Table Of ContentMercantile
Law
for the CA–Common Proficiency Test (CPT)
Second Edition
Tejpal Sheth
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Contents
Preface to the Second Edition vii
About the Author ix
Chapter 1 The Indian Contract Act, 1872 1.1—1.104
1.1 The Basics of the Indian Contract Act, 1872
Some Facts About the Act
What is a Contract?
Essential Elements of Valid Contracts–Sec 10
Difference Between Agreement and Contract
Types of Contracts or Classification of Contracts
Difference Between Void and Voidable Contract
Difference Between Void and Illegal Agreement
Similarities Between Void and Illegal Agreements
1.2 Offer and Acceptance of the Offer
Essential elements of an offer (Proposal)
Legal Rules as to Offer
Classification of Offer or Kinds of Offer
Legal Effects of Counter Offer
Lapse of Offer–When Offer Comes to an End?
Legal Rules for the Acceptance
General Rules as to Communication of Acceptance
1.3 Capacity of Party
Capacity of Party
Minor
Effect of Minor’s Agreement
Different Position of a Minor
Minor’s Liability for Necessities
Person of Unsound Mind
Person Disqualified by Law
1.4 Consideration
What is Consideration?
Types of Consideration
Essentials of a Valid Consideration
Stranger to Consideration
iv Contents
Stranger to Contract
Exception to the Rule of—Stranger to Contract
Exception to Rule— “No Consideration No Contract”-Sec 25
Promise to Charities
1.5 Free Consent
Meaning of consent-Sec 13
Free Consent-Sec 14
Coercion
Certain Threats Do Not Amount to Coercion
Undue Influence
When is a Person Deemed to be in a Position to Dominance of Will of Others?
In Which Cases, is there no Presumption of Dominance of Will?
Difference Between Coercion and Undue Influences
Fraud
Essential Elements of Fraud
Exception to the Rule—Silence is not Fraud
Effects of Fraud
Misrepresentation
Essential Elements of Misrepresentation
Consequences of Misrepresentation
Difference Between Fraud and Misrepresentation
Similarities Between Fraud and Misrepresentation
Mistake
Difference Between Unilateral Mistake and Bilateral Mistake
1.6 Void Agreement and Contingent Contract
When Object or Consideration is Unlawful-Sec 23
An Agreement Opposed to Public Policy
Agreements in Restraint of Trade-Sec 27
Agreement in Restraint of Legal Proceedings-Sec 28
Agreements Unlawful in Part
Wagering Agreement-Sec 30
Essentials of Wagering Agreement
Examples of Wagering Agreement
Examples which are not Held as Wagering Agreement
Effects of Wagering Agreement
Illegal Agreement
Contingent Contract-Sec 31
Essential Features of Contingent Contract
Uncertain Agreement
Whether the following are Uncertain Agreements?
Difference Between Wagering Agreement and Insurance Contract
Difference Between Void Agreement and Void Contract
Difference Between Wagering Agreement and Contigent Contract
1.7 Performance of the Contract
Effects of valid tender
Essentials of Valid Tender
Types of Tender
Contract Which Need not to Perform
Contents v
Who Must Perform the Contract?
Performance of Joint Promise-Sec 42-45
Who Can Demand Performance of Contract?
Kinds of Reciprocal Promise
Rules Regarding Performance of Reciprocal Promise
Appropriation of Payments
1.8 Discharge of Contract
Discharge of contract on Performance
Discharge by Mutual Agreement or by Implied Consent
Difference Between Novation and Alteration
Difference Between Rescission and Alteration
Discharge by Impossibility of Performance
Initial Impossibility or Pre-contractual Impossibility
Supervening Impossibility or Post-contractual Impossibility
Specific Grounds of Subsequent Imposibilities
Cases Where Contract is not Discharged on the Ground of Supervening Impossibility
Discharge of Contract by Lapse of Time
Discharge of Contract by Operation of Law
Dischare of Contract by Breach of Contract
Actual Breach of Contract
Anticipatory Breach of Contract
1.9 Remedies for the Breach of Contract
Rescission of Contract-Sec 39
Effect of Rescission of Contract
When can Court Grant Rescind Contract?
Suit for Damages
Kinds of Damages
Suit for Specific Performance
Suit for Injunction
Quantum Meruit
Quasi Contract
Cases of Quasi Contract
Difference Between Quasi Contract and Contract
Multiple Choice Questions 1.36—1.103
Chapter 2 The Indian Partnership Act, 1932 2.1—2.38
Applicability of the Act
Essential Characteristics of Partnership
Difference Between Partnership and Hindu Undivided Family
Difference Between Partnership and Association
Difference Between Partnership and Co-ownership
Difference Between Partnership and Club
Registration of Firm-Sec 56–71
Types of Partners
Who can be a Partner in a Firm?
Partnership Property-Sec-14
Authority of Partner-Sec 19 and 22
Partner’s Authority in Emergency
vi Contents
Difference Between Dissolution of Partnership and Dissolution of Firm
Settlement of Accounts
Garner vs Murray Rule
Mode of Giving Public Notice
Multiple Choice Questions 2.15—2.38
Chapter 3 The Sale of Goods Act, 1930 3.1—3.40
Applicability of the act
Some definitions
Whether the Following are Goods?
Essential Elements of Valid Contract of Sales
Transfer of “Property in Goods”
Difference Between Sale and Agreement to Sell
Difference Between Sale and Hire Purchase
Difference Between Sale and Bailment
Contract for Work and Skill
Types of Goods
Price of Goods-Sec 9-10
Consequences of Destruction of Specific Goods-Sec 7-8
Conditions and Warranties
Implied Conditions
Implied Warranties
Difference Between Condition and Warranty
Doctrine of Caveat Emptor
Transfer of Ownership of Specific Goods-Sec 20-22
Transfer of Ownership in Case of Goods Sent on Approval or on Sale or Return Basis-Sec 24
Passing of Risk
Rules Regarding Delivery of Goods-Sec 32-39
Unpaid Seller
Rights of an Unpaid Seller
Right of Lien
Right of Stoppage in Transit-Sec 50 to 52
Right of Resale
Right to Withhold Delivery of Goods
Delivery to Carrier
Sale by Non-Owners or Transfer of Title by Non-Owners-Sec 27-30
Auction Sale–Sec 64
Delivery of Goods in Contract by Sea Route
Multiple Choice Questions 3.15—3.39
Chapter 4 Mock Tests 4.1—4.18
Mock Test 1
Mock Test 2
Mock Test 3
Mock Test 4
Mock Test 5
Appendix A.1—A.5
Preface to the
Second Edition
I am glad to present the revised second edition of this book with additional information and material
on Mercantile Law-CA CPT (Common Proficiency Test) for the benefit of students and teaching fac-
ulties. A list of sections for each chapter and five sets of model question papers have been added for
practice.
I welcome suggestions, feedback and constructive criticism from professors on this subject to
help me improve the quality of book. I express my gratitude and thankfulness to the faculty members
and students for their encouragement and support. I also thank Pearson Education for their coopera-
tion and effort.
I hope that the present edition will meet the requirements of both the faculty members and students.
Tejpal Sheth
Preface
Never get discouraged because nothing great is achieved so far. Remember it is often the
last key in the bunch that opens the lock. Without patience and hope nothing can be achieved.
Passing the CA Common Proficiency Test in your first attempt is possible! The objective of this book is to
provide simple and readable study material which outlines all areas tested in CA CPT. The clear examples
and illustrations are designed to help candidates quickly understand and retain concepts.
To make the task of preparing for examination more manageable, I have divided the course into several
chapters followed by Multiple Choice Questions for practice work. This book consists of 1,400 MCQs to
sharpen your skills. At the beginning of MCQs of each chapter, an estimated time required to be invested
for solving is also given so that the students can plan out their practice schedule.
The CA CPT is not too easy but if you follow the guidelines with confidence and focus on your goal,
you will be thrilled with what you can accomplish. Remember, confidence is not where you have an answer
to all questions but it is when you are ready for all questions.
Although every care has been taken to check mistakes and misprints, yet it is difficult to claim
perfection. Any errors, omissions and suggestions for improvement of this edition will be thankfully
acknowledged and incorporated in the next edition. Students, readers and the teaching community can
reach me at tejpalsheth@ hotmail.com. You may also visit my blog http://tejpalsheth.blogspot.com for
additional information.
Lastly, I am grateful to Dhiraj Pandey, Naresh Sharma, Showick Thorpe, and Pearson Education for
their immense support and effort to bring this product well in form and time. Apart from many hands and
hearts that made this work possible, I would like to place on record my sincere gratitude to CA Sandeep
Kamdar, Professor Kashyap Trivedi, Professor Milan Shah and Ashish Dholakia, for their persistent effort,
support and motivation.
Tejpal Sheth
About the Author
Tejpal Sheth is an associate member of the Institute of Company Secretaries of India (ICSI) and
holds an MBA in International Business and Diploma in Pharmacy. Apart from practising as company
secretary, he is a dynamic and well-known educator in the professional stream. He is a visiting faculty
in many reputed MBA colleges and professional courses for more than 11 years. He has taught innu-
merable students of CA, CS, ICWA, MBA, BBA, CPA (USA) and Global CFA programme on various
topics like mercantile law, business law, corporate law, regulation, business ethics and communica-
tion. He has served as a member of various committees of Ahmedabad Chapter of ICSI in past years.
He is a regular guest speaker in many academic and training programmes on various topics like cyber
law, time management, effective executive, interview skills and body language.
