Q.1 Which of the following is the primary purpose of commercial law?
To regulate personal relationships
To govern business and commercial transactions
To enforce criminal penalties
To control government functions
Explanation - Commercial law focuses on rules, regulations, and legal principles that govern business activities, trade, and commerce.
Correct answer is: To govern business and commercial transactions
Q.2 A contract is considered 'void' if:
It is legally enforceable
It lacks consideration or legal purpose
It is written and signed
It has been partially performed
Explanation - A void contract is one that is not legally enforceable from the beginning due to lack of essential elements such as consideration, lawful purpose, or capacity.
Correct answer is: It lacks consideration or legal purpose
Q.3 Which of the following best describes a 'partnership'?
A business owned and operated by a single person
A business owned by two or more people who share profits and liabilities
A government-owned business
A company listed on the stock exchange
Explanation - A partnership is a form of business where two or more individuals share ownership, profits, and responsibilities.
Correct answer is: A business owned by two or more people who share profits and liabilities
Q.4 What is the primary legal document that governs a company’s internal management?
Memorandum of Association
Articles of Association
Partnership Deed
Contract Agreement
Explanation - The Articles of Association define the internal management rules of a company and the responsibilities of its members and directors.
Correct answer is: Articles of Association
Q.5 In commercial law, 'consideration' refers to:
The written format of a contract
Something of value exchanged between parties
The legality of the contract
The date of contract signing
Explanation - Consideration is a key element of a valid contract and refers to something of value given or promised in exchange for the performance of an act.
Correct answer is: Something of value exchanged between parties
Q.6 Which type of company limits the liability of its members to their share capital?
Sole proprietorship
Limited liability company
Unlimited partnership
Government corporation
Explanation - In a limited liability company, the owners are only liable for the amount of capital they invested in the company, protecting personal assets.
Correct answer is: Limited liability company
Q.7 Which of the following is considered an 'unfair trade practice'?
Advertising a product truthfully
Misrepresenting goods to deceive consumers
Offering discounts legally
Providing after-sales service
Explanation - Unfair trade practices include misleading advertisements, false claims, or deception that harms consumers in the marketplace.
Correct answer is: Misrepresenting goods to deceive consumers
Q.8 The sale of goods act primarily governs:
Employment contracts
Contracts for the sale of goods
Property leases
Insurance policies
Explanation - The Sale of Goods Act regulates contracts related to the buying and selling of goods, defining rights and duties of buyers and sellers.
Correct answer is: Contracts for the sale of goods
Q.9 Which of the following is an example of negotiable instrument?
Promissory note
Employment contract
Lease agreement
Partnership deed
Explanation - Negotiable instruments, like promissory notes and cheques, are transferable documents that guarantee payment of a certain sum of money.
Correct answer is: Promissory note
Q.10 In a contract, 'capacity to contract' refers to:
The physical ability to sign a document
Legal ability to enter into a binding agreement
The financial status of the party
The type of business involved
Explanation - Capacity to contract means that the parties must be legally competent (e.g., of legal age, sound mind) to create a valid contract.
Correct answer is: Legal ability to enter into a binding agreement
Q.11 Which of the following is a feature of a sole proprietorship?
Unlimited liability of owner
Shared management
Separate legal entity
Regulated by shareholders
Explanation - A sole proprietorship is owned by one individual who is fully responsible for all debts and liabilities of the business.
Correct answer is: Unlimited liability of owner
Q.12 Which of these contracts must be in writing to be legally enforceable?
Sale of goods under $500
Contract for sale of land
Verbal employment contract
Oral partnership agreement
Explanation - Contracts involving the sale of land or real estate generally must be in writing under the Statute of Frauds to be enforceable.
Correct answer is: Contract for sale of land
Q.13 Which body primarily regulates competition and trade practices in many countries?
Company Registrar
Competition Commission
Supreme Court
Ministry of Finance
Explanation - Competition Commissions oversee market fairness, prevent monopolies, and regulate anti-competitive practices to protect consumers.
Correct answer is: Competition Commission
Q.14 Which of the following is a characteristic of a contract?
Voluntary agreement between parties
Mandatory government approval
Unilateral legal obligation without consent
Public announcement
Explanation - A contract is a legally binding voluntary agreement between two or more parties with mutual obligations.
Correct answer is: Voluntary agreement between parties
Q.15 In commercial law, a 'franchise' refers to:
An exclusive government contract
A license to operate a business under an established brand
A form of partnership
A type of negotiable instrument
Explanation - A franchise allows a business owner to use an established brand, trademarks, and business model in exchange for fees or royalties.
Correct answer is: A license to operate a business under an established brand
Q.16 Which of the following best describes 'agency' in commercial law?
A business partnership
A relationship where one person acts on behalf of another
A contract for the sale of goods
A government trade organization
Explanation - Agency is a legal relationship in which an agent is authorized to act for and on behalf of a principal in business dealings.
Correct answer is: A relationship where one person acts on behalf of another
Q.17 A 'letter of credit' is primarily used in:
Employment contracts
International trade transactions
Real estate agreements
Insurance contracts
Explanation - Letters of credit are financial instruments issued by banks to guarantee payment to exporters, widely used in international trade.
Correct answer is: International trade transactions
Q.18 Which of the following is true about limited liability partnerships (LLPs)?
Partners are personally liable for all business debts
Partners enjoy limited liability while participating in management
They are unregulated
They cannot enter contracts
Explanation - In an LLP, partners can actively manage the business while limiting their personal liability for business debts beyond their investment.
Correct answer is: Partners enjoy limited liability while participating in management
Q.19 Which type of bankruptcy allows a business to reorganize and continue operations?
Chapter 7
Chapter 11
Chapter 13
Chapter 9
Explanation - Chapter 11 bankruptcy enables businesses to restructure their debts and continue operations under court supervision.
Correct answer is: Chapter 11
Q.20 Which of the following is NOT a feature of a negotiable instrument?
Transferable by endorsement
Guarantees payment of money
Must be in writing
Can be used for barter transactions
Explanation - Negotiable instruments are monetary instruments and cannot be used for barter; they are designed to facilitate payment of money only.
Correct answer is: Can be used for barter transactions
Q.21 In commercial contracts, 'force majeure' refers to:
A legal clause limiting liability for unforeseen events
A type of contract breach
An intentional misrepresentation
A mandatory government approval
Explanation - Force majeure clauses protect parties from liability if contractual obligations cannot be met due to extraordinary events like natural disasters or wars.
Correct answer is: A legal clause limiting liability for unforeseen events
Q.22 Which of the following is an essential element for a valid commercial contract?
Mutual consent
Government license
Public announcement
Prior registration with the trade authority
Explanation - Mutual consent or agreement between parties is essential for a contract to be valid; both parties must agree freely to the terms.
Correct answer is: Mutual consent
Q.23 Which of the following best defines 'commercial paper'?
A legal document related to commercial disputes
Unsecured, short-term promissory notes issued by companies
A memorandum of association
A government-issued trade license
Explanation - Commercial paper is a short-term unsecured debt instrument issued by companies to raise funds, typically for operational needs.
Correct answer is: Unsecured, short-term promissory notes issued by companies
Q.24 Which law governs the sale and lease of goods in most countries?
Criminal Law
Commercial/Business Law
Tort Law
Constitutional Law
Explanation - Commercial law regulates business activities including sale and lease of goods, contracts, and trade practices.
Correct answer is: Commercial/Business Law