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Friday, January 10, 2014

IGNOU SOLVED ASSGINMENTS: ECO - 05 (2014 - 15) - DEMO

Course Code: ECO - 05
Course Title: Mercantile Law
Assignment Code: ECO – 05/TMA/2014-15
Coverage: All Blocks
Maximum Marks: 100

Attempt all the questions.
Answer of Q.N.1 (a).
(i) Distinguish between Void and Voidable Contracts
Void Contract: An agreement which was enforceable at the time of formation but later on due to certain event it lost the enforceability, such agreement is known as void contract. For example, on 1st January ‘A’ agrees with ‘B’ to sell his horse for Rs. 100 on 15th of January. The horse dies on 10th January. Now the performance of contract on 15th January becomes impossible, hence this contract is void. 
Voidable Contract: An agreement which is enforceable at the option of one of the parties thereto but not at the option of the other, is a voidable contract. A Voidable Contract is defective contract and is enforceable at the instance of the injured party by the defect. Agreements obtained by fraud or coercion are Voidable Contracts. For Example, ‘A’ induces ‘B’ by giving false description to purchase certain goods. ‘B’ on discovering misrepresentation can repudiate the contract or can elect to carry on the contract.

Difference between Void and Voidable Contract:

1. Void agreements are void ab initio and voidable contract becomes void when the party on whose option the contract is voidable, chooses to repudiate it.
2. In void agreement restitution is allowed except when illegality or voidness of the agreement was in the knowledge of both the contracting parties. In voidable contract when they are rescinded, benefits will be restored as much as possible.
3. Collateral transactions are not effected in case of voidable contracts, the same is in case of void agreement also. But where the agreement is void because of the illegality of the consideration or object, the collateral transaction will also become void.

(ii) Distinguish between Void and Illegal Contracts
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Answer of Q.N.1 (b).
Offer: Section 2 (a) defines an offer as “When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the asset of that other to such act or abstinence.” The person making the offer is known as the Offeror or Promisor and the person to whom it is made is called the Offeree or Promisee [Section 2(c)].
For e.g. A says to B, “Will you purchase my flat at Andheri for Rs.20 Lacs? Here A is the promisor and B is the promises.

Essentials of a Valid offer:
1. Intention to create legal relationship: The Offeror while making the offer must do it with the intention to create legal relations. Offeror must be conscious that a contract will arise, if the Offeree accepts the same.

2. Certain or Unambiguous: The terms of the Offer to be valid must be certain, clear and unambiguous.  For e.g. An offers to sell B, ten tones of oil. A is a dealer of various oil. Here the offer is ambiguous as the offer does not specify the type of oil. However, if A was a dealer only in Parashute Coconut oil then the offer is unambiguous.

3. Offer must be distinguished from:
(i) A declaration of intention: A declaration by a person that he intends to do something gives right of action to another. Such a declaration only means that an offer will be made or invited in future and not that an offer is made now.
(ii) An invitation to make an offer or do business: Display of goods by a shopkeeper in his window, with prices marked on them, is not an offer but merely an invitation to the public to make an offer to buy the goods at the marked prices. A buyer, in case the prices of the goods are marked, cannot force the seller to sell the goods at those prices. He can, at the most, ask the seller to sell the goods to him, in which case he is making an offer to the seller and it is upto the seller to accept the offer or not. Likewise, quotations, menu card, catalogues, prospectus issued y a company for subscribing to shares are all example of an invitation to make an offer.

4. Offer must be to a definite person: The words of an Offer must apply to definite persons or class of persons to create a legal relationship.

5. Offer must be communicated: An offer, to be complete, must be communicated to the person to whom it is made. Unless an offer is communicated, there can be no acceptance of it.

6. Offer must be made with a view to obtaining the assent: The offer to do or not to do something must be made with a view to obtaining the assent of the other party addressed and not merely with a view to disclosing the intention of making an offer.

7. Special Terms to be made clear in the Offer: The offer may be conditional but the conditions or special terms must be clearly communicated in the offer. Whenever an offer has special terms attached to it, these special terms and conditions must be effectively communicated to the Offeree to bind him.

8. Offer should not contain a term, the non-compliance of which may be assumed to amount to acceptance: A person cannot say that if acceptance is not communicated within a certain time, the offer would be considered as accepted.

Answer of Q.N.2.
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Answer of Q.N.3 (a).
Consideration and Exceptions to the Rule “No Consideration, No Contract”
Section 2 (d) of Indian Contract Act, 1872, defines consideration as “When at the desire of the promisor the promise or any other person has done or abstained from doing or does or abstains from doing something, such act abstinence or promise is called a consideration for the promisor.”
Consideration is an advantage or benefit which moves from one party to another. It is the essence of bargain. It is the reciprocal promise i.e. to do something or abstain from doing something in return of a promise. It is necessary for an agreement to be enforceable by law. In consideration both the parties give something & get something in return. It may be in cash or kind. The general rule is that an agreement made without consideration is void. But there are certain exceptions to the rule ‘No consideration no contract’. Section 25 deals with the exceptions to this rule which are given below:
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Answer of Q.N.3 (b).
When an agent does more than he is authorised to do, and when the part of what he does, which is within his authority, can be separated from the part which is beyond his authority, so much only of what he does as is within his authority is binding as between him and his principal. In the given situation, Anil permits his agent Basant to purchase goods on credit from Chander. But Basant makes credit purchases from Chander by using the authority for his own use. Here Anil is liable for every acts of Basant if such acts are within the authority which is given by him to Basant. Here Basant exceeds his authority by purchasing goods for his own use. Hence Anil cannot be made liable to Chander.

Answer of Q.N.4.
Meaning of Goods
Goods is defined in Section 2 (7) as ‘Every kind of moveable property other than actionable claims and money; and includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.’ Trademarks, copyrights, patent rights, goodwill, electricity, water and gar are all considered as goods. Therefore Goods as defined by this act has the following characteristics:
1.  Every movable property is goods.
2.  Money and actionable claims are not considered as goods. Money is defined as the current coin of realm. But those coins which are no longer in circulation can become the subject matter of a contract of sale as an article of curiosity.
3.  Goods include stocks and share although in English raw stocks and shares are not covered by the definition.
4.  Goods also include growing crops and grass.
5.  Anything which is attached to or forming part of the land (immovable property) can become goods if it is separated from the immovable property. Therefore, unless something is separate from immovable property, it cannot be called goods.
Types of Goods
Goods may be classified into various types as under:
1. Existing goods: These are goods which are owned and possessed by the seller at the time of sale. Only existing goods can be the subject-matter of a sale. The existing goods may be:
Specific goods: These are goods which are identified and agreed upon at the time of contract of sale is made. For e.g. a person visit s a Titan showroom and identifies a watch for purchase.
Ascertained goods: Though commonly used as similar in meaning to specific goods, these are the goods which become ascertained subsequent to the formation of contract of sale. For e.g. from say 10 Sony T.V. a person identifies the particular T.V.
Unascertained goods: These are the goods which are not identified and agreed upon at the time of the contract of sale. They are defined only by description and may form part of a lot. For e.g. a shopkeeper has a bag containing 50 kg of sugar. He agrees to sell 10 kg sugar to X out of that bag The 10 kg of sugar is unascertained goods as they are yet to be identified from the bag containing 50 kg.
2. Future Goods: These are goods which a seller does not possess at the time of the contract but which will be manufactured, or produced, or acquired by him after the making of the contract of sale. [Section 2(6)]. A contract of present sale of future goods, though expresses as an actual sale, purports to operate as an agreement to sell the goods and not a sale. This is because the ownership of a thing cannot be transferred before that thing comes into existence.
Examples: (a)    A agrees to sell to B all the milk that his cow may yield during the coming year. This is a contract for the sale of future goods.
(b)X agrees to sell to Y all the mangoes, which will be produced in his garden next year. It is contract of sale of future goods, amounting to ‘an agreement to sell.’
3. Contingent Goods: It is a type of future goods but these are goods the acquisition of which by the seller depends upon a contingency which may or may not happen.
Example: A agrees to sell specific goods in a particular ship to B to be delivered on the arrival of the ship. If the ship arrives but with no such goods on board, the seller is not liable, for the contract is to deliver the goods should they arrive.

Answer of Q.N.5 (a).
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Answer of Q.N.5 (b).
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