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SECTION A : FUNDAMENTALS OF BUSINESS LAWS
Answers
CHAPTER 3.2
TRANSFER OF OWNERSHIP
Quick Revision of the chapter
PASSING OF PROPERTY
Rules for ascertaining when the property in goods passes from seller to buyer under sec. 18 to 25 are as follows:
Sec. & terms
Sec. 18 Goods must be ascertained
Sec. 19(2) Intention of parties
Explanation
Until and unless, the goods are ascertained, the property in goods does not pass to the buyer.
The property in goods is transferred to buyer at such times as intended by parties in case of specific or ascertained goods. The intention is ascertained from:
u Terms of contract,
u Conduct of parties and
u Circumstances of case.
When parties’ intention cannot be ascertained, then rules under Secs. 20 to 24 will apply.
Sec. 20 Specific goods in deliverable state
Deliverable state: Goods are said to be in deliverable state when they are in such state that buyer is bound to take their delivery. For sale of specific goods in deliverable state, the property in goods passes to buyer when the contract is made even if time of payment and delivery is postponed.
Specific goods to be put in deliverable state 21
Specific goods in deliverable state but the seller has to do something in order to ascertain the price 22
Sale of unascertained goods by description 23(1) Ascertainment means to identify and set apart the goods as per description. It is unilateral act of seller.
Apportionment means selecting the goods with intention of using them in contract’s performance and with mutual consent of seller and buyer.
Delivery to carrier 23(2)
Goods on approval or on sale or return basis 24
When goods are sold with an option to approve or return the goods within a specified time, it is called sale on return or approval basis. Here, the property in goods remains with seller till approval is received from buyer.
For sale of specific goods on which the seller is bound to do something to put them in deliverable state, the property in goods passes to buyer when such thing is done and has been brought into buyer’s notice.
For sale of specific goods in deliverable state to which the seller is bound to do something (weigh, test, measure, any act) to ascertain their price, the property in goods passes to buyer when such thing is done and has been brought into buyer’s notice.
For sale of unascertained goods by description, if goods of a specific description are appropriated either by the seller with the consent (can be expressed or implied, after or before appropriation is made) buyer or by the buyer with the consent of the seller, then the property in goods is passed to the buyer.
The seller has unconditionally appropriated the property if he delivers the property to the buyer/ carrier/ bailee for the reason of transmission to the buyer without reserving the right of disposal; it is deemed that he has appropriated the goods.
For sale of goods on return or approval basis, the property in goods passes to buyer when:
1. Buyer signifies his approval for goods.
2. Buyer does an act leading to approval of contract.
3. In case time is specified, if he doesn’t give his approval but retain goods without giving notice of retention, then on expiration of time, the property transfers to buyer. In case no time is specified, then reasonable time period is to be counted.
RISK PRIMA FACIE PASSES WITH PROPERTY SEC. 26:
This rule of 26 will apply only if there is no agreement to the contrary. It is permissible for the parties to provide in the agreement that although the property does not pass, the risk passes and they may fix the point of time when it is to pass.
The goods remain at seller’s risk until the property is transferred to buyer unless otherwise agreed. When the property in goods is transferred to buyer, the risk transfers to buyer even if delivery is not made.
The rule regarding risk passes with the property enshrined in section 26 is subject to the following exceptions:
u Where delivery has been delayed through the fault of either party the buyer or the seller, the goods are at the risk of the party at fault as regards any loss which might not have been occurred but for such fault. The goods are at the risk of the party who is at fault in delay of delivery.
u If there is a custom in that particular trade that the risk does not pass with property, in such a case the risk will pass as per the custom.
u Risk and property may be separated by agreement between the parties.
EFFECT OF DESTRUCTION OF GOODS:
Secs. (7 & 8) are applicable only in case of specific goods and not unascertained/ generic goods. It may further be noted that if the seller was aware of the destruction of goods and still enters into a contract. He is stopped from disputing the contract. In such case the buyer can sue him for breach of contractual obligations and claim damages.
Sec. 7
Goods perishing before making the contract.
If without the seller’s knowledge, at time of making contract the goods in contract perishes or gets damaged leaving them not matching with description, the contract becomes void.
Sec. 8
Goods perishing before sale but after agreement to sell.
If without any fault of seller or buyer, the goods in contract perishes or gets damaged leaving them not matching with description before passing of risk to buyer, the agreement becomes void.
SALE BY PERSON NOT THE OWNER (NEMO DAT QUOD NON HABET)
Nemo dat quod non habet, literally meaning “no one gives what they do not have” is a legal rule, sometimes called the nemo dat rule that states that the purchase of a possession from someone who has no ownership right to it also denies the purchaser any ownership title. In short non -owner cannot make valid transfer in goods and if he sells them the buyer (even if he is honest) who purchases those goods also doesn’t get valid title as the seller also didn’t have the same.
This rule is to protect the real owner of the goods. In order to protect bonafide buyers who purchased goods in good faith for value certain exceptions to this doctrine were made as follows:
Sec.
Sale by mercantile agent 27
Explanation
When a mercantile agent in ordinary course of business, sells any goods in his possession or of document of title to goods with consent of owner shall be as valid as he was expressly authorized by owner provided buyer buys in good faith and has not noticed at time of contract that seller has no authority to sell.
Sec. Explanation
Sale by one of joint owners 28
Sale by person in possession under voidable contract 29
Seller or buyer in possession of goods after sale 30
With permission of co-owners, if one of the joint owners has the possession of goods, then on selling these goods, the property in goods transfers to buyer if buyer has purchased in good faith without having notice at time contract that seller has no authority to sell. The property in goods doesn’t transfer in case of unascertained goods, until the goods are ascertained.
When the seller of goods has obtained possession thereof under a contract voidable under Section 19 or Section 19A of the Indian Contract Act, 1872, but the contract has not rescinded at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller’s defect of title.
1. Where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer of goods or document of title by that person or by his mercantile agent under any sale, pledge other disposition thereof to any other person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the transferor were expressly authorized by the owner of the goods to make the same.
2. Where a person who buys or agrees to buy goods, obtains with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer of goods or document of title by that buyer or by his mercantile agent under any sale, pledge or other disposition thereof to any other person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have effect as if such lien or right did not exist.
Sale by estoppel 27 Estoppel: a rule of evidence whereby a person is barred from denying the truth of fact that has already been stated.
Sale by finder of goods u/s 169 of Indian Contract Act, 1872
Sale by pawnee u/s 176 Indian Contract Act, 1872
Sale by official receiver or assignee
Where the owner by his conduct or omission, leads the buyer to believe that the seller has authority to sell, he is stopped from denying the fact afterwards. The buyer thus gets a better title than the seller.
If the true owner is not found or true owner refuses to pay lawful charges of finder of list goods, then the finder of goods can sell them if goods are of perishable nature or when lawful charges of finder amounts to 2/3rd of its value.
A pawnee of goods has the right to sell the goods pawned subject to satisfying some conditions.
In case of insolvency of any individual his official receiver or liquidator of a company can sell the goods and buyer thereof gets good title to it.
Sec.
Under Negotiable instruments Act
Explanation
A person who takes a negotiable instrument in good faith and for value becomes the true owner even if he takes it from a thief or finder.
PAST EXAMINATION QUESTIONS
Q.1. Goods are at the risk of the party who has the:
(a) Delivery of goods
(b) Ownership of goods
(c) Custody of goods
(d) Dealership of goods
[Sep. 2014]
Q.2. “Mercantile Agent” means the person:
(a) Who sell goods or consigns for the purpose of sell, or buy goods or raise money on security of goods
(b) Who only sell or purchase
(c) Who only consign goods
(d) Who only transfer goods [Sep. 2014, March 2015, June 2016]
Q.3. Mercantile Agent is having an authority to:
(a) Sell or consign goods
(b) Raise money on security of goods
(c) Sell or buy goods
(d) Any of the above [Dec. 2014]
Q.4. The property in the goods means the:
(a) Possession of goods
(b) Custody of goods
(c) Ownership of goods
(d) Both (a) & (b) [Dec. 2014, June 2016, June 2017, June 2018 Dec. 2022]
Q.5. “Mercantile agent” means the person:
(a) Who sell goods, or consigns for the purpose of sell, or buy goods or raise money on security of goods
(b) Who only sell or purchase
(c) Who only stores goods
(d) Who raise money on security of goods [March 2015]
Q.6. Anil sold and delivered 20 kg of bajra to Sunil. Sunil instead of expressing his acceptance of the bajra in writing or by words send the same to floor mill. The acceptance of goods:
(a) Has not taken place
(b) By implied adoption has taken place
(c) By default
(d) By estoppels [March 2015]
Q.7. The general rule of Sale of Goods Act is, risk prima facie passes with.
(a) Ownership
(b) Possession
(c) Delivery
(d) Custody [June 2015, Dec. 2015, March 2016, Dec. 2019]
Q.8. The process of identifying the goods and setting apart as per the intended quality or description is called:
(a) Identification
(b) Procurement
(c) Ascertainment
(d) Allocation [June 2015]
Q.9. In case of carriage of goods by sea, where the seller has to deliver the goods to the buyer at the port of destination, the contract is known as:
(a) F.O.B. Contract
(b) CLE Contract
(c) Ex-ship Contract
(d) FAS Contract [June 2015]
Q.10. The rule as to passing of property as laid down in Section 20 of the Sale of Goods Act shall be applicable:
(
a) The time of payment of price is postponed
(b) The time of delivery of the goods is postponed
(c) Even if the time of payment of price and the time of delivery of the goods are both postponed
(d) Neither the time of payment of price nor the time of delivery of the goods is postponed [Sep. 2015]
Q.11. Where the third party fails to fix the price, but the buyer has received and appropriated the goods, then the buyer is liable to pay?
(a) Penalty
(b) Damages
(c) Reasonable price
(d) According to seller’s demand [Sep. 2015]
Q.12. A had ten horses. He agreed to sell one horse to B. This is a contract for the sale of:
(a) Specific goods
(b) Ascertained goods
(c) Unascertained goods
(d) Contingent goods [Dec. 2015]
Q.13. As per Section 5(1) of the Sale of Goods Act, 1930, which of the following is a recognised mode of a contract of sale? The price and delivery of the goods may be:
(a) Postponed
(b) Agreed to be made in instalments
(c) Agreed to be made immediately
(d) All of these [Dec. 2015]
Q.14. A finder can sell the goods if
(a) The goods are ascertained
(b) The goods are unascertained
(c) The goods are valuable
(d) The goods are perishable [March 2016, Dec. 2022]
Q.15. Section 19 of the Sale of Goods Act deals with passing of property of goods.
(a) Unascertained goods
(b) Future goods
(c) Ascertained or specific goods
(d) Contingent goods [June 2016]
Q.16. Property in goods in the Sale of Goods Act means?
(a) Ownership of goods
(b) Possession of goods
(c) Asset in the goods
(d) Custody of goods [June 2016, June 2017]
Q.17. Seller can sue for price only when property in goods has passed on to the buyer.
(a) True
(b) False
(c) Partly true
(d) Partly false [June 2017]
Q.18. Nemo dat quad non habet means
(a) No one is greater than God
(b) None can give who does not himself possess
(c) Everyone can give everything he has
(d) Everyone is bound by his habit [Dec. 2017]
Q.19. If a finder of lost goods could not find the true owner with reasonable effort or the true owner refuses to pay the lawful charges of the finder of lost goods, the finder of lost goods can sell such goods when the lawful charges of the finder of lost goods amounts to ____ of its value.
(a) 1/3rd
(b) 2/3rd
(c) 1/4th
(d) None [Dec. 2017, Dec. 2019]
Q.20. Mr. A obtained mobile set from Mr. B by fraud. Mr. A has a voidable title at the option of Mr. B. Before Mr. B could rescind the contract, Mr A sold the same to Mr. C who purchased from Mr. A in good faith and without knowledge of fraud by Mr. A and paid for it. In this case
(a) Mr. C has a good title to the goods
(b) Mr. B has a good title
(c) Mr. C has no right
(d) None of the above [June 2018]
Q.21. Risk is associated with _____ of goods.
(a) Ownership
(b) Possession
(c) Both
(d) None [Dec. 2018]
Q.22. A finder of goods can sell the goods if
(a) The goods are ascertained
(b) The goods are unascertained
(c) The goods are valuable
(d) The goods are perishable [Dec. 2018]
Q.23. Which of the following is not a case of Nemo Dat Quo Non Habet?
(a) Sale by mercantile agent
(b) Sale by one of the joint owners
(c) Sale by paid seller
(d) Sale by estoppel [Dec. 2019]
Q.24. In case of Nemo Dat Quo Non Habet, if goods are sold further then the buyer who acts in __________ is entitled to the goods.
(a) Good Faith
(b) Malafide
(c) Bad faith
(d) None of the above [Dec. 2019]
Q.25. Can pawnee convey a good title to the buyer?
(a) Yes
(b) No [Dec. 2019]
Q.26. The doctrine of Nemo dat quo non habet means that no one can give what he himself
(a) Has
(b) Likes
(c) Does not have
(d) Does not likes [Dec. 2022]
Q.27. Select the Odd one
(a) Sale by Estoppel
(b) Sale by Mercantile Agent
(c) Sale by power of Attorney holder
(d) Sale by joint owner [Dec. 2022]
Q.28. In a contract of sale, where goods lie undelivered with the seller, the risk of loss of goods remains with:
(a) Seller only
(b) Buyer only
(c) Buyer and seller equally
(d) Insurance company [June 2023]
Q.29. A delivered a horse to B on the condition of sale or return within 10 days. The horse died within 5 days while in B’s custody. Which of the following is the correct solution as per Sale of Goods Act?
(a) The loss would fall on the buyer (B) as the horse died in his custody
(b) The loss will fall on the seller (A) as the property in goods has not yet passed to the buyer (B).
(c) The loss will be shared equally between (a) and (b).
(d) None of the above [June 2023]
Q.30. In case of appropriation of goods, which are the essential requirements?
(
a) The goods should confirm to the description and quality stated in the contract
(b) The goods must be in a deliverable state
(
c) The appropriation must be by the seller with the assent of the buyer
(d) All of the above [Dec. 2023]
Q.31. In case of contract for the sale of specific or ascertained goods the property in goods passes to the buyer:
Answers
(a) At such time as the parties to the contract intend it to be transferred
(b) When the price is paid
(c) When delivery is given
(d) When the contract is made [Dec. 2023]
Q.32. In FOB contract, property and risks passes on
(a) Shipment
(b) Landing at the port of destination
(c) Payment of price
(d) Reaching the warehouse of buyer [June 2024]
Q.33. Select the odd one out.
(a) Estoppel
(b) Sale by merchant agent
(c) Sale by power of attorney holder
(d) Sale by joint owner [June 2024]
CHAPTER 3.3
ESSENTIAL CONDITIONS OF A CONTRACT
Quick Revision of the chapter
ESSENTIALS CONDITIONS (SINE QUA NON) OF A CONTRACT OF SALE:
u It must involve two parties. The goods need to transfer from one entity to another. The goods cannot be bought from one’s own self and be called a contract.
u The transfer must involve the transfer of title to the goods or the transfer of ownership of the goods.
u A contract of sale is not complete unless there is a certain subject matter which is to be transferred in lieu of a specific amount of consideration. As
FUNDAMENTALS OF BUSINESS LAWS & BUSINESS
(FBLC | LAW) | CRACKER
AUTHOR : Leena Lalit Parakh
PUBLISHER : Taxmann
DATE OF PUBLICATION : June 2026
EDITION : 5th Edition
ISBN NO : 9789375614302
NO. OF PAGES : 252
BINDING TYPE : Paperback
DESCRIPTION
Fundamentals of Business Laws & Business Communication (FBLC | Law) – CRACKER is an exam-focused revision-and-practice book for Paper 1 of the CMA Foundation. Built for a fully objective, 100-mark MCQ exam (50 questions × 2 marks), it mirrors the ICMAI weightage exactly—Section A: Fundamentals of Business Laws (80 marks) and Section B: Business Communication (20 marks).
Rather than reproducing bulky study material, it distils each topic into a quick-revision snapshot and drills it through an exam-tagged question bank—pairing 950+ MCQs with fully solved past papers up to June 2026, module-wise marks analytics, and a mapping to the ICMAI Study Material, so students revise strategically and walk in knowing exactly what gets asked.
The Present Publication is the 5th Edition | June 2026, authored by CA. Leena Lalit Parakh, with the following noteworthy features:
• [Fully Solved Past Papers (till June 2026)] December 2024, June 2025, December 2025 and June 2026 papers reproduced with suggested answers and explanatory notes—section citations and reasoning—so students learn why, not just what
• [Module-wise Marks Distribution of Past Exams] A topic-by-topic table of marks (June 2023–June 2026) with averages, making high-yield areas obvious at a glance
• [Module-wise Comparison with the ICMAI Study Material] A mapping table aligning every module with the Institute's official material, for gap-free, syllabus-complete coverage
• [Tabular Summary at the Start of Each Chapter] A 'Quick Revision of the Chapter' at the head of all 36 chapters for rapid, last-minute recall
• [950+ MCQs, Including Practice Questions] A deep objective bank, with past-exam questions tagged by session (2014–2025) to show how concepts have been framed
• [Descriptive Questions Converted into MCQs] Older theory/descriptive questions reframed as multiple-choice in line with the current pattern, keeping legacy material exam-ready