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Mock Test Paper - Series I: December, 2024

Date of Paper: 21st December, 2024
Time of Paper: 10.30 A.M. to 1.30 P.M.

FOUNDATION COURSE
PAPER – 2: BUSINESS LAWS
ANSWERS
1. (a) As per section 126 of the Indian Contract Act, 1872, the contract of
guarantee is defined as a contract to perform the promise or discharge the
liability of a third person in case of his default.
In this case, Sooraj has given a guarantee for Pankaj 's payment
obligation towards Rahul. When Pankaj defaulted after making four
monthly instalments and became insolvent, Sooraj 's liability as a
guarantor will come into existence.
According to Section 128 of the Act, the liability of the surety is co-
extensive with that of the principal debtor, unless it is otherwise provided
by the contract.
Since Pankaj failed to pay the remaining instalments due to insolvency,
Sooraj, as the guarantor, is liable to pay the balance price of the water
purifier to Rahul. In the given situation, Sooraj will have to pay the
balance amount of ` 30,000 to Rahul. [54,000-(4x6,000)]
In the second situation, Rahul sold the water purifier misrepresenting
it as having a copper filter, while it actually has a normal filter; this
changes the situation significantly.
According to Section 142 of the Act, any guarantee which has been
obtained by means of misrepresentation made by the creditor, or with
his knowledge and assent, concerning a material part of the transaction,
is invalid. Here, guarantee is obtained by means of misrepresentation
made by the creditor (Rahul), and therefore the guarantee is invalid.
Furthermore, under Section 143, any guarantee which the creditor has
obtained by means of keeping silence as to material circumstances, is
invalid.
Here Rahul misrepresented the filter type and both Pankaj and Sooraj
were unaware of this fact. The creditor (Rahul) has obtained the
guarantee by remaining silent as to material circumstances. Therefore,
the guarantee obtained from Sooraj will be considered to be invalid.
Consequently, Sooraj cannot be held liable to pay the balance price of
the water purifier to Rahul.

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(b) As per Section 2(46) of the Companies Act, 2013, holding company in
relation to one or more other companies, means a company of which
such companies are subsidiary companies.
Section 2(87) defines “subsidiary company” in relation to any other
company (that is to say the holding company), means a company in
which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power
either at its own or together with one or more of its subsidiary
companies.
In the instant case, as on 31.03.2024, DEF Limited had a paid-up capital
of ` 1 lakh (10,000 equity shares of ` 10 each). In June 2024, DEF
Limited issued an additional 10,000 equity shares, which was fully
subscribed. Post-issue, the total paid-up capital of DEF Limited is ` 2
lakhs (20,000 equity shares of `10 each).
Of these, 5,000 shares were issued to MNO Private Limited. Since MNO
Private Limited holds only 25% of the shares in DEF Limited, it does not
have control of more than one-half of the total voting power of DEF
Limited. Hence, MNO Private Limited cannot be considered as a
subsidiary company of DEF Limited in terms of the second criteria stated
above, that of controlling of voting power.
MNO Private Limited is the holding company of JKL Private Limited,
having control over the composition of its Board of Directors. But since
MNO Private Limited cannot be termed as a subsidiary company of DEF
Limited, JKL Private Limited cannot claim the status of being a subsidiary
of DEF Limited in terms of the first criteria, that of controlling the
composition of directors.
As per section 2(6) of the Act, Associate Company in relation to another
company, means a company in which that other company has a
significant influence, but which is not a subsidiary company of the
company having such influence and includes a joint venture company.
The expression “significant influence” means control of at least twenty
per cent of total voting power, or control of or participation in business
decisions under an agreement.
In terms of the above provision, the relationship between DEF Limited
and MNO Private Limited can be of an Associate Company.
Since MNO Private Limited holds more than 20 percent of voting power
in DEF Limited, it can be considered as an Associate Company of DEF
Limited.
(c) (i) If a partner is otherwise expelled, the expulsion is null and void.
According to Section 33 of the Indian Partnership Act, 1932
(i) the power of expulsion must have existed in a contract between
the partners;
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(ii) the power has been exercised by a majority of the partners; and
(iii) it has been exercised in good faith.
If all these conditions are not present, the expulsion is not deemed
to be in bona fide interest of the business of the firm.
The test of good faith as required under Section 33(1) includes
three things:
(i) The expulsion must be in the interest of the partnership.
(ii) The partner to be expelled is served with a notice.
(iii) He is given an opportunity of being heard.
Hence, it is correct to say that, if a partner is otherwise expelled, the
expulsion is null and void.
(ii) “The partner who is expelled will cease to be liable to the third
party for the act of the firm done after expulsion”
According to Section 32(3) of the Indian Partnership Act, 1932,
notwithstanding the expulsion a partner from a firm, he and the
partners continue to be liable as partners to third parties for any act
done by any of them which would have been an act of the firm if
done before the expulsion, until public notice is given of the
expulsion.
However, an expelled partner is not liable to any third party who
deals with the firm without knowing that he was a partner.
Hence, the statement given is partially correct.
2. (a) (i) As per the provisions of section 24 of the Sale of Goods Act, 1930,
when goods are delivered to the buyer on approval or “on sale or
return" or other similar terms, the property therein passes to the buyer
when he does something to the good which is equivalent to accepting
the goods e.g. he pledges or sells the goods.
Referring to the above provisions, we can analyse the situation
given in the question.
Since, Mohan, who had taken delivery of the camera on Sale or
Return basis and delivers the same to Raj on sale for cash only or
return, has attracted the third condition that he has done something
to the good which is equivalent to accepting the goods e.g. he
pledges or sells the goods. Therefore, the property therein
(Camera) passes to Mohan.
Now, Raj delivered it to Vikas on a sale or return without paying
cash to Mohan.
Since Raj did not pay cash and had not exercised the option to
purchase, ownership of the camera did not pass to Raj. Therefore,
Raj is not liable to pay the price of the camera either.

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Since Vikas did not accept the goods and the camera was lost by
theft (despite his due care), Vikas is not liable for the price of the
camera as ownership had not passed to him.
Therefore, Mohan is solely liable to pay the price of the camera to
Ashish, as he accepted the camera on a "sale or return" basis and
did not return it within a reasonable time.
(ii) According to Section 51 of the Sale of Goods Act, 1930, when the
carrier wrongfully refuses to deliver the goods to buyer, the right of
stoppage in transit is lost and transit comes to an end.
On the other hand, according to section 57 of the Sale of Goods
Act, 1930, where buyer suffers losses due to non-delivery, he can
sue seller for damages on account of non-delivery.
In the instant case, the transit came to an end when Chirag
wrongfully refused to deliver the goods to Barun, and he suffered a
huge loss due to non- delivery. Hence, Akash cannot exercise the
right of stoppage of goods in transit as the transit has already come
to an end.
Barun can claim loss suffered due to non-delivery from Akash.
(b) Section 2(62) of the Companies Act, 2013 defines one person company
(OPC) as a company which has only one person as a member.
Ram wants to incorporate a company in which he will be the only
member. Hence, he can incorporate an One person Company.
According to section 3(1)(c) of the Companies Act, 2013, OPC is a
private limited company with the minimum paid up share capital as may
be prescribed and having one member.
OPC (One Person Company) – salient features
♦ Only one person as member.
⬥ Minimum paid up capital – no limit prescribed.
⬥ The memorandum of OPC shall indicate the name of the other
person, who shall, in the event of the subscriber’s death or his
incapacity to contract, become the member of the company.
⬥ The other person whose name is given in the memorandum shall
give his prior written consent in prescribed form and the same shall
be filed with Registrar of companies at the time of incorporation.
⬥ Such other person may be given the right to withdraw his consent.
⬥ The member of OPC may at any time change the name of such
other person by giving notice to the company and the company
shall intimate the same to the Registrar.
⬥ Any such change in the name of the person shall not be deemed to
be an alteration of the memorandum.

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⬥ Only a natural person who is an Indian citizen whether resident in

India or otherwise and has stayed in India for a period of not less
than 120 days during the immediately preceding financial year.
 shall be eligible to incorporate an OPC;
 shall be a nominee for the sole member of an OPC.
♦ No person shall be eligible to incorporate more than one OPC or
become nominee in more than one such company.
♦ No minor shall become member or nominee of the OPC or can hold
share with beneficial interest.
♦ Such Company cannot be incorporated or converted into a
company under section 8 of the Act. Though it may be converted
to private or public companies in certain cases.
♦ Such Company cannot carry out Non-Banking Financial Investment
activities including investment in securities of any body-corporate.
⬥ If One Person Company or any officer of such company
contravenes the provisions, they shall be punishable with fine
which may extend to ten thousand rupees and with a further fine
which may extend to one thousand rupees for every day after the
first during which such contravention continues.
Here the member can be the sole member-cum-director.
(c) (i) Change of name of LLP (Section 17 of Limited Liability
Partnership Act, 2008):
(1) Notwithstanding anything contained in sections 15 and 16, if
through inadvertence or otherwise, a LLP, on its first
registration or on its registration by a new body corporate, its
registered name, is registered by a name which is identical
with or too nearly resembles to —
(a) that of any other LLP or a company; or
(b) a registered trade mark of a proprietor under the Trade
Marks Act, 1999, as is likely to be mistaken for it,
then on an application of such LLP or proprietor referred to in
clauses (a) and (b) respectively or a company,
the Central Government may direct that such LLP to change its
name or new name within a period of 3 months from the date of
issue of such direction.
(2) Where a LLP changes its name or obtains a new name under
sub-section (1), it shall within a period of 15 days from the
date of such change, give notice of the change to Registrar
along with the order of the Central Government, who shall
carry out necessary changes in the certificate of incorporation
and within 30 days of such change in the certificate of

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incorporation, such LLP shall change its name in the LLP

agreement.
(3) If the LLP is in default in complying with any direction given
under sub-section (1), the Central Government shall allot a
new name to the LLP in such manner as may be prescribed
and the Registrar shall enter the new name in the register of
LLP in place of the old name and issue a fresh certificate of
incorporation with new name, which the LLP shall use
thereafter.
Nothing contained in this sub-section shall prevent a LLP from
subsequently changing its name in accordance with the
provisions of section 16.
(ii) Small Limited Liability Partnership [Section 2(1)(ta) of the
Limited Liability Partnership Act, 2008]: It means a limited
liability partnership—
(i) the contribution of which, does not exceed twenty-five lakh
rupees or such higher amount, not exceeding five crore
rupees, as may be prescribed; and
(ii) the turnover of which, as per the Statement of Accounts and
Solvency for the immediately preceding financial year, does
not exceed forty lakh rupees or such higher amount, not
exceeding fifty crore rupees, as may be prescribed; or
(iii) which meets such other requirements as may be prescribed,
and fulfils such terms and conditions as may be prescribed.
3. (a) (i) Partner by holding out (Section 28 of the Indian Partnership Act,
1932):
Anyone who by words spoken or written or by conduct represents
himself, or knowingly permits himself to be represented, to be a
partner in a firm, is liable as a partner in that firm to anyone who
has on the faith of any such representation given credit to the firm,
whether the person representing himself or represented to be a
partner does or does not know that the representation has reached
the person so giving credit.
In the instant case, since Gaurav allowed himself to be represented
as a partner to the RS & Co. and third parties acted based on this
belief and therefore, Gaurav is held liable to Sahil as he
represented himself by his act to be a partner to the RS & Co.
However, Gaurav is not liable to Madhav for the liabilities incurred
by the firm. Information of Gaurav being a partner to the firm was
shared by the Sahil (Supplier to the firm) which is not falling within
the ambit of doctrine of holding out.
Hence Gaurav is liable to Sahil and not to Madhav for the liability
of the Firm.

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(ii) Rights and liabilities of new partner: The new firm, including the
new partner who joins it, may agree to assume liability for the
existing debts of the old firm, and creditors may agree to accept the
new firm as their debtor and discharge the old partners. The
creditor’s consent is necessary in every case to make the
transaction operative. Novation is the technical term in a contract
for substituted liability, of course, not confined only to case of
partnership.
But a mere agreement amongst partners cannot operate as Novation.
Thus, an agreement between the partners and the incoming partner
that he shall be liable for existing debts will not ipso facto give
creditors of the firm any right against him.
In the instant case, Ashwin will not be liable in a suit filed by the
creditor against the firm and all existing partners for recovery of the
old debt of the firm.
(b) (i) Doctrine of ultra vires: The meaning of the term ultra vires is simply
“beyond (their) powers”. It is a fundamental rule of Company Law that
any act done, or a contract made by the company which travels
beyond the powers not only of the directors but also of the company
is wholly void and inoperative in law and is therefore not binding on
the company.
The impact of the doctrine of ultra vires is that a company can
neither be sued on an ultra vires transaction, nor can it sue on it.
Since the memorandum is a “public document”, it is open to public
inspection. Therefore, when one deals with a company one is
deemed to know about the powers of the company. If in spite of this
you enter into a transaction which is ultra vires the company, you
cannot enforce it against the company.
In the instant case, borrowing more than ₹1 crore was clearly
beyond MN Limited’s powers as per its MoA, making the loan
transaction ultra vires to the extent of the excess amount over ₹1
crore.
Hence, the decision of the company denying the repayment of the
loan being ultra virus the company shall be valid for ` 4 crore.
If the funds have been applied for legitimate business purposes
(such as repaying lawful debts), the lender steps into the shoes of
the debtor paid off and consequently he would be entitled to recover
his loan to that extent from the company.
Therefore, MN Limited cannot deny repayment of ₹3 crore, as it
was utilised for lawful purposes, despite the ultra vires nature of the
loan.
Ultimately, the company has no remedy available to recover the
balance amount of loan of ` 1 crore as the spending thereof is not
traceable.

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(ii) The documents which need to be authenticated by a common seal

will be required to be so done, only if the company opts to have a
common seal.
In case a company does not have a common seal, the authorization
shall be made by two directors or by a director and the Company
Secretary, wherever the company has appointed a Company
Secretary.
In the instant case, the objection of Suman is not valid as the share
certificate was signed by two directors Arnav and Sohail as the
company secretary was not appointed.
If the company had a company secretary, then the share certificate
has to be signed by a director and the Company secretary.
Hence, yes, the answer will be different.
(c) Wagering agreement (Section 30 of the Indian Contract Act, 1872):
An agreement by way of a wager is void. It is an agreement involving
payment of a sum of money upon the determination of an uncertain
event. The essence of a wager is that each side should stand to win or
lose, depending on the way an uncertain event takes place in reference
to which the chance is taken and in the occurrence of which neither of
the parties has legitimate interest.
Transactions resembling with wagering transaction but are not void
(i) Chit fund: Chit fund does not come within the scope of wager
(Section 30). In case of a chit fund, a certain number of persons
decide to contribute a fixed sum for a specified period and at the
end of a month, the amount so contributed is paid to the lucky
winner of the lucky draw.
(ii) Commercial transactions or share market transactions: In
these transactions in which delivery of goods or shares is intended
to be given or taken, do not amount to wagers.
(iii) Games of skill and Athletic Competition: Crossword puzzles,
picture competitions and athletic competitions where prizes are
awarded on the basis of skill and intelligence are the games of skill
and hence such competitions are valid.
(iv) A contract of insurance: A contract of insurance is a type of
contingent contract and is valid under law and these contracts are
different from wagering agreements.
4. (a) (i) As per section 146 of the Indian Contract Act, 1872, when two or more
persons are co-sureties for the same debt either jointly, or severally
and whether under the same or different contracts and whether with
or without the knowledge of each other, the co-sureties in the absence
of any contract to the contrary, are liable, as between themselves, to
pay each an equal share of the whole debt, or of that part of it which
remains unpaid by the principal debtor.

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Section 147 provides that the principle of equal contribution is,

however, subject to the maximum limit fixed by a surety to his
liability. Co-sureties who are bound in different sums are liable to
pay equally as far as the limits of their respective obligations permit.
In the given question, Mr. D makes a default of ` 42,000, and X, Y
and Z as sureties have executed the bond with varying penalty
amounts. Hence, X is liable to pay ` 10,000, and Y and Z ` 16,000
each.
In the given case, if there is no contractual arrangement among the
sureties, they would be liable for equal contribution. Hence, X, Y
and Z will be liable to pay ` 14,000 each.
(ii) Illegal Agreement: It is an agreement which the law forbids to be
made. As an essential condition, lawful consideration and object is
a must to make the agreement valid. (Section 10 of the Indian
Contract Act, 1872). As per Section 23, an agreement is illegal and
void, if the consideration and object is unlawful/contrary to law i.e.
if forbidden by law. Such an agreement is void and is not
enforceable by law. Even the connected agreements or collateral
transactions to illegal agreements are also void.
In the present case,
(A) X agrees to give ` 1,00,000 to Y if Y kills Z. Thus, the
agreement between X and Y is void agreement being illegal
in nature.
(B) X borrows ` 1,00,000 from W and W is also aware of the
purpose of the loan. Thus, the agreement between X and W
is void as the connected agreements of an illegal agreements
are also void.
(b) As per Section 76 of the Negotiable Instruments Act, 1881: No
presentment for payment is necessary, and the instrument is
dishonoured at the due date for presentment, in any of the following
cases:
(A) (i) If the maker, drawee or acceptor intentionally prevents the
presentment of the instrument, or
(ii) if the instrument being payable at his place of business, he
closes such place on a business day during the usual
business hours, or
(iii) if the instrument being payable at some other specified place,
neither he nor any person authorised to pay it attends at such
place during the usual business hours, or
(iv) if the instrument not being payable at any specified place, he
cannot after due search be found;
(B) as against any party sought to be charged therewith, if he has
engaged to pay notwithstanding non-presentment;
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(C) as against any party if, after maturity, with knowledge that the
instrument has not been presented—
o he makes a part payment on account of the amount due on
the instrument,
o or promises to pay the amount due thereon in whole or in part,
o or otherwise waives his right to take advantage of any default
in presentment for payment;
(D) as against the drawer, if the drawer could not suffer damage from
the want of such presentment.
(c) Meaning of Law: Law is a set of obligations and duties imposed by the
government for securing welfare and providing justice to society. India’s
legal framework reflects the social, political, economic, and cultural
aspects of our vast and diversified country.
The Process of Making a Law
• When a law is proposed in parliament, it is called a Bill.
• After discussion and debate, the law is passed in Lok Sabha.
• Thereafter, it has to be passed in Rajya Sabha.
• It then has to obtain the assent of the President of India.
• Finally, the law will be notified by the Government in the publication
called the Official Gazette of India.
• The law will become applicable from the date mentioned in the
notification as the effective date.
• Once it is notified and effective, it is called an Act of Parliament.
5. (a) (i) Section 10 of the Sale of Goods Act, 1930 provides for the
determination of price by a third party.
1. Where there is an agreement to sell goods on the terms that
price has to be fixed by the third party and he either does not or
cannot make such valuation, the agreement will be void.
2. In case the third party is prevented by the default of either party
from fixing the price, the party at fault will be liable to the
damages to the other party who is not at fault.
In the instant case, as Kiran cannot do valuation of laptop due to non-
sharing of particulars and configuration by Karan who was bound by
his promise, the agreement will be void.
The other remedy available to Vishal is that he can claim damages
from Karan as he will be liable for the damages to Vishal who is not
at fault.
(ii) As per the provisions of Sub-Section (2) of Section 17 of the Sale
of Goods Act, 1930, in a contract of sale by sample, there is an
implied condition that:
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(a) the bulk shall correspond with the sample in quality;

(b) the buyer shall have a reasonable opportunity of comparing
the bulk with the sample.
In the instant case, in the light of the provisions of Sub-Clause (b)
of Sub-Section (2) of Section 17 of the Act, Mrs. Meenu will not be
successful as she casually examined the sample of rice (which
exactly corresponded to the entire lot) without noticing the fact that
even though the sample was that of Basmati Rice but it contained
a mix of long and short grains.
(ii) In the instant case, Mrs. Meenu does not have any option available
to her for grievance redressal.
(iii) In case Mrs. Meenu specified her exact requirement as to length of
rice, then there is an implied condition that the goods shall
correspond with the description. If it is not so, the seller will be held
liable.
(b) It is true to say that the Indian Partnership Act, 1932 does not make the
registration of firms compulsory nor does it impose any penalty for non-
registration.
Following are consequences of Non-registration of Partnership
Firms in India:
The Indian Partnership Act, 1932 does not make the registration of firms
compulsory nor does it impose any penalty for non-registration.
However, under Section 69, non-registration of partnership gives rise to
a number of disabilities which we shall presently discuss. Although
registration of firms is not compulsory, yet the consequences or
disabilities of non-registration have a persuasive pressure for their
registration. These disabilities are as follows:
(i) No suit in a civil court by firm or other co-partners against third
party: The firm or any other person on its behalf cannot bring an
action against the third party for breach of contract entered into by
the firm, unless the firm is registered and the persons suing are or
have been shown in the register of firms as partners in the firm. In
other words, a registered firm can only file a suit against a third
party and the persons suing have been in the register of firms as
partners in the firm.
(ii) No relief to partners for set-off of claim: If an action is brought
against the firm by a third party, then neither the firm nor the partner
can claim any set-off, if the suit be valued for more than ` 100 or
pursue other proceedings to enforce the rights arising from any
contract.
(iii) Aggrieved partner cannot bring legal action against other
partner or the firm: A partner of an unregistered firm (or any other
person on his behalf) is precluded from bringing legal action against
the firm or any person alleged to be or to have been a partner in
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the firm. But such a person may sue for dissolution of the firm or
for accounts and realization of his share in the firm’s property where
the firm is dissolved.
(iv) Third party can sue the firm: In case of an unregistered firm, an
action can be brought against the firm by a third party.
(c) (i) Ordinary damages: When a contract has been broken, the party who
suffers by such breach is entitled to receive, from the party who has
broken the contract, compensation for any loss or damage cause to
him thereby, which naturally arose in the usual course of things from
such breach, or which the parties know, when they made the contract,
to be likely to result from the breach of it.
Special damages: Where a party to a contract receives a notice of
special circumstances affecting the contract, he will be liable not
only for damages arising naturally and directly from the breach but
also for special damages.
Liquidated damage is a genuine pre-estimate of compensation of
damages for certain anticipated breach of contract. This estimate
is agreed to between parties to avoid at a later date detailed
calculation and the necessity to convince outside parties.
(ii) (A) Agreement made based on natural love and affection:
Conditions to be fulfilled under section 25(1) of the Indian
Contract Act, 1872
(i) It must be made out of natural love and affection
between the parties.
(ii) Parties must stand in near relationship to each other.
(iii) It must be in writing.
(iv) It must also be registered under the law.
A written and registered agreement based on natural love and
affection between the parties standing in near relation (e.g.,
husband and wife) to each other is enforceable even without
consideration.
(B) Promise to pay time barred debts: Where a promise in
writing signed by the person making it or by his authorised
agent, is made to pay a debt barred by limitation it is valid
without consideration [Section 25(3)].
6. (a) Dishonour of Cheque for Insufficiency, Etc., of funds in the accounts
[Section 138 of the Negotiable Instruments Act, 1881]
Where any cheque drawn by a person on an account maintained by him
with a banker—
• for payment of any amount of money
• to another person from that account

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• for the discharge, in whole or in part, of any debt or other liability,

[A cheque given as gift or donation, or as a security or in discharge
of a mere moral obligation, or for an illegal consideration, would be
outside the purview of this section]
• is returned by the bank unpaid,
• either because of the—
o amount of money standing to the credit of that account is
insufficient to honour the cheque, or
o that it exceeds the amount arranged to be paid from that
account by an agreement made with that bank,
such person shall be deemed to have committed an offence and
shall, be punished with imprisonment for a term which may extend
to two years, or with fine which may extend to twice the amount of
the cheque, or with both.
In the instant case,
(i) Since Y’s cheque was dishonoured by the Bank due to
insufficiency of funds in his account, he shall be deemed to
have committed an offence and shall, be punished with
imprisonment for a term which may extend to two years, or
with fine which may extend to ` 20,000, or with both.
(ii) A cheque given as gift or donation, or as a security or in
discharge of a mere moral obligation, or for an illegal
consideration, would be outside the purview of this section.
Hence, if Y issued a cheque as a donation to Mr. Z, he shall
not be liable under section 138 of the Act.
(b) Quasi Contracts: Under certain special circumstances, obligations
resembling those created by a contract are imposed by law although the
parties have never entered into a contract. Such obligations imposed by
law are referred to as ‘Quasi-contracts’. Such a contract resembles a
contract so far as result or effect is concerned but it has little or no affinity
with a contract in respect of mode of creation. These contracts are based
on the doctrine that a person shall not be allowed to enrich himself
unjustly at the expense of another. The salient features of a quasi-
contract are:
1. It does not arise from any agreement of the parties concerned but
is imposed by law.
2. Duty and not promise is the basis of such contract.
3. The right under it is always a right to money and generally though
not always to a liquidated sum of money.
4. Such a right is available against specific person(s) and not against
the whole world.

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5. A suit for its breach may be filed in the same way as in case of a
complete contract.
(c) The main points of distinction between the 'Sale' and 'Hire-
Purchase' are as follows:
Sr. Basis of Sale Hire-Purchase
No. difference
1 Time of passing Property in the Property in goods
property goods is passes to the hirer
transferred to upon payment of the
the buyer last installment.
immediately at
the time of the
contract
2 Position of the The position of The position of the
property the buyer is that hirer is that of a bailee
of the owner of till he pays the last
the goods installment.
3 Termination of The buyer The hirer may, if he
contract cannot terminate so likes, terminate the
the contract and contract by returning
is bound to pay the goods to its owner
the price of the without any liability to
goods pay the remaining
installments.
4 Burden of Risk of The seller takes The owner takes no
Insolvency of the the risk of any such risk, for if the
buyer loss resulting hirer fails to pay an
from the installment, the owner
insolvency of the has right to take back
buyer the goods.
5 Transfer of title The buyer can The hirer cannot pass
pass a good title any title even to a
to a bona fide bona fide purchaser.
purchaser from
him
6 Resale The buyer in The hire purchaser
sale can resell cannot resell unless
the goods he has paid all the
installments.

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