was swaying to the foot-tapping music and gave a thunderous applause amid
encore requests. A thematic play was presented by the senior school students of grade
XI and XII that showcased the cultural and civilizational ethos of our nation.
The chief guest then gave away prizes to the meritorious students, winners of the
Painting & Debate Competition held on ‘Bal Diwas’ on November 14, 2021 and House
Captain of the ‘Ganges’ House for winning maximum medals at the recently held sports
meet. The programme ended with The Principal Dr. Mrs. BNM delivering vote of thanks
to the Chief Guest. The guests were ushered to the school grounds where Winter
Carnival was organized and refreshments were served. It was a fun day well spent amid
entertainment galore, giggles and laughter.
Question 10
(a) Write about the cultural barriers in communication. (2 Marks)
(b) (i) Change the sentence from active to passive voice.
By this time tomorrow we will have signed the deal. (1 Mark)
(ii) Change the sentence from passive to active voice.

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24 FOUNDATION EXAMINATION: DECEMBER, 2021

The minister was welcomed by the people. (1 Mark)

(iii) Change the following sentence to indirect speech:
She said to me, "Do you know this man?" (1 Mark)
(c) (i) As a Finance head of Zeeta Private Limited, draft a circular to be distributed to all
employees of finance department informing them to attend a meeting to finalise
financial statements for the quarter ending 30th September 2021. (3 Marks)
(ii) Write a formal email to the Reporting Manager (E-mail: [email protected]) as the
Assistant Manager (E-mail: [email protected]) of KK Private Limited to request for
leave of one week for personal work. (2 Marks)
Answer
(a) Cultural barriers refer to having knowledge of different cultures in order to communicate
effectively with cross culture people. Understanding various cultures in this era of
globalization is an absolute necessity as the existence of cultural differences between
people from various countries, regions tribes and religions, where words and symbols
may be interpreted differently can result in communication barriers and
miscommunications.
(b) (i) By this time tomorrow the deal will have been signed. / By this time tomorrow the deal
will have been signed by us / The deal will have been signed by this time tomorrow.
(ii) The people welcomed the minister.
(iii) She asked me if / whether I knew that man.
(c) (i) Meeting:
Zeeta Private Limited
Circular No. XXI December 15, 2021
Meeting : Finance Department
As per past practice, the meeting to finalize financial statements for the last quarter
ending September 30, 2021 is being held as per the under mentioned schedule. All
employees of the department are directed to attend the same mandatorily.
All are requested to note the details and make themselves available without fail. No
leave shall be granted/approved except under emergent circumstances.
Defaulters will be liable for explanation and strict action will be taken against them.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 25

Schedule:
Date: Dec XX, 2021
Time: 9:30 AM
Venue: Conference Hall, 2nd Floor
PQR
Head, Finance
(ii) Mail:
From:[email protected]
To: [email protected]
Subject: Request for Leave (One week)
Dear Sir,
Greetings! This is to inform to your good self that I have few urgent tasks to be
completed in the coming week. Owing to the same I shall not be able to attend
office for a week. However, I shall be available over telephone, if required.
I request you to grant me leave for a week starting from December 20 till 24 , 20XX.
I shall join office w. e. f December 27, 20XX positively.
Looking forward to your kind approval.
Best Regards,
RST
Assistant Manager,
KK Private Limited,
C-9 Sector-3,
DD Nagar, New Delhi-1100XX
Question 11
(a) Explain horizontal communication. (2 Marks)
(b) Select the correct moaning of Idiom/Phrases given below:
(i) Notch up
(1) To win or create a record.
(2) To look disappointed.

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26 FOUNDATION EXAMINATION: DECEMBER, 2021

(3) To get annoyed.

(4) To be agitated. (1 Mark)
(ii) To play second fiddle
(1) To be happy, cheerful and healthy
(2) To reduce importance of one's senior
(3) To support the role and view of another person
(4) To do back seat driving (1 Mark)
(iii) Change the sentence into passive voice:
Mohan will tell you later. (1 Mark)
(iv) Choose the word which best expresses the meaning of the given word:
Novice
(1) Beginner
(2) Concrete
(3) Reality
(4) Veteran (1 Mark)
(c) You are Vishnu Shreshth, 16 KY Nagar, Delhi. You wish to apply for the post of the
Marketing Manager in a reputed firm in Mumbai. Write a letter on 1st December 2021 to
the Public Relations Officer, ZZ Enterprises, Mumbai, applying for the job. Write the letter
including your bio-data. (4 Marks)
Answer
(a) Horizontal communication involves communication between two entities of an
organization at the same level. For example, the managers of a project in a company
may hold a regular daily, weekly or monthly meeting to discuss the progress of the
project.
(b) (i) (1) / To win or create a record
(ii) (3) / To support the role and view of another person / None.
(iii) You will be told by Mohan later. / You will be told later by Mohan.
(iv) (1) / Beginner


reputable to be read as reputed in the Question Paper.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 27

(c) Cover Letter

Vishnu Shreshth
16, KY Nagar
Delhi
e-mail: vish_shreshth @ymail.com
December 01, 2021
Public Relations Officer
ZZ Enterprises,
339, Coral Street
Mumbai

Sir / Madam,
SUBJECT: Application for the post of Marketing Manager
This is with reference to your advertisement in ‘The Times of India’ dated November 15,
2021 for the post of Marketing Manager. I wish to apply for the same. I am confident that
my extensive experience, dynamism and teamwork skills make me a strong candidate for
the said profile.
My zest for learning, ability to confront and overcome challenges, positivity and clear
communication skills have helped strengthen our team’s efficiency and sense of
community.
I look forward to the opportunity to present myself in person for an interview/discussion.
Thank you so much for your time and consideration.
Yours Sincerely,

Signature
(Vishnu Shreshth)

Encl.: 1. Photograph
2. Testimonials & Certificates.
3. Resume / Biodata

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28 FOUNDATION EXAMINATION: DECEMBER, 2021

Resume / Bio-data
Vishnu Shreshth
16, KY Nagar, Delhi
Tel: 954XXXXXXX / email: vish_shreshth @ymail.com
Career Objective
Seeking to work for a progressive organisation as a Marketing Manager which will
provide opportunities to utililize my skills & abilities.
Education
Marketing Management, Master of Business Administration, Completed, June 2016
ABC College
BBA/MBA
Delhi

Work Experience
May 2016 - present
Marketing Manager
XYZ Ltd
Delhi,
Job Responsibilities
• Develop and Evaluate marketing strategy, based on market characteristics, cost to
achieve customer satisfaction.
• Formulate, direct and coordinate marketing activities and policies to promote
products and services, working with advertising and promotion managers
• Direct the hiring, training, and performance evaluations of marketing and sales staff
and oversee their daily activities
• Negotiate contracts with vendors and distributors to manage product distribution,
establishing distribution networks and developing distribution strategies
Competency Areas:
• Strategy, Execution & Leadership
• Market Analysis/ Research/ Roadmap

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 29

• Vendor Coordination/ Management

• Work Force Supervision
• Marketing Campaign Development
• Target Achievement
• Training
• Team Building
Computer Proficiency
• MS Office – Word, Excel and PowerPoint
• Internet Applications
Languages
English, Hindi, Marathi
References
Available upon request
Declaration
I solemnly declare that all the above information is correct to the best of my knowledge
and belief.

Date: Signature
Place: (Vishnu Shreshth)

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAWS

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) Sheena was a classical dancer. She entered into an agreement with Shital Vidya Mandir
for 60 dance performances. As per the contract, she was supposed to perform every
weekend and she will be paid ` 10,000/- per performance. However, after a month, she
was absent without informing, due to her personal reasons. Answer the following
questions as per the Indian Contract Act, 1872.
(i) Whether the management of Shital Vidya Mandir has right to terminate the
contract?
(ii) If the management of Shital Vidya Mandir informed Sheena about its continuance,
can the management still rescind the contract after a month on this ground
subsequently?
(iii) Can the Shital Vidya Mandir claim damages that it has suffered because of this
breach in any of the above cases? (4 Marks)
(b) The Articles of Association of Aarna Limited empowers its managing agents to borrow
loans on behalf of the company. Ms. Anika, the director of the company, borrowed ` 18
Lakhs in name of the company from Quick Finance Limited, a non-banking finance
company. Later on, Aarna Limited refused to repay the money borrowed on the pretext
that no resolution authorizing such loan have been actually passed by the company and
therefore the company is not liable to pay such loan.
Decide whether the contention of Aarna Limited is correct in accordance with the
provisions of the Companies Act, 2013? (4 Marks)
(c) What are the consequences of destruction of specified goods, before making of contract
and after the agreement to sell under the Sale of Goods Act, 1930. (4 Marks)
Answer
(a) Section 39 provides that when a party to a contract has refused to perform or disabled
himself from performing his promise in its entirety the promisee may put an end to the
contract unless he had signified, by words or conduct his acquiesce in its continuance.
Further, in term of Section 40, the promisee shall be required to perform personally, if
there is such an apparent intention of the parties.
Also, as per Section 75 of the Act, a person who rightfully rescinds a contract is entitled
to compensation for any damage which he has sustained through non-fulfilment of the
contract.

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2 FOUNDATION EXAMINATION: MAY, 2022

Therefore, in the instant case,

(i) Since, Sheena could not perform as per the terms of contract, Shital Vidya Mandir
can terminate the contract.
(ii) In the second situation, the management of Shital Vidya Mandir informed Sheena
about the continuance of the contract. Hence, the management cannot now rescind
the contract after a month on this ground subsequently.
(iii) As per Section 75, Shital Vidya Mandir can claim damages that it has suffered
because of this breach in part (i).
(b) Doctrine of Indoor Management
According to this doctrine, persons dealing with the company need not inquire whether
internal proceedings relating to the contract are followed correctly, once they are
satisfied that the transaction is in accordance with the memorandum and articles of
association.
Stakeholders need not enquire whether the necessary meeting was convened and held
properly or whether necessary resolution was passed properly. They are entitled to take
it for granted that the company had gone through all these proceedings in a regular
manner.
The doctrine helps to protect the external members from the company and states that the
people are entitled to presume that internal proceedings are as per documents submitted
with the Registrar of Companies.
Thus,
1. What happens internal to a company is not a matter of public knowledge. An
outsider can only presume the intentions of a company, but do not know the
information he/she is not privy to.
2. If not for the doctrine, the company could escape creditors by denying the authority
of officials to act on its behalf.
In the given question, Quick Finance Limited being external to the company, need not
enquire whether the necessary resolution was passed properly. Even if Aarna Limited
claims that no resolution authorizing the loan was passed, Aarna Limited is bound to
repay the loan to Quick Finance Limited.
(c) (i) Goods perishing before making of Contract (Section 7 of the Sale of Goods
Act, 1930): In accordance with the provisions of the Sale of Goods Act, 1930 as
contained in Section 7, a contract for the sale of specific goods is void, if at the time
when the contract was made; the goods without the knowledge of the seller,
perished or become so damaged as no longer to answer to their description in the
contract, then the contract is void ab initio.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

(ii) Goods perishing before sale but after agreement to sell (Section 8 of the Sale
of Goods Act, 1930): Where there is an agreement to sell specific goods, and
subsequently the goods without any fault on the part of the seller or buyer perish or
become so damaged as no longer to answer to their description in the agreement
before the risk passes to the buyer, the agreement is thereby avoided or becomes
void.
Question 2
(a) "The general rule is that an agreement made without consideration is void." State the
exceptions of this general rule as per the Indian Contract Act, 1872. (7 Marks)
(b) Explain the incorporation by registration of a Limited Liability Partnership and its
essential elements under the LLP Act, 2008. (5 Marks)
Answer
(a) An agreement made without consideration is void (Section 25 of the Indian
Contract Act, 1872): In every valid contract, consideration is very important. A contract
may only be enforceable when consideration is there. However, the Indian Contract Act
contains certain exceptions to this rule. In the following cases, the agreement though
made without consideration, will be valid and enforceable.
Exceptions:
1. Natural Love and Affection: Conditions to be fulfilled under section 25(1)
(i) It must be made out of natural love and affection between the parties.
(ii) Parties must stand in near relationship to each other.
(iii) It must be in writing.
(iv) It must also be registered under the law.
A written and registered agreement based on natural love and affection between the
parties standing in near relation (e.g., husband and wife) to each other is
enforceable even without consideration.
2. Compensation for past voluntary services: A promise to compensate, wholly or
in part, a person who has already voluntarily done something for the promisor, is
enforceable under Section 25(2). In order that a promise to pay for the past
voluntary services be binding, the following essential factors must exist:
(i) The services should have been rendered voluntarily.
(ii) The services must have been rendered for the promisor.
(iii) The promisor must be in existence at the time when services were rendered.
(iv) The promisor must have intended to compensate the promisee.

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4 FOUNDATION EXAMINATION: MAY, 2022

3. Promise to pay time barred debt: Where a promise in writing signed by the person
making it or by his authorised agent, is made to pay a debt barred by limitation it is
valid without consideration [Section 25(3)].
4. Agency: According to Section 185 of the Indian Contract Act, 1872, no
consideration is necessary to create an agency.
5. Completed gift: In case of completed gifts, the rule no consideration no contract
does not apply. Explanation (1) to Section 25 states “nothing in this section shall
affect the validity as between the donor and donee, of any gift actually made.” Thus,
gifts do not require any consideration.
6. Bailment: No consideration is required to affect the contract of bailment. Section
148 of the Indian Contract Act, 1872, defines bailment as the delivery of goods from
one person to another for some purpose. This delivery is made upon a contract that
post accomplishment of the purpose, the goods will either be returned or disposed
of, according to the directions of the person delivering them. No consideration is
required to affect a contract of bailment.
7. Charity: If a promisee undertakes the liability on the promise of the person to
contribute to charity, there the contract shall be valid. (Kadarnath v. Gorie
Mohammad)
(b) Incorporation by registration (Section 12 of LLP Act, 2008):
(1) When the requirements imposed by clauses (b) and (c) of sub-section (1) of section
11 have been complied with, the Registrar shall retain the incorporation document
and, unless the requirement imposed by clause (a) of that sub-section has not been
complied with, he shall, within a period of 14 days—
(a) register the incorporation document; and
(b) give a certificate that the LLP is incorporated by the name specified therein.
(2) The Registrar may accept the statement delivered under clause (c) of sub-section
(1) of section 11 as sufficient evidence that the requirement imposed by clause (a)
of that sub-section has been complied with.
(3) The certificate issued under clause (b) of sub-section (1) shall be signed by the
Registrar and authenticated by his official seal.
(4) The certificate shall be conclusive evidence that the LLP is incorporated by the
name specified therein.
Essential elements to incorporate Limited Liability Partnership (LLP)
Under the LLP Act, 2008, the following elements are very essential to form a LLP in
India:

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5

(i) To complete and submit incorporation document in the form prescribed with
the Registrar electronically;
(ii) To have at least two partners for incorporation of LLP [Individual or body
corporate];
(iii) To have registered office in India to which all communications will be made
and received;
(iv) To appoint minimum two individuals as designated partners who will be
responsible for number of duties including doing of all acts, matters and things
as are required to be done by the LLP. At least one of them should be resident
in India.
(v) A person or nominee of body corporate intending to be appointed as
designated partner of LLP should hold a Designated Partner Identification
Number (DPIN) allotted by Ministry of Corporate Affairs.
(vi) To execute a partnership agreement between the partners, inter se or between
the LLP and its partners. In the absence of any agreement the provisions as
set out in First Schedule of LLP Act, 2008 will be applied.
(vii) LLP Name.
Question 3
(a) (i) What do you mean by 'Partnership for a fixed period' as per the Indian Partnership
Act, 1932? (2 Marks)
(ii) Can a minor become a partner in a partnership firm? Justify your answer and also
explain the rights of a minor in a partnership firm. (4 Marks)
(b) Srishti, a minor, falsely representing her age, enters into an agreement with an
authorised Laptop dealer Mr. Gupta, owner of SP Laptops, for purchase of Laptop on
credit amounting ` 60,000/- for purchasing a laptop, on 1st August 2021. She promised to
pay back the outstanding amount with interest @ 16% p.a. by 31st July 2022. She told
him that in case she won’t be able to pay the outstanding amount, her father Mr. Ram will
pay back on her behalf. After One year, when Srishti was asked to pay the outstanding
amount with interest she refused to pay the amount and told the owner that she is minor
and now he can't recover a single penny from her.
She will be adult on 1st January 2024, only after that agreement can be ratified. Explain
by which of the following way Mr. Gupta will succeed in recovering the outstanding
amount with reference to the Indian Contract Act, 1872.
(i) By filing a case against Srishti, a minor for recovery of outstanding amount with
interest?

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6 FOUNDATION EXAMINATION: MAY, 2022

(ii) By filing a case against Mr. Ram, father of Srishti for recovery of outstanding
amount?
(iii) By filing a case against Srishti, a minor for recovery of outstanding amount after she
attains maturity? (6 Marks)
Answer

(a) (i) Partnership for a fixed period (Indian Partnership Act, 1932): Where a provision
is made by a contract for the duration of the partnership, the partnership is called
‘partnership for a fixed period’. It is a partnership created for a particular period of time.
Such a partnership comes to an end on the expiry of the fixed period.
(ii) Minor as a partner: A minor is not competent to contract. Hence, a person who is a
minor according to the law to which he is subject may not be a partner in a firm, but
with the consent of all the partners for the time being, he may be admitted to the
benefits of partnership.
Rights of a minor in a partnership firm:
(i) A minor partner has a right to his agreed share of the profits and of the firm.
(ii) He can have access to, inspect and copy the accounts of the firm.
(iii) He can sue the partners for accounts or for payment of his share but only when
severing his connection with the firm, and not otherwise.
(iv) On attaining majority, he may within 6 months elect to become a partner or not to
become a partner. If he elects to become a partner, then he is entitled to the share
to which he was entitled as a minor. If he does not, then his share is not liable for
any acts of the firm after the date of the public notice served to that effect.
(b) A contract made with or by a minor is void ab-initio: Pursuant to Section 11, a minor
is not competent to contract and any agreement with or by a minor is void from the very
beginning.
(i) By following the above provision, Mr. Gupta will not succeed in recovering the
outstanding amount by filing a case against Srishti, a minor.
(ii) Minor cannot bind parent or guardian: In the absence of authority, express or
implied, a minor is not capable of binding his parent or guardian, even for
necessaries. The parents will be held liable only when the child is acting as an
agent for parents.
In the instant case, Mr. Gupta will not succeed in recovering the outstanding amount
by filing a case against Mr. Ram, father of Srishti.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

(iii) No ratification after attaining majority: A minor cannot ratify the agreement on
attaining majority as the original agreement is void ab initio and a void agreement
can never be ratified.
Hence, in this case also, Mr. Gupta will not succeed in recovering the outstanding
amount by filing a case against Srishti, after she attains majority.
Question 4
(a) What are the implied conditions in a contract of 'Sale by sample' under the Sale of Goods
Act, 1930? Also state the implied warranties operative under the Act? (6 Marks)
(b) M/s ABC Associates is a partnership firm since 1990. Mr. A, Mr. B and Mr. C were
partners in the firm since beginning. Mr. A, being a very senior partner of aged 78 years
transfers his share in the firm to his son Mr. Prateek, a Chartered Accountant. Mr. B and
Mr. C were not interested that Mr. Prateek join them as partner in M/s ABC Associates.
After some time, Mr. Prateek felt that the books of accounts were displaying only a small
amount as profit despite a huge turnover. He wanted to inspect the book of accounts of
the firm arguing that it is his entitlement as a transferee. However, the other partners
believed that he cannot challenge the books of accounts. Can Mr. Prateek, be introduced
as a partner if his father wants to get a retirement? As an advisor, help them resolve the
issues applying the necessary provisions from the Indian Partnership Act, 1932. (6 Marks)
Answer
(a) (i) Sale by sample [Section 17 of the Sale of Goods Act, 1930]: In a contract of sale
by sample, there is an implied condition that
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing the bulk with the
sample,
(c) the goods shall be free from any defect rendering them un-merchantable,
which would not be apparent on reasonable examination of the sample. This
condition is applicable only with regard to defects, which could not be
discovered by an ordinary examination of the goods. If the defects are latent,
then the buyer can avoid the contract. This simply means that the goods shall
be free from any latent defect i.e. a hidden defect.
(ii) The following are the implied warranties operative under the Act:
1. Warranty as to undisturbed possession [Section 14(b)]: An implied
warranty that the buyer shall have and enjoy quiet possession of the goods.
That is to say, if the buyer having got possession of the goods, is later on
disturbed in his possession, he is entitled to sue the seller for the breach of the
warranty.

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8 FOUNDATION EXAMINATION: MAY, 2022

2. Warranty as to non-existence of encumbrances [Section 14(c)]: An implied

warranty that the goods shall be free from any charge or encumbrance in
favour of any third party not declared or known to the buyer before or at the
time the contract is entered into.
3. Warranty as to quality or fitness by usage of trade [Section 16(3)]: An
implied warranty as to quality or fitness for a particular purpose may be
annexed or attached by the usage of trade.
Regarding implied condition or warranty as to the quality or fitness for any
particular purpose of goods supplied, the rule is ‘let the buyer beware’ i.e., the
seller is under no duty to reveal unflattering truths about the goods sold, but
this rule has certain exceptions.
4. Disclosure of dangerous nature of goods: Where the goods are dangerous
in nature and the buyer is ignorant of the danger, the seller must warn the
buyer of the probable danger. If there is a breach of warranty, the seller may
be liable in damages.
(b) (i) Introduction of a Partner (Section 31 of the Indian Partnership Act, 1932):
Subject to contract between the partners and to the provisions of Section 30, no
person shall be introduced as a partner into a firm without the consent of all the
existing partners.
In the instant case, Mr. Prateek can be introduced as a partner with the consent of
Mr. B and Mr. C, the existing partners.
(ii) Rights of Transferee of a Partner’s interest (Section 29): A transfer by a partner
of his interest in the firm, either absolute or by mortgage, or by the creation by him
of a charge on such interest, does not entitle the transferee, during the continuance
of the firm, to interfere in the conduct of business, or to require accounts, or to
inspect the books of the firm, but entitles the transferee only to receive the share of
profits of the transferring partner, and the transferee shall accept the account of
profits agreed to by the partners.
Hence, here Mr. Prateek, the transferee in M/S ABC Associates cannot inspect the
books of the firm and contention of the other partners is right that Mr. Prateek
cannot challenge the books of accounts.
Question 5
(a) Sonal went to a Jewellery shop and asked the sales girl to show her diamond bangles
with Ruby stones. The Jeweller told her that we have a lot of designs of diamond bangles
but with red stones if she chooses for herself any special design of diamond bangle with
red stones, they will replace red stones with Ruby stones. But for the Ruby stones they
will charge some extra cost. Sonal selected a beautiful set of designer bangles and paid
for them. She also paid the extra cost of Ruby stones. The Jeweller requested her to

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come back a week later for delivery of those bangles. When she came after a week to
take delivery of bangles, she noticed that due to Ruby stones, the design of bangles has
been completely disturbed. Now, she wants to terminate the contract and thus, asked the
manager to give her money back, but he denied for the same. Answer the following
questions as per the Sale of Goods Act, 1930.
(i) State with reasons whether Sonal can recover the amount from the Jeweller.
(ii) What would be your answer if Jeweller says that he can change the design, but he
will charge extra cost for the same? (6 Marks)
(b) Explain the 'Doctrine of ultra vires under the Companies Act, 2013. What are the
consequences of 'ultra vires' acts of the company? (6 Marks)
Answer
(a) As per Section 4(3) of the Sale of Goods Act, 1930, where under a contract of sale, the
property in the goods is transferred from the seller to the buyer, the contract is called a
sale, but where the transfer of the property in the goods is to take place at a future time
or subject to some condition thereafter to be fulfilled, the contract is called an agreement
to sell and as per Section 4(4), an agreement to sell becomes a sale when the time
elapses or the conditions are fulfilled subject to which the property in the goods is to be
transferred.
(i) On the basis of above provisions and facts given in the question, it can be said that
there is an agreement to sell between Sonal and Jeweller and not a sale. Even
though the payment was made by Sonal, the property in goods can be transferred
only after the fulfilment of conditions fixed between the buyer and the seller. As due
to Ruby Stones, the original design is disturbed, bangles are not in original position.
Hence, Sonal has right to avoid the agreement to sell and can recover the price
paid.
(ii) If Jeweller offers to bring the bangles in original position by repairing, he cannot
charge extra cost from Sonal. Even though he has to bear some expenses for
repair; he cannot charge it from Sonal.
(b) Doctrine of ultra vires:
The meaning of the term ultra vires is simply “beyond (their) powers”. The legal phrase
“ultra vires” is applicable only to acts done in excess of the legal powers of the doers.
This presupposes that the powers in their nature are limited. To an ordinary citizen, the
law permits whatever does the law not expressly forbid. It is a fundamental rule of
Company Law that the objects of a company as stated in its memorandum can be
departed from only to the extent permitted by the Act, thus far and no further [Ashbury
Railway Company Ltd. vs. Riche]. In consequence, any act done or a contract made by
the company which travels beyond the powers not only of the directors but also of the
company is wholly void and inoperative in law and is therefore not binding on the

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10 FOUNDATION EXAMINATION: MAY, 2022

company. On this account, a company can be restrained from employing its fund for
purposes other than those sanctioned by the memorandum. Likewise, it can be
restrained from carrying on a trade different from the one it is authorised to carry on.
Consequences of ‘ultra vires’ acts of the company:
The impact of the doctrine of ultra vires is that a company can neither be sued on an
ultra vires transaction, nor can it sue on it. Since the memorandum is a “public
document”, it is open to public inspection. Therefore, when one deals with a company
one is deemed to know about the powers of the company. If in spite of this one enters
into a transaction which is ultra vires the company, he/she cannot enforce it against the
company.
An act which is ultra vires the company being void, cannot be ratified by the shareholders
of the company.
However, some ultra vires act can be regularised by ratifying them subsequently. For
instance, if the act is ultra vires the power of the directors, the shareholders can ratify it;
if it is ultra vires the articles of the company, the company can alter the articles; if the act
is within the power of the company but is done irregularly, shareholders can validate
such acts.
Question 6
(a) "Liquidated damage is a genuine pre-estimate of compensation of damages for certain
anticipated breach of contract whereas Penalty on the other hand is an extravagant
amount stipulated and is clearly unconscionable and has no comparison to the loss
suffered by the parties". Explain the statement by differentiating between liquidated
damages and penalty with reference to provisions of the Indian Contract Act, 1872.
(5 Marks)
(b) Explain the grounds on which court may dissolve a partnership firm in case of any
partner files a suit for the same. (4 Marks)
(c) Mr. R is an Indian citizen, and his stay in India during the immediately preceding financial
year is for 130 days. He appoints Mr. S, a foreign citizen, as his nominee, who has
stayed in India for 125 days during the immediately preceding financial year. Is Mr. R
eligible to be incorporated as a One-Person Company (OPC)? If yes, can he give the
name of Mr. S in the Memorandum of Association as his nominee? Justify your answers
with relevant provisions of the Companies Act, 2013. (3 Marks)
Answer
(a) Liquidated damages is a genuine pre-estimate of compensation of damage for certain
anticipated breach of contract. This estimate is agreed to between parties to avoid at a
later date detailed calculation and the necessity to convince outside parties.

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Penalty on the other hand is an extravagant amount stipulated and is clearly

unconscionable and has no comparison to the loss suffered by the parties.
Distinction between liquidated damages and penalty
Penalty and liquidated damages have one thing in common that both are payable on the
occurrence of a breach of contract. It is very difficult to draw a clear line of distinction
between the two but certain principles as laid down below may be helpful.
1. If the sum payable is so large as to be far in excess of the probable damage on
breach, it is certainly a penalty.
2. Where a sum is expressed to be payable on a certain date and a further sum in the
event of default being made, the latter sum is a penalty because mere delay in
payment is unlikely to cause damage.
3. The expression used by the parties is not final. The court must find out whether the
sum fixed in the contract is in truth a penalty or liquidated damages. If the sum
fixed is extravagant or exorbitant, the court will regard it is as a penalty even if, it is
termed as liquidated damages in the contract.
4. The essence of a penalty is payment of money stipulated as a terrorem of the
offending party. The essence of liquidated damages is a genuine pre-estimate of the
damage.
5. English law makes a distinction between liquidated damages and penalty, but no
such distinction is followed in India. The courts in India must ascertain the actual
loss and award the same which amount must not, however exceed the sum so fixed
in the contract. The courts have not to bother about the distinction but to award
reasonable compensation not exceeding the sum so fixed.
(b) According to Section 44 of the Indian Partnership Act, 1932, Court may, at the suit of the
partner, dissolve a firm on any of the following grounds:
(a) Insanity/unsound mind: Where a partner (not a sleeping partner) has become of
unsound mind, the court may dissolve the firm on a suit of the other partners or by
the next friend of the insane partner. Temporary sickness is no ground for
dissolution of firm.
(b) Permanent incapacity: When a partner, other than the partner suing, has become
in any way permanently incapable of performing his duties as partner, then the court
may dissolve the firm. Such permanent incapacity may result from physical disability
or illness etc.
(c) Misconduct: Where a partner, other than the partner suing, is guilty of conduct
which is likely to affect prejudicially the carrying on of business, the court may order
for dissolution of the firm, by giving regard to the nature of business.

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12 FOUNDATION EXAMINATION: MAY, 2022

(d) Persistent breach of agreement: Following comes into category of breach of

contract:
➢ Embezzlement,
➢ Keeping erroneous accounts
➢ Holding more cash than allowed
➢ Refusal to show accounts despite repeated request etc.
(e) Transfer of interest: Where a partner other than the partner suing, has transferred
the whole of his interest in the firm to a third party or has allowed his share to be
charged or sold by the court, in the recovery of arrears of land revenue due by the
partner, the court may dissolve the firm at the instance of any other partner.
(f) Continuous/Perpetual losses: Where the business of the firm cannot be carried
on except at a loss in future also, the court may order for its dissolution.
(g) Just and equitable grounds: Where the court considers any other ground to be
just and equitable for the dissolution of the firm, it may dissolve a firm. The following
are the cases for the just and equitable grounds-
(i) Deadlock in the management.
(ii) Where the partners are not in talking terms between them.
(iii) Loss of substratum.
(iv) Gambling by a partner on a stock exchange.
(c) As per the provisions of the Companies Act, 2013, only a natural person who is an Indian
citizen and resident in India (person who stayed in India for a period of not less than 120
days during immediately preceding financial year) –
- Shall be eligible to incorporate an OPC
- Shall be a nominee for the sole member.
In the given case, Mr. R is an Indian citizen and his stay in India during the immediately
preceding financial year is 130 days which is above the requirement of 120 days. Hence,
Mr. R is eligible to incorporate an OPC.
Also, even though Mr. S’s name is mentioned in the Memorandum of Association as
nominee and his stay in India during the immediately preceding financial year is more
than 120 days, he is a foreign citizen and not an Indian citizen. Hence, S’s name cannot
be given as nominee in the memorandum.

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SECTION-B : BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.
Answer any three questions from the remaining four questions.
All candidates (including those who have opted for Hindi Medium) are required to answer the
questions in Section B, in English only.
Question 7
(a) Read the passage given below and answer the questions that follows:
Electricity is the life force of modern world. The use of electricity in daily life at all levels
is far too elaborate to be measured. The electric power has transformed human life into
an amazing experience of convenience, luxury, comfort and ease. A push by a finger to a
button brings the light on and the same act sets hundreds of thousands of gadgets in
action. This giant dinosaur has become slave of a human finger which now controls the
electric power. It simply is a miracle, very real and· more bountiful than any other thing
available on the planet. The electricity has revolutionized our houses, drawing rooms and
kitchen with useful equipment.
The array of entertainment aids powered by electricity has created a fancy world around
us. The coming into the existence of a power like electricity that obeyed the command of
the human finger’s touch inspired the inventions and innovations of a mind boggling
range of electric equipment. In fact, all the manmade machines or gadgets wholly or
partly run on electricity.
It created wonders ·of entertainment like cinema, radio, television, other audio-video
systems. The electricity has enabled the man go to space, land on moon and harness
natural powers and resources. The mining, construction, irrigation, transport, printing and
other industrial activities are dependent on electric power. Even the computers won't
work any wonders without the electricity. The electricity has penetrated in our lives to
such an extent that if it is cut off for some time; the life comes to a standstill. Today, the
progress of a society or a nation or economy is so dependent on electric power that all
the power generating resources and options are being exploited or explored so that we
have unrestrained supply of electric power. Oil, coal, water, air, sun light, tidal waves and
atomic phenomena are being used for power generation. The research on hydrogen as
fuel and controlled fusion process are going on at feverish pitch.
The oil and coal are non-renewable resources. Hydel power has limitations as no new
rivers can be created. Solar energy is yet costly to harness. The wind energy too has
limitations. The tidal wave processes are yet at an experimental stage. And so are
hydrogen and fusion ideas. Conventional atomic energy clearly is the best pollution free
option but it entails the tricky problem of atomic waste disposal.
Questions:
(i) What has created a fancy world around us? (1 Mark)

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14 FOUNDATION EXAMINATION: MAY, 2022

(ii) What part of the human body controls the power of electricity? (1 Mark)
(iii) What happens when the electricity is cut off in the modern day city? (1 Mark)
(iv) Why hydel power has limitations? (1 Mark)
(v) Write one merit and demerit of nuclear power generation. (1 Mark)
(b) Read the Passage:
Cholesterol is a wax like substance that is present in our body. It's an important
component of our cell walls and other tissues, but it is considered to be harmful if in
excess. It can lead to blockages caused by plaque formation in the heart's arteries
causing heart disease and heart attacks. Such blockages can also happen in arteries, in
the legs or in the brain. Cholesterol is produced in the liver, and the amount produced is
influenced by our genes and many other factors. The food consumed by us has also an
effect on cholesterol levels. Fatty foods, especially those high in saturated fats and foods
high in simple sugars such as cold drinks increase cholesterol levels. Lack of physical
activity and exercise also leads to elevated levels of cholesterol.
Cholesterol levels can be reduced by following a heart-healthy lifestyle, which includes
regular physical activity for at least 30 minutes daily and a diet high in fruits and
vegetables and low in saturated sugar. Statins are a group of drugs most recommended
for those with high cholesterol. Red yeast rice has been shown to be effective in lowering
cholesterol. Garlic and flaxseed can be included in the daily diet. Olive oil, Canola oil or
other oils rich in monounsaturated fatty acids can be used for cooking in order to reduce
cholesterol through food.
The ill-effects of high cholesterol take time to show up, and one may not realise it until
it's a bit too late. Cholesterol, by itself is important because it insulates nerve cells and
membranes. Being a fatty substance, it does not dissolve in the blood and is packaged
into protein. There are 'good' HDL cholesterol and 'bad' LDL cholesterol. Bad cholesterol
can stick to the smooth lining of the blood vessels, where it is absorbed, while HDL mops
up excess bad cholesterol and removes it from blood vessels. Even moderate physical
activity on a regul!1rbasis can help increase HDL cholesterol.
Exercise five days a week, whether you are overweight or underweight. Aerobic
exercises like walking, cycling, swimming, slow jogging, dancing etc. for 45 minutes,
three times a week and anaerobic exercises like weight training, and sprinting for another
three days will help increase good and reduce bad cholesterol. In order to maximize your
cardiovascular fitness, aerobic exercises should raise your heart to a certain level. This
level is called heart zone. One should keep the heart rate elevated for at least 20
minutes. Always warm-up, stretch, and relax before and after any workout to avoid
injuries. All these contribute to a healthier and fitter life.
(i) Make notes, using headings, sub-headings and abbreviation wherever necessary
giving a suitable title. (3 Marks)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

(ii) Write a summary. (2 Marks)

Answer
(a) (i) The array of entertainment aids powered by electricity has created a fancy world
around us.
(ii) A push by a finger to a button brings the light on and the same act sets hundreds of
thousands of gadgets in action. Power like electricity obeys the command of the
human finger’s touch. Hence, the tip of a human finger controls electric power by
pressing switches.
(iii) The electricity has penetrated in our lives to such an extent that if the power
(electricity) is cut off for some time, the life comes to a standstill.
(iv) Hydel power has limitations as no new rivers can be created by human endeavour.
(v) The merit of the nuclear power generation is that it is totally pollution free. The
demerit of the nuclear power is that the nuclear waste disposal is very tricky and
hazardous.
(b) (i) Note Making
Title: Good Cholesterol for a healthier life / Cholesterol and health
Notes:
1. Impact
1.1 leads to blockages
1.2 causes heart diseases
1.3 heart attacks
2. Reasons
2.1 plq formation in arteries
2.2 fatty foods
2.2.1 high in sat fats
2.2.2 lack of phys activity
3. Remedies
3.1 heart-healthy lifestyle
3.1.1 reg phys activity
3.1.2 diet high in fruits and veg

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16 FOUNDATION EXAMINATION: MAY, 2022

3.2 statins
3.2.1 red yeast rice
3.2.2 garlic & flaxseeds
3.2.3 olive oil, canola oil
4. Types of CL
4.1 HDL- good
4.2 LDL- bad
5. For healthier & fitter life
5.1 Exercise five days a week
5.2 Aerobic exercises 45 mins, three times a week
5.2.1 walking
5.2.2 cycling
5.2.3 swimming
5.2.4 slow jogging
5.2.5 dancing
5.3 Anaerobic exercises three days a week
5.3.1 wt training
5.3.2 sprinting
List of / Key to abbreviations used:
sat. - saturated
phys. - physical
reg. - regular
veg. - vegetables
&-and
mins. - minutes
wt. -weight
plq- plaque
CL-Cholesterol
HCL- Good Cholesterol
LCL- Bad Cholesterol

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 17

(ii) Summary:
Cholesterol, a wax-like substance present in our body, is an important component of
our cell walls and other tissues. If present in excess, it can be very harmful. Our
cholesterol levels are affected by the food we consume. We can reduce cholesterol
levels by leading a heart• healthy life, doing regular physical activity and having a
diet rich in fruits and vegetables. There are 'good' HDL cholesterol and 'bad' LDL
cholesterol. To ensure an increase in our HDL level and to lead a healthier and fitter
life, we must do aerobic and anaerobic exercises at least five times a week for
around 45 minutes daily. All these contribute to a healthier and fitter life.
Question 8
(a) "A well dressed and groomed person is presumed to be organised and methodical,
whereas a sloppy or shabby person fails to make a favourable impression". Discuss.
(2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
GERMANE
(1) Responsible
(2) Logical
(3) Possible
(4) Relevant. (1 Mark)
(ii) Select a suitable antonym fer the word given under:
FIDELITY
(1) Commitment
(2) Inconstancy
(3) Ambitious
(4) Devotion (1 Mark)
(iii) Change the following sentences to indirect speech:
‘Why don't you go away for a few days?’ Jenifer said to me. (1 Mark)
(c) Write a precis and give an appropriate title to the passage given below:
We are bombarded by noise and sound in all our waking hours. We 'hear' conversations,
news, gossips and many other forms of speech all the time. However, most of it is not
listened to carefully and therefore, not understood, partially understood or
misunderstood. A good listener does not only listen to the spoken words, but observes

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18 FOUNDATION EXAMINATION: MAY, 2022

carefully the nonverbal cues to understand the complete message. He/she absorbs the
given information's, processes it, understands its context and meaning and to form an
accurate, reasoned, intelligent response.
Listening starts with hearing but goes beyond. Hearing, in other words is necessary but is
not a sufficient condition for listening. Listening involves hearing with attention. Listening
is a process that calls· for concentration. While, listening, one should also be observant.
In other words, listening has to do with the ears, as well as with the eyes and the mind.
Listening is to be understood as the total process that involves hearing with attention,
being observant and making interpretations. Good communication is essentially an
interactive process. It calls for participation and involvement. It is quite often a dialogue
rather than a monologue. It is necessary to be interested and also show or make it
abundantly clear that one is interested in knowing what the other person has to say.
Good listening is an art that can be cultivated. It relates to skills that can be developed. A
good listener knows the art of getting much more than what the speaker is trying to
convey. He knows how to prompt, persuade but not to cut off or interrupt what the other
person has to say. At times the speaker may or may not be coherent, articulate and well
organised in his thoughts and expressions. He may have it in his mind and yet he may
fail to marshal the right words while communicating is thought.
The listener has to be objective, practical and in control pf his emotions. Often the
understanding of a listener is coloured by his own emotions, judgments, opinions, and
reactions to what is being said. (5 Marks)
Answer
(a) Appearance is usually the first thing noticed about a person. A well dressed and groomed
person is presumed to be organised and methodical, whereas a sloppy or shabby person
fails to make a favourable impression. Therefore, dressing appropriately in all formal
interactions is emphasised.
The dress code in office is generally formal. It constitutes of formal suits, trousers with
plain white- or light-coloured shirts and leather shoes. Bright colours, jeans, T- shirts,
especially with slogans and other informal wear are not allowed. For women, formal two-
piece trouser or skirt sets or formal ethnic wear like saree is permissible.
(b) (i) (4) / Relevant
(ii) (2)/Inconstancy
(iii) Jenifer asked me why I didn't go away for a few days.
(c) Précis
Title: The Art of Listening / Hearing v. Listening
There is a vast difference between hearing and listening. Listening goes beyond hearing,
it is hearing with attention and calls for concentration. One also needs to be observant,

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 19

using not only one's ears but also one's eyes and mind. A good listener does not only
listen to the spoken words but observes carefully the nonverbal cues to understand.
Good listening needs participation and involvement and involves dialogue more than a
monologue. It is an art that needs to be cultivated. A good listener knows how to prompt
and persuade but not to cut off or interrupt what the other person has to say.
Understanding of a listener is coloured by his own emotions, judgments, opinions, and
reactions.
Question 9
(a) (i) Define chain network in communication. (2 Marks)
OR
(ii) How 'Technology barrier' affects communication?
(b) (i) Choose the word which best expresses the meaning of the given word:
Sluggard
(1) Cheat
(2) Lazy
(3) Old
(4) Talkative (1 Mark)
(ii) Choose the word which best expresses the meaning of the given word:
Turbulence
(1) Stillness
(2) Repose
(3) Agitation
(4) Calmness (1 Mark)
(iii) Change the following sentence to indirect speech:
Mother said to her daughter, "May God grant you success in your examination".
(1 Mark)
(c) You are a purchase manager of Global Traders Pvt Ltd. You had ordered 100 units
special kind of Bolts from a company SN Nut Bolts Pvt. Ltd in Mumbai. While checking,
the consignment was found to be very poor in quality. Write a complaint letter to the
Sales Manager to replace the order. (5 Marks)

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20 FOUNDATION EXAMINATION: MAY, 2022

Answer
(a) (i) Chain Network in Communication
The communication pattern that follows the chain of command from the senior to the
junior is called the chain network. Communication starts at the top, like from a CEO,
and works its way down to the different levels of employees. The supervisor
/manager /CEO gives commands or instructions to those working under him/her in
the organization. The chain network often takes up time, and communication may
not be clear.
Example- B, C, D and E, F, G are the subordinates to A in the organizational
hierarchy and receive commands from ‘A’. This may be explained with the help of a
diagram as below:

OR
(ii) Technology Barriers
In the present world, communication modes are primarily technology driven.
Communication technology is being constantly upgraded and new formats emerge
ever so frequently. Anyone who is not tech friendly struggles to communicate
effectively via the medium.
Moreover, an individual is swamped with a huge amount of information every day in
the form of emails, texts and social updates. Multitasking is the norm these days.
The information overload and trying to accomplish too many things together can
result in gaps resulting in miscommunication.
(b) (i) (2) / Lazy
(ii) (3) / Agitation
(iii) Mother prayed that God might grant her daughter success in her examination.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

(c) Complaint Letter

Global Traders Pvt. Ltd.
27, Nai Sarak, Chandni Chowk,
New Delhi - 110006
Date: February 4, 2022

The Sales Manager,

SN Nut Bolts Pvt. Ltd.,
15, Industrial Road, Ramnagar,
Mumbai
Pin Code: xxx xxx

Dear Sir / Madam,

Subject: Complaint for consignment received on 3rd February, 2022.
Reference: Order No. XXXX –Dated 22nd December, 2021
With reference to above, an order for supply of 100 units of specific kind of bolts was
placed on 22nd December, 2021 with product ID XXX and order no. XXXX. The
consignment against this order was received on 3 rd February, 2022. However, during
inspection the above supplied consignment has been found to be of substandard / poor
quality. As the required quality of above product has been specified to you earlier with
order itself, you are requested to replace this consignment within a week positively. If you
fail to do this, we shall be constrained to cancel the order and you would be made liable
to compensate us for the losses caused to us due to above.
We shall be thankful for your quick response to replace the consignment keeping in view
our long business relations.

Yours Faithfully / Sincerely,

Mr. CVB
Purchase Head
Global Traders Pvt. Ltd.

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22 FOUNDATION EXAMINATION: MAY, 2022

Question 10
(a) "Human behaviour is not under the sole control of emotion or deliberation but results
from the interaction of these two processes". Explain. (2 Marks)
(b) (i) Change the sentence from Active to Passive Voice.
I ran the obstacle course in record time. (1 Mark)
(ii) Change the sentence from Passive to Active Voice.
Money was generously donated to the homeless shelter by Larry. (1 Mark)
(iii) Change the following sentence into indirect speech.
The students said to their teacher, 'please allow us to watch the cricket match.'
(1 Mark)
(b) Corruption has become the order of the day. It has entered all walks of life.
Write an article for your school magazine in 250 words on 'The Role of Youth in
combating corruption'. (5 Marks)
Answer
(a) Emotional Awareness and Control: "Human behaviour is not under the sole control of
emotion or deliberation but results from the interaction of these two processes,"
Loewenstein said.
Emotions are a powerful force that affect our perception of reality regardless of how hard
we try to remain unbiased. In fact, intense emotions can undermine a person's capacity
for rational decision-making, even when the individual is aware of the need to make
careful decisions.
Consequently, emotional awareness is a necessary element of good communication.
While interacting with another person or a group, it is important to understand the
emotions you and he/ she/ they are bringing to the discussion. Managing your own
emotions and at the same time respecting the emotional state of others helps in smooth
interaction.
(b) (i) The obstacle course was run by me in record time.
(ii) Larry generously donated money to the homeless shelter.
(iii) The students requested / urged / begged their teacher to allow / kindly allow them to
watch the cricket match.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 23

(c) Article
'The Role of Youth in combating corruption'
By ........ (Writer's name)
Corruption has become the order of the day. It has spread its tentacles in all walks of life.
It seems that corruption has spared no one; everyone is in the grip of corruption. It is
ruining power, society and the country as well. There is an urgent need t o check this
rampant corruption otherwise we will land ourselves nowhere.
A beginning can be made in this direction by holding anti-corruption drives. The ill-effects
of corruption in public life should be publicised through the internet and blogs. The
uprising young citizens need to join hands as one and battle against corruption. They
need to spread awareness, more so in rural areas and equip them with knowledge about
this burning issue. Recently the name of Anna Hazare has become synonymous with
combating corruption so the youth of India have an idol among them whom they can
follow. The dedicated efforts of the honest youth are bound to succeed in the long run -in
demolishing and vanquishing this social evil which has earned us a bad name.
Youth can play an important role in combating corruption. They can arrange awareness
campaigns about corruption and make an anti-corruption youth brigade, to keep a vigil
over the offices.
Youth can make people understand that they should not resort to corrupt practices to get
their work done. Youngsters must discourage people to offer or receive bribes. If no one
gives any money, work will be done automatically.
The youth must make the general public aware of various anti-corruption laws and the
right to information so that they come in handy at the most opportune time. Youth are the
future of the country. A lot rests on their strong shoulders.
Question 11
(a) "Understanding cultural aspects of communication is absolutely necessary otherwise it
will become a barrier to communication". Discuss. (2 Marks)
(b) Select the correct meaning of Idioms/ Phrases given below:
(i) In the pink of health
(1) Prolonged suffering
(2) Emergency situation
(3) Challenging situation
(4) Best of health (1 Mark)

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24 FOUNDATION EXAMINATION: MAY, 2022

(ii) Out of the blue

(1) Quietly

(2) Unexpectedly
(3) Angrily
(4) Revengefully (1 Mark)

(iii) Change the sentence into passive voice,

The builder is building the flat. (1 Mark)
(iv) Choose the word which best expresses the meaning of the given word.
Precedence
(1) Priority
(2) Uprise

(3) Present
(4) Insignificance (1 Mark)
(c) There is an urgent job opportunity in an established chartered accountancy firm for the
jab of qualified/competent Chattered Accountant. Prepare a detailed resume for a
candidate applying for the post. (4 Marks)
Answer
(a) Understanding cultural aspects of communication refer to having knowledge of different
cultures in order to communicate effectively with cross culture people. Understanding
various cultures in this era of globalization is an absolute necessity as the exist ence of
cultural differences amongst people from various countries, regions tribes and religions,
where words and symbols may be interpreted differently can result in communication
barriers and miscommunications.

(b) (i) (4) / Best of health

(ii) (2) / Unexpectedly
(iii) The flat is being built by the builder.

(iv) (1) / Priority

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 25

(c) Resume / Bio-Data / CV

Varun Gupta
A-29, Kirti Nagar New Delhi, 1100xx
Email Id:[email protected]
Mobil No. +91xxxxxxxxxx
CAREER OBJECTIVE:
Seeking a challenging professional career as a Chartered Accountant with an established
firm of Chartered Accountants that provides an opportunity to utilize my professional
skills & abilities in the relevant field.
WORK EXPERIENCE
• As an Articled Assistant in SN & Associates, a firm of Chartered Accountants.
• As a Chartered Accountant with AS & Associates, a firm of Chartered Accountants
for about three years with the following job responsibilities:
JOB RESPONSIBILITIES
• Performed statutory audit of companies, audit of firms and other type of
organization viz. proprietary concerns, charitable institutions etc.
• Handled Tax Audits, GST Audits.
• Rendered other financial services, consultancy etc.
PROFESSIONAL QUALIFICATION:
• Chartered Accountant
ACADEMIC QUALIFICATION:
• Bachelor of Commerce from Delhi University. Year of Passing: XXXX
• LL.B. from Delhi University. Year of Passing: XXXX
COMPETANCY AREAS
• Statutory Audit / Tax & GST Audit
• Taxation
• Project Financing
• Other professional services
ACHIEVEMENTS:
• Represented school as a part of the student delegation from the NCR region for the
Event:
➢ "CONFLUENCE-2000", held at HYDERABAD.

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26 FOUNDATION EXAMINATION: MAY, 2022

• Captain of the school cricket team.

• State-level cricket player.
HONOURS AND AWARDS:
• Won First prize in Inter-school Quiz Competition
• A consistent scholarship holder school.
• Won 2nd Prize in the Inter-school Debate Competition.
COMPUTER PROFICIENCY
• SAP, Advance Excel, MIS, Payroll, MS- Office, Tally
• Internet Applications
LANGUAGES KNOWN
• English, Hindi
REFERENCES
Available upon request
PERSONAL DETAILS
• Name: Varun Gupta
• Father’s Name: Mr. S.D Gupta
• Date of birth: xxx, 19xx
• Gender: Male
• Marital Status: Bachelor
• Holding valid passport
DECLARATION
I solemnly declare that all the above information is correct to the best of my knowledge
and belief.
Date: Signature
Place: (Varun Gupta)

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAW

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) X agrees to pay Y ` 1,00,000/-, if Y kills Z. To pay Y, X borrows ` 1,00,000/- from W,
who is also aware of the purpose of the loan. Y kills Z but X refuses to pay. X also to
repay the loan to W. Explain the validity of the contract.
(i) Between X and Y.
(ii) Between X and W (4 Marks)
(b) Mr. R, a manufacturer of toys approached MNO Private Limited for supply of raw material
worth ` 1,50,000/-. Mr. R was offered a credit period of one month. Mr. R went to the
company prior to the due date and met Mr. C, an employee at the billing counter, who
convinced the former that the payment can be made to him as the billing -cashier is on
leave.
Mr. R paid the money and was issued a signed and sealed receipt by Mr. C. After the
lapse of due date, Mr. R received a recovery notice from the company for the payment of
` 1,50,000/-.
Mr. R informed the company that he has already paid the above amount and being an
outsider had genuine reasons to trust Mr. C who claimed to be an employee and had
issued him a receipt.
The Company filed a suit against Mr. R for non-payment of dues. Discuss the fate of the
suit and the liability of Mr. R towards company as on current date in consonance with the
provision of the Companies Act 2013? Would your answer be different if a receipt under
the company seal was not issued by Mr. C after receiving payment? (4 Marks)
(c) Discuss the essential elements regarding the sale of unascertained goods and its
appropriation as per the Sale of Goods Act, 1930. (4 Marks)
Answer
(a) Illegal Agreement: It is an agreement which the law forbids to be made. As an essential
condition, the lawful consideration and object is must to make the agreement valid.
(Section 10). As per Section 23 of the Indian Contract Act, 1872, an agreement is illegal
and void, if the consideration and object is unlawful / contrary to law i.e. if forbidden by

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2 FOUNDATION EXAMINATION: NOVEMBER, 2022

law. Such an agreement is void and is not enforceable by law. Even the connected
agreements or collateral transactions to illegal agreements are also void.
In the present case,
(i) X agrees to give ` 1,00,000 to Y if Y kills Z. Thus, the agreement between X and Y
is void agreement being illegal in nature.
(ii) X borrows ` 1,00,000 from W and W is also aware of the purpose of the loan. Thus,
the agreement between X and W is void as the connected agreements of an illegal
agreements are also void.
(b) (i) Fate of the suit and the liability of Mr. R towards the company:
Doctrine of the Indoor Management
According to the Doctrine of the Indoor Management, the outsiders are not deemed
to have notice of the internal affairs of the company. They are entitled to assume
that the acts of the directors or other officers of the company are validly performed,
if they are within the scope of their apparent authority. So long as an act is valid
under the articles, if done in a particular manner, an outsider dealing with the
company is entitled to assume that it has been done in the manner required. This is
the indoor management rule, that the company’s indoor affairs are the company’s
problem. This rule has been laid down in the landmark case-the Royal British Bank
vs. Turquand. (Known as “Turquand Rule”)
In the instant case, Mr. R is not liable to pay the amount of ` 1,50,000 to MNO
Private Limited as he had genuine reasons to trust Mr. C, an employee of the
company who had issued him a signed and sealed receipt.
(ii) Liability of Mr. R in case no receipt is issued by Mr. C:
Exceptions to doctrine of indoor management: Suspicion of irregularity is an
exception to the doctrine of indoor management. The doctrine of indoor
management, in no way, rewards those who behave negligently. It is the duty of the
outsider to make necessary enquiry, if the transaction is not in the ordinary course
of business.
If a receipt under the company seal was not issued by Mr. C after receiving
payment, Mr. R is liable to pay the said amount as this will be deemed to be a
negligence on the part of Mr. R and it is his duty to make the necessary enquiry to
check that whether Mr. C is eligible to take the payment or not.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3

(c) Sale of unascertained goods and Appropriation:

Where there is a contract for the sale of unascertained goods by description and goods
of that description are in a deliverable state are unconditionally appropriated to the
contract, either by the seller with the assent of the buyer or by the buyer with the assent
of the seller, the property in the goods thereupon passes to the buyer.
Whereas, Appropriation of goods involves selection of goods with the intention of using
them in performance of the contract and with the mutual consent of the seller and the
buyer.
The essentials elements are:
(a) There is a contract for the sale of unascertained or future goods.
(b) The goods should conform to the description and quality stated in the contract.
(c) The goods must be in a deliverable state.
(d) The goods must be unconditionally (as distinguished from an intention to
appropriate) appropriated to the contract either by delivery to the buyer or his agent
or the carrier.
(e) The appropriation must be made by:
(i) the seller with the assent of the buyer; or
(ii) the buyer with the assent of the seller.
(f) The assent may be express or implied.
(g) The assent may be given either before or after appropriation.
Question 2
(a) Explain the following statements in the light of provisions of Indian Contract Act, 1872:
(i) "Agreements made out of love and affection are valid agreements."
(ii) "Promise to pay a time barred debt cannot be enforced." (7 Marks)
(b) "A LLP (Limited Liability Partnership) is a type of partnership in which participants'
liability is fixed to the amount of money they invest whereas a LLC (Limited Liability
Private/Public Company) is a tightly held business entity that incorporates the qualities of
a corporation and a partnership".
In line of above statement clearly elaborate the difference between LLP and LLC.
(5 Marks)

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4 FOUNDATION EXAMINATION: NOVEMBER, 2022

Answer
(a) (i) Agreements made out of love and affection are valid agreements: A written and
registered agreement based on natural love and affection between the parties
standing in near relation (e.g., husband and wife) to each other is enforceable even
without consideration. The various conditions to be fulfilled as per Section 25(1) of
the Indian Contract Act, 1872:
(A) It must be made out of natural love and affection between the parties.
(B) Parties must stand in near relationship to each other.
(C) It must be in writing.
(D) It must also be registered under the law.
Hence, the agreements made out of love and affection, without consideration, shall
be valid, if the above conditions are fulfilled.
(ii) Promise to pay a time barred debt cannot be enforced: According to Section
25(3) of the Indian Contract Act, 1872, where a promise in writing signed by the
person making it or by his authorised agent, is made to pay a debt barred by
limitation is valid without consideration.
Hence, this statement is not correct.
Note: The above statement can be correct also on the basis of the “Discharge of
Contract by Lapse of time” as per Limitation Act, 1963, and accordingly it can be
mentioned that contract should be performed within a specified period as prescribed
by the Limitation Act, 1963 and if no action is taken by the promisee within the
specified period of limitation, he is deprived of remedy at law.
(b) Distinction between Limited Liability Partnership (LLP) and Limited Liability
Company (LLC)
S. Basis LLP Limited Liability Company
No. (LLC)
1. Regulating Act The LLP Act, 2008. The Companies Act, 2013.
2. Members/ The persons who The persons who invest the
Partners contribute to LLP are money in the shares are
known as partners of the known as members of the
LLP. company.
3. Internal The internal governance The internal governance
governance structure of a LLP is structure of a company is
structure governed by agreement regulated by statute (i.e.,

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5

between the partners. Companies Act, 2013) read

with its Memorandum of
Association and Articles of
Association.
4. Name Name of the LLP to Name of the public company
contain the word “Limited to contain the word “limited”
Liability partnership” or and Pvt. Co. to contain the
“LLP” as suffix. word “Private limited” as
suffix.
5. No. of members/ Minimum – 2 partners Private company:
partners Maximum – No such limit Minimum – 2 members
on the partners in the Maximum 200 members
Act. The partners of the Public company:
LLP can be individuals/or
Minimum – 7 members
body corporate through
the nominees. Maximum – No such limit on
the members.
Members can be
organizations, trusts, another
business form or individuals.
6. Liability of Liability of a partners is Liability of a member is limited
members/ limited to the extent of to the amount unpaid on the
partners agreed contribution. shares held by them.
7. Management The business of the LLP The affairs of the company are
managed by the partners managed by board of directors
including the designated elected by the shareholders.
partners authorized in
the agreement.
8. Minimum 2 designated partners. Pvt. Co. – 2 directors
number of Public co. – 3 directors
directors/design
ated partners
Question 3
(a) Can a partner be expelled? If so, how? Which factors should be kept in mind prior to
expelling a partner from the firm by the other partners according to the provision of Indian
Partnership Act, 1932? (6 Marks)
(b) Mr. Y aged 21 years, lost his mental balance after the death of his parents in an
accident. He was left with his grandmother aged 85 years, incapable of walking and
dependent upon him. Mr. M their neighbour, out of pity, started supplying food and other

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6 FOUNDATION EXAMINATION: NOVEMBER, 2022

necessaries to both of them. Mr. Y and his grandmother used to live in the house built by
his parents. Mr. M also provided grandmother some financial assistance for her
emergency medical treatment. After supplying necessaries to Mr. Y for four years, Mr. M
approached the former asking him to payback ` 15 Lakhs inclusive of ` 7 Lakhs incurred
for the medical treatment of the lady (grandmother). Mr. Y pleaded that he has got his
parent's jewellery to sell to a maximum value of ` 4 Lakhs, which may be adjusted
against the dues. Mr. M refused and threatened Mr. Y of legal suit to be brought against
for recovering the money.
Now, you are to decide upon based on the provisions of the Indian Contract Act, 1872:
(i) Will Mr. M succeed in filing the suit to recover money? Elaborate the related
provisions?
(ii) What is the maximum amount- of money that can be recovered by Mr. M?
(iii) Shall the provisions of the above act also apply to the medical treatment given to
the grandmother? (6 Marks)
Answer
(a) Expulsion of partner and factors to be kept in mind:
As per Section 33 of the Indian Partnership Act, 1932, a partner may not be expelled
from a firm except
(i) the power of expulsion must have existed in a contract between the partners;
(ii) the power has been exercised by a majority of the partners; and
(iii) it has been exercised in good faith.
If all these conditions are not present, the expulsion is not deemed to be in bona fide
interest of the business of the firm and shall be null and void.
The test of good faith as required under Section 33(1) includes three things:
(i) The expulsion must be in the interest of the partnership
(ii) The partner to be expelled is served with a notice
(iii) He is given an opportunity of being heard.
Yes, a partner may be expelled by other partners strictly in compliance with the
provisions of section 33.
(b) (i) Claim for necessaries supplied to persons incapable of contracting (Section
68 of the Indian Contract Act, 1872):
If a person, incapable of entering into a contract, or anyone whom he is legally
bound to support, is supplied by another person with necessaries suited to his

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 7

condition in life, the person who has furnished such supplies is entitled to be
reimbursed from the property of such incapable person.
In the instant case, Mr. M supplied the food and other necessaries to Mr. Y (who
lost his mental balance) and Mr. Y’s grandmother (incapable of walking and
dependent upon Mr. Y), hence, Mr. M will succeed in filing the suit to recover
money.
(ii) Supplier is entitled to be reimbursed from the property of such incapable person.
Hence, the maximum amount of money that can be recovered by Mr. M is ` 15
Lakhs and this amount can be recovered from Mr. Y’s parent’s jewellery amounting
to ` 4 Lakhs and rest from the house of Y’s Parents. (Assumption: Y has inherited
the house property on the death of his parents)
(iii) Necessaries will include the emergency medical treatment. Hence, the above
provisions will also apply to the medical treatment given to the grandmother as Y is
legally bound to support his grandmother.
Question 4
(a) What are the rights of unpaid seller in context to re-sale the goods under Sale of Goods
Act, 1930? (6 Marks)
(b) "Indian Partnership Act does not make the registration of firm's compulsory nor does it
impose any penalty for non-registration." In light of the given statement, discuss the
consequences of non-registration of the partnership firms in India. Also, explain the rights
unaffected due to non-registration of firms. (6 Marks)
Answer
(a) Right of re-sale [Section 54 of the Sale of Goods Act, 1930]:
The unpaid seller can exercise the right to re-sell the goods under the following
conditions:
(i) Where the goods are of a perishable nature: In such a case, the buyer need not
be informed of the intention of resale.
(ii) Where he gives notice to the buyer of his intention to re-sell the goods: If after
the receipt of such notice the buyer fails within a reasonable time to pay or tender
the price, the seller may resell the goods.
It may be noted that in such cases, on the resale of the goods, the seller is also
entitled to:
(a) Recover the difference between the contract price and resale price, from the
original buyer, as damages.
(b) Retain the profit if the resale price is higher than the contract price.

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8 FOUNDATION EXAMINATION: NOVEMBER, 2022

It may also be noted that the seller can recover damages and retain the profits only
when the goods are resold after giving the notice of resale to the buyer. Thus, if the
goods are resold by the seller without giving any notice to the buyer, the seller
cannot recover the loss suffered on resale. Moreover, if there is any profit on resale,
he must return it to the original buyer, i.e. he cannot keep such surplus with him
[Section 54(2)].
(iii) Where an unpaid seller who has exercised his right of lien or stoppage in
transit resells the goods: The subsequent buyer acquires the good title thereof as
against the original buyer, despite the fact that the notice of re-sale has not been
given by the seller to the original buyer.
(iv) A re-sale by the seller where a right of re-sale is expressly reserved in a
contract of sale: Sometimes, it is expressly agreed between the seller and the
buyer that in case the buyer makes default in payment of the price, the seller will
resell the goods to some other person. In such cases, the seller is said to have
reserved his right of resale, and he may resell the goods on buyer’s default.
It may be noted that in such cases, the seller is not required to give notice of resale.
He is entitled to recover damages from the original buyer even if no notice of resale
is given.
(v) Where the property in goods has not passed to the buyer: The unpaid seller has
in addition to his remedies a right of withholding delivery of the goods. This right is
similar to lien and is called “quasi-lien”.
(b) It is true to say that Indian Partnership Act, 1932 does not make the registration of firms
compulsory nor does it impose any penalty for non-registration.
Following are the consequences of Non-registration of Partnership Firms in India:
The Indian Partnership Act, 1932 does not make the registration of firms compulsory nor
does it impose any penalty for non-registration. However, under Section 69 of the Indian
Partnership Act, 1932, non-registration of partnership gives rise to a number of
disabilities. These disabilities briefly are as follows:
(i) No suit in a civil court by firm or other co-partners against third party: The firm
or any other person on its behalf cannot bring an action against the third party for
breach of contract entered into by the firm, unless the firm is registered and the
persons suing are or have been shown in the register of firms as partners in the
firm.
(ii) No relief to partners for set-off of claim: If an action is brought against the firm by
a third party, then neither the firm nor the partner can claim any set-off, if the suit be
valued for more than `100 or pursue other proceedings to enforce the rights arising
from any contract.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 9

(iii) Aggrieved partner cannot bring legal action against other partner or the firm:
A partner of an unregistered firm (or any other person on his behalf) is precluded
from bringing legal action against the firm or any person alleged to be or to have
been a partner in the firm. But, such a person may sue for dissolution of the firm or
for accounts and realization of his share in the firm’s property where the firm is
dissolved.
(iv) Third party can sue the firm: In case of an unregistered firm, an action can be
brought against the firm by a third party.
Following are the Rights unaffected due to non-registration of firms: Non-
registration of a firm does not, however effect the following rights:
1. The right of third parties to sue the firm or any partner.
2. The right of partners to sue for the dissolution of the firm or for the settlement of the
accounts of a dissolved firm, or for realization of the property of a dissolved firm.
3. The power of an Official Assignees, Receiver of Court to release the property of the
insolvent partner and to bring an action.
4. The right to sue or claim a set-off if the value of suit does not exceed ` 100 in value.
5. The right to suit and proceeding instituted by legal representatives or heirs of the
deceased partner of a firm for accounts of the firm or to realise the property of the
firm.
Question 5
(a) Mr. K visited M/s Makrana Marbles for the purchase of marble and tiles for his newly built
house. He asked the owner of the above shop Mr. J to visit his house prior to supply so
that he can clearly ascertain the correct mix and measurements of marble and tiles. Mr. J
agreed and visited the house on the next day. He inspected the rooms in the first floor
and the car parking space. Mr. K insisted him to visit the second floor as well because
the construction pattern was different, Mr. J ignored the above suggestion.
Mr. J. supplied 146 blocks of marble as per the size for the rooms and 16 boxes of tiles
with a word of caution that the tiles can bear only a reasonable weight. Marble and Tiles
were successfully laid except on second floor due to different sizes of the marble. The
tiles fitted in the parking space also got damaged due to the weight of the vehicle came
for unloading cement bags. Mr. K asked Mr. J for the replacement of marble and tiles to
which Mr. J refused, taking the plea that the marble were as per the measurement and it
was unsafe to fit tiles at the parking area as it cannot take heavy load. Discuss in the
light of provisions of Sale of Goods Act 1930:
(i) Can Mr. J refuse to replace the marble with reference to the doctrine of Caveat
Emptor? Enlist the duties of both Mr. K. and Mr. J.

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10 FOUNDATION EXAMINATION: NOVEMBER, 2022

(ii) Whether the replacement of damaged tiles be imposed on M/ s Makrana Marbles?

Explain. (6 Marks)
(b) (i) Mr. Anil formed a One Person Company (OPC) on 16 April, 2018 for manufacturing
electric cars. The turnover of the OPC for the financial year ended 31 March, 2019
was about ` 2.25 crores. His friend Sunil wanted to invest in his One Person
Company (OPC), so they decided to convert it voluntarily into a private limited
company. Can Anil do so, as per the provisions of the Companies Act, 2013?
(4 Marks)
(ii) Explain listed company and unlisted company as per the provisions of the
Companies Act, 2013. (2 Marks)
Answer
(a) (i) Yes, Mr. J can refuse to replace the marble as he has supplied the marble as per
the requirement of the buyer i.e. Mr. K.
Duty of Mr. K (the buyer) is that he has to examine the marbles and tiles carefully
and should follow the caution given by Mr. J i.e. the seller that tiles can bear only a
reasonable weight before laying them in the parking space of his house.
Duty of Mr. J (the seller) is that the goods supplied (i.e. tiles and marbles) shall be
reasonably fit for the purpose for which the buyer wants them.
According to the doctrine of Caveat Emptor, it is the duty of the buyer to satisfy
himself before buying the goods that the goods will serve the purpose for which they
are being bought.
In this case Mr. K has accepted the marbles without examination. Hence, there is no
implied condition as regards to defects in marbles. Mr. J can refuse to replace the
marble as he has supplied the marble as per the requirement of the buyer i.e.,
Mr. K.
Alternate Answer
(a) (i) According to doctrine of caveat emptor the buyer cannot hold the seller responsible
for defect in goods supplied as it is the duty of the buyer to make a proper selection
or choice of the goods. Section 16(1) also provides that there is no implied conditio n
as to quality of fitness of the goods sold for any particular purpose. However, as an
exception to this doctrine, the section further provides that if the buyer had made
known to the seller the purpose of his purchase; relied on the seller’s skill and
judgement; and Seller’s business is to supply goods of that description then it shall
be the duty of the seller to supply such goods as are reasonably fit for that purpose.
In the instant case, Mr. K has made known to Mr. J the purpose of his purchase and
relied on his skill and judgement. It was the duty of Mr. J to supply the marbles fit

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 11

for that purpose including for second floor. Since the marbles supplied were not fit
for second floor Mr. J is liable to replace the marbles to the extent not fit for that
purpose.
Duty of Mr. K (the buyer) As per the above doctrine it was the duty of the buyer
Mr. K to make known to Mr. J the purpose of his purchase of marbles. He has fully
performed his part arranging the visit of Mr. J to the site.
Duty of Mr. J (the seller) is that the goods supplied (i.e. tiles and marbles) shall be
reasonably fit for the purpose for which the buyer wants them. If Mr. K relied on the
skill and judgement of Mr. J he failed to perform his duty by neglecting the request
of Mr. K to visit second floor resulting in supplies of unfit marbles for the purpose of
Mr. K.
Considering the above provisions Mr. J will be liable to replace the marbles not fit
for the second floor as Mr. J is bound to the implied condition to supply the marbles
as per the requirement of Mr, J when he has made him known about that and relied
on his skill and judgement.
(ii) According to the doctrine of Caveat Emptor, it is the duty of the buyer to satisfy
himself before buying the goods that the goods will serve the purpose for which they
are being bought.
Here, Mr. J supplied the boxes of tiles with a word of caution that the tiles can bear
only a reasonable weight. Even though the tiles were laid in the car parking space
of Mr. K and got damaged later because of vehicle used for unloading of cement
bags were beyond the reasonable weight. Hence, the seller i.e., M/ s Makrana
Marbles is not liable as the buyer Mr. K as before laying down the tiles, has to
satisfy himself that the tiles will serve the specific purpose i.e., can be used for car
parking space only.
Therefore, the replacement of the damaged tiles cannot be imposed on
M/s Makrana Marbles.
(b) (i) Section 2(62) of the Companies Act, 2013 defines one person company as a
company which has only one person as a member. However, a private company
shall have minimum 2 members without any restriction on the share capital or
turnover. If OPC is converted into private company Mr. Anil and Mr. Sunil both can
be the members of the company and investment from Mr. Sunil can be accepted.
A One Person Company can voluntarily convert itself into a private company by
following the compliances given under the Companies Act, 2013.
In the instant case, OPC formed by Mr. Anil can be voluntarily converted into a
private company by following the compliances given under the Companies Act,
2013. Here, the information given relating to turnover for the financial year ended
31st March, 2019 is immaterial.

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12 FOUNDATION EXAMINATION: NOVEMBER, 2022

(ii) Listed company: As per the definition given in the section 2(52) of the Companies
Act, 2013, it is a company which has any of its securities listed on any recognised
stock exchange.
Provided that such class of companies, which have listed or intend to list such class
of securities, as may be prescribed in consultation with the Securities and Exchange
Board, shall not be considered as listed companies.
Whereas the word securities as per the section 2(81) of the Companies Act, 2013
has been assigned the same meaning as defined in clause (h) of section 2 of the
Securities Contracts (Regulation) Act, 1956.
Unlisted company means company other than listed company.
Question 6
(a) Differentiate between Novation and Alteration as per the Indian Contract Act, 1872.
(5 Marks)
(b) What is the difference between partnership and co-ownership as per the Indian
Partnership Act, 1932? (4 Marks)
(c) Mike LLC incorporated in Singapore having an office in Pune, India. Analyse whether
Mike LLC would be called as a foreign company as per the provisions of the Companies
Act, 2013? Also explain the meaning of foreign company. (3 Marks)
Answer
(a) Novation and Alteration: The law pertaining to novation and alteration is contained in
Sections 62 to 67 of the Indian Contract Act, 1872. In both these cases, the original
contract need not be performed. Still there is a difference between these two.
1. Meaning: Novation means substitution of an existing contract with a new one. But
in case of alteration the terms of the contract may be altered by mutual agreement
by the contracting parties.
2. Change in terms and conditions and parties: Novation may be made by changing
in the terms of the contract or there may be a change in the contracting parties. But
in case of alteration the terms of the contract may be altered by mutual agreement
by the contracting parties but the parties to the contract will remain the same.
3. Substitution of new contract: In case of novation, there is altogether a
substitution of new contract in place of the old contract. But in case of alteration, it
is not essential to substitute a new contract in place of the old contract. In alteratio n,
there may be a change in some of the terms and conditions of the original
agreement.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 13

(b) Partnership Vs. Co-Ownership or joint ownership i.e. the relation which subsists
between persons who own property jointly or in common.
Basis of difference Partnership Co-ownership
1. Formation Partnership always Co-ownership may arise
arises out of a contract, either from agreement or by
express or implied. the operation of law, such as
by inheritance.
2. Implied agency A partner is the agent of A co-owner is not the agent
the other partners. of other co-owners.
3. Nature of interest There is community of Co-ownership does not
interest which means necessarily involve sharing of
that profits and losses profits and losses.
must have to be shared.
4. Transfer of interest A share in the A co-owner may transfer his
partnership is transferred interest or rights in the
only by the consent of property without the consent
other partners. of other co-owners.
(c) Mike LLC is incorporated in Singapore and having a place of business in Pune, India.
Since, Mike LLC is incorporated outside India and having a Place of business in India,
hence it is a foreign Company.
Foreign Company [Section 2(42) of the Companies Act, 2013]: It means any company
or body corporate incorporated outside India which—
(i) has a place of business in India whether by itself or through an agent, physically or
through electronic mode; and
(ii) conducts any business activity in India in any other manner.

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SECTION-B : BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.
Answer any three questions from the remaining four questions.
All candidates (including those who have opted for Hindi Medium) are required to answer the
questions in Section B, in English only.
Question 7
(a) Read the passage given below and answer the questions that follows:
To make our life meaningful, we need to mind our thoughts, for our thoughts are the
foundation, the inspiration, and the motivating power of our deeds. We create our entire
world the way we think. Thoughts are the causes and the conditions are the effects.
Our circumstances and conditions are not dictated by· the world outside; it is the world
inside us that creates the outside. Self - awareness comes from the mind, which means
soul. Mind is the sum total of the states of consciousness we have the power to choose
and think. Krishna says: "No man resteth a movement inactive." Even when inactive on
the bodily plane, we are all the time acting on the thoughts plane. Therefore, if we
observe ourselves, we can easily mould our thoughts. If our thoughts are pure and noble,
our actions will naturally follow the same pattern. If our thoughts are filled with jealousy,
hatred and greed, our actions will reflect the same attributes.
Karmically, however, a thought or intent is more responsible and dynamic than an act.
One may perform a charitable act, but if one does not think charitably and is doing the
act just for the sake of gain and glory, it is one's thoughts that will determine the result.
Theosophy teaches us that every thought, no matter how fleeting, leaves a seed in the
mind of thinker. These small seed together go to make up a large thought seed and
determine one's general character. Our thoughts affect our whole body. Each thought
once generated and sent out becomes independent of the brain and mind, and we live
upon its own energy depending upon its intensity.
Trying to keep a thought from our mind can produce the very state we are trying to avoid.
We can alter our environment to create the mood. When, for instance, we are depressed,
if we sit by ourselves trying to think cheerful thoughts, we often do not succeed. But if we
mix with people who are cheerful we can bring about a change in our mood and
thoughts. Every thought we think, every act we perform, creates in us an impression, like
everything else, and is subject to cyclic law and becomes repetitive in our mind. So, we
alone have the choice to create our thoughts and develop the kind of impression that
makes our action more positive.
Let us choose the thought seeds of right ideas, noble and courageous aspirations that
will be received by minds of the same nature. Right introspection will be required of us to
determine what we easily deserve to effect. Everything in the universe is inter -related
and inter-dependent, that we live in one another and by accepting the grand principle of

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

universal brotherhood, we shall be in a position to appreciate what a heavy responsibility

is ever ours to think right. Let us reflect and send loving and helpful thoughts and lighten
the load of the world's suffering.
Questions:
(i) How do our thoughts affect our action? (2 Marks)
(ii) How can we change our mood when we are depressed? (2 Marks)
(iii) Find word in the passage which has a meaning similar to the words given below:
To look into one's thoughts and feelings. (1 Marks)
(b) Read the passage:
In nature, the ability to change colour can be a key to survival. Vision is a very important
sense in much of the animal kingdom, and many animals have come up with unique ways
to use this sense to enhance their own survival. They may use this superpower to vanish
into their environments or to boldly assert their dominance. The colour of animals is by
no means a matter of chance; it depends on many considerations, but in the majority of
cases tends to protect the animal from danger by rendering it less conspicuous. Perhaps
it may be said that if colouring is mainly protective, there ought to be but few brightly
coloured animals. There are, however, not a few cases in which vivid colours are
themselves protective. The kingfisher itself, though so brightly coloured, is by no means
easy to see. The blue harmonizes with the water, and the bird as it darts along the
stream looks almost like a flash of sunlight.
Desert animals are generally the colour of the desert. Thus, for instance, the lion, the
antelope, and the wild donkey are all sand-coloured. "Indeed," says Canon Tristram, "in
the desert, where neither tree, brushwood, nor even undulation of the surface affords the
slightest protection to its foes, a modification of colour assimilated to that of the
surrounding country is necessary. Hence, without exception, the upper plumage of every
bird, and the fur of all the smaller mammals and the skin of all the snakes and lizards, is
of one uniform sand colour."
The next point is the colour of the mature caterpillars, some of which are brown. This
probably makes the caterpillar even more conspicuous among the green leaves than
would otherwise be the case. Let us see, then, whether the habits of the insect will throw
any light upon the riddle.
What would you do if you were a big caterpillar? Why, like most other defenceless
creatures, you would feed by night, and lie concealed by day. So do these caterpillars.
When the morning light comes, they creep down the stem of the food plant, and lie
concealed among the thick herbage and dry sticks and leaves, near the ground, and it is
obvious that under such circumstances the brown colour really becomes a protection. It
might indeed be argued that the caterpillars, having become brown, concealed
themselves on the ground, and that we were reversing the state of things. But this is not

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16 FOUNDATION EXAMINATION: NOVEMBER, 2022

so, because, while we may say as a rule 'that large caterpillars feed by night and lie
concealed by day, it is by no means always the case that they are brown; some of them
still retaining the green colour.
We may then conclude that the habit of concealing themselves by day came first, and
that the brown colour is a later adaptation.
(i) Make Notes, using headings, Sub-headings, and abbreviations whenever
necessary. (3 Marks)
(ii) Write a summary. (2 Marks)
Answers
(a) (i) We create our entire world the way we think. Thoughts are the causes and the
conditions are the effect. If our thoughts are pure and noble, our actions will
naturally follow the same pattern. If our thoughts are filled with jealously, hatred and
greed, our actions will reflect the same attributes. Thus, every thought seed is
generated and affect our action.
(ii) We can alter our environment to create our mood. When, for instance, we are
depressed, if we sit by ourselves trying to think cheerful thoughts, we often do not
succeed. But if we mix with people who are cheerful, we can bring about a change
in our mood and thoughts. So, we need to change our environment to change our
mood.
(iii) Introspection
(b) (i) Note Making (Animal Kingdom)
Notes:
1. Cl. of anmls
1.1 adpt to surround envnt
1.2 CI. change nec for safety and survival
1.3 CI. adptn makes them less consip.
2. The kngfshr
2.1 Brightly clred
2.2 But harmonizes with blue cl. of water
2.3 is rarely visible
3. Dsrt anmls
3.1 Lion, antelope, wild donkey are sand clred
3.2 No trees necessitate cl adptn for safety

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 17

3.3 Snakes and lizards are of sand CI.

4. The Ctrplr
3.4 Mature ones are brown
3.5 Defnsls- creatures
3.6 The brown CI conceals them among herbage and leaves
3.7 Feed by night and lie concled in day
List of / Key to abbreviations used:
a. CI - Colour
b. Anmls - Animals
c. envnt. - Environment
d. adpt - Adapted
e. Nec - Necessary
f. Adptn - Adaption
g. Consip - Conspicuous
h. Kngfshr - kingfisher
i. Dsrt - Desert
j. Clred - Coloured
k. Defnsls - Defenceless
l. Ctrplr - Caterpillar
m. Concled - concealed
(ii) Summary:
Colour Camouflage is a necessity for the animal kingdom required for its existence
and survival. Animals adapt to the colour of their surroundings to become less
visible to their enemies. The Kingfisher’s blue colour adapts to the colour of water
as it dives into it. Desert animals like lion, antelope and wild donkey are sand
coloured making them less visible to their opponents. The caterpillar although of
green colour adapts the colour brown for their safety. The brown colour helps to
conceal itself in herbage and ground. Therefore, colour acts as a dense mechanism
for all animals. It allows them to hide from predators and catch their prey.

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18 FOUNDATION EXAMINATION: NOVEMBER, 2022

Question 8
(a) Courteousness is the important characteristics of effective communication. Comment.
(2 Marks)
(b) (i) Choose the correct meaning of given word: PATHOS.
(1) Five
(2) Emotion
(3) Fidelity
(4) Bitter (1 Marks)
(ii) Select the suitable antonym for the- given word: ELEGANT
(1) Stylish
(2) Bombastic
(3) Palatial
(4) Gauche (1 Marks)
(iii) Change the following sentence into direct speech:
The policeman asked the stranger who he was. (1 Marks)
(c) Write Precis and give appropriate title to the passage given below:
There is an enemy beneath our feet-an enemy more deadly for his complete impartiality.
He recognizes no national boundaries, no political parties. Everyone in the world is
threatened by him. The enemy is the Earth itself. When an earthquake strikes, the world
trembles. The power of a quake is greater than anything man himself can produce.
But today scientists are directing a great deal of their effort into finding some way-of
combating earthquakes and, perhaps at some time shortly, mankind will have discovered
a means of protecting itself from earthquakes. An earthquake strikes without warning.
When it does, its power is immense. If it strikes a modern city, the damage it causes is as
great as if it has struck a primitive village. Gas mains burst, explosions are caused and
fires are started. Underground railways are wrecked. Buildings collapse, bridges fall,
dams burst and gaping crevices appear in busy streets.
A modern city when struck is reduced -to a nibble. A quake strikes plains, seas and
mountains causing all round destruction. Scientists are trying to find out means to
combat earthquakes, to predict the origin of the quake so that precaution can be taken to
save man and property from destruction.
If the quake strikes at sea, huge tidal waves sweep inland. If it strikes in mountain
regions, avalanches roar down into the valley. Consider the terrifying statistics from the

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 19

past 1755: Lisbon, capital of Portugal - the city was destroyed entirely and 450 killed;
1970: Peru - 50,000 killed.
In 1968, an earthquake struck Alaska. As this is a relatively unpopulated part, only a few
people were killed. But this likely was one of the most powerful quakes ever to have hit
the world. Geologists estimate that during the tremors, the whole of the state moved over
80 feet farther west into the Pacific Ocean. Imagine the power of something that can
move an entire subcontinent. This is the problem that scientists face. They are dealing
with forces so immense that man cannot hope to resist them. All that can be done is to
try to pinpoint just where the earthquake will strike and work from there. At least some
precautionary measures can be taken at that time to save lives and property. (5 Marks)
Answer
(a) Courtesy implies that the sender is polite, considerate, respectful, open and honest with
the receiver. The sender of the message takes into consideration the viewpoints and
feelings of the receiver of the message. Make sure nothing offensive or with hidden
negative tone is included.
(b) (i) (2) Emotion
(ii) (4) Gauche
(iii) The policeman said to / inquired the stranger, “Who are you?”
(c) Precis:
Title: Disaster in Earthquake/Earthquake Damages/ Losing the Ground: Nature of
Earthquakes / Earthquake- Great enemy of mankind
An earthquake causes great damage to life and property without recognising any
boundaries or political affiliations, small or big cities. It is a great enemy of mankind.
Statistics show that the immense loss of life is due to quakes, including those in Peru
and Portugal and they were so terrible that they could move the entire continent. The
Alaska earthquake of 1968 killed few people, but the state moved over 80 feet farther
west into the Pacific Ocean. Scientists are finding ways to combat the disaster, but the
problem is that it strikes without warning, and only precautionary measures can be taken
to save lives and property.
Question 9
(a) How attitude barriers affect communication in the organization? (2 Marks)
OR
Explain the term Aesthetic communication.

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20 FOUNDATION EXAMINATION: NOVEMBER, 2022

(b) (i) Choose the word which best expresses the meaning of the given word:
ALTER EGO
(1) Self-esteem
(2) Second self
(3) Competitor
(4) Egocentric (1 Marks)
(ii) Choose the word which best expresses the meaning of the given word:
AMBIVALENT
(1) Uncertain
(2) Definite
(3) Dramatic
(4) Pensive (1 Marks)
(iii) Change the following sentence into indirect speech:
The Tutor rebuked Sonu saying "If you do not finish your project, I'll call your
mother." (1 Marks)
(c) Hectic Schedule of academic leads to neglect of sports and co-curricular activities. It
badly affects the moulding of personality of an individual and his overall development.
Keeping in view the need for sports and co-curricular activities, write an article in about
200 words. (5 Marks)
Answer
(a) (i) Attitude Barrier - Personal attitude of employees can affect communication within
the organization. A proactive, motivated worker will facilitate the communication
process, whereas a dissatisfied, disgruntled, shy, introvert or lazy employee can
delay, hesitate in taking the initiative, or refuse to communicate. Attitude problems
can be addressed by good management and regular interaction with staff members.
OR
(ii) Aesthetic Communication- Communicate / sharing our thoughts through art forms
such as dancing, painting, sculpting, music are also means of communication and is
called aesthetic communication. They distinctly convey the ideas and thoughts of
the artist.
(b) (i) (2) Second self
(ii) (1) Uncertain

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

(iii) The Tutor scolded/rebuked Sonu and said that he would call his mother, if he did
not finish his project. / The Tutor scolded/rebuked Sonu and said that, if he did not
finish his project, he would call his mother.
(c) Article
Need for sports and co-curricular activities / Sports and co-curricular activities-Impact on
personality
By .... (Writer's / Author’s name)
It is a well-pronounced dictum that a sound mind dwells in a sound body. So, for the
harmonious development of personality, one needs both physical and co-curricular
activities along with the academics. Sports and co-curricular activities are meant to bring
social and intellectual skills, moral values, and character appeal among students. Co-
curricular activities fuel learning by stimulating creative thoughts, developing interest and
talents, and offering the chance to switch off and do something one reall y enjoys. Further
participation in sports develops personality traits like cooperation, teamwork, leadership,
competition, and adventure. Ignorance of any of these aspects of life is detrimental. But in
the modern field of education, our students are much burdened by the hectic schedule of
academics. They are too pre-occupied to even eat or engage in other activities. Such an
unhealthy state of work is very dangerous for their growth.
If they continue to fail to develop the other traits of personality at the expense of
education, their lives will become a stumbling block not only for the individual but for the
nation as well.
So, our educators should think along the healthy lines of developing a balanced
personality among all because the insufficiency of one or more traits makes life
troublesome.
Question 10
(a) Explain any two types of formal communication. (2 Marks)
(b) (i) Change the sentence from active to passive voice:
She said to me, "It has been raining heavily and you cannot go. (1 Marks)
(ii) Change the sentence from passive to active voice:
The girls who had not done their homework were punished by the teacher. (1 Marks)
(iii) Change the following sentence to Indirect Speech:
Had he delivered the letter? (1 Marks)
(c) Write an article of about 250 words on the topic "Why is the new generation worried a
lot?" (5 Marks)

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22 FOUNDATION EXAMINATION: NOVEMBER, 2022

Answer
(a) Formal communication- Formal communication, both oral and written, follows certain
rules, principles and conventions. The hierarchy in the organization has to be followed.
Formal format, style and language have to be used. The communication pattern can be
vertical, horizontal or diagonal.
Vertical: Information can flow upwards or downwards in the organization. Data that is
collected flows up to the top levels of management for review and decision making, while
instructions and orders are passed down from the management/ seniors to the
subordinates for implementation.
Horizontal: Horizontal communication involves two employees of the organization at the
same level. For example, the managers of a project in a company may hold a regular
daily, weekly, or monthly meeting to discuss the progress of a project.
Diagonal: Cross-functional communication between employees at different levels of the
organizational hierarchy is described as diagonal communication. Diagonal
communication is increasingly common in larger organizations. It reduces the chances of
distortion or misinterpretation by encouraging direct communication between the relevant
parties. For example, a Junior Engineer reports directly to the General Manager
regarding the progress on a project.
Note: Out of the above three, any two can be given as a part of main answer.
(b) (i) Active to passive voice:
I was said / told by her that it had been raining heavily and I could not go..
OR
Direct to indirect speech:
She said to / told me that it had been raining heavily and I could not go
(ii) The teacher punished the girls who had not done their homework.
(iii) Indirect speech:
Someone asked whether / if he had delivered the letter.
OR
Active to passive voice: Had the letter been delivered by him? /If /Whether the
letter had been delivered by him?
(c) Article:
'Why is the new generation worried a lot?'
By ...... (Author / Writer's name)

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 23

Recently the Harvard Business Review published a study on mental health in the
workplace that paints a bleak picture of anxiety among young people. In the survey,
majority of those aged between 24 and 39, said they’d left a job partly for mental health
reasons. For those between 18-23, the percentage spikes to 75 percent, as compared to
20 percent among the general population.
It is a well-established fact that we have stepped forward and progressed commendably
with the fast-developing nations of the world. Indian minds are earning a lot of name and
fame in far-away nations. Curing fatal diseases is no longer a dream. We communicate
with our near and dear ones on the screen, however, far they may be. Our tickets are
booked online. With the advancement of science and technology, with just one click on
the internet we get any required information.
Thus, we are leading a life of luxury and freedom as well as rest and repose. Despite all
this, our youngsters are a worried lot. The basic reason being that we are not safe,
protected and free. We are living under constant fear. There are not adequate resources
for employment. Terrorists and extremists are bent on disrupting the peace and harmony
among people. Thus, there prevails a sense of chaos, dissatisfaction, terror, disruption,
confusion, fear and anxiety. We are blindly following western civilization while losing our
moral and social values. Many social evils have entered our lives. All these reasons have
made the modern generation a worried lot.
Question 11
(a) What do you mean by grapevine communication? (2 Marks)
(b) Select the correct meaning of Idioms/Phrases given below:
(i) Grasping at Straws
(1) Totally calm.
(2) Totally desperate.
(3) Totally fake.
(4) Totally real. (1 Marks)
(ii) You’ve got your work cut out for you.
(1) Easy task.
(2) Settled task.
(3) Good Task.
(4) Difficult task. (1 Marks)
(iii) Change the sentence into passive voice.
One should keep one's promises. (1 Marks)
(iv) Choose the word which best expresses the meaning of the given word:

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24 FOUNDATION EXAMINATION: NOVEMBER, 2022

Blandishment
(1) Flattery
(2) Terrifying
(3) Funny
(4) Denial (1 Marks)
(c) You are Mr. M, a general manager in P Mall. Write an official email to the employees of P
Mall about the introduction of new dress code and office timings as part of marketing
strategy with effect from 22.12.2022. (4 Marks)
Answer
(a) Employees in an organization interact with each other outside the formal domain. Such
communication is called grapevine communication (gossip in the office). Employees of
different departments and varied levels meet and discuss matters casually and
informally. The grapevine satisfies the social needs of the people and help in building
relationships. It is also useful in addressing certain needs and grievances of employees.
(b) (i) (2) Totally desperate
(ii) (4) Difficult task
(iii) Promises should be kept. / One’s promises should be kept / One’s promises should
be kept by himself / herself.
(iv) (1) Flattery
(c) From: [email protected]
To: E-mail addresses of the employees
CC/BCC: Mr. G, Mr. H and other departmental heads
Subject: Implementation of a new dress code and shift in office hours for all employees
from December 22, 2022 onwards.
Dear Sir/Madam,
Greetings of the Day!
As you are all aware, our mall has developed a new marketing strategy, and the following
changes will take effect on December 22, 2022.
(a) A new dress code has been introduced for employees in the mall, as below:
(i) Sky blue shirt and black pants for male employees on weekdays and striped
shirt and blue pants on weekends.
(ii) Male employees should wear a Kurta-Pajama on festivals.

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 25

(iii) During the week, female employees are expected to wear white shirts and red
skirts and striped shirts and white skirts on weekends.
(iv) Female employees should wear traditional clothes such as saree during
festivals.
(b) New office hours have been introduced, i.e., the day begins at 11 a.m. and ends at
10.30 p.m.
Kindly follow / adhere to the dress code and office timings meticulously.
Thank you and best wishes

Mr. M,
General Manager
P Mall, New Delhi

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PAPER – 2: BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAWS

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) Radha invited her ten close friends to celebrate her 25 th birthday party on 1st January,
2023 at 7.30 P.M. at a well-known "Hi-Fi Restaurant" at Tonk Road, Jaipur. All invited
friends accepted the invitation and promised to attend the said party. On request of the
hotel manager, Radha deposited ` 5,000/- as non-refundable security for the said party.
On the scheduled date and time, three among ten invited friends did not turn up for the
birthday party and did not convey any prior communication to her. Radha, enraged with
the behaviour of the three friends, wanted to sue them for loss incurred in the said party.
Advise as per the provisions of the Indian Contract Act, 1872.
Would your answer differ if the said party had been a "Contributory 2023 New Year
celebration Party" organized by Radha? (4 Marks)
(b) ABC Limited has allotted equity shares with voting rights to XYZ Limited worth ` 15
crores and convertible preference shares worth ` 10 crores during the financial year 2022-
23. After that the total share capital of the company is ` 100 crores.
Comment on whether XYZ Limited would be called an Associate Company as per the
provisions of the Companies Act, 2013? Also define an Associate Company. (4 Marks)
(c) Mr. A contracted to sell his swift car to Mr. B. Both missed to discuss the price of the said
swift car. Later, Mr. A refused to sell his swift car to Mr. B on the ground that the
agreement was void being uncertain about the price. Does Mr. B have any right against
Mr. A under the Sale of Goods Act, 1930? (4 Marks)
Answer
(a) As per one of the requirements of Section 10 of the Indian Contract Act, 1872, there must
be an intention on the part of the parties to create legal relationship between them.
Social or domestic agreements are not enforceable in court of law and hence they do not
result into contracts.
In the instant case, Radha cannot sue her three friends for the loss incurred in the said
party as the agreement between her and her ten friends was a social agreement, and the
parties did not intend to create any legal relationship.
If the said party organised by Radha had been a “Contributory 2023 New year
celebration party”, then Radha could have sued her three friends for the loss incurred in
the said party as the agreement between her and her friends would have legal backing;

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2 FOUNDATION EXAMINATION: JUNE, 2023

on the basis of which Radha deposited the advance amount and the parties here
intended to create legal relationship.
(b) Associate company [Section 2(6) of the Companies Act, 2013] in relation to another
company, means a company in which that other company has a significant influence, but
which is not a subsidiary company of the company having such influence and includes a
joint venture company.
The expression “significant influence” means control of at least twenty per cent of total
voting power, or control of or participation in business decisions under an agreement.
The term “joint venture” means a joint arrangement whereby the parties that have joint
control of the arrangement have rights to the net assets of the arrangement.
In the instant case, ABC Limited has allotted equity shares with voting rights to XYZ
Limited worth ` 15 crore and convertible preference shares worth `10 crore during the
financial year 2022-23 out of the total share capital of ABC Limited of ` 100 crore.
Since XYZ Limited is holding only 15% significant influence (` 15 crore equity shares
with voting rights) in ABC Limited, which is less than twenty per cent, XYZ Limited is not
an Associate company of ABC Limited.
Important Note:
It can be assumed that the convertible preference shareholders are having voting rights
and due to this, XYZ Limited is holding overall 25% paid up share capital in ABC Limited
(with voting rights). Hence, XYZ limited is having significant control over ABC Limited and
therefore XYZ is an Associate company of ABC Limited.
(c) As per the provisions of Section 2(10) of the Sale of Goods Act, 1930, price is the
consideration for sale of goods and therefore is a requirement to make a contract of sale.
Section 2(10) is to be read with Section 9 of the Sale of Goods Act, 1930.
According to Section 9 of the Sale of Goods Act, 1930, the price in a contract of sale may
be fixed by the contract or may be left to be fixed in manner thereby agreed or may be
determined by the course of dealing between the parties.
Even though both the parties missed to discuss the price of the car while making the
contract, it will be a valid contract, rather than being uncertain and void; the buyer shall
pay a reasonable price in this situation.
In the given case, Mr. A and Mr. B have entered into a contract for sale of a motor car,
but they did not fix the price of the same. Mr. A refused to sell the car to Mr. B on this
ground. Mr. B can legally demand the car from Mr. A and Mr. A can recover a reasonable
price of the car from Mr. B.

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 3

Question 2
(a) As per the general rule, "Stranger to a contract cannot file a suit in case of breach of
contract". Comment and explain the exceptions to this rule as per the provisions of the
Indian Contract Act, 1872. (7 Marks)
(b) Discuss the liabilities of Limited Liability Partnership (LLP) and its partners in case of
fraud as per the provisions of the Limited Liability Partnership Act, 2008. (5 Marks)
Answer
(a) Under the Indian Contract Act, 1872, the consideration for an agreement may proceed
from a third party; but the third party cannot sue on contract. Only a person who is party
to a contract can sue on it.
The aforesaid rule, that stranger to a contract cannot sue is known as a “doctrine of
privity of contract”, is however, subject to certain exceptions. In other words, even a
stranger to a contract may enforce a claim in the following cases:
(1) In the case of trust, a beneficiary can enforce his right under the trust, though he
was not a party to the contract between the settler and the trustee.
(2) In the case of a family settlement, if the terms of the settlement are reduced into
writing, the members of family who originally had not been parties to the settlement,
may enforce the agreement.
(3) In the case of certain marriage contracts/arrangements, a provision may be
made for the benefit of a person, who may file a suit though he is not a party to the
agreement.
(4) In the case of assignment of a contract, when the benefit under a contract has
been assigned, the assignee can enforce the contract but such assignment should
not involve any personal skill.
(5) Acknowledgement or estoppel – Where the promisor by his conduct
acknowledges himself as an agent of the third party, it would result into a binding
obligation towards third party.
(6) In the case of covenant running with the land, the person who purchases land
with notice that the owner of land is bound by certain duties affecting land, the
covenant affecting the land may be enforced by the successor of the seller.
(7) Contracts entered into through an agent: The principal can enforce the contracts
entered by his agent where the agent has acted within the scope of his authority
and in the name of the principal.

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4 FOUNDATION EXAMINATION: JUNE, 2023

(b) Unlimited liability in case of fraud (Section 30 of the Limited Liability Partnership
Act, 2008):
(1) In case of fraud:
• In the event of an act carried out by a LLP, or any of its partners,
• with intent to defraud creditors of the LLP or any other person, or for any
fraudulent purpose,
• the liability of the LLP and partners who acted with intent to defraud creditors
or for any fraudulent purpose
• shall be unlimited for all or any of the debts or other liabilities of the LLP.
However, in case any such act is carried out by a partner, the LLP is liable to the
same extent as the partner, unless it is established by the LLP that such act was
without the knowledge or the authority of the LLP.
(2) Punishment: Where any business is carried on with such intent or for such purpose
as mentioned in sub-section (1), every person who was knowingly a party to the
carrying on of the business in the manner aforesaid shall be punishable with
• imprisonment for a term up to 5 years and
• with fine which shall not be less than ` 50,000, but which may extend to ` 5
Lakhs.
(3) Compensations on commission of fraud: Where a LLP or any partner or
designated partner or employee of such LLP has conducted the affairs of the LLP in
a fraudulent manner, then without prejudice to any criminal proceedings which may
arise under any law for the time being in force, the LLP and any such partner or
designated partner or employee shall be liable to pay compensation to any person
who has suffered any loss or damage by reason of such conduct.
However, such LLP shall not be liable if any such partner or designated partner or
employee has acted fraudulently without knowledge of the LLP.
Question 3
(a) Explain about the registration procedure of a partnership firm as prescribed under the
Indian Partnership Act, 1932. (6 Marks)
(b) (i) Mr. A, the employer induced his employee Mr. B to sell his one room flat to him at
less than the market value to secure promotion. Mr. B sold the flat to Mr. A. Later on,
Mr. B changed his mind and decided to sue Mr. A. Examine the validity of the
contract as per the provisions of the Indian Contract Act, 1872. (2 Marks)
(ii) Mr. S promises Mr. M to paint a family picture for ` 20,000 and assures to complete
his assignment by 15th March, 2023. Unfortunately, Mr. S died in a road accident on

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 5

1st March, 2023 and his assignment remains undone. Can Mr. M bind the legal
representative of Mr. S for the promise made by Mr. S? Suppose Mr. S had
promised to deliver some photographs to Mr. M on 15th March, 2023 against a
payment of ` 10,000 but he dies before that day. Will his representative be bound to
deliver the photographs in this situation?
Decide as per the provisions of the Indian Contract Act, 1872. (4 Marks)
Answer
(a) Application for Registration (Section 58 of the Indian Partnership Act, 1932): The
registration of a firm may be effected at any time by sending by post or delivering to the
Registrar of the area in which any place of business of the firm is situated or proposed to
be situated, a statement in the prescribed form and accompanied by the prescribed fee,
stating-
(a) The firm’s name
(b) The place or principal place of business of the firm,
(c) The names of any other places where the firm carries on business,
(d) the date when each partner joined the firm,
(e) the names in full and permanent addresses of the partners, and
(f) the duration of the firm.
The statement shall be signed by all the partners, or by their agents specially authorised
in this behalf.
(1) Each person signing the statement shall also verify it in the manner prescribed.
(2) A firm name shall not contain any of the following words, namely:-
‘Crown’, ‘Emperor’, ‘Empress’, ‘Empire’, ‘Imperial’, ‘King’, ‘Queen’, ‘Royal’, or words
expressing or implying the sanction, approval or patronage of Government except when
the State Government signifies its consent to the use of such words as part of the firm -
name by order in writing.
Registration (Section 59): When the Registrar is satisfied that the provisions of section
58 (above mentioned provisions) have been duly complied with, he shall record an entry
of the statement in a register called the Register of Firms and shall file the statement.
The Firm when registered shall use the brackets and word (Registered) immediately after
its name.

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6 FOUNDATION EXAMINATION: JUNE, 2023

(b) (i) According to section 16 of the Indian Contract Act, 1872, a contract is said to be
induced by ‘undue influence’ where the relations subsisting between the parties are
such that one of the parties is in a position to dominate the will of the other and he
uses that position to obtain an unfair advantage over the other.
When consent to an agreement is caused by undue influence, the contract is
voidable at the option of the party, whose consent was so caused.
Hence, the contract between Mr. A and Mr. B is voidable at the option of Mr. B as it
was induced by undue influence by Mr. A and therefore Mr. B can sue Mr. A.
(ii) 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 this Act, or of any other law.
Promises bind the representatives of the promisors in case of the death of such
promisors before performance, unless a contrary intention appears from the
contract. (Section 37 of the Indian Contract Act, 1872).
As per the provisions of Section 40 of the Indian Contract Act, 1872, if it appears
from the nature of the case that it was the intention of the parties to any contract
that any promise contained in it should be performed by the promisor himself, such
promise must be performed by the promisor. In other cases, the promisor or his
representative may employ a competent person to perform it.
In terms of the provisions of Section 40 stated above, in case where Mr. S has to
paint a family picture for Mr. M, Mr. M cannot ask the legal representative of Mr. S
to complete the painting work on Mr. S’s death, since painting involves the use of
personal skill.
In terms of the provisions of Section 37 stated above, in case where Mr. S had
promised to deliver some photographs to Mr. M, the legal representatives of Mr. S
shall be bound to deliver the photographs in this situation.
Question 4
(a) Describe in brief the rights of the buyer against the seller in case of breach of contract of
Sale. (6 Marks)
(b) P, Q and R are partners in a partnership firm. R retires from the firm without giving public
notice. P approached S, an electronic appliances trader, for purchase of 25 fans for his
firm. P introduced E, an employee of the firm, as his partner to S. S believing E and R as
partners supplied 25 fans to the firm on credit. S did not receive the payment for the fans
even after the expiry of the credit period. Advise S, from whom he can recover the
payment as per the provisions of the Indian Partnership Act, 1932. (6 Marks)

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 7

Answer
(a) If the seller commits a breach of contract, the buyer gets the following rights against the
seller:
1. Damages for non-delivery [Section 57 of the Sale of Goods Act, 1930]: Where
the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer
may sue the seller for damages for non-delivery.
2. Suit for specific performance (Section 58): Where the seller commits breach of
the contract of sale, the buyer can appeal to the court for specific performance. The
court can order for specific performance only when the goods are ascertained or
specific and where damages would not be an adequate remedy.
3. Suit for breach of warranty (Section 59): Where there is breach of warranty on
the part of the seller, or where the buyer elects to or is forced to treat breach of
condition as breach of warranty, the buyer is not by reason only of such breach of
warranty entitled to reject the goods on the basis of such breach of warranty; but
the buyer may –
(i) set up against the seller the breach of warranty in diminution or extinction of
the price; or
(ii) sue the seller for damages for breach of warranty.
4. Repudiation of contract before due date (Section 60): Where either party to a
contract of sale repudiates the contract before the date of delivery, the other may
either treat the contract as:
• subsisting and wait till the date of delivery, or
• he may treat the contract as rescinded and sue for damages for the breach.
5. Suit for interest:
(1) The buyer is entitled to recover interest or special damages, or to recover the
money paid where the consideration for the payment of it has failed.
(2) In the absence of a contract to the contrary, the court may award interest at
such rate as it thinks fit on the amount of the price to the buyer in a suit by him
for the refund of the price in a case of a breach of the contract on the part of
the seller from the date on which the payment was made.
(b) According to sub-section (3) of Section 32 of the Indian Partnership Act, 1932, a retiri ng
partner along with the continuing partners continue to be liable to any third party for acts
of the firm after his retirement until public notice of his retirement has been given either
by himself or by any other partner. But the retired partner will not be liable to any third
party if the latter deals with the firm without knowing that the former was a partner.

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8 FOUNDATION EXAMINATION: JUNE, 2023

As per the provisions of Section 28, where a man holds himself out as a partner or allows
others to do it, when in fact he is not a partner, he is liable like a partner in the firm to
anyone who on the faith of such representation has given credit to the firm.
In the instant case, since Mr. R has not given the public notice of his retirement from the
partnership firm and Mr. S believes that Mr. R is a partner, Mr. R will be liable to Mr. S
under the provisions of Section 32.
Also Mr. E, who has been introduced as a partner of the firm to which Mr. E has not
presumably denied, will also be liable for the payment of 25 fans supplied to the firm on
credit along with other partners in terms of the provisions of Section 28 as stated above.
Over and above R and E, P and Q being the partners of the firm along with the firm will
also be held liable to S.
Therefore, S can recover the payment from the Firm, P, Q, R and E.
Question 5
(a) (i) An auction sale of the certain goods was held on 7 th March, 2023 by the fall of
hammer in favour of the highest bidder X. The payment of auction price was made
on 8th March, 2023 followed by the delivery of goods on 10th March, 2023. Based
upon on the provisions of the Sale of Goods Act, 1930, decide when the auction
sale is complete. (2 Marks)
(ii) Certain goods were sold by sample by J to K, who in turn sold the same goods by
sample to L and L by sample sold the same goods to M. M found that the goods
were not according to the sample and rejected the goods and gave a notice to L. L
sued K and K sued J. Can M reject the goods? Also advise K and L as per the
provisions of the Sale of Goods Act, 1930. (4 Marks)
(b) Explain the concept of 'Corporate Veil'. Briefly state the circumstances when the
corporate veil can be lifted as per the provisions of the Companies Act, 2013. (6 Marks)
Answer
(a) (i) According to Section 64 of the Sale of Goods Act, 1930, the sale is complete when
the auctioneer announces its completion by the fall of hammer or in any other
customary manner.
In the given question, the auction sale is complete on 7th March, 2023.
(ii) As per the provisions of Sub-Section (2) of Section 17 of the Sale of Goods Act,
1930, in a contract of sale by sample, there is an implied condition that:
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing the bulk with the
sample.

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 9

In this case, M received the goods by sample from L but since the goods were not
according to the sample, M can reject the goods and can sue L.
With regard to K and L, L can recover damages from K and K can recover damages
from J. But, for both K and L, it will not be treated as a breach of implied condition
as to sample as they have accepted and sold the goods according to Section 13(2)
of the Sale of Goods Act, 1930.
(b) Corporate Veil: Corporate Veil refers to a legal concept whereby the company is
identified separately from the members of the company. Due to this, members of a
company are shielded from liability connected to the company’s actions.
Lifting of Corporate Veil: The following are the cases where company law disregards
the principle of corporate personality or the principle that the company is a legal entity
distinct and separate from its shareholders or members:
(1) To determine the character of the company i.e. to find out whether co-enemy
or friend: It is true that, unlike a natural person, a company does not have mind or
conscience; therefore, it cannot be a friend or foe. It may, however, be
characterised as an enemy company, if its affairs are under the control of people of
an enemy country. For this purpose, the Court may examine the character of the
persons who are really at the helm of affairs of the company.
(2) To protect revenue/tax: In certain matters concerning the law of taxes, duties and
stamps particularly where question of the controlling interest is in issue. Where
corporate entity is used to evade or circumvent tax, the Court can disregard the
corporate identity.
(3) To avoid a legal obligation: Where it was found that the sole purpose for the
formation of the company was to use it as a device to reduce the amount to be paid
by way of bonus to workmen, the Supreme Court upheld the piercing of the veil to
look at the real transaction.
(4) Formation of subsidiaries to act as agents: A company may sometimes be
regarded as an agent or trustee of its members, or of another company, and may
therefore be deemed to have lost its individuality in favour of its principal. Here the
principal will be held liable for the acts of that company.
(5) Company formed for fraud/improper conduct or to defeat law: Where the device
of incorporation is adopted for some illegal or improper purpose, e.g., to defeat or
circumvent law, to defraud creditors or to avoid legal obligations.
Question 6
(a) Distinguish between Void Contract and Voidable Contract according to the Indian
Contract Act, 1872. (5 Marks)

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10 FOUNDATION EXAMINATION: JUNE, 2023

(b) What are the rights of partners with respect to conduct of the business of a firm as
prescribed under the Indian Partnership Act, 1932? (4 Marks)
(c) ABC Private Limited is a registered company under the Companies Act, 2013 with paid
up capital of ` 35 lakhs and turnover of ` 2.5 crores. Whether the ABC Private Limited
can avail the status of a Small Company in accordance with the provisions of the
Companies Act, 2013? Also discuss the meaning of a Small Company. (3 Marks)
Answer
(a) The differences between void contract and voidable contract are as follows:
S. Basis Void Contract Voidable Contract
No.
1 Meaning A Contract which ceases to An agreement which is
be enforceable by law enforceable by law at the
becomes void when it option of one or more of the
ceases to be enforceable. parties thereto, but not at the
option of the other or others,
is a voidable contract.
2 Enforceability A void contract cannot be It is enforceable only at the
enforced at all. option of aggrieved party and
not at the option of the other
party.
3 Cause A contract becomes void A contract becomes a
due to change in law or voidable contract if the
change in circumstances consent of a party was not
beyond the contemplation of free.
parties.
4 Performance A void contract cannot be If the aggrieved party does
of contract performed. not, within reasonable time,
exercise his right to avoid the
contract, any party can sue
the other for claiming the
performance of the contract.
5 Rights A void contract does not The party whose consent
grant any legal remedy to was not free has the right to
any party. rescind the contract within a
reasonable time. If so
rescinded it becomes a void
contract. If it is not rescinded
it becomes a valid contract.

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PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 11

(b) Conduct of the Business (Section 12 of the Indian Partnership Act, 1932): Subject to
contract between the partners-
(a) every partner has a right to take part in the conduct of the business;
(b) every partner is bound to attend diligently to his duties in the conduct of the
business;
(c) any difference arising as to ordinary matters connected with the business may be
decided by majority of the partners, and every partner shall have the right to
express his opinion before the matter is decided, but no change may be made in the
nature of the business without the consent of all partners; and
(d) every partner has a right to have access to and to inspect and copy any of the
books of the firm.
(e) in the event of the death of a partner, his heirs or legal representatives or their duly
authorised agents shall have a right of access to and to inspect and copy any of the
books of the firm.
(c) Small Company: Small Company as defined under Section 2(85) of the Companies Act,
2013 means a company, other than a public company—
(i) paid-up share capital of which does not exceed ` 4 crore or such higher amount
as may be prescribed which shall not be more than ` 10 crore; and
(ii) turnover of which as per profit and loss account for the immediately preceding
financial year does not exceed ` 40 Crore or such higher amount as may be
prescribed which shall not be more than ` 100 crore:
Exceptions: This clause shall not apply to:
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act.
In the instant case, since the paid-up capital of ABC Private Limited is ` 35 Lakhs and
turnover is ` 2.5 crore, it can avail the status of a small company as both the
requirements with regard to paid-up share capital as well as turnover are fulfilled by the
Company.

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12 FOUNDATION EXAMINATION: JUNE, 2023

SECTION-B : BUSINESS CORRESPONDENCE AND REPORTING

Question No. 7 is compulsory.
Answer any three questions from the remaining four questions.
All candidates (including those who have opted for Hindi Medium) are required to answer the
questions in Section B, in English only.
Question 7
(a) Answer any THREE questions out of the remaining Four questions.
Read the passage carefully and answer the questions given below:
Air pollution is an issue which concerns us all alike. Air pollutant is defined as a
substance which is present in air while normally it is not there or present in an amount
exceeding the normal concentrations. It could either be gaseous or a particulate matter.
The important and harmful polluting gases are carbon monoxide, carbon dioxide, ozone
and oxides of sulphur and nitrogen. The common particulate pollutants are the dusts of
various inorganic or organic origins. Although we often talk of the outdoor air pollution
caused by industrial and vehicular exhausts, the indoor pollution may prove to be as or a
more important cause of health problems.
Recognition of air pollution is relatively recent. It is not uncommon to experience a feeling
of 'suffocation' in a closed environment. It is often ascribed to the lack of oxygen.
Fortunately, however, the composition of air is remarkably constant all over the world.
There is about 79 percent nitrogen and 21 percent oxygen in the air and the other gas
forming a very small fraction. It is true that carbon dioxide exhaled out of lungs may
accumulate in a closed and overcrowded place. But such an increase is usually small
and temporary unless the room is really airtight. Exposure to poisonous gases such as
carbon monoxide may occur in a closed room, heated by burning coal insi de. This may
also prove to be fatal.
What is more common in a poorly ventilated home is a vague constellation of symptoms
described as the sick-building syndrome. It is characterized by a general feeling of
malaise, headache, dizziness and irritation of mucous membranes. It may also be
accompanied by nausea, itching, aches, pains and depression. Sick building syndrome is
getting commoner in big cities with the small houses, which are generally over furnished.
By products of fuel combustion are important in houses with indoor kitchens. It is not only
the burning of dried dung and fuel wood which is responsible, but also kerosene and
liquid petroleum gas. Oxides of both nitrogen and sulphur are released from their
combustion.
Smoking of tobacco in the closed environment is an important source of indoor pollution.
It may not be high quantitatively, but significantly hazardous for health. It is because of

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 13

the fact that there are over 3,000 chemical constituents in tobacco smoke, which have
been identified. These are harmful for human health.
Microorganisms and allergens are of special significance in the causation and spread of
diseases, Most of the infective illnesses may involve more persons of a family living in
common indoor environment. These include viral and bacterial diseases like tuberculosis.
Besides infections, allergic and hypersensitivity disorders are spreading fast. Although
asthma is the most common form of respiratory allergic disorders, pneumonias are not
uncommon, but more persistent and serious. These are attributed to exposures to
allergens from various fungi, moulds, hay and other organic materials. Indoor air
ventilation systems, coolers, air conditioners, dampness, decay, pet animals, production
or handling of the causative items are responsible for these hypersensitivity diseases.
Obviously, the spectrum of pollution is very wide and our options are limited. Indoor
pollution may be handled relatively easily by an individual. Moreover, the good work must
start from one's own house.
(i) What is an air pollutant? (1 Mark)
(ii) Why do we feel suffocated in a closed environment? (1 Mark)
(iii) How the sick building syndrome can be characterized? (1 Mark)
(iv) How is indoor smoking very hazardous? (1 Mark)
(v) How can one overcome the dangers of indoor air pollution? (1 Mark)
(b) Read the passage:
Effective speaking depends on effective listening. It takes energy to concentrate on
hearing and to concentrate on understanding what has been heard. Incompetent
listeners fail in a number of ways. First, they may drift. Their attention drifts from what the
speaker is saying. Second, they may counter. They find counter-arguments to whatever a
speaker may be saying. Third, they compete. Then, they filter. They exclude from their
understanding those parts of the message which do not readily fit with their own frame of
reference. Finally, they react. They let personal feelings about a speaker or subject
override the significance of the message which is being sent.
What can a listener do to be more effective? The first key to effective listening is the art
of concentration. If a listener positively wishes to concentrate on receiving a message his
chances of success are high.
It may need determination. Some speakers are difficult to follow, either because of voice
problems or because of the form in which they send a message. There is then a
particular need for the determination of a listener to concentrate on what is being said.
Concentration is helped by alertness. Mental alertness is helped by physical alertness. It
is not simply physical fitness, but also positioning of the body, the limbs and the head.

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14 FOUNDATION EXAMINATION: JUNE, 2023

Some people also find it helpful to their concentration if they hold the head slightly to one
side. One useful way for achieving this is intensive note-taking, by trying to capture the
critical headings and sub-headings the speaker is referring to.
Note-taking has been recommended as an aid to the listener. It also helps the speaker. It
gives him confidence when he sees that listeners are sufficiently interested to take notes;
the patterns of eye-contact when the note-taker looks up can be very positive; and the
speaker's timing is aided-he can see when a note-taker is writing hard and can then
make effective use of pauses.
Posture too is important. Consider the impact made by a less competent listener who
pushes his chair backwards and slouches. An upright posture helps a listener's
concentration. At the same time it is seen by the speaker to be a positive feature
amongst his listeners. Effective listening skills have an impact on both the listener and
the speaker.
(i) Make notes, using headings, sub-headings and abbreviation whenever necessary.
(3 Marks)
(ii) Write a summary. (2 Marks)
Answer
(a) (i) An air pollutant is a substance which is present in air while normally it is not there or
present in an amount exceeding the normal concentrations.
(ii) We feel suffocated in a closed environment due to the lack of oxygen.
(iii) The sick building syndrome can be characterized by a general feeling of malaise,
headaches, dizziness and irritation of mucous membranes. It may also be
accompanied by nausea, itching, aches, pains and depression.
(iv) Indoor smoking is very hazardous because over 3000 chemicals constituents are
present in tobacco smoke, which are harmful for human health.
(v) Indoor pollution can be handled easily by an individual by starting the good work
from one’s own house. It can be avoided through well ventilated houses, not
smoking tobacco inside the houses and not burning coal inside the closed rooms.
(b) (i) The Art of effective Listening
1. Eff. speaking depends on:
1.1 eff. Listening
1.2 concen. on listening
1.3 concen. on understanding what you hear

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 15

2. Reasons why incompetent lstnr. fail :

2.1 their attention drifts
2.2 they find counter arguments
2.3 they compete & then filter
2.4 they react
3. Ways for a lstnr. to be more eff.:
3.1 concen. on the msg. recd.
3.2 determination
3.3 phys. alertness-positioning body
3.4 note-taking-aid
3.4.1 helps spkr.
3.4.2 gives him confidence
3.4.3 encourages eye contact
4. Impact of posture
4.1 helps lstnr. in concen.
4.2 seen by spkr. as a +ve feature among his lstnr.
Key to Abbreviations
Eff. effective
Lstnr listener
Concen. concentrating
Msg. message
Recd. received
Phys. physical
+ve positive
Spkr. speaker
(ii) Summary:
Title: The Art of Effective Listening
Effective speaking and effective listening are two sides of the same coin, both are
equally important. An incompetent listener will always fail as he drifts away from

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16 FOUNDATION EXAMINATION: JUNE, 2023

counters, competes and finally filters what the speakers is saying. In order to be a
good listener, concentration is importantly combined with mental and physical
alertness. The importance of other factors like note-taking and posture cannot be
ignored. All these are vital for effective listening skills and are viewed as a positive
feature by the speaker amongst his listeners. These skills have an impact not only
on the listener but also on the speaker.
Question 8
(a) Comment on following statement:
"Communication does not simply involve sending of a message by a person." (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
ADAMANT
(1) Willing
(2) Inflexible
(3) Poor
(4) Unfavourable (1 Mark)
(ii) Fill in the blanks with the most suitable option:
The study of coding-decoding involves various _______________ clues.
(1) Healthy
(2) Obvious
(3) Verbose
(4) Cryptic (1 Mark)
(iii) Change the following sentence to indirect speech:
He said, "I clean my teeth twice a day." (1 Mark)
(c) Write Precis and give appropriate title to the passage given below:
Almost every organism has the tendency to react to certain stimuli for survival. This
reaction to each and every situation has an evolutionary basis of adaptation. The study of
human emotions dates back to the 19th century and psychologists have since then
discovered many reasons for every emotion, yet these are just theories. The arousal of
emotions and their assumed structures is said to occur due to repeated encounters with
a situation followed by the adaptation of the encounter. Human emotions have been
linked to adaptively regulate emotion gathering mechanisms. The emotion of fear which
is associated with ancient parts of the brain has presumably evolved among our pre-
mammal ancestors while the emotion of a mother's love called the 'filial emotion' has

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 17

seen to evolve among early mammals. Various emotions work as manipulative strategies
that favour survival. Feigning emotions by an accused person may help him be saved
from the punishment. An exaggerated display of anger is also associated with
manipulating or threatening someone.
Despite there being several emotions for various events, ironically the most interesting
emotion is the emotion of disgust. Disgust is aroused when the body senses a danger to
the immunity or the physiology of the human. The disgusted memory is associated with
alerting the brain of a potentially dangerous substance. A few studies have shown that
the encoding triggered in adaptive memory for problems is stronger than any other
behaviour. This makes us instantly have a disgusted expression at the sight of something
that makes us uncomfortable or uneasy. These expressions are also closely linked to self-
protective communication. (5 Marks)
Answer
(a) Communication does not simply involve sending of a message by a person rather it is a
process of exchanging information, ideas, thoughts and emotions through speech, signal,
writing or behaviour. For effective communication the sender is required to select the
appropriate medium and mode of communication for sending the message. He/she must
communicate his message in a manner which is understandable and acceptable by the
receiver. This requires selection of appropriate language and suitable time for
communication by the sender. Communication is supposed to be complete and effective
only when the listener responds relevantly and appropriately.
(b) (i) (2) Inflexible
(ii) (4) cryptic
(iii) He said that he cleans his teeth twice a day.
(c) précis
Title: Human Evolution and Emotions
The emotions that humans express and how they react to stimuli in the environment has
an evolutionary basis. Emotions are assumed to be a result of repeated encounters with
a certain event. According to evolution, emotions like fear, love, feigning, anger, and
disgust are results of consistent reactions in particular situations. Encoding triggered in
adaptive memory for problems results in having a disgusted expression that makes us
uncomfortable. Some expressions are often built up or adapted as a form of self-
protection.
Question 9
(a) Concreteness is an important characteristic of effective communication. Comment.
(2 Marks)

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18 FOUNDATION EXAMINATION: JUNE, 2023

Or
What do you mean by Visual communication? (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
RELISH
(1) Like
(2) Abhore
(3) Hate
(4) Loathe (1 Mark)
(ii) Choose the word which best expresses the meaning of the given word:
MESSY
(1) Organised
(2) Dirty
(3) Hygienic
(4) Clean (1 Mark)
(iii) Change the following sentence into direct speech:
She said that she would buy a new house if she had been rich. (1 Mark)
(c) Write a report in 250 words on the topic: "Climate Change". (5 Marks)
Answer
(a) The content of one’s communiqué should be tangible and based on data. Abstract ideas
and thoughts are liable to misinterpretation. It should be made sure that there is just
sufficient detail to support one’s case /argument with focus to the main message.
OR
Visual communication through visual aids such as signs, typography, drawing, graphic
design, illustration, colour and other electronic resources usually reinforces written
communication altogether. Visual communication is a powerful medium, due to which the
print and audio visual media makes effective use of visuals to convey their message.
Visuals like graphs, pie charts and other diagrammatic presentations convey clearly and
concisely a great deal of information. They are an essential part of official presentations
these days.
(b) (i) (1) Like
(ii) (2) Dirty
(iii) She said, “I would buy a new house if I were rich,”

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 19

(c) Climate Change

By—Raman Gupta
Climate change is basically a change in the pattern of the climate that lasts for a few
decades to centuries. Various factors lead to the changes in the climate conditions on the
earth. These factors are also referred to as forcing mechanisms. These mechanisms are
either external or internal.
External forcing mechanisms can either be natural such as the variation in the earth’s
orbit, variation in solar radiation, volcanic eruptions, plate tectonics, etc. or can be
caused due to human activities such as greenhouse gases, carbon emission, etc.
Internal forcing mechanisms, on the other hand, are the natural processes that occur
within the climate system. These include the ocean-atmosphere variability as well as the
presence of life on the earth.
Human activities such as deforestation, use of land and use of methods that lead to the
increase in carbon in the atmosphere have been a major cause of climate change in the
recent past. It is important to keep a check on such activities in order to control climatic
changes and ensure environmental harmony.
Climate change has a negative impact on the forests, wildlife, water systems as well as
the polar region on the earth. A number of species of plants and animals have gone
extinct due to the changes in the climate on the earth and several others have also been
affected adversely.
As per researchers, human activities have contributed majorly to this change during the
last few decades. In order to control climate change and maintain a healthy environment
on the earth, human influences on the same need to be controlled.
Question 10
(a) Define Wheel and Spoke Network in communication. (2 Marks)
(b) (i) Change the sentence from Active to Passive Voice:
Please help me. (1 Mark)
(ii) Change the sentence from Passive to Active Voice:
Jobs will have been lost by thousands of individuals due to the pandemic. (1 Mark)
(iii) Change the following sentence to direct Speech:
The teacher suggested the boys that they should go swimming since it was so
warm. (1 Mark)
(c) You are Bhupendra, a resident of B-128 Rajeev Gandhi Nagar, New Delhi. You are
worried about your younger brother's habit of excessive use of Internet for completing his
homework. Write a letter to the Editor of a popular newspaper, expressing your opinion

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20 FOUNDATION EXAMINATION: JUNE, 2023

on the advantages, disadvantages of the dependence of youth for utilizing Internet as a

homework tool in the present times. Also send it by email (assume emails of yourself and
the receiver appropriately). (5 Marks)
Answer
(a) Wheel and Spoke Network: There is a single controlling authority who gives instructions
and orders to all employees working under him / her in this communication network. All
employees get instructions directly from the leader and report back to him / her. It is
direct and efficient for the small business / company, but inappropriate way of
communication in a large organization with many people. A company with many
employees needs more decision makers or nothing would get done.

(b) (i) You are requested to help me.

(ii) Thousands of individuals will have lost their jobs due to the pandemic.
(iii) The teacher said to the boys, “Since it is so warm let us go swimming.”
(c) B-128, Rajeev Gandhi Nagar
New Delhi
(Email : [email protected])
10 February, 2023
The Editor
The Hindustan Times
New Delhi
(Email: [email protected])
Subject: Expressing concern over students’ craze for using internet as homework tool.
Sir,
Through the columns of your esteemed newspaper, I wish to highlight the problem of
growing dependence of the present generation on the internet as a homework tool.
In many ways, internet is a boon for the students. It is one of the quickest ways to find
information on any topic. Students have access to a variety of sources to gather
information on any topic. This enriches their knowledge and may expose them to

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 21

additional valid information. Time required to get answers to queries is very less.
Therefore, students have more time on hand to indulge in recreation activities.
However, it seems that internet has more disadvantages than advantages. There are
chances that some websites may contain inaccurate and inappropriate information too.
Besides reading habit of students, understanding skills are deteriorating as they just copy
information. They display lack of interest in listening to the teacher in school. The
concept of hard work seems to be disappearing amongst the youth of the present
generation, which is a dangerous sign.
Excess of anything is bad. A balanced, sensible and guided use of internet is required so
that our present generation enjoys the fruit of technology positively. I hope you will
publish my views in public interest.
Bhupendura
A concerned citizen
(PS: Above communication has been also sent from my email: [email protected] to
you at [email protected])
Question 11
(a) How 'Emotions' of a person become barrier of communication? (2 Marks)
(b) Select the correct meaning of Idioms/ Phrases given below:
(i) Bone of contention
(1) To be cautious
(2) Subject of dispute
(3) Area of agreement
(4) Of least importance (1 Mark)
(ii) Face the music
(1) To anticipate good response of something you have done
(2) To accept award for something you have done
(3) To accept criticism for something you have done
(4) To wait for result of something you have done (1 Mark)
(iii) Correct the following sentence:
I cannot explain that why I like her so much. (1 Mark)
(c) You are Karunesh Vijay, a resident of 123 Mahaveer Nagar, Indore, Madhya Pradesh.
You came across a notice on the website of a. CA Firm 'Saha and Company' posted on

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22 FOUNDATION EXAMINATION: JUNE, 2023

24 February, 2023, for the recruitment of an Article Assistant. Prepare a resume along
with a cover letter in response to this notice. (5 Marks)
Answer
(a) Emotional barrier in Communication: Emotions play a very vital role in our life. Both
encoding and decoding of message are influenced by our emotions. A message received
when we are emotionally charged up will have a different meaning for us than when we
are calm and composed. It is one of the chief barriers to open and free communications.
A person who is upset and disturbed cannot pass on or receive information appropriately
and objectively.
(b) (i) (2) Subject of dispute
(ii) (3) To accept criticism for something you have done.
(iii) I cannot/can’t explain why I like her so much.
(c) Cover Letter
Karunesh Vijay
123 Mahaveer Nagar, Indore,
Madhya Pradesh
Phone Number: +91 9910838521
Email. Id: [email protected]
Date: 28-02-2023
To
The Managing Partner,
Shah & Company
Connaught Place,
New Delhi.
Subject: Application for the position of an Article Assistant
Dear Sir,
This is with reference to the notice posted on your website dated 24-02-2023 for
requirement of Article Assistants. I wish to apply for the same. As regards my
qualification, I am enclosing my resume to enable you to assess my suitability for the
same. If given an opportunity, I will prove to deliver my duties to the best of my abilities.
I will be readily available for personal interaction any time at your convenience in case
my candidature is considered for the aforesaid post.
Looking forward for a favorable reply,

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PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 23

Thanking you,
Yours sincerely
Karunesh Vijay.
Enclosures:
“Resume”
For the position of an Article Assistant
Name: Karunesh Vijay
Father’s name: Dr. Mohan Lal Vijay
Permanent Address: 123, Mahaveer Nagar, Indore,
Madhya Pradesh
Contact: Phone Number: +91 9910838521
Email. Id: [email protected]
Date of Birth: 01-02-2002
Nationality: Indian
Qualification:
S. Qualification Institution Board/ Year of Percentage/
No University Passing Division
1. Class X Delphi Public School, CBSE 2017 84.5
Indore, Madhya
Pradesh
2. Class XII Delphi Public School, CBSE 2019 87.5
Indore, Madhya
Pradesh
3. CA Foundation ICAI ICAI 2020 73.00
4. CA Intermediate ICAI ICAI 2022 72.59
Technical Skill:
Very well versed with MS- Excel
Can work in all versions of tally
Good analytical Skill
Good communication and Interpersonal Skill
Training:

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24 FOUNDATION EXAMINATION: JUNE, 2023

1. Information Technology Training: Completed ITT (100 hours) conducted by ICAI in

virtual mode
2. Orientation program: Completed OP (100 hours) conducted by ICAI in virtual mode
Languages known: English/ Hindi

I declare that the details mentioned are true to the best of my knowledge and belief.

Date: 28-02-2023 (Karunesh Vijay)

Place: Indore, MP

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ABOUT OUR FACULTY
Niraj Agarwal is a Chartered Accountant,
Company Secretary, Cost & Management
Accountant. He is an All India Rank Holder in
all the 3 courses. He has graduated from St.
Xavier’s College, Kolkata and holds a
Master’s degree in Commerce too. He
believes that learning is a continuous
process and hence he is also a ICAI certified
IFRS professional, an Associate from
Insurance Institute of India and completed 5
papers of Actuarial Science. He is also a
visiting Faculty at ICAS, Kolkata

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Multiple Mock Tests with evaluation

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