Legal Aspect of Business DEC 2026
Dec 2026 Examination
Q1 ABC Electronics, a national retailer, enters into a contract to buy 2,000 smart refrigerators from a manufacturer, with delivery scheduled in two installments over three months. The contract includes an express warranty stating all refrigerators will have a 3-year repair warranty, and meet a minimum energy efficiency standard. When the first installment arrives, 400 units are found to be less energy efficient than promised, but fully functional. Despite this, ABC decides to keep and sell the refrigerators, then seeks damages from the manufacturer for the shortfall in efficiency. Applying the concept of ‘warranty’ under section 12(3) of the Sale of Goods Act, 1930, and the distinction between condition and warranty, how should ABC Electronics proceed to claim its commercial rights? What legal remedies are available to ABC, and why can it not repudiate the entire contract in this scenario? (10 Marks)
Ans 1.
Introduction
This case turns on the distinction between the distinction that the Sale of Goods Act, 1930, makes between a guarantee and a warrantee, which is the basis for determining what remedies a purchaser is entitled to when a promise made by a seller is broken. ABC Electronics ordered smart refrigerators promising to achieve a minimum energy efficiency standard, but the first batch of units didn’t meet expectations, while remaining functional. ABC kept and sold these appliances instead of refusing to purchase them. They then demanded damages in the event of a shortfall. Applying subsection 12(3) of the Act and the rules governing acceptance of goods, it is
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Q2 (A) An e-commerce marketplace inadvertently processes a double payment from a customer for a single order due to a technical glitch. The customer requests a refund, but the seller refuses, believing no contract covered the second payment. The marketplace itself is unsure whether it is required to intervene or if a contractual or quasi-contractual remedy should apply. Stakeholders aim to resolve the dispute with fairness and legal correctness. Evaluate whether the remedy in this scenario lies under a quasi-contract or a traditional contract within the framework of the Indian Contract Act, 1872. Justify your position by weighing the legal obligations of all three entities, customer, seller, and marketplace, and recommend a fair course of action. (5 Marks)
Ans 2(A).
Introduction
The technical issue led to the customer having to pay twice for one order, but no agreement was in place to protect the second transaction. It’s not a matter of dispute about a broken promise under an old contract, but about money received without any legal obligation to hold it, a situation the Indian Contract Act, 1872 deals with through its regulations about quasi-contract.
Concept and Application
Why This Is Not a Traditional Contract
An effective contract demands an offer, acceptance, and consideration for a specific
Q2 (B) In India, a mid-sized manufacturer seeks to secure a substantial loan for expansion. The lender demands a contract of guarantee, and the manufacturer’s director offers to act as surety. Subsequently, the lender and borrower amend the terms without consulting the surety, leading to borrower’s default. The director contests his liability, citing changes to the agreement. Both sides refer to the Indian Contract Act’s provisions on guarantee and discharge of surety’s liability. Assess the legal and ethical implications of enforcing liability against a surety when key contract terms have been modified without their knowledge. Drawing on statutory and practical considerations, argue how courts should balance creditor protection and fair treatment of guarantors in such situations. (5 Marks)
Ans 2(B).
Introduction
A director gave a personal assurance for his company’s loan. But the lender later changed his loan’s terms with the borrower without telling him. If the borrower failed to pay, the lender attempted to impose the guarantee nonetheless. This is how the Indian Contract Act, 1872