Legal Aspect of Business SEM 2 April 2026

Description

Legal Aspect of Business

Apr 2026 Examination

 

 

Q1. A chemical supplier provides industrial disinfectant to a cleaning company. The cleaning company’s contract with the supplier does not mention safety instructions, but the product requires special handling due to hazardous components. An accident occurs when the disinfectant is mishandled, resulting in injuries. It emerges that the supplier knew about the risk but did not communicate it to the buyer. The cleaning company wants to seek damages.Using the concept of implied warranties under Section 16(1) of the Sale of Goods Act, 1930, describe how the cleaning company should proceed with a claim for damages and what specific elements must be proven to establish the supplier’s liability. How should the company apply this framework to strengthen its case? (10 Marks)

Ans 1.

Introduction

Commercial contracts for the supply of goods often rely not only on express terms but also on legal obligations that arise by implication of law. In industrial transactions involving hazardous materials, the responsibility of the seller becomes even more significant because improper use can result in serious harm. Under the Sale of Goods Act, 1930, Indian law recognizes certain implied conditions and warranties that protect buyers from undisclosed risks. Section 16(1) is particularly relevant where a buyer depends on the seller’s expertise for selecting goods fit for a specific purpose. In the present case, the cleaning company suffered injuries due to improper

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Q2. Suhana & Sons, a well-known mobile phone manufacturer, launched an aggressive advertising campaign claiming their new smartphone was ‘5G enabled,’ ‘water resistant,’ and featured ‘fast-charging’ capabilities. However, after release, numerous buyers discovered the device was not 5G compatible, had no water resistance, and charged slowly. The company did not notify consumers of these discrepancies, and complaints flooded social media platforms. Facing mounting pressure, Suhana & Sons argued that due diligence was the consumers’ responsibility, citing the old common law doctrine of caveat emptor. Consumer groups countered by invoking the Consumer Protection Act, 2019, demanding product recall and compensation.Critically evaluate the applicability of caveat emptor and its statutory exceptions in this scenario. Assess the company’s liability for misleading advertisements and advise on how regulatory authorities and courts should adjudicate and remedy such a dispute under the Consumer Protection Act, 2019. (10 Marks)

Ans 2.

Introduction

The principle of caveat emptor, meaning “let the buyer beware,” traditionally placed the responsibility on consumers to examine goods before purchase and bear the risk of defects. However, modern commercial practices, especially in technology-driven markets, have significantly altered this balance. Aggressive advertising, online sales, and information asymmetry have increased the vulnerability of consumers. In the case of Suhana & Sons, the company promoted a smartphone with claims of 5G capability, water resistance, and fast charging, which later proved

 

Q3(A) Zenith Group, a real estate company, entered into several agreements which were later challenged on the grounds of absence of free consent, unlawful consideration, fraud, and illegality of object. Due to these defects, some agreements were held void while others were voidable under the Indian Contract Act, 1872, resulting in financial losses to the company.

With reference to the provisions of the Indian Contract Act, 1872, explain the essential elements of a valid contract and examine how the absence of these elements affects the validity of agreements. Also discuss the legal remedies available in cases of void and voidable contracts. (5 Marks)

Ans 3a.

Introduction

Under the Indian Contract Act, 1872, not every agreement automatically becomes a legally enforceable contract. For a contract to be valid and binding, certain essential elements must be present. In the case of Zenith Group, agreements were challenged due to lack of free consent, unlawful consideration, fraud, and illegality of object. These defects directly affect the enforceability of contracts and determine whether an agreement is void or voidable. Understanding these legal principles is crucial for businesses to protect themselves from financial

 

Q3 (B) A construction company completed a commercial building for a client. Although the building was largely operational, certain minor works such as installation of fixtures remained incomplete. The client refused to make full payment, claiming that the contract had not been completely performed. The contract did not expressly deal with partial or substantial performance.

With reference to the Indian Contract Act, 1872, examine the concepts of performance, substantial performance, and partial performance of contracts. Discuss the rights and remedies available to the parties in such cases. (5 Marks)

Ans 3b.

Introduction

Performance of a contract refers to the fulfillment of obligations by the parties as agreed. In practical business transactions, complete performance may not always occur exactly as planned. In the case of the construction company, although the building was substantially completed, minor works remained unfinished, leading to a dispute over payment. The Indian Contract Act, 1872 recognizes different forms of performance, including complete, substantial, and partial