LEARNOVATE E- COMMERCE

CH.L.SRI KARI

TOPIC: THE ENTIRE WEEK TASK

Q.1 a)Explain how firms and individuals participate and interact in the product
market and in the factor market?

In the product market, households buy goods and services from businesses in exchange for
money. In the factor market, the businesses buy labor from households in exchange for
money. ... Households interact with businesses in the factor market every time a person
does paid work for a company

Product and Factor Markets

A product market refers to a place where goods and services are bought and sold

A factor market refers to the employment of factors of production, such as labour, capital
and land.

Product market

Demand for product markets comes primarily from households

The main sellers of goods are different kinds of firms.
Demand for goods is a direct demand. The good is bought for its intrinsic use.
The market facilitates the exchange of goods and services in the economy. It is based
on a voluntary transaction across a wide range of places
Factor markets

The factor market is a place where factors of production (land, labour, capital) are bought
and sold.

A factor market is a market in which companies buy the factors of production or the
resources they need to produce their goods and services. Companies buy these productive
resources in return for making payments at factor prices. This market is also referred to as
the input market.

A factor market is different from the product, or output, market—the market for finished
products or services. In the latter, households are buyers and businesses are sellers. But in
a factor market, the reverse is true: households are sellers and businesses are buyers. The
primary difference between product markets and factor markets is that factors of
production like labor and capital are part of factor markets and product markets are
markets for goods. The relationship between the factor market at the product market is
determined by derived demand, or the demand for productive resources, as determined by
the demand for goods and services output, or products. When consumers demand more
goods and services, producers increase their demands for the productive resources used to
make those goods and services.

Examples of Factor Markets

A labour exchange where firms post available jobs.

Modern equivalents include websites/apps for job seekers.
Commercial real estate agents, making available office space to rent

B) What roles does profit plays in Market system

The Role of Profit in an Economy

Profit is the surplus revenue after a firm has paid all its costs. Profit can be seen as the
monetary reward to shareholders and owners of a business. In a capitalist economy, profit
plays an important role in creating incentives for business and entrepreneurs. For an
incumbent firm, the reward of higher profit will encourage them to try and cut costs and
develop new products. If an industry is profitable, it will encourage new firms to enter. If a
firm becomes unprofitable, it will either have to adapt and change or close down. This
profit motive can help increase efficiency, provide greater choice for consumers and
allocate resources according to consumer preferences.

However, profit can have a downside. To increase profits, firms may take action which
cause market failure. For example, an asset stripper could buy a failing firm – selling off its
assets and then make workers redundant. Alternatively, a firm may increase profits by
finding ways around environmental regulation and cause more pollution. Also, a firm may
seek short-run profit maximisation and under-invest in the long-term.

Behavioural economists argue that economics can often over-emphasise the role of profit.
For example, individuals are motivated by many factors other than profit, such as pride in
work, desire to work in bigger company, be successful and attachment to ideas – even if
unprofitable.

importance-of-profit

Importance of profit

1. Investment in Research & Development. Higher profit enables a firm to spend more on
research and development. This can lead to better technology, lower costs and dynamic
efficiency. This profit is particularly important for some industries such as oil exploration,
drug research and car manufacturing – which require significant risky investment to
develop. Without this profit and investment, the economy will stagnate and lose
international competitiveness, leading to job losses in some sectors.

dynamic-efficiency

This is a graph showing dynamic efficiency – a fall in long-run average costs due to
investment in more productive technology. Without supernormal profit, this investment
may not occur.

2. Reward for Shareholders

Shareholders are given dividends. Higher profit leads to higher dividends and encourages
people to buy shares. Shareholders are an important source of finance for firms. Profit is
important to be able to remunerate shareholders. It is the hope of future profit that enables
firms to raise finance from shareholders to finance expansion.

Low profit may make a firm the target of a takeover bid. If a firm appears to be under-
performing, shareholders may feel they are better off selling to a firm wishing to take them
over.

3. High Profit should attract new firms into the industry

If the price of oil is high then it will become more profitable. These profits should
encourage firms to develop new oil fields. With mobile Apps becoming more profitable, it
will encourage more firms to enter.
The role of profit in competitive markets

perfect-competition-short-run

In this example, a price of P2 gives supernormal profit (AR>ATC). However, if the market is
perfectly competitive, this profit encourages more firms to enter. Supply increases and
price falls until normal profit is made (at P1 where AR=ATC).

perfect-competition-increase-supply

In the long-run profit returns to a normal profit level.

4. Risk Bearing Economies

Profit can be saved and provide insurance for an unexpected downturn, such as recession
or rapid appreciation in the exchange rate. This is important for volatile industries, like
luxury products. Luxury goods may be very profitable in boom years, but make a loss in
recession.

5. Tax Revenues

Governments charge corporation tax on company profits and this provides several billion
pounds of tax revenue per year. In the UK the corporation tax rate is 19%

us-corporate-profit
Company profit levels in the US. This shows the dip in profit during the recession, but sharp
rise after.

6. The incentive effect

Higher profit acts as an incentive for entrepreneurs to set up a business. Without the
reward of profit, there would be less investment and fewer people willing to take risks. In a
command economy, there is no profit incentive but this can easily lead to a lack of
incentives.

Q.2 Explain the concept and various determination of Market Demand

Definition: The Market Demand is defined as the sum of individual demands for a product
per unit of time, at a given price. Simply, the total quantity of a commodity demanded by all
the buyers/individuals at a given price, other things remaining same is called the market
demand.

There are several factors that determine the demand for a product. These are:

Price of the Product: The price of a product is the most important determinant of market
demand in the long-run and the only determinant in the short-run. As per the law of
demand, the price of a product and its quantity demanded are inversely related, i.e. the
quantity demanded increases when the price falls and decreases when the price rises,
other things remaining the same.

Here, other things imply that the income of the consumer, the price of the substitute and
complementary goods, tastes and preferences and the number of consumers, all remains
constant. The price-demand relationship has more significance in the oligopolistic market
structure in which the result of a price war among the firm and its rival decides the level of
success of the firm.

Price of the Related Goods: The market demand for a commodity is also affected by the
changes in the price of the related goods. The related goods may be the substitute or
complementary goods. Two commodities are said to be a substitute for one another if they
satisfy the same want of an individual and the change in the price of one commodity affects
the demand for another in the same direction. Such as, tea and coffee, Maggi and Yippie,
Pepsi and Coca-Cola are close substitutes for each other. The increase in the price of either
commodity the demand for the other also increases and vice-versa.

A commodity is said to be a complement for another if the use of two goods goes together
such that their demand changes (increases or decreases) simultaneously. For example,
bread and butter, car and petrol, mattress and cot, etc. are complementary goods. The
increase in the price of either commodity the demand for another decreases and vice-versa.

Consumer’s Income: The income is the basic determinant of the quantity demanded of a
product as it decides the purchasing power of the consumers. Thus, people with higher
disposable income spend a larger amount of income on consumer goods and services as
compared to those with lower disposable income. Consumer goods and services can be
grouped under four categories: essential goods, inferior goods, normal goods, and prestige
or luxury goods. The relationship between the consumer’s income and these goods is
explained below:

Essential Consumer Goods: The essential goods are the basic necessities of the life and are
consumed by all the persons of the society. Such as food grains, salt, cooking oil, clothing,
housing, etc., the demand for such commodities increases with the increase in consumer’s
income but only up to a certain limit, although the total expenditure may increase with
respect to the quality of goods consumed, other things remaining the same.

Inferior Goods: A commodity is deemed to be inferior if its demand decreases with the
increases in the consumer’s income beyond a certain level of income and vice-versa. For
example, Bajra, millet, bidi are the inferior goods.

Normal Goods: The normal goods are those goods whose demand increases with the
increase in the consumer’s income, such as clothing, household furniture, automobiles, etc.
It is to be noted that, demand for the normal goods increases rapidly with the increase in
the consumer’s income but slows down with a further increase in the income.

Luxury Goods: The luxury goods are those goods which add to the prestige and pleasure of
the consumer without enhancing the earnings. For example, jewelry, stone, gem, luxury
cars, etc. The demand for such goods increases with the increase in the consumer’s income.

Consumers’ tastes and preferences: Consumer’s Tastes and preferences play a vital role in
determining a demand for a product. Tastes and preferences often depend on the lifestyle,
culture, social customs, hobbies, age and sex of the consumers and the religious sentiments
attached to a commodity. The change in any of these factors results in the change in the
consumer’s tastes and preferences, thereby resulting in either increase or decrease in the
demand for a product.

Advertisement Expenditure: Advertisement is done to promote sales of a product. It helps

in stimulating demand for a product in four ways; by informing the prospective consumers
about the availability of a product, by showing its superiority over the competitor’s brand,
by influencing the consumer’s choice against the rival product and by setting new fashion
and changing tastes of the consumers. The effect of advertisement is said to be fruitful if it
leads to the upward shift in the demand curve, i.e. the demand increases with the increase
in the advertisement expenditure, other things remaining constant.

Consumers’ Expectations: In the short run, the consumer’s expectation with respect to the
income, future prices of the product and its supply position plays a vital role in determining
the demand for a commodity. If the consumer expects a high rise in the price of the
commodity, shall purchase it today at a high current price so as to avoid the pinch of the
high price in the future. On the contrary, if the prices are expected to fall in the future the
consumer will postpone their purchase with a view to avail benefits of lower prices in the
future, especially in case of nonessential goods.

Likewise, an expected increase in the income increases the demand for a product and vice-
versa. Also, in the case of scarce goods, if its production is expected to fall short in the
future, the consumer will buy it at current higher prices.

Demonstration Effect: Often, the new commodities or new models of an existing product
are bought by the rich people. Some people buy goods due to their genuine need for them
or have excess purchasing power. While some others do so because they want to exhibit
their affluence. Once the commodity is in very much fashion, many households buy them
not because they have a genuine need for them but their neighbors have purchased it. Thus,
the purchase made by such people arises out of feelings as jealousy, equality in society,
competition, social inferiority, status consciousness. The purchases made on the account of
these factors results in the demonstration effect, also called as Bandwagon Effect.

Consumer-Credit Facility: The availability of credit to the consumer also determines the
demand for a product. The credit extended by sellers, banks, friends, relatives or from
other sources induces a consumer to buy more than what would have not been possible in
the absence of the credit. Thus, the consumers with more borrowing capacity consumes
more than the ones who borrow less.

Population of the Country: The population of the country also determines the total
domestic demand for a product of mass consumption. For a given level of per capita
income, tastes and preferences, price, income, etc., the larger the size of the population the
larger the demand for a product and vice-versa.

Distribution of National Income: The national income is one of the basic determinants of
the market demand for a product, such as the higher the national income, the higher the
demand for all the normal goods. Apart from its level, the distribution pattern of the
national income also determines the overall demand for a product. Such as, if the national
income is unevenly distributed, i.e., the majority of the population falls under the low-
income groups, then the market demand for the inferior goods will be more than the other
category goods.

Thus, the demand for a commodity can be estimated or analyzed by studying the
determinants of market demand and the nature of the relationship between the demand
and its determinants

b)Write a detailed note on- price output decisions in multi plant firms?

A monopolist can produce output in various plants having different cost conditions. The
problem faced by the firm is, therefore, how to allocate the firm’s desired level of
production among these plants.

For the sake of simplicity, we may assume that the firm is having only two plants, A and B.
Suppose at the desired level of output, the following situation prevails

MCA < MCB.

The firm should surely transfer output from the higher cost plant B to the lower cost Plant
A. If the last unit produced in Plant B costs Rs. 9, but one more unit produced in Plant A
adds only Rs. 6 to A’s cost, then that unit should be transferred from B to A. The transfer
results in a cost saving of Rs. 3. In fact, the firm will continue to transfer output from B to A
until

MCA = M CB.

The marginal cost of the two plants are equalized because of the operation of the law
increasing marginal cost. As output is transferred out of B into A, the marginal cost in A
rises and the marginal cost in B falls. Exactly the opposite happens when the following
inequality holds:
MCA> MCB.

Output is transferred from A to B (i.e., less is produced in A and more in B) until

MCA = MCB.

It is easy to determine the total output of the firm. The firm’s total marginal cost curve is ar-
rived at by summing up horizontally the marginal cost curves of both the plants. The total
marginal cost curve is equated to marginal revenue curve in order to determine the profit
maximizing output and price. This output is divided among the plants so as to equate the
marginal cost for both the plants.

Q.3 Elaborate the meaning and various types of cost in detail.

In general terms, cost refers to an amount to be paid or given up for acquiring any resource
or service. ... In economics, cost can be defined as a monetary valuation of efforts, material,
resources, time and utilities consumed, risks incurred, and opportunity forgone in the
production of a good or service

Fixed Costs (FC) The costs which don’t vary with changing output. Fixed costs might
include the cost of building a factory, insurance and legal bills. Even if your output changes
or you don’t produce anything, your fixed costs stay the same. In the above example, fixed
costs are always £1,000.

Variable Costs (VC) Costs which depend on the output produced. For example, if you
produce more cars, you have to use more raw materials such as metal. This is a variable
cost.
Semi-Variable Cost. Labour might be a semi-variable cost. If you produce more cars, you
need to employ more workers; this is a variable cost. However, even if you didn’t produce
any cars, you may still need some workers to look after an empty factory.

Total Costs (TC) = Fixed + Variable Costs

Marginal Costs – Marginal cost is the cost of producing an extra unit. If the total cost of 3
units is 1550, and the total cost of 4 units is 1900. The marginal cost of the 4th unit is 350.

Opportunity Cost – Opportunity cost is the next best alternative foregone. If you invest
£1million in developing a cure for pancreatic cancer, the opportunity cost is that you can’t
use that money to invest in developing a cure for skin cancer.

Economic Cost. Economic cost includes both the actual direct costs (accounting costs) plus
the opportunity cost. For example, if you take time off work to a training scheme. You may
lose a weeks pay of £350, plus also have to pay the direct cost of £200. Thus the total
economic cost = £550.

Accounting Costs – this is the monetary outlay for producing a certain good. Accounting
costs will include your variable and fixed costs you have to pay.

Sunk Costs. These are costs that have been incurred and cannot be recouped. If you left the
industry, you could not reclaim sunk costs. For example, if you spend money on advertising
to enter an industry, you can never claim these costs back. If you buy a machine, you might
be able to sell if you leave the industry. See: Sunk cost fallacy

Avoidable Costs. Costs that can be avoided. If you stop producing cars, you don’t have to
pay for extra raw materials and electricity. Sometimes known as an escapable cost.

Explicit costs – these are costs that a firm directly pays for and can be seen on the
accounting sheet. Explicit costs can be variable or fixed, just a clear amount.

Implicit costs – these are opportunity costs, which do not necessarily appear on its balance
sheet but affect the firm. For example, if a firm used its assets, like a printing press to print
leaflets for a charity, it means that it loses out on revenue from producing commercial
leaflets.

LMarket FailureSocial Costs. This is the total cost to society. It will include the private costs
plus also the external cost (cost incurred by a third party). May also be referred to as
‘Truecosts’

External Costs. This is the cost imposed on a third party. For example, if you smoke, some
people may suffer from passive smoking. That is the external cost.

Private Costs. The costs you pay. e.g. the private cost of a packet of cigarettes is £6.10

Social Marginal Cost. The total cost to society of producing one extra unit. Social Marginal
Cost (SMC) = Private marginal cost (PMC) + External marginal Cost (XMC

b)Discuss the meaning of the risk. Explain the decision making under risk in detail?
Risk is the chance or probability that a person will be harmed or experience an adverse
health effect if exposed to a hazard. It may also apply to situations with property or
equipment loss, or harmful effects on the environment.

In case of decision-making under uncertainty the probabilities of occurrence of various

states of nature are not known. When these probabilities are known or can be estimated,
the choice of an optimal action, based on these probabilities, is termed as decision making
under risk.

Risk implies a degree of uncertainty and an inability to fully control the outcomes or
consequences of such an action. Risk or the elimination of risk is an effort that managers
employ. However, in some instances the elimination of one risk may increase some other
risks. Effective handling of a risk requires its assessment and its subsequent impact on the
decision process. The decision process allows the decision-maker to evaluate alternative
strategies prior to making any decision. The process is as follows:
1.The problem is defined and all feasible alternatives are considered. 2.The possible
outcomes for each alternative are evaluated.
3.Outcomes are discussed based on their monetary payoffs or net gain in reference to
assets or time.
4. uncertainties are quantified in terms of probabilities.
5.The quality of the optimal strategy depends upon the quality of the judgments
. The decision-maker should identify and examine the sensitivity of the optimal strategy
with respect to the crucial factors.

Q.4 Explain composition and functions of Money Market in India

There are two kinds of markets where borrowing and lending of money takes place
between fund scarce and fund surplus individuals and groups. The markets catering the
need of short term funds are called Money Markets while the markets that cater to the
need of long term funds are called Capital Markets.
 Thus, money markets is that segment of financial markets where borrowing and lending
of the short-term funds takes place. The maturity of the money market instruments is
one day to one year. In our country, Money Markets are regulated by both RBI and SEBI.

Indian money market is divided into organized and unorganized segments. Unorganized
market is old Indigenous market mainly made of indigenous bankers, money lenders etc.
Organized market is that part which comes under the regulatory purview of RBI and
SEBI. The nature of the money market transactions is such that they are large in amount
and high in volume. Thus, the entire market is dominated by small number of large
players. At the same time, the money market in India is yet underdeveloped. The key
players in the organized money market include Governments (Central and State),
Discount and Finance House of India (DFHI), Mutual Funds, Corporate, Commercial /
Cooperative Banks, Public Sector Undertakings (PSUs), Insurance Companies and
Financial Institutions and Non-Banking Financial Companies (NBFCs).
Structure of Organised Money Market in India
The organized money market in India is not a single market but is a conglomeration of
markets of various instruments. They have been discussed below:

Call Money / Notice Money / Term Money Market

Call Money, Notice Money and Term Money markets are sub-markets of the Indian Money
Market. These refer to the markets for very short term funds. Call Money refers to the
borrowing or lending of funds for 1 day. Notice Money refers to the borrowing and lending
of funds for 2-14 days. Term money refers to borrowing and lending of funds for a period
of more than 14 days. More information is available here.

Treasury Bill (T – Bills)

The bill market is a sub-market of the money market in India. There are two types of bills
viz. Treasury Bills and commercial bills. While Treasury Bills or T-Bills are issued by the
Central Government; Commercial Bills are issued by financial institutions. Click here for
more information on Treasury Bills.
Commercial Bills
Commercial bills market is basically a market of instruments similar to Bill of Exchange.
The participants of commercial bill market in India are banks and financial institutions but
this market is not yet developed.

Certificate Of Deposits (CDs)

Certificate of Deposit (CD) refers to a money market instrument, which is negotiable and
equivalent to a promissory note. All scheduled commercial banks excluding Regional Rural
Banks (RRBs) and Local Area Banks (LABs) and Select All India Financial Institutions
permitted by RBI are eligible to issue certificates of deposits. More information is here.

Commercial Papers (CP)

Commercial Paper (CP) is yet another money market instrument in India, which was first
introduced in 1990 to enable the highly rated corporates to diversify their resources for
short term fund requirements. More Information about Commercial Papers is here.

Money Market Mutual Funds (MMMFs)

Money Market Mutual Funds (MMMFs) were introduced by RBI in 1992 but since 2000,
they are brought under the purview of the SEBI. They provide additional short-term
avenue to individual investors.

The Repo / Reverse Repo Market

Repo (repurchase agreement ) was introduced in December 1992. Repo means selling a
security under an agreement to repurchase it at a predetermined date and rate. Repo
transactions are affected between banks and financial institutions and among bank
themselves, RBI also undertake Repo. IN 1996, Reverse Repo was introduced. Reverse
Repo means buying a security on a spot basis with a commitment to resell on a forward
basis. Reverse Repo transactions are affected with scheduled commercial banks and
primary dealers.

Discount And Finance House Of India (DFHI)

It was established in 1988 by RBI and is jointly owned by RBI, public sector banks and all
India financial institutions which have contributed to its paid up capital. DFHI plays
important role in developing an active secondary market in Money Market Instruments.
From 1996, it has been assigned status of a Primary Dealer (PD). It deals in treasury bills,
commercial bills, CDs, CPs, short term deposits, call money market and government
securities.

Functions of Money Markets

Due to short maturity term, the instruments of money market are liquid and can be
converted to cash easily and thus are able to address the need of the short term surplus
fund of the lenders and short term borrowing requirements of the borrowers. Thus, the
major function of the money markets is to cater to the short term financial needs of the
economy. The other functions are as follows:

Money Markets help in effective implementation of the RBI’s monetary policy

Money markets help to maintain demand and supply equilibrium with regard to short term
funds
They cater to the short term fund requirement of the governments
They help in maintaining liquidity in the economy

B) Role of SEBI in monitoring and regulating capital market in India.

Understanding what is SEBI and role of SEBI in Financial Market: The capital market
started emerging as a new sensation in India at the end of the 1970s. However, with the
popularity of stocks, a number of malpractices also started rising like price rigging,
unofficial private placements, non-compliance with the provisions of the Companies Act,
insider trading, violation of stock exchange rules and regulations, delay in making delivery
of shares and many others.

As this time, the Indian Government realized the need for establishing an authority to
reduce these malpractices and regulate the working of the Indian securities market as the
majority of Indian People started losing their trust in the stock market.
Soon after, SEBI (Securities and Exchange Board of India) was set up in the year 1988.
SEBI’s main roles in the Indian financial market
In order to achieve its objectives, SEBI takes care of the three most important financial
market participants.

— Issuer of securities. These are the companies listed in the stock exchange which raise
funds through the issue of shares. SEBI ensures that the issue of IPOs and FPOs can take
place in a transparent and healthy way.

what is sebi securites and exchange board of india

What is SEBI? And What is its role in Financial Market?

March 7, 2019Rajarshi BoseInvestment Basics

Understanding what is SEBI and role of SEBI in Financial Market: The capital market
started emerging as a new sensation in India at the end of the 1970s. However, with the
popularity of stocks, a number of malpractices also started rising like price rigging,
unofficial private placements, non-compliance with the provisions of the Companies Act,
insider trading, violation of stock exchange rules and regulations, delay in making delivery
of shares and many others.

As this time, the Indian Government realized the need for establishing an authority to
reduce these malpractices and regulate the working of the Indian securities market as the
majority of Indian People started losing their trust in the stock market.

Soon after, SEBI (Securities and Exchange Board of India) was set up in the year 1988.
What is SEBI?

The organizational structure of SEBI

The objectives of SEBI

SEBI’s main roles in the Indian financial market

The functions of SEBI

Conclusion

What is SEBI?

Initially, SEBI acted as a watchdog and lacked the authority of controlling and regulating
the affairs of the Indian capital market. Nonetheless, in the year 1992, it got the statutory
status and became an autonomous body to control the activities of the entire stock market
of the country. The statutory status of the SEBI authorized it to conduct the following
activities:-

SEBI got the power of regulating and approving the by-laws of stock exchanges.

It could inspect the accounting books of the recognized stock exchanges in the country. It
could also call for periodical returns from such stock exchanges.

SEBI became empowered to inspect the books and records of financial Intermediaries.

It could constrain companies for getting listed on any stock exchange.

It could also handle the registration of stockbrokers.

SEBI is headquartered in Mumbai and having its regional offices in New Delhi, Chennai,
Kolkata, and Ahmedabad. You can also find SEBI’s local offices in Jaipur, Guwahati,
Bangalore, Patna, Bhubaneswar, Chandigarh, and Kochi.
At present, 17 stock exchanges are currently operating in India, including NSE and BSE. The
operations of all these stock exchanges are regulated by the guidelines of SEBI.

The organizational structure of SEBI

Mr. Ajay Tyagi is the current chairman of SEBI. He was appointed on the 10th of January,
2017 and took over the charge with effect from 1st March 2017 from Mr. U.K. Sinha.

SEBI consists of one chairman and other board members. The honorable chairman is
nominated by the Central Government. Out of the eight board members, two members are
nominated by the Union Finance Ministry and one member is nominated by the RBI. The
rest five members of the board are nominated by the Union Government.

The objectives of SEBI

SEBI’s responsibility is to ensure that the securities market in India functions in an orderly
manner. It is made to protect the interests of investors and traders in the Indian stock
market by providing a healthy environment in securities and to promote the development
of, and to regulate the equity market.

Further, as stated earlier, one of the prime reason for establishing SEBI was to prevent
malpractices in the Indian capital market.

SEBI’s main roles in the Indian financial market

In order to achieve its objectives, SEBI takes care of the three most important financial
market participants.

— Issuer of securities. These are the companies listed in the stock exchange which raise
funds through the issue of shares. SEBI ensures that the issue of IPOs and FPOs can take
place in a transparent and healthy way.

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— Players in the capital market i.e. the traders and investor. The capital markets are
functioning only because the traders exist. SEBI is responsible for ensuring that the
investors don’t become victims of any stock market manipulation or fraud.

— Financial Intermediaries. They act as mediators in the securities market and ensure that
the stock market transactions take place in a smooth and secure manner. SEBI monitors the
activities of the stock market intermediaries like brokers and sub-brokers.

The functions of SEBI

The SEBI carries out the following three key functions to perform its roles.

1. Protective Functions: SEBI performs these functions for protecting the interests of the
investors and financial institutions. Protective functions include checking price rigging,
prevention of insider trading, promoting fair practices, creating awareness among
investors and prohibition of fraudulent and unfair trade practices.

2. Regulatory Functions: Through regulatory functions, SEBI monitors the functioning of

the financial market intermediaries. It designs the guidelines and code of conduct for
financial intermediaries and regulates mergers, amalgamations, and takeovers takeover of
companies.

SEBI also conducts inquiries and audit of stock exchanges. It acts as a registrar for the
brokers, sub-brokers, merchant bankers and many others. SEBI has the power to levy fees
on the capital market participants. Apart from controlling the intermediaries, SEBI also
regulates the credit rating agencies.

3. Development Functions: Among the list of SEBI’s development functions, one of them is
imparting training to intermediaries. SEBI promotes fair trading and malpractices
reduction. It also educates and makes investors aware of the stock market by utilizing the
funds available in IEPF.

Write a note on

1) WTO and GATT

Meaning GATT can be described as a set of rules, multilateral trade agreement, that
came into force, to encourage international trade and remove cross-country trade barriers.
WTO is an international organization, that came into existence to oversee and
liberalize trade between countries.
2) GDP and PPP

A nation's GDP at purchasing power parity (PPP) exchange rates is the sum value of all
goods and services produced in the country valued at prices prevailing in the United States.

Gross Domestic Product

Gross Domestic Product meaning: Gross Domestic Product, abbreviated as GDP, is the total
value of goods and services produced in a country. GDP in economics: GDP is measured
over specific time frames, such as a quarter or a year. GDP as an economic indicator is used
worldwide to show the economic health of a country.

Purchasing power parity

Purchasing power parity (PPP) is a popular metric used by macroeconomic analysts that
compares different countries' currencies through a "basket of goods" approach. Purchasing
power parity (PPP) allows for economists to compare economic productivity and standards
of living between countries.

Define the following terms in relation with union budget:

1)Revenue Account

Fees earned from providing services and the amounts of merchandise sold. ... Examples of
revenue accounts include: Sales, Service Revenues, Fees Earned, Interest Revenue, Interest
Income. Revenue accounts are credited when services are performed/billed and therefore
will usually have credit balances.Revenue Accounts are those accounts that report income
of the business and therefore have credit balances. Examples include Revenue from Sales,
Revenue from Rental incomes, Revenue from Interest income, etc.

2) Capital Account

In accounting, the capital account shows the net worth of a business at a specific point in
time. It is also known as owner's equity for a sole proprietorship or shareholders' equity
for a corporation, and it is reported in the bottom section of the balance sheet

The components of the capital account include foreign investment and loans, banking and
other forms of capital, as well as monetary movements or changes in the foreign exchange
reserve. The capital account flow reflects factors such as commercial borrowings, banking,
investments, loans, and capital
3) Revenue Deficit

Revenue Deficit is the excess of its total revenue expenditure to its total revenue receipts.
Revenue Deficit is only related to revenue expenditure and revenue receipts of the
government. The difference between total revenue expenditure to the total revenue
receipts is Revenue Deficit.

Revenue Deficit is shown as a reference indicator in the Medium-term Fiscal Policy

Statement (MTFP). The Revenue Deficit of the government has several implications, such
as, it has to be met from the capital receipts, because of which a government either
borrows or sells its existing assets. This brings in a reduction in assets.

4) Capital Deficit

A capital account deficit shows that more money is flowing out of the economy along with
increase in its ownership of foreign assets and vice-versa in case of a surplus.

A capital account deficit occurs when the equity in a business turns negative. This means
that the total amount of liabilities exceeds the total amount of assets. For example, if the
total amount of assets is $50,000 and total liabilities are $65,000, then the capital account
deficit is $15,000

5) plan and non plan expenditure

Non-plan expenditure is what the government spends on the so-called non-productive

areas, such as salaries, subsidies, loans and interest, while plan expenditure pertains to the
money to be set aside for productive purposes, like various projects of ministries.

Plan expenditure is spent on productive asset creation through Centrally-sponsored

programmes and flagship schemes, while “non-Plan" refers to all other expenditure such as
defence expenditure, subsidies, interest payments, including expenditure on establishment
and maintainance activities such as salaries.

Q.1 Define contract. What are the essential elements of a valid contract?

1 a) Define contract. What are the essential element of a valid contract?

A contract is a legally binding document between at least two parties that defines and
governs the rights and duties of the parties to an agreement. [1] A contract is legally
enforceable because it meets the requirements and approval of the law. A contract typically
involves the exchange of goods, service, money, or promise of any of those. "Breach of
contract", means that the law will have to award the injured party either the access to  legal
remedies such as damages or cancellation.[2]

Essential elements of a valid contract

1. Offer and Acceptance

Basically, a contract unfolds when an offer by one party is accepted by the other party. The
accepted offer should be without any qualification and be definite. An offer needs to be
clear, definite, complete and final. It should be communicated to the offeree. A proposal
when accepted becomes a promise or agreement. The offer and acceptance must be
‘consensus ad idem’ which means that both the parties must agree on the same thing in the
same sense i.e. identity of wills or uniformity of minds.

2. Intention to Create Legal Relationship

The intention of the parties to a contract must be to create a legal relationship between
them. Agreements of social nature, as they do not contemplate legal relationship, are not
contracts. For instance, if a father fails to give his daughter the promised pocket money, the
daughter cannot sue the father, because it was purely a domestic arrangement. Thus, it is
clear that all agreements, which do not result in legal relations, are not contracts.

3. Capacity to Contract
If an agreement is entered between parties who are competent enough to contract, then the
agreement becomes a contract.

4. Genuine and Free Consent

Free consent is another essential element of a valid contract. An agreement must have been
made by free consent of the parties. The contract would be void in case of mutual mistakes.
When consent is obtained by unfair means, the contract would be voidable.

5. Lawful Object
Objectives of an agreement should be lawful. It must not be illegal or immoral or opposed
to public policy. It is lawful unless it is forbidden by law. When the object of a contract is
not lawful, the contract is void.

6. Lawful Consideration
Something in return is Consideration. In every contract, agreement must be supported by
consideration. It must be lawful and real.
7. Certainty and Possibility of Performance
The agreements, in which the meaning is uncertain or if the agreement is not capable of
being made certain, it is deemed void. T&C of the contract should always be certain and
cannot be vague. Any contract that are uncertain are considered void. The terms of the
agreement must also be capable of performance and should not enforce impossible act.

8. Legal Formalities
Legal formalities if any required for particular agreement such as registration, writing, they
must be followed. Writing is essential in order to effect a sale, lease, mortgage, gift of
immovable property etc. Registration is required in such cases and legal formalities in the
relevant legislation should be strictly followed.

B. A, a minor borrows Rs. 5000 & executes a promissory note for the amount in
favour of B, after attaining majority A executes another pronote in a settlement of
the first pronote. Will B succeed in recovering money from A. give reasons.

A)A Contract made with a Minor is Void

Since any contract with minor, that is any individual less than 18 years of age cannot
contract, so any minor agreement which has been formed is void ab-initio (from the
beginning).

As per the Indian Majority Act, 1875, the age of majority in India is specified as 18 years.
Even a day short of the specified age of entering in a contract disqualifies the individual
from being a party to it. Any individual, domiciled in India, who has not attained the age of
18 years, is referred to as a minor

Question 2. What is discharge of contract. What are the various ways in which
contract is discharged.

Discharge of a contract relates to the circumstances in which the contract is brought to an

end. Where a contract is discharged, each party is freed from their continuing obligations
under the contract.

A contract may be discharged in any of the following ways :

By performance.

By tender of performance

By mutual consent

By subsequent impossibility

By operation of law, and

By breach.

By performance: A party to a contract is said to have actually performed his promise when
he has fulfilled all his obligations under the contract. When both the parties have
performed their respective promises, a contract is said to have been actually performed.
Actual performance brings the contract to an end.

By tender of Performance: Section 37 provides that the parties to a contract must either
perform or offer to perform their respective promises. The offer to perform is called tender
of performance. If the promisee does not accept performance, the promisor is not
responsible for non-performance, nor does he thereby lose his rights under the contract.
Thus, a tender of a performance is equivalent to adtual performance.

Essentials of a valid tender

It must be unconditional.

It must be made at proper time and place.

It must be of the whole obligation contracted for and not only of the part.

If the tender relates to delivery of goods, it must give a reasonable opportunity to the
promisee for inspection of goods.

It must be made by a person who is in a position and is willing to perform the promise.

It must be made to the proper person.

If there are several joint promisees, an offer to anyone of them is a valid tender.

By Mutual Consent: If the parties to a contract agree to substitute a new contract for it, or to
rescind, it or alter it, the original contract is discharged.
By Subsequent Impossibility: In some cases it may so happen that the performance of a
contract may become impossible subsequent to the formation of a contract. This is called
subsequent impossibility of performance. In such cases the parties are discharged from
further performance. Section 56 provides in this regard: ‘A contract to do an act which after
the contract is made, becomes impossible or by reason of some event which the promisor
could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

The contract becomes void on the ground of subsequent impossibility only if the following
conditions are satisfied:

The act should have become impossible.

The impossibility should have been caused by circumstances beyond the control of the
parties.

The impossibility should not be the result of the act of the parties.

A contract is deemed to have become impossible of performance and thus void under the
following circumstances:

Destruction of the subject -matter of the contract for no fault of the promisor.

By the death or disablement of the promisor, where personal execution by him was
necessary.

By the subsequent legislation forbidding the performance.

By declaration of war with the country whose resident the contract was made.

Non-existence or non-occurance of particular stable of thing.

Example: X and Y contract to marry each other. Before the time fixed for the marrige, X
goes mad. The contract becomes void.

Exceptions: Under the following cases a contract is not discharged on the ground of
supervening impossibility.
Difficulty of performance: Sometimes the performance becomes difficult. In such cases the
parties are not discharged from performance on account of certain obstacles to execution
of the contract.

Commercial hardship: A party to a contract cannot be discharged from performing it simply

on the ground that it is unprofitable for him to perform the contract.

Impossibility due to default of the third party: The doctrine of subsequent impossibility
does not apply to cases where a contract could not be performed due to the default of a
third person on whose word the promisor relied.

Strikes, lockouts and civil disturbances: Strikes, lockouts and civil disturbances do not
discharge the contract unless the parties had specifically agreed in this regard at the time of
entering into a contract.

Failure of one of the objects: Sometimes a contract is entered into for achieving more than
one object. In such cases if one of the objects fails, the contract is not discharged.

Discharge by operation of law: A contract terminates by operation of law in the following

cases.

By the death of the promisor in case involving personal skill or ability.

By insolvency of the promisor.

Sometimes a person enters into a contract by which he gets certain rights which are
superior to some rights possessed by him under a contract already entered into by him. In
such cases the inferior rights of a person merge into his superior rights. On merger, the
inferior rights vanish and that contract is discharged.

By the unauthorized. alteration of terms of written document.

Discharge by breach of contract: Breach of contract by a party thereto is also a method of

discharge of contract, because breach of contract also brings to an end the obligations
created by a contract on the part of each of the parties. Breach of contract may be of two
kinds:

Anticipatory breach, andActual breach. Actual Breach: It refers to the failure to

perform contractual obligation when performance is due and during the
performance of the contract. In the case of an actual breach, the promisee retains his
right of action for damages.
 Anticipatory Breach: It takes place before the date of actual performance. In
anticipatory breach, the promisee cannot file a suit for damages and even it
discharges the promisor also from performing his part of the contract. It may take
place in two ways: Expressly by words and Implied by the conduct.
(b) ‘A’ in Delhi rings up to B of Bombay offering to sell a machine for Rs. 100000. B
says that he accepts the offer but at the precise moment due to some mechanical
defect in A’s telephone, A does not hear B’s acceptance. Is there binding contract
between A and B.

It is a binding contract between A and B because A doesn't here B' s acceptance

Question.3 who is an unpaid seller? Explain the rules for excercising the right of lien
by an unpaid seller?

The Sale of Goods Act, 1930 (hereinafter referred to as the "Act") defines an unpaid seller
as a seller that has not been paid the full price of the goods that have been sold or that has
received a bill of exchange or other negotiable instrument as conditional payment, and the
condition on which it was received has not ...

Rights (Remedies) of Unpaid Seller(The unpaid seller has the rights/ remedies against
goods and buyer both)

Rights of unpaid seller against goods Rights of unpaid seller against buyer

1.Right of possession/ lien 1.Suit for price2.Right of stoppage of goods in transit

2.Suit for interest and specia ld amages3.Right of resale3.Suit for damages for non-
acceptance4.Suit for breach of contract

Rights of Unpaid Seller against Goods – Lien, Stoppage in Transit, Re-Sale

Who is an Unpaid Seller?

An unpaid seller is one to whom the whole of the price has not been paid or a bill of
exchange or such other negotiable instrument given to him has been dishonoured.

Rights of Unpaid Seller against Goods – Right of Lien, Right of Stoppage in transit, Right of
Re-sale

Rights of an unpaid seller against the goods

These rights of the unpaid seller are known as ‘rights in rem’. If the property in the goods
has already been passed on to the buyer, the unpaid seller has the following rights against
the goods:

1. Right of Lien

The right of lien is the right to retain possession of the goods until payment for the same is
made. Such a right is available to the unpaid seller having possession of the goods if the
goods have been sold without any stipulation as to credit or they have been sold on credit,
but the term of credit has expired. Such a right is also available in case the buyer has
become insolvent.

Rules regarding lien

1. Possession of goods is important to exercise the right of lien.

2. The right of lien is not affected even if the seller has parted with the document of title to
the goods.

3. The possession of the goods by the seller must not expressly exclude the right of lien.

4. The lien can be exercised by the unpaid seller only for the price due and not for any other
charges like warehouse rent or carriage expenses.

5. If the unpaid seller has already made part delivery of the goods to the buyer, he may
exercise lien on the remainder.

Termination of Lien

The unpaid seller loses his right of lien on the goods in the following circumstances:
1. If he delivers the goods to a carrier or other bailee for the purpose of transmission to the
buyer without reserving the right of disposal of the goods.

2. If the buyer or his agent lawfully obtains possession of the goods.

3. If he waives his right of lien on the goods. The seller may waive his rights either
expressly or impliedly. If the contract of sale itself provides in express terms that the seller
shall not retain possession of the goods even if the price has not.been paid, it is said to be
an express waiver of lien. Implied waiver of lien takes place when the seller sells the goods
on credit, or grants a fresh term of credit on the expiry of the original term of credit.

2. Right of stoppage in transit

It is a right of stopping the goods while in transit after the unpaid seller has lost possession
of the goods. This right enables the seller to regain possession. Such a right is available to
the unpaid seller when the buyer becomes insolvent and when the goods are in transit.
Goods are deemed to be in course of transit if they are delivered to a carrier or other bailee
for the purpose of transmission to the buyer, until the buyer or his agent takes delivery of
them.

. 3.Right of Re-Sale

The unpaid seller can re-sell the goods if the goods are of a perishable nature. He can also
make a resale of the goods if he has given notice to the buyer of his intention to re-sell and
the buyer has not within a reasonable time paid the price. If on resale, the seller incurs loss,
he can claim the same from the buyer as damages for breach of contract. If there is a profit
on resale, he is not bound to hand it over to the buyer.

If the property in the goods has not passed to the buyer, the unpaid seller has, in addition
to all other remedies, the right to withhold delivery.

Rights of an unpaid seller against the buyer personally

These rights of the unpaid seller against the buyer are called ‘rights in personam’. These are
as follows:

1. If the property in the goods has passed to the buyer and the buyer wrongfully refuses to
pay for the goods, the seller may sue him for the price.
2. Even if the property in the goods has not passed to the buyer, the unpaid seller may sue
the buyer for the price if he wrongfully refuses to pay.

3. If the buyer wrongfully refuses to accept and pay for the goods, the seller may sue him
for non-acceptance.

4. If the buyer abandons the contract before the date of delivery, the seller may treat the
contract as existing and wait till the date of delivery or he may treat the contract as
cancelled and sue the buyer for damages for the breach.

5. If there is a specific agreement between the seller and the buyer as to interest on the
price of the goods from the date on which payment becomes due, the seller may recover
interest from the buyer. If there is no such agreement, the seller may charge interest on the
price when it becomes due from such day as he may notify to the buyer.

B. P AGREES TO SELL TO Q GOODS WORTH Rs. 5000 WHICH WILL BE PRODUCED IN

HIS FARM NEXT YEAR, WHAT KIND OF GOODS ARE THESE?

Ans… This is an agreement for the sale of future goods and these are agricultural products

Question 4. Define condition. Elaborate implied condition in contract of sale.

This means that each of the parties is obligated, or required, to perform a duty under the
contract. The contract conditions determine the parties' obligations. A condition is an act or
event that affects a party's contractual duty. It is a qualification that is placed on an
obligation.

Implied Conditions

Conditions and Warranties may be either express or implied. The implied conditions and
warranties are those which are presumed by law to be present in the contract though they
have not been put into it in expressed words. Implied conditions are dealt with in Sections
14 to 17 of the Sale of Goods Act, 1930. Unless otherwise agreed, the law incorporates into
a contract of a sale of goods the following implied conditions:

Condition As To Title
In every contract of sale, the first implied condition on the part of the seller is that:

In case of a sale, he has a right to sell the goods,

and in the case of an agreement to sell, he will have the right to sell the goods at the time
when the property is to pass. Buyer is entitled to reject the goods and to recover the price if
the title turns out to be defective. [Section 14(a)].

Let us try to understand this with the help of an example. Let us say that person A bought a
tractor from another person B. The person B had no title to the tractor. Person A then goes
on to use the tractor for three months. Three months later, the legal owner of the tractor
spots it and demands it back from A. In this, the law holds that A is bound within the law to
hand over the tractor to the real owner of the tractor. A has the right to sue B, for the
recovery of the purchase price.

Condition As To Description

If there is a contract of sale of goods by description, a default implied condition is that these
goods must correspond with this description. The buyer is not bound to accept and pay for
the goods which are not in accordance with the description of goods. [Section (15)]

Let us consider an example. Suppose a ship was contracted to be sold as “copper-fastened

vessel” but actually it was only partly copper-fastened. This means that the goods did not
correspond to the description and hence they can be returned or if the buyer took the
goods, he could claim damages for breach.

Sale By Sample

In a contract of sale by sample, there is an implied condition that:

the bulk shall correspond with the sample in the quality;

the buyer shall have or shall be given a reasonable opportunity/chance of
comparing the bulk with the sample, and
the goods shall be free from any defect that may render them unmerchantable,
which would not be apparent on a reasonable examination of the sample. [Section
(17)]
Condition As To Quality Or Fitness

Generally, there is no implied condition as to the quality or fitness of the goods that are sold
for a particular purpose. However, the condition as to the reasonable fitness of goods for a
particular purpose may be implied on the part of the seller for which the buyer wants them.
Following are the conditions to be satisfied:
 If the buyer had made known to the seller the purpose of his purchaseand the buyer
relied on the seller’s skill and judgment, and
seller’s business to supply goods of that description. [Section 16]

Condition As To Merchantability

This is implied only where the sale is by description and the goods should be of
‘merchantable quality’ i.e. the goods must be such as are reasonably saleable under the
description by which they are known in the market. [Section 16(2)]

Conditions As To Wholesomeness

In the case of eatables and provisions, there is another implied condition that the goods
shall be wholesome, in addition to the implied condition as to merchantability.

For example, A supplies B with milk. The milk contains bacteria and B’s wife consumes the
milk and is diagnosed with a disease. She later succumbs to the disease. Hence, there was a
breach of condition as to the fitness of the supplies and A was liable to pay damages to B in
this case.

b) State with reasons whether the following contracts of sale amount to 'sale' or an
'agreement to sell'.

a)X entered into a contract for the sale of some goods in a particular ship to be
delivered on the arrival of the ship.
b)'X' purchases books at book stall for Rs. 10,000/- & pays cash & gets the
delivery of books.
Ans.. a) it is only a agreement of sale... X entered only a contract of some goods there
is no sale is often in this agreement
b) in this case there is sale is often. X purchased books at Rs 10000 and paid cash
and delivered the books.

Q 1 Define holder and explain the right of holder in due course.

Holder is a term used to any person that has in his custody a promissory note, bill of
exchange or cheque. ... Holder means a person entitled in his own name to the possession of
a negotiable instrument and to receive the amount due on it.

Holder in due course acquiring the instrument for consideration and in good faith gets the
following rights under the act:

1) Holder in due course can file a suit in his own name against the parties liable to pay. He
is deemed prima facie to be holder in due course (Sec 118)

2) The holder is due course gets a good title even though the instruments were originally
stamped but was an inchoate instrument (Sec 20). The person who has signed and
delivered an inchoate instrument cannot plead as against the holder in due course that the
instrument has not been filled in accordance with the authority given by him. However, a
holder who himself completes the instrument is not a holder in due course.

3) Every prior party to the instruments is liable to a holder in due course until the
instrument is duly satisfied (Sec 36).

4) Acceptor cannot plead against a holder in due course that the bill is drawn in a fictitious
name (Sec 42). In Bank of England v Vagliano Bros (1891 – Ac 107) it was held that the
acceptor should consider whether the bill was genuine of false before signing his
acceptance in it.

5) The other parties liable to pay cannot plead that the delivery of the instrument was
conditional or for a specific purposes only (Sec 46).

6) He gets a good title to the instrument even though the title of the transferor or any price
party to the instrument is defective (Sec 53) He can recover the full amount unless he was a
party to fraud; or if the instrument is negotiated by means of a forged endorsement.

7) Even if the negotiable instrument is made without consideration, if it get into the hands
of the holder in due course, he can recover the amount on it from any of the prior parties
thereto.

8) The person liable cannot plead against the holder in due course that the instrument had
been lost or was obtained by means of an offence of fraud or for an unlawful consideration
(sec 58).

9) The validity of the instrument as originally made or dawn cannot be denied by the
maker of drawer of a negotiable instrument or by acceptor of a bill of exchange for honor of
the drawer (Sec 120).
10) The maker of a note or an acceptor of a bill payable to order cannot deny the payee’s
capacity to indorse the same at the date of the note or bill (sec 121).

11) Endorser is not permitted as against the holder in due course to deny the signature or
capacity to contract of any prior party to the instrument (Sec 122).

b. sells a radio to M, a minor, who pays for it by cheque.A indorses the cheque to B
whotakes it in good faith and for value.The cheque is dishonoured on
presentation.Can B enforcepayment of the cheque against A or M?

Sol:Payment can’t be enforced against M as he is a minor. But the instrument can be

enforcedagainst A ,A bill is dishonoured by non-acceptance.The bill is endorsed to ‘A’.

Q2. Define promissory note and essential features of promissory note.

“A promissory note is defined as an instrument in writing (not being a bank note or a

currency note), containing an unconditional undertaking signed by the maker, to pay a
certain sum of money only to or to the order of a certain person, or to the bearer.”

The features of promissory note are:

1. It must be in writing.

2. It must contain an unconditional promise to pay.

3. It should be signed by the maker.

4. The payment should be made to a certain person.

5. The certainty of the amount payable should be there.

6. It should be stamped

B. yes C is a holder in due course.and it was a bearer instrument as he take it B in a good

faith and valuable consideration..while B can sue any of the parties from A,C

Q3.Define company .differentiate between company and partnership firm.

A company is a legal entity formed by a group of individuals to engage in and operate a
business—commercial or industrial—enterprise. A company may be organized in various
ways for tax and financial liability purposes depending on the corporate law of its
jurisdiction.

Differences between a Company and Partnership

The special features of a joint stock company can be well understood if we compare the
features of a company form of organization with that of a partnership firm. The important
points of distinction between the company and partnership are given below:

1. Definition

Any voluntary association of persons registered as a company and formed for the purpose
of any common object is called a company. But a partnership is the relation between two or
more individuals who have agreed to share the profits of a business carried on by all or any
of them acting for all. The partners are collectively called as a firm.

2. Law

A company is regulated and controlled by the Companies Act. But a partnership firm is
regulated by the Partnership Act, 1932.

3. Registration

A company should be compulsorily registered under the Companies Act. Its formation is
very difficult. But registration of a partnership firm is not compulsory under the
Partnership Act. The firm is based on the partnership deed. Its formation is very easy.

4. Legal Position

A company is a body corporate and a legal person having a corporate personality distinct
from its members. The members are not liable for the acts of the company. But a
partnership has no legal existence distinct from its members. Partners are liable for the
acts of the firm.

5. Life Time

A company is a mere abstraction of law. So its existence is not affected by the change of
membership or death or insolvency of its members. But a partnership is a mere
aggregation of individuals. So the life of a partnership ends on the death or insolvency or
insanity of any on partner.
6. Liability

The maximum liability of the shareholders, in case of a limited company, is limited to the
face value of the shares purchased by them. In case of companies limited by guarantee, the
liability of the shareholders will be up to the amount guaranteed by them. But in case of a
partnership. the liability of the partners is unlimited. The partners are jointly and severally
liable for all the debts of the partnership firm.

7. Transferability of Shares

Shares of a company are freely transferable unless restricted by the Articles. But a partner
cannot transfer his share without the consent of all other partners.

8. Contract

A member of a company can enter into a contract with the same company. But a partner of
a firm cannot enter into contract with the same partnership firm.

9. Number of Members

A private company should have a minimum of 2 members and can have a maximum of 50
members. A public company should have a minimum of 7 members and there is no
maximum limit. But a partnership should have a minimum of 2 and can have a maximum of
20 persons [10 in the case of banking business].

10. Audit

The accounts of a company should be audited by a qualified auditor. But in the case of a
partnership, the accounts need not be audited. Even though the partners decide to arrange
for the audit of their firm, the auditor need not be a qualified person. The powers, duties
and liabilities of an auditor of a company are regulated by the Companies Act.

B. Define company . Difference between public And private company.

What Is a Company?

A company is a legal entity formed by a group of individuals to engage in and operate a

business—commercial or industrial—enterprise. A company may be organized in various
ways for tax and financial liability purposes depending on the corporate law of its
jurisdiction.

Write a note on

a) Trade mark

A trademark is a unique symbol or word(s) used to represent a business or its products.

Once registered, that same symbol or series of words cannot be used by any other
organization, forever, as long as it remains in use and proper paperwork and fees are paid.

A trademark (or trade mark) is a way for a business to help people to identify the products
that the business makes from products made by another business. A trademark can be a
name, word, phrase, symbol, logo, design, or picture. It can only be used on things made by
the business that owns the trademark.

b) Digital Signature
A digital signature is a mathematical technique used to validate the authenticity and
integrity of a message, software or digital document. As the digital equivalent of a
handwritten signature or stamped seal, a digital signature offers far more inherent
security, and it is intended to solve the problem of tampering and impersonation in digital
communications.

Digital signatures can provide the added assurances of evidence of origin, identity and
status of an electronic document, transaction or message and can acknowledge informed
consent by the signer.

C) Who is consumer? Who is not consumer? With example..

Who is a Consumer ?

A Consumer is a person who purchases a product or avails a service for a consideration,

either for his personal use or to earn his livelihood by means of self employment. The
consideration may be:

Paid
Promised
Partly paid and partly promised. It also includes a beneficiary of such goods/services when
such use is made with the approval of such person.

Who is not a Consumer ?

A person is not a consumer if he/she:

Purchases any goods or avails any service free of charge;

Purchases a good or hires a service for commercial purpose;
Avails any service under contract of service
D) patent

A patent is a right granted to an inventor by the federal government that permits the
inventor to exclude others from making, selling or using the invention for a period of time.
The patent system is designed to encourage inventions that are unique and useful to
society.

E) Unfair Trade practice

The phrase unfair trade practices can be defined as any business practice or act that is
deceptive, fraudulent, or causes injury to a consumer. These practices can include acts that
are deemed unlawful, such as those that violate a consumer protection law.