"Legal Aspects of Business" — Practice

Question 1

A 16-year-old enters into an agreement to purchase a laptop on instalment credit. Under the Indian Contract Act, 1872, as settled by Mohori Bibee v. Dharmodas Ghose (1903), this agreement is:
(a) Voidable at the minor's option  (b) Void ab initio  (c) Valid and fully binding on both parties  (d) Illegal and punishable under the Act

Accepted Answer

A minor lacks the capacity to contract under Section 11 of the Indian Contract Act, 1872, and Indian courts, following Mohori Bibee v. Dharmodas Ghose (1903), treat a minor's agreement as void from its very inception, not merely voidable.

Answer: (b) Void ab initio. Trap (a) describes the treatment of consent vitiated by coercion, fraud, undue influence, or misrepresentation, not a minor's incapacity. Trap (c) ignores the capacity requirement under Section 11 entirely. Trap (d) wrongly treats a capacity defect as a punishable illegality, which it is not.

Question 2

A seller, in a sale by description, delivers goods that do not correspond to the description agreed upon between the parties. This breach relates to:
(a) A condition, entitling the buyer to repudiate the contract and claim damages  (b) A warranty, entitling the buyer to damages only  (c) An illegal agreement, void from inception  (d) A mere misrepresentation carrying no remedy at all

Accepted Answer

Correspondence with description in a sale by description is an implied CONDITION under the Sale of Goods Act, 1930, going to the essential purpose of the contract; breach of a condition entitles the buyer to repudiate the contract entirely, in addition to claiming damages.

Answer: (a). Trap (b) describes the weaker remedy available only for breach of a collateral warranty, not an essential condition. Trap (c) misapplies an unrelated contract-law category to a straightforward goods-description breach. Trap (d) wrongly claims no remedy exists at all.

Question 3

Under Section 138 of the Negotiable Instruments Act, 1881, within how many days of receiving the cheque-dishonour memo from the bank must the payee issue a written demand notice to the drawer?
(a) 15 days  (b) 60 days  (c) 90 days  (d) 30 days

Accepted Answer

Section 138's statutory procedure requires the payee to issue a written demand notice to the drawer within 30 days of receiving the bank's dishonour memo, with a further 15-day window then given to the drawer to make payment before a criminal complaint can be filed.

Answer: (d) 30 days. Trap (a) is actually the LATER window given to the drawer to pay after receiving the notice, not the notice-issuing window itself. Traps (b) and (c) both invent longer periods with no basis in the Act's actual text.

Question 4

Which category of company, introduced specifically by the Companies Act, 2013 (and not permitted under the earlier 1956 Act), allows a single individual to incorporate a company with limited liability?
(a) Section 8 company  (b) Private company  (c) One Person Company (OPC)  (d) Public company

Accepted Answer

The One Person Company (OPC) is a category introduced specifically by the Companies Act, 2013, allowing a lone individual to incorporate with limited liability — a structure the earlier 1956 Act simply did not provide for.

Answer: (c) OPC. Trap (a) names a charitable-purpose company category, unrelated to single-member incorporation. Trap (b) still requires a minimum of two members under ordinary private-company rules, unlike an OPC. Trap (d) requires an even larger minimum membership and public-facing freedoms, the opposite of a single-member structure.

Question 5

Which foundational company document defines the scope and objects of the company — effectively its charter, setting out what the company can lawfully do?
(a) Articles of Association  (b) Memorandum of Association  (c) Certificate of Incorporation  (d) Prospectus

Accepted Answer

The Memorandum of Association is the company's charter document, defining its objects and the scope of activity it can lawfully undertake; acting beyond it is ultra vires and void. The Articles of Association, by contrast, govern how the company is run internally.

Answer: (b) Memorandum of Association. Trap (a) describes the internal rulebook document, not the objects-defining charter. Trap (c) is merely the certificate confirming a company's legal existence, not a document defining its objects. Trap (d) is a document used to invite public investment, not to define corporate objects.

Question 6

Under the Patents Act, 1970, a granted patent typically protects an invention for how long, counted from the date of filing?
(a) 20 years  (b) 10 years, renewable indefinitely  (c) 14 years  (d) The inventor's lifetime plus 60 years

Accepted Answer

A granted patent under the Patents Act, 1970 provides protection for 20 years from the date of filing the application, after which the invention enters the public domain.

Answer: (a) 20 years. Trap (b) describes trademark protection duration and its renewability, not patent protection. Trap (c) invents a duration figure with no statutory basis. Trap (d) describes copyright's duration structure, a completely different IPR category.

Question 7

An agreement whose object is expressly forbidden by law, and which additionally taints any collateral transaction connected to it, is best classified as:
(a) A voidable agreement  (b) An unenforceable contract  (c) An illegal agreement  (d) A valid but unregistered contract

Accepted Answer

An agreement with an object forbidden by law is illegal, not merely void — and unlike a simple void agreement, an illegal agreement additionally taints connected collateral transactions, a distinguishing feature the question specifically flags.

Answer: (c) Illegal agreement. Trap (a) describes agreements affected by vitiated consent, not an unlawful object. Trap (b) describes a substantively valid agreement blocked only by a technical defect, the opposite of an unlawful-object problem. Trap (d) wrongly labels the agreement as valid despite its unlawful object.

Question 8

Two parties contract for the sale of specific goods, unaware that the goods had already been destroyed by fire before the agreement was made. This mutual (bilateral) mistake of fact renders the agreement:
(a) Voidable at either party's option  (b) Illegal and punishable  (c) Valid, since neither party acted in bad faith  (d) Void

Accepted Answer

A mistake of fact common to both parties (a bilateral mistake), such as both being unaware the specific subject matter had already ceased to exist, renders an agreement void under the Indian Contract Act, 1872 — distinct from unilateral vitiated-consent situations like fraud or coercion, which instead render an agreement voidable.

Answer: (d) Void. Trap (a) confuses this bilateral-mistake scenario with the voidable-at-one-party's-option treatment used for coercion, fraud, undue influence, or misrepresentation. Trap (b) wrongly treats an innocent mutual mistake as a punishable illegality. Trap (c) wrongly assumes good faith alone preserves validity despite the absence of genuine subject matter.

Question 9

An author completes an original novel and fixes it in written form. Under the Copyright Act, 1957, copyright protection over this work:
(a) Arises automatically upon creation, with registration serving only as optional evidence of ownership  (b) Exists only after formal registration is granted by the Copyright Office  (c) Requires the same application-and-examination process as a patent  (d) Lasts for a fixed 20 years from the date of publication

Accepted Answer

Copyright arises automatically the moment an original work is created and fixed in tangible form; registration is optional and serves only as evidentiary proof of ownership, unlike a patent, which must be formally applied for, examined, and granted before any right exists at all.

Answer: (a). Trap (b) reverses the correct rule — registration is not a precondition for copyright to exist. Trap (c) wrongly imports the patent-specific examination-and-grant process into copyright law. Trap (d) misstates copyright's duration, which generally runs for the author's lifetime plus 60 years, not a fixed 20-year term.

Question 10

Which new enforcement authority was established by the Consumer Protection Act, 2019, empowered to investigate unfair trade practices, order product recalls, and penalise misleading advertisements?
(a) National Consumer Disputes Redressal Commission  (b) Registrar of Companies  (c) Central Consumer Protection Authority (CCPA)  (d) Competition Commission of India

Accepted Answer

The Central Consumer Protection Authority (CCPA) is a wholly new enforcement layer created by the 2019 Act, distinct from the pre-existing three-tier redress commissions, specifically empowered to investigate, order recalls, and penalise misleading advertising.

Answer: (c) CCPA. Trap (a) names the top tier of the pre-existing dispute-redress structure, a case-adjudicating body, not the new investigative-enforcement authority. Trap (b) is a Companies Act authority with no consumer-protection role. Trap (d) is a separate competition-law regulator, unconnected to the 2019 Act's consumer-specific enforcement authority.

Question 11

Under the Companies Act, 2013, a private company is specifically restricted from doing which of the following, unlike a public company?
(a) Appointing key managerial personnel  (b) Entering into contracts with third parties  (c) Applying its profits toward its own business operations  (d) Inviting the general public to subscribe to its securities

Accepted Answer

A private company is barred from inviting the general public to subscribe to its shares or debentures, and also restricts share transferability and caps membership at 200 — restrictions a public company does not face.

Answer: (d). Traps (a), (b), and (c) all describe ordinary corporate activities available to both private and public companies alike, none of which form part of the private-company-specific restrictions the Act actually imposes.

Practice — "Legal Aspects of Business"

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