Mercantile Law CSS Paper 2008




NOTE: (i) First attempt PART-I (MCQ) on separate Answer Sheet which shall be taken back after 30 minutes. (ii) Overwriting/cutting of the options/answers will not be given credit.


Q.1. Select the best option and fill in the appropriate box on the answer sheet

I- If the consideration for an agreement is inadequate, the agreement is:
(a) Valid (b) Void (c) Voidable (d) None

II- On a contract by an agent on the behalf of undisclosed principal, the principal:
(a) May sue on contact (b) Cannot sue (c) Is hit by privity of contract (d) None

III- Carlill v Carbolic Smoke Ball Co. Ltd. deals with:
(a) Counter proposal (b) Implied acceptance (c) Implied revocation (d) None

IV- What is the amount of care a bailee is required to take in respect of goods bailed to him:
(a) Extraordinary (b) Ordinary (c) Reasonable (d) None

V- A void contract is:
(a) An illegal agreement (b) Partly valid agreement (d) None

VI- X agrees not to carry on a similar business with Y for two years in consideration of Rs.50,000/- as good will. The agreement is:
(a) Void due to restraint of trade (b) Valid (c) Against X’s fundamental rights (d) None

VII- Which one of the following cannot be called an Act of God:
(a) An unprecedented rainfall (b) An earthquake (c) Fire not caused by lightning (d) None

VIII- An obligation arises from:
(a) A contract (b) From a wrongful act (c) Both a & b (d) None

IX- The rule nemo dat quod non habet means:
(a) No one should interfere in another’s business (b) No one should be retained in a partnership against his will (c) No one can give what he has not got (d) None

X-In a public company the shares are subscribed by:
(a) Government (b) Management (c) Creditors (d) None

XI- Can a minor be:
(a) Admitted as partner in a firm (b) Admitted to the benefits of partnership (c) Admitted as a sleeping partner (d) None

XII- Transfer of property means:
(a) Delivery of goods (b) Transfer of possession (c) Transfer of ownership (d) None

XIII- Caveat Emptor rule means:
(a) Employer beware (b) Seller beware (c) Creditor beware (d) None

XIV- A liquidator is a person:
(a) Who is chairman of board of directors (b) Promoter of a company (c) Who winds up a company (d) None

XV- Which one of the following clauses is considered vital in a memorandum of association of a public company:
(a) Name clause (b) Object clause (c) Capital clause (d) None

XVI- A subsidiary company means:
(a) A supporting company (b) A non entity (c) An unregistered company (d) None

XVII-Which of the following actions an unpaid seller cannot take against a buyer:
(a) Exercise the right of lien (b) Stoppage of goods in transit (c) Sale (d) None

XIX- X is involved in some business; he transfers his share without the consent of all its members. He is working in:
(a) A company (b) A firm (c) A private company (d) None

XX- At times a contract is discharged under the doctrine of frustration. Does it mean:
(a) Discharge by performance (b) Discharge by agreement (c) Discharge by breach (d) None


(i) PART-II is to be attempted on the separate Answer Book.
(ii) Attempt ONLY FOUR questions from PART-II. All questions carry EQUAL marks.
(iii) Extra attempt of any question or any part of the attempted question will not be considered.

Q.No.2 X agreed in writing to sell 120 acres of land to Y for Rs. 3 Million. The purchase price was to be paid in three installments: a first of 1.6 million Rs., followed in twelve months by a second of Rs. 0.7 Million and then, after further twelve months by a final payment of Rs. 0.7 million. It was further provided that ‘on the occasion of each completion a proportionate part of the land shall be released forthwith to Y’. The parties provided no machinery for the allocation of the proportional parts. What is the legal effect of the agreement? Support your answer with arguments discussing the question of law involved.

Q.No.3 Ahmad who was admitted in a hospital, was required to undergo a surgery, before his operation he agreed to sell his house which was already listed for sale, to his doctor for Rs. 9.7 million. The market price of the house was Rs. 10 million. After the successful operation Ahmad rescinded the agreement alleging “Undue influence” by the doctor. Can he succeed? Explain keeping in view the ingredients of undue influence as laid down in the Contract Act, 1872.

Q.No.4 JK goes to the show room of Nasir a car dealer, and after looking at various models, he agrees to buy a Honda Civic car. The car breaks down four times during the first month and JK wished to know whether he has any remedies against Nasir. Advise him in the light of Sales of Goods Act, 1930.

Q.No.5 Describe the general principle in determining the existence of partnership? Compare the principle with the rule laid down in Cox v. Hickman.

Q.No.6 R signed a document in these terms ‘in consideration of the loan of Rs. 1000/- from W; I, R agree to repay W the sum of Rs.1000/- on or before December 31, 2007″. Whether the above document can be treated as a promissory note? Give the specifics of a promissory note.

Q.No.7 Explain the status and significance of Articles of Association of a company. The articles of a private company provided that ‘every member who intends to transfer shares shall inform the Directors who will take the said shares … at a fair price’. The plaintiff held 725 fully paid up shares of Rs.10/- each and he asked the directors to buy them but they refused. Were the directors bound to take the shares? Give reasons?

Q.No.8 Explain the essentials of a valid award. A ship called Tanais was chartered for a voyage between Canada and Italy. A clause in the charter party provided for disputes to be settled in London. A dispute arouse and the owners of the Tanais asked the charterers to agree on an arbitrator but the charterers would not concur in an appointment. Suggest solution

Q.7 a) What remedies are available to a buyer when the seller delivers him goods less than/or more than the quantity contracted? (10)
b) A purchased a pole for his carriage from B, While A was driving the pole due to a latent defect, broke and the horses got frightened and injured. Is any remedy available to A in such a case? Comment” (10)

Q.8 a) In what cases, a party to the arbitration agreement may appoint his own appointed arbitrator to act as sole arbitrator in the reference? (10)
b) Define the following: (10)
(i) Drawee (ii) Payee (iii) Accommodation Bills (iv) Blank instrument (v) Cross cheque

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