Business Law and Commercial Knowledge
This domain tests the legal framework behind ordinary business transactions: contract, sale of goods, negotiable instruments, GST and consumer protection. Questions are usually applied - a short situation with a legal question at the end.
Contract (Indian Contract Act, 1872)
- Essentials: offer, acceptance, lawful consideration, capacity, free consent, lawful object, certainty, and not expressly declared void.
- A catalogue, price list or auction advertisement is an invitation to treat, not an offer. Consideration must be real but need not be adequate; past consideration is valid in India.
- Consent obtained by coercion, undue influence, fraud or misrepresentation makes the agreement voidable; a mistake of fact makes it void. A minor's agreement is void from the start, though a minor may be a beneficiary.
Sale of goods, cheques and GST
- Condition vs warranty: breach of a condition lets the buyer repudiate; breach of warranty only gives damages. Caveat emptor applies with exceptions such as fitness for a disclosed purpose.
- Cheque validity is three months. On dishonour, notice must be sent within 30 days; a complaint under s.138 of the Negotiable Instruments Act follows after the 15-day payment window.
- GST registration is generally required above ₹40 lakh turnover for goods and ₹20 lakh for services; the composition scheme charges 1.5% for traders and manufacturers and 5% for restaurants.
- Consumer commissions hear claims up to ₹50 lakh at district level, ₹50 lakh to ₹2 crore at state level, above that nationally.
Worked example
A 17-year-old buys goods on credit and refuses to pay. The agreement is void, so the seller cannot sue on the contract. If the goods are necessaries suited to the minor's station in life, the seller can still recover the price from the minor's estate under s.68.
Traps
Treating a voidable contract as void; saying consideration must be adequate; quoting a four-month cheque validity.