BCOC 133 Free Solved Assignment
BCOC 133 Free Solved Assignment Jan 2022
Q-2 Explain the various ways by which a contract can be discharged.
ANS:- A Contract is said to be discharged , when parties enter into a contract, each has rights and duties that are spelled out in the agreement.
When the sides perform their rights and duties, the contract is then discharged. In these cases, discharge of contract refers to an agreement that’s fully performed.
There are many ways in which a contract is discharged:-
1] Discharge by Performance
When the parties to a contract fulfil the obligations rising under the contract within the time and manner prescribed, then the contract is discharged by performance.
Example: Peter agrees to sell his cycle to John for an amount of Rs 10,000 to be paid by John on the delivery of the cycle. As soon as it is delivered, John pays the promised amount.
2] Discharge by Mutual Agreement BCOC 133 Free Solved Assignment
If all parties to a contract mutually agree to replace the contract with a new one or annul or remit or alter it, then it leads to a discharge of the original contract due to a mutual agreement.
Example: Peter owes Rs 100,000 to John and agrees to repay it within one year. They document the debt under a contract.
Subsequently, he loses his job and requests John to accept Rs 75,000 as a final settlement of the loan. John agrees and they make a contract to that effect. This discharges the original contract due to mutual consent.
3] Discharge by the Impossibility of Performance
If it is impossible for any of the parties to the contract to perform their obligations, then the impossibility of performance leads to a discharge of the contract. If the impossibility exists from the start, then it is impossibility ab-initio.
Example: Peter enters into a contract with John to marry his sister Olivia within one year. However, Peter meets with an accident and becomes insane. The impossibility of performance leads to a discharge of the contract.
4] Discharge of a Contract by Lapse of Time
The Limitation Act, 1963 prescribes a specified period for performance of a contract. If the promisor fails to perform and the promisee fails to take action within this specified period, then the latter cannot seek remedy through law. BCOC 133 Free Solved Assignment
It discharges the contract due to the lapse of time. Example: Peter takes a loan from John and agrees to pay installments every month for the next five years.
However, he does not pay even a single installment. John calls him a few times but then gets busy and takes no action. Three years later, he approaches the court to help him recover his money.
However, the court rejects his suit since he has crossed the time limit of three years to recover his debts.
5] Discharge of a Contract by Operation of Law
A contract can be discharged by operation of law which includes insolvency or death of the promisor
6] Discharge by Breach of Contract
If a party to a contract fails to perform his obligation according to the time and place specified, then he is said to have committed a breach of contract.
Also, if a party repudiates a contract before the agreed time of performance of a contract, then he is said to have committed an anticipatory breach of contract.
7] Discharge of a Contract by Remission
A promisee can waive or remit the performance of promise of a contract, wholly or in part. He can also extend the time agreed for the performance of the same.
In example 3 above, Peter only repays a part of the money he owes to John. However, John agrees to accept it as a final settlement of the debt. John’s act of remission discharges the contract. BCOC 133 Free Solved Assignment
8] Discharge by Non-Provisioning of Facilities
In many contracts, the promisee agrees to offer reasonable facilities to the promisor for the performance of the contract. If the promisee fails to do so, then the promisor is discharged of all liabilities arising due to non-performance of the contract.
Example: Peter agrees to fix John’s garage floor provided he keeps his car out for at least 6 hours.
Peter approaches him a few times but John is reluctant to get his car out. John fails to provide reasonable facilities to Peter (an empty floor). This discharges him of all obligations arising under the contract.
Q-3 Explain the doctrine of ‘Caveat Emptor’. What are the exceptions to this rule?
ANS:- The Doctrine of Caveat Emptor means that the responsibility lies on the buyer of goods and he must perform due diligence before the purchase of the goods. It is expected from the buyer to be alert in a contract of sale.
He cannot hold the seller responsible for inferior goods unless the contact is based on fraud. The Doctrine of Caveat Emptor is generally applicable in case of property transactions but it can also be applied in the sale of goods and other services.
Section 16 of the Sale of Goods Act, defines it as ‘“there is no implied warranty or condition as to the quality or the fitness for any particular purpose of goods supplied under such a contract of sale“ BCOC 133 Free Solved Assignment
Let’s explain the Doctrine of Caveat Emptor with an example. The seller makes the goods available in the market and it is the responsibility of the buyer to inspect them well before buying.
If the buyer later discovers a defect in the goods that could have been detected earlier by him, he cannot sue the seller for inferior quality.
Though the responsibility lies with the buyer, can be shift it to the seller under the given conditions :-
-If the buyer has informed the seller about the purpose of the purchase, before making the purchase.
-If the buyer relies on the technical expertise and experience of the seller.
-If the goods are of a description that the seller supplies in his normal course of business
Exceptions to the Doctrine of Caveat Emptor:
The Doctrine of Caveat Emptor and its exceptions will help us understand the situations in which the responsibility is not put only on the buyer.
Fitness of the Product for the Buyer’s Purpose of Purchase: Section 16 (1)-
If the buyer informs the seller about his purpose behind purchasing the goods and the seller does not sell the goods according to that knowingly,
it relieves the buyer from the responsibility. In this case, it becomes the duty of the seller to supply the right goods to the buyer. BCOC 133 Free Solved Assignment
Sale of Goods Under the Trade Name – If the buyer purchases a branded product or a product sold under a trade name, then he is assured of the quality that is associated with that brand name.
The seller in this case cannot be held responsible. In this case, the buyer is not relying on the skill or judgment of the seller but on the implied quality standard that the brand offers.
*Goods Sold by Description– If the buyer purchases the goods based on their description which matches the product, then the seller cannot be held liable. The seller will be held liable only if he provides an incorrect description of the goods.
Merchantable Quality of Goods: Section 16(2)- The seller must provide goods of merchantable quality to the buyer. This means that the goods must be fit for resale in the market and must pass the market standards.
When the buyer purchases the goods from a seller based on a description and the seller deals in the goods of that description, then the goods must be of merchantable quality.
If the goods are not of merchantable quality, then the seller can be held liable for the same.
Sale by Sample Inspection – The Doctrine of Caveat Emptor does not apply if the buyer purchases the goods after careful inspection of a sample of the goods that he intends to buy and the seller supplies goods different from that sample.
Trade Usage: Section 16(3)-The rule of Caveat Emptor does not apply if the seller deviates from informing the buyer about the quality or the fitness of goods/products. There is an implied condition or warranty on the condition of the goods.
Fraudulent Representation by the Seller – If the seller provides fraudulent information about the goods or conceals some important information about them, the buyer is not responsible. BCOC 133 Free Solved Assignment
Q-4 Who is finder of lost goods? Explain his rights and duties.
ANS:- According to Section 71 of the Indian Contract Act, 1872 deals with the finder of goods. A finder of goods means a person who finds goods that belongs to another and place them into his custody.
The finder of the goods holds the same position as that of bailee and he is required to take care of the goods in the same manner as is expected out of bailee under Section 151 of the Indian Contract Act, 1872. BCOC 133 Free Solved Assignment
He is also responsible for all the duties of bailee such as duty to return the goods after the true owner is found. If he refuses to return such goods then he would be made liable for the same.
Rights of finder of goods:
1.Right of Lien- It says that the finder of goods has no right to sue the owner for the trouble and expenses which are borne by him for maintenance and preservation of goods.
He only has the right of particular lien regarding such goods.
He only has the right to retain those goods against the owner until and unless he receives some compensation for trouble and expenses voluntarily incurred by him in preservation and maintenance of goods.BCOC 133 Free Solved Assignment
2. May sue for specific reward- According to Section 168 of the Act, the finder of the goods cannot sue the owner of the goods for the trouble and expenses incurred by him in preserving those goods.
He only has the right to receive compensation where the owner of the goods promised to give a specific reward to the person who returns him the goods which he has lost.
Here the acquirer of the goods can only sue the owner for non-payment of compensation or reward and has the power to retain them until he receives it.
3. When finder of thing commonly on sale may sell it- Section 169 of the Indian Contract Act, 1872 says that where a thing which is commonly the subject of sale is lost and the owner of the goods cannot be found or if he refuses to pay compensation or lawful charge of such goods to the finder then the finder has the power to sell it where:
a. The thing is of perishable nature or will lose the greater part of its value, or
b. Where the lawful charge of the finder in respect of the thing found amount to two thirds of its value.BCOC 133 Free Solved Assignment
Obligations of Finder of Goods:
1. He must take reasonable care of the goods found. If he has taken reasonable care, he is not responsible for any loss.
2. He must not use the goods found until true owner is found within a reasonable time.
3. He must not mix them with his own goods until the true owner is found within a reasonable time.
4. He must take reasonable steps to trace the true owner otherwise, he will be guilty of wrongful conversion of goods.
Q-5 An agreement in restraint of trade is void. Discuss this statement with exceptions to it.
ANS:- Freedom of trade and commerce is a fundamental right protected by Article 19(g) of the Constitution of India.BCOC 133 Free Solved Assignment
Just as the Legislature cannot take away individual freedom of trade, so also the individual cannot barter it away by an agreement.
As per Justice James, V.C., “public policy requires that every man shall be at liberty to work for himself, and shall not be at liberty to deprive himself or the of his labour, skill or talent, by any contract that he enters into”.
Courts, therefore, do not allow any tendency to impose restrictions upon the liberty of an individual to carry on any business, profession or trade .
In India, the law on the subject is contained in section 27 which reads: Every agreement by which any one is restrained from exercising lawful profession, trade or business of any kind, is to extent void.
Thus all agreements in restraint of trade and whether general or partial, qualified or unqualified, are void.BCOC 133 Free Solved Assignment
- A person Susan agrees with John, in return for some consideration, that she will not marry a certain person Mark. This agreement is one in restraint of marriage and is thereby void.
2. Tina’s father promises a person Rahul, that he won’t marry his daughter Tina to anyone else but he, if only he would pay a sum of Rs. 20,000 per month until their wedding date. This is a void agreement, as it is in restraint of marriage of a person of age.
Exception: There are two exceptions to this rule, they are as follows:
Under Statutory Exceptions-
Sale of goodwill- The seller of goodwill of a business may agree with the buyer thereof not to carry on a similar business within specified local limits. Such a restrain shall be valid, if limits are reasonable (section-27).
The reasonableness of restrictions will depend upon many factors, such as the area in which the goodwill is effectively enjoyed, the price paid for it and above all, the nature of the business. BCOC 133 Free Solved Assignment
For example-a seller of imitation jewellery in England, sold his business to B and promised that for a period of two years he would not deal
(a) in imitation jewellery in England
(b) in real jewellery in certain foreign countries,
Certain restraints in Partnership– There are four provision under the Partnership Act which recognise agreements in restraint of trade as valid. Accordingly, partners may agree that:
a) According to Section 11(2) of the Indian Partnership Act, 1932, a partner shall not carry on any business other than that of the firm while he is a partner.
b) According to Section-36(2) of the Indian Partnership Act, 1932, a partner on ceasing to be a partner will not carry on any business similar to that of the firm within a specified period or within specified local limits.
The agreement shall be valid only if the restrictions are reasonable.
c) According to Section-54 of the Indian Partnership Act, 1932, partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within a specified period or within a specified local limits. BCOC 133 Free Solved Assignment
Such an agreement shall be valid provided the restrictions imposed are reasonable
d) According to Section-55(3) of the Indian Partnership Act, 1932, a partner may, upon the sale of the goodwill of a firm make an agreement that such partner will not carry on any business similar to that of the firm within a specified period or within specified local limits. Any such agreement shall be valid if the restrictions imposed are reasonable.
Under Judicial Interpretations-
Trade Combinations: Business combinations with the idea of regulating business and not restraining it have been held to be desirable in public interest. Restraints imposed by such associations are, therefore, not to be declared void on grounds of restraint of trade.
The Bombay High Court held the agreement to be valid and enforceable. But the Courts would not allow a restraint to be imposed disguised as trade regulations.
Exclusive Dealing Agreements– Reasonable agreements to deal in the products of a single manufacturer or to sell the whole produce to a single dealer have been upheld to be valid and not in restraint of trade.BCOC 133 Free Solved Assignment
Service Agreements– An agreement of service by which a person binds himself during the term of the agreement not to take service with anyone else, directly or indirectly, take part in or promote or aid any business in direct competition with that of his employer is valid.
For example-A agreed to become assistant for three years to B who was a doctor practising at Zanzibar. It was agreed that during the term of the agreement A was not to practise on his own account on Zanzibar.
After one year, A started his own practise on his own practise. Held the agreement was valid and A could be restrained by an injunction from doing so.
Q.6 Define undue influence. What is the effect of it on the validity of a contract?
ANS:- Undue influence occurs when an individual is able to persuade another’s decisions due to the relationship between the two parties.
Often, one of the parties is in a position of power over the other due to elevated status, higher education, or emotional ties. BCOC 133 Free Solved Assignment
The more powerful individual uses this advantage to coerce the other individual into making decisions that might not be in their long-term best interest.
Undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person.
This inequity in power between the parties can vitiate one party’s consent as they are unable to freely exercise their independent will. In exerting undue influence, the influencing individual is often able to take advantage of the weaker party.
In contract law, a party claiming to be the victim of undue influence may be able to void the terms of the agreement.
Effects of Undue Influence:-
“When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.
Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit there under, upon such terms and conditions as the court may seem just.” (Sec. 19-A)BCOC 133 Free Solved Assignment
Illustrations (Appended to Sec. 19-A).
(a) A’s son has forged B’s name to a promissory note. B, under threat of prosecuting A ‘s son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the Court may set the bond aside.
(b) A, a money lender, advances Rsl00 to B. an agriculturist, and by undue influence, induces B to execute a bond for Rs200 with interest at 6 percent per month.
The Court may set the bond aside, ordering B to repay the Rs100 with such interest as may seem just.
Thus, it will be noticed that Section 19-A also declares a contract brought about by undue influence voidable at the option of the aggrieved party, just as section 19 so declares.
In case of a contract brought about by coercion, misrepresentation or fraud, the special feature of Section 19, is that while in the case of rescission of a contract procured by coercion, misrepresentation or fraud, any benefit received by the aggrieved party has to be restored under Section 64 of the Contract Act; under Section19A,
if a contract procured by undue influence is set aside, the Court has discretion to direct the aggrieved party for refunding the benefit whether in whole or in part or set aside the contract without any direction for refund of benefit.
(i)Lack of judgment, lack of knowledge of facts or absence of foresight are generally not by themselves sufficient reasons for setting aside a contract on the ground of undue influence. Persuasion and argument are also not in themselves undue influence.
Undue influence implies mental and moral coercion so as to make the consent of one of the parties to the contract without freedom.BCOC 133 Free Solved Assignment
(ii) Undue influence by a person, who is not a party to the contract, may make the contract voidable in other words, it is not necessary that the person in a position to dominate the will of the other party use himself be benefited.
Q.7 How can a firm be dissolved by the order of the court.
ANS:- According to Section 44 of the Indian Partnership Act, 1932, the Court may dissolve a firm on the suit of a partner on any of the following grounds:
1] Insanity/Unsound mind – If an active partner becomes insane or of an unsound mind, and other partners or the next friend files a suit in the court, then the court may dissolve the firm.
2] Permanent Incapacity -If a partner becomes permanently incapable of performing his duties as a partner, and other partners file a suit in the court, then the court may dissolve the firm
3] Misconduct – When a partner is guilty of conduct which is likely to affect prejudicially the carrying on of the business, and the other partners file a suit in the court, then the court may dissolve the firm.BCOC 133 Free Solved Assignment
4] Persistent Breach of the Agreement – A partner may willfully or persistently commit a breach of the agreement relating to
— the management of the affairs of the firm, or
— a reasonable conduct of its business, or
— conduct himself in matters relating to business that is not reasonably practicable for other partners to carry on the business in partnership with him.
5] Transfer of Interest – A partner may transfer all his interest in the firm to a third party or allow the court to charge or sell his share in the recovery of arrears of land revenue.
Now, if the other partners file a suit against him in the court, then the court may dissolve the firm.
6] Continuous/Perpetual losses – If a firm is running under losses and the court believes that the business of the firm cannot be carried on without a loss in the future too, then it may dissolve the firm.
7] Just and equitable grounds – The court may find other just and equitable grounds for the dissolution of the firm. Some such grounds are:
• Deadlock in management
• Partners not being in talking terms with each other
• Loss of substratum (the foundation of the business)
• Gambling by a partner on the stock exchange.BCOC 133 Free Solved Assignment
Q.8 Who is a minor? When can a minor enter into a valid contract?
ANS:- A minor is an individual who has not attained the age of 18 years and the attaining majority for every contract is an essential condition precedent.
As per Indian law, minor’s agreement stands void, which means that it has no stand whatsoever in the eyes of the law.
So a contract with minor stands null and void since either party can not impose it. And even after the person attains majority, the same agreement cannot be ratified by him.
The difference here is that a minor’s contract is void/null; So a contract however, it is not illegal as there is no statutory provision on this.
Any person who is 18 years is the age of majority, a minor enter into a valid contract. Below the age of 18 years does not have the capacity to enter into a contract.
A contract or agreement with a minor is null from the beginning, and no one can sue them. The State provides the Minors with civil and criminal immunities. In addition to that, it takes custody of the well being and the property of the minor.
These immunities do not let the minors to enter into a contract. But if a minor enters into a contract knowing his incapability, then such a contract shall work independently of any contract.BCOC 133 Free Solved Assignment
As per section 68, any person shall be entitled to reimbursement out of the minor’s estate for necessaries supplied towards him or his family.
Necessities also consist of goods and services. So, a minor’s agreement amounting to payment for necessaries can be enforced. If a minor had acquired payment falsely by concealment of age, then he might be compelled to restore the payment.
However, he cannot be obliged for an identical amount, if any, as it would sum to enforcing a void contract.
Thus it could be said that as per law, an agreement formed and entered into by a minor is void. The Indian Contract Act states that only an individual who is a major that is who has attained the age of 18 years is competent to contract.
The primary reason of holding a minor’s agreement void is that where an agreement, through which a minor includes a promise on his part or his promise is an essential part of the agreement,BCOC 133 Free Solved Assignment
it stands void since a minor is not qualified to make a promise imposing a legal obligation.
Q.9 Under what circumstances an agency can be terminated by the operation of law.
ANS:- According to Section 201, An agency is terminated by the principal revoking his authority, or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors.
Agency can be terminated by operation of law-
i) By the completion of agency – Agency can become to an end after the completion of work for which the agency is created.
ii) By expiry of the time – Agency can also be terminated by the expiry of time. if the agency is created for the specific period, it is terminated after the expiry of the time.
iii) Death or insanity of principal or agent – Section 209 of the Indian Contract Act 1872 imposes an agent, duty to terminate the contract of agency on the death of the principal.BCOC 133 Free Solved Assignment
In other words, Agency comes to an end on the death or insanity of the principal or agent.
iv) Insolvency of principal – According to Section 201 of the Indian Contract Act 1872, an insolvent or bankrupt is a person who is unable to run the business due to Excess of liabilities over assets.
In this way, if the principal becomes an insolvent agency can be terminated.
v) Destruction of the subject matter – If this subject matter of the agency is destroyed agency comes to an end. For example – Any agency is created for sale of an Airplane if the Airplane caught fire before the sale the agency comes to an end.
In this contract Airplane is the subject matter.
vi) Principal becoming an alien enemy – If the Principal becomes an alien enemy the contract of agency comes to an end.
vii) Dissolution of company or firm – A Firm or company may be regarded as a Principal in the contract of Agency. If the company or firm is dissolved the agency comes to an end .BCOC 133 Free Solved Assignment
Q.10 What are essentials of a valid endorsement?
ANS:- Essentials of a valid endorsement are as follow:
1. It must be on the instrument. The endorsement may be on the back or the face of the instrument and if no space is left on the instrument, it may be made on a separate paper attached to it called along.
2. It must be an endorsement of the entire bill. A partial endorsement that is which purports to transfer to the endorse a part only of the amount payable does not operate as a valid endorsement.
3. It must be made by the maker or holder of the instrument. A stranger cannot endorse it.
4. It may be made either by the endorser merely signing his name on the instrument or by any words showing an intention to endorse or transfer the instrument to a specified person.
5. It must be signed by the endorser. It is not necessary to write the full name initial may be sufficient. Thumb- impression should be attested.
6. It must be completed by delivery of the instrument. The delivery must be made by the endorser himself or by somebody on his behalf with the intention of passing property therein. BCOC 133 Free Solved Assignment
Q.11 What is irrevocable agency?
ANS:- An agent is a person employed to do any act or enter into a contractual relationship with others (third parties) on behalf of his principal. An agent acts as a connecting link between his principal and third parties.
While representing his principal, an agent acts in the same capacity as of his principal. An agent is authorized by his principal to act on his behalf.
An agent binds his principal legally in business transactions with third parties due to their agency relationship.
(a) Where agency is coupled with interest then it is a case where the agent has interest in the subject matter of agency.
In this case, agency cannot be terminated except where there is an express provision, to cause prejudice to the interest of the agent.
For the agency coupled with interest does not come to an end on the death, insanity, or the insolvency of the principal. BCOC 133 Free Solved Assignment
(b) Where the agent has incurred personal liability, principal cannot revoke the agency leaving the agent to face the liability.
For instance where ‘A’ appoints ‘B’ as his agent and ‘B’ purchases as per orders of ‘A’ some rice in his personal name, A cannot revoke the authority.
Where the agent has partly exercised the authority, the authority cannot be revoked, where ‘A’ appoints ‘B’ as his agent to procure 10 bags of rice and ‘B’ procures in the name of ‘A’ then ‘A’ cannot revoke his authority.
Q.12 What is negotiation?
ANS:- A negotiation is a strategic discussion that resolves an issue in a way that both parties find acceptable. In a negotiation, each party tries to persuade the other to agree with his or her point of view.
By negotiating, all involved parties try to avoid arguing but agree to reach some form of compromise.
Negotiations involve some give and take, which means one party will always come out on top of the negotiation. The other, though, must concede—even if that concession is nominal.
Parties involved in negotiations can vary. They can include talks between buyers and sellers, an employer and prospective employee, or governments of two or more countries.
There are some specific conditions where negotiation will achieve the best results:
• When the conflict consists of two or more parties or groups
• A major conflict of interest exists between both parties
• All parties feel that the negotiation will lead to a better outcome
• All parties want to work together, instead of having a dysfunctional conflict situation
Q.13 An unregistered partnership firm is illegal, comment.
ANS:- The Indian Partnership Act, 1932, Section 4, defined partnership as “the relation between persons who have agreed to share the profits of business carried on by all or any of them acting for all”. BCOC 133 Free Solved Assignment
The Uniform Partnership Act of the USA defined a partnership “as an association of two or more persons to carry on as co-owners a business for profit”.
Partnership can be defined as an association of two or more persons who have agreed to share the profits of
a business which they run together. This business may be carried on by all or anyone of them acting for all.
1 It cannot enforce its claims against the third party in a court of law.
2 It cannot file a legal suit against any of its partners
3 Partners of an unregistered firm cannot file any suit to enforce a right against the firm.
4 A partner of an unregistered firm cannot file suit against other partners.
5 It cannot claim adjustment for any sum exceeding Rs. 100. Suppose an unregistered firm owes Rs. 1200 to X and X owes Rs.1000 to the firm. The firm cannot enforce an adjustment of Rs.1000 in a court of law. BCOC 133 Free Solved Assignment
Q.14 What is free consent?
ANS:- Free Consent is a vital part of a sound contract. But how does the law determine if two parties have willingly and knowingly entered into a contract?
For a contract to be enforceable consensus ad idem i.e meeting of minds of all the parties involved is necessary.
According to Section 13 of the Indian Contract Act, 1872 two or more persons are said to be in consent when they agree on the same thing in the same sense (Consensus-ad-idem).
This means that the two parties must have the same understanding with regards to the subject matter of the contract. If consent is gained by coercion or even mistake the contract will not be considered enforceable by law.
For Example- Ankita agrees to sell her house to Ira. Ankita owns three houses and wants to sell the house in Delhi. Ira thinks she is buying her Mumbai House.
Here there is no Consensus-ad-idem between Ankita and Ira. Hence there is no consent and therefore no contract between them.BCOC 133 Free Solved Assignment
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