Professional Knowledge: Commercial and Business Law
Scope
Commercial and Business Law covers the Sale of Goods Act, 1930, the Indian Partnership Act, 1932, the Limited Liability Partnership Act, 2008, the Companies Act, 2013 and the Negotiable Instruments Act, 1881. Questions test definitions, rights and duties, and the consequences of default.
Core rules
- Sale of goods transfers property immediately; an agreement to sell transfers it in future or subject to a condition.
- In sale of goods, conditions are essential terms; breach of a condition allows repudiation and damages. Warranties are collateral; breach gives damages only.
- A partnership is governed by an agreement; partners are agents of the firm and are jointly and severally liable. An LLP gives limited liability and is a separate legal entity.
- A company is a separate legal person with perpetual succession.
- Under the NI Act, a cheque is a bill of exchange drawn on a banker payable on demand.
Worked example
A buys a second-hand printer from B, relying on B's statement that it prints 20 pages per minute. It prints 8. The statement is a condition going to the root of the contract, so A may reject the printer and claim damages. If the statement were merely about after-sales service, it could be a warranty.
Traps
Treating every agreement to sell as a sale; confusing a company with a partnership for liability; and forgetting that a cheque must be payable on demand.