Business Law and Ethics
The Business Law and Ethics domain tests the Nepali legal framework governing business and the standards expected of a chartered accountant. The main sources are the Contract Act 2056, the Partnership Act 2020 BS, the Companies Act 2063, the Negotiable Instruments Act 2034 and the Labour Act 2074, together with the ICAN Code of Ethics based on the IESBA framework.
Core rules
- A valid contract needs offer, acceptance, lawful consideration, capacity, free consent and a lawful object. Agreements with minors are void; consent obtained by coercion, undue influence, fraud or misrepresentation makes a contract voidable.
- Remedies for breach include damages, specific performance, injunction and quantum meruit. Damages aim to put the injured party in the position they would have occupied had the contract been performed.
- A partnership arises from an agreement to share profits; partners have mutual agency and unlimited liability unless registration and notice requirements are met.
- A company is a separate legal person. A private company restricts share transfers and limits members; a public company may invite the public to subscribe. The memorandum and articles form its constitution.
- A cheque is a bill of exchange drawn on a banker payable on demand. Crossing and endorsement affect negotiability and collection.
- Ethics: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Identify threats - self-interest, self-review, advocacy, familiarity, intimidation - and apply safeguards or decline the engagement.
Worked example
A supplier contracts to deliver 100 kg of goods at Rs 200 per kg on 1 June. It fails to deliver; on that date the market price is Rs 250 per kg. The buyer's expectation loss is (250 − 200) × 100 = Rs 5,000. The buyer can also recover consequential losses that were reasonably foreseeable, but must mitigate the loss by buying substitute goods.
Traps
Treating every invalid agreement as voidable; confusing past consideration with executed consideration; assuming a private company can issue shares to the public; forgetting that confidentiality is subject to legal disclosure; and failing to distinguish a threat from a safeguard.