Business Law and Commercial Knowledge
What the exam tests
Business law and commercial knowledge tests the Indian Contract Act 1872, Sale of Goods Act 1930, partnership and company basics, negotiable instruments and consumer protection. Expect essentials, definitions and short application scenarios.
Core rules
- A valid contract needs offer, acceptance, lawful consideration, capacity, free consent, lawful object and intention to create legal relations.
- An invitation to treat is not an offer; a display of goods is generally an invitation to treat.
- Consideration may be past, present or future, but must be lawful and real. A minor’s agreement is void ab initio.
- Sale of Goods: a contract of sale transfers or agrees to transfer property in goods for a price; conditions are essential, warranties collateral.
- Negotiable instruments: cheque, promissory note and bill of exchange; a cheque is drawn on a banker and payable on demand.
Worked example
A 17-year-old buys a bicycle on credit and refuses to pay. Under the Indian Contract Act, a minor lacks capacity; the agreement is void ab initio. The seller cannot enforce the promise to pay. If the minor had misrepresented age, the minor may be liable to restore property under equitable principles, but the safe exam answer is void ab initio with no contractual liability. The reasoning turns on capacity, not on the fairness of the price.
Traps
Calling a minor’s contract “voidable” instead of “void ab initio”, treating a quotation as a binding offer, and confusing a condition with a warranty cost marks. In negotiable instruments, do not call a cheque a bill of exchange drawn on a trader. Read the scenario for the exact legal issue.