Chapter No.

01
Q1: What is Law and define the classification of law?

Ans: According to Holland Law refers to a general rule of action, taking cognizance (notice) only of
external acts enforced by a determinate authority, which authority is human, and among human authorities
is that which is permanent in a political society.

According to Austin A law is a rule of conduct imposed and enforced by the sovereign.
According to Salmond Law is the body of principles recognized and applied by the State in the
administration of justice.

Classification of Pakistan Law

1. Public Law, 2. Private Law, 3. Civil Law, 4. Criminal Law

Public law is that part of law which governs relationships between individuals and the government, and
those relationships between individuals which are of direct concern to the society.
Examples of Public Law are:
International Law (it serves as frame work of practice globally)
Administrative Law
Constitutional Law
Criminal Law

Private Law governs relationship of individuals between individuals.

Examples of Private Law are:
Company Law
Law Of Contract
Law Of Guarantee
Law Of Tort ( The law for monitory as compensation)
Law Of Agency ( Authority as agent)
Law of Negotiable instruments( Promissory note, Bill of exchange)

Civil law identifies the circumstances in which individuals may seek remedies from government or from
another against wrongful acts which not necessarily constitute crime.
Examples of Civil Law are:
Company Law ( Corporate Law)
Revenue Law ( Wealth & Profitability)
Commercial Law ( Business law trading, buying)
Family Law
Employment Law

Criminal law is the body of law that relates to crime. It regulates social conduct and prescribes whatever is
threatening, harmful, or otherwise endangering to the property, health, safety, and moral welfare of people.
It includes the punishment of people who violate these laws
Q2: Define the Classification of Law and their sources?

Classification of Pakistan Law

Public Law,
Private Law,
Civil Law,
Criminal Law

Public law is that part of law which governs relationships between individuals and the government, and
those relationships between individuals which are of direct concern to the society.

Private Law governs relationship of individuals between individuals.

Civil law identifies the circumstances in which individuals may seek remedies from government or from
another against wrongful acts which not necessarily constitute crime.

Criminal law is the body of law that relates to crime. It regulates social conduct and prescribes whatever is
threatening, harmful, or otherwise endangering to the property, health, safety, and moral welfare of people.
It includes the punishment of people who violate these laws
Sources of Law
Sources of law means the origin from which rules of human conduct come into existence and
derive legal force or binding characters. It also refers to the sovereign or the state from which
the law derives its force or validity.
According to Salmond, following are the main sources:
Formal Sources
Material Sources
Legal Sources
Formal Sources
Formal sources are comprised of statutes and decision of the courts.
i.e.: Parliament House and National Assembly of Pakistan are the bodies which are play role.

Material Sources:
Materials sources that discuss, explain, interpret, and analyze what the law is or what it should be,
including treatises, law reviews, encyclopedias, Restatements, and legal newspapers.

Legal Sources:
Legal sources are those which are the instruments of the state by which legal rules are formulated
Following are the legal sources:
Legislation
Precedent
Customs
Agreement

Legislation:
Legislation is the law which is created by the Parliament of a country and other bodies to whom it has
delegated authority.

Precedent:
Precedent is judgment or a decision of a court of law cited as an authority for deciding an identical case
which serve as an authority for legal principles embodied in its decision.

Customs:
The law, which is based on custom.
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Agreement:
The contract acts as a mutual special law and is binding on the contracting parties in addition to general law
of the country.

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 Chapter No. 02
Q1: Define contract and explain essentials of valid contract?

Contract
An agreement enforceable by law is a contract

A contract is an agreement creating and defining obligations between the parties (Salmonds)
An agreement as a source of legal contract imports that one party shall be bound to assure performance
which the other shall have a legal right to enforce. (Leaks)

Essentials of Valid Contract

1. Offer and Acceptance
2. Intention to Create Legal Relationship
3. Capacity of Parties
4. Lawful Consideration
5. Free Consent
6. Lawful Object
7. Possibility of Performance
8. Legal Formalities

1. Offer and Acceptance

There must be at least two parties- one making the offer and the other accepting it. Such offer any
acceptance must be valid. An offer to be valid must fulfill certain conditions, such as it must intend to
create legal relations, its terms, it must be communicated to the person to whom it is made, etc.

2. Intention to Create Legal Relationship

There must be an intention among the parties to create a legal relationship. In case of social or domestic
agreements, the usual presumption is that the parties do not intend to create legal relationship but in
commercial or business agreements, the usual presumption is that the parties intend to create legal
relationship unless otherwise agreed upon.
Example: Zahid invited Yaseen to a dinner Yaseen accepted the invitation. It is a social agreement. If
Zahid fails to serve dinner to Yaseen, Yaseen cannot go to the courts of law for enforcing the agreement.
Similarly, if Yaseen fails to attend the dinner, Zahid cannot go to the courts of law for enforcing the
agreement.

3. Capacity of Parties
The parties to an agreement must be competent to contract. In other words, the person must be major, must
be of sound mind and must not be declared disqualified from contracting by any law to which he is subject.
If the parties to agreement are not competent to contract, then no valid contract comes into existence.

4. Lawful Consideration
An agreement must be supported by lawful consideration. Consideration means something in return.
Example: Ahmed agrees to sell his car to Yaseen for Rs. 1,00,000. Here Yaseens promise to pay Rs.
1,00,000 is the consideration for Ahmeds promise to sell the car and Ahmeds promise to sell the car is
the consideration for Ys promise to pay 1,00,000.

5. Free Consent
There must be free consent of the parties to the contact.
According to Section 14, Consent is said to be free when it is not caused by:
1. Coercion ( To give threats)
2. Undue influence (Highly influence)
3. Fraud
4. Misrepresentation ( not accurate)
5. Mistake
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 If the consent of the parties is not free, then no valid contract comes into existence.
Example: Wajid threatens to kill Yaseen if he does not sell his house to Wajid. Yaseen agrees to sell his
house to Wajid. In this case, Yaseens consent has been obtained by coercion and therefore, it cannot be
regarded as free

6. Lawful Object
The object of an agreement must be lawful.
The object is considered lawful unless it is forbidden by law or is fraudulent or involves or implies injury
to the person or property of another or is immoral or is opposed to public policy.
Example: X, Y and Z enter into an agreement for the division among them of gains acquired or to be
acquired by them by fraud. The agreement is void because its object is unlawful

7. Possibility of Performance
The terms of the agreement must be such as are capable of performance.
Example: X agrees with Y to discover treasure by magic and Y agrees to pay Rs 1,000 to X. This
agreement is void because it is an agreement to do an impossible act.

8. Legal Formalities
The agreement must comply with the necessary formalities as to writing, registration, stamping etc. if any
required in order to make it enforceable by law.
Example: An oral agreement for arbitration is unenforceable because the law requires that arbitration
agreement must e in writing.

Q2: How many kinds of contract and explain with examples:

There are seven kinds of contracts

1. Valid Contract
2. Voidable Contract
3. Bilateral Contract
4. Unilateral Contract
5. Express Contract
6. Implied Contract
7. Contingent Contract

1. Valid Contract
Valid contract is an agreement enforceable by law.
Example:
A contract for the sale of a car between Mr. Yasir and Mr. Waqas has been concluded and all necessary
formalities have been completed. The said contract meets all essentials of a valid contract. If either of the
two that is Mr. Yasir or Mr. Waqas fails to perform his part of contract, the counter party can sue the other
party for the breach of contract.

2. Voidable Contract
An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at
the option of the other or others, is a voidable contract
Example: Mr. Ali entered into an agreement to sell his house to Mr. Frida for Rs 1 Million. The consent of
Mr. Umar was obtained by use of coercion by Mr. Yasir. This agreement is voidable at the option of Mr.
Umar since his consent was not free.

3. Bilateral Contract

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An agreement formed by an exchange of a promise in which
the promise of one party is consideration supporting the promise of the other party.
Example: Bilateral contracts are present in everyday life. You're entering this type of agreement every time
you make a purchase at your favorite store, order a meal at a restaurant, receive treatment from your doctor.
In each circumstance, you've promised a certain action to another person or party in response to that person
or party's action.

4. Unilateral Contract
A contract in which only one party makes an express promise, or undertakes a performance without first
securing a reciprocal agreement from the other party.
Example: Unilateral Contract the insurance company promises it will pay the insured person a specific
amount of money in case a certain event happens. If the event doesn't happen, the company won't have to
pay.

5. Express Contract
An exchange of promises in which the terms by which the parties agree to be bound are declared either
orally or in writing, or a combination of both, at the time it is made.
Example: X says to Y will you buy my car for Rs. 1000000? Y says to X, I am ready to buy you car for Rs.
1000000. It is made orally contract.

6. Implied Contract
An implied contract is an agreement created by actions of the parties involved, but it is not written or
spoken. This is a contract assumed to have been drawn. In this case, there is no written record nor any
actual verbal agreement.
Example: You purchased a refrigerator for home you paid amount for commodity to dealer, and your
commodity give you benefits as cold water, produce ice etc.

7. Contingent Contract
A contingent is one in which a promise is conditional and the contract shall be performed only on the
happening of some future uncertain event.
Example: A contracts to pay B Rs 10,000, if Bs house is burnt. This is a contingent contract.

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Q3: How a contract can get discharge and explain with example?

A Contract may be discharged in any of the following way.

1. By Performance
2. By Agreement or by Consent.
3. By Impossibility of performance.
4. By Promisee failing to offer facilities for performance.
5. By Death
6. By Refusing tender of performance.
7. By unauthorized material alteration of contract.
8. Discharge by lapse of time.

1. Discharge of Contract By Performance

According to Contract Act 1872 If both parties to the contract have performed what they have agreed to
do, the contract is discharged.
Performance of obligation by parties to the contract puts an end to the contract.
Here both parties performed their obligations & rights , what they promised to do in the contract. Thus the
contract is come to an end by the performance.

2. By Agreement or by Consent.
According to Contract Act 1872 A Contract can be terminated or discharged by mutual express or implied
agreement between the parties in any of the following ways -
A) By Novation
Novation means the wiping out of the original contract as well as the creating of a new valid
contract.
If the new agreement is invalid it cannot serve as novation, and the original contract continues
unless the rights thereunder are expressly abandoned.
Novation may occur in two ways
I. New party is substituted for the old one.
e.g. A owes money to B under a contract. It is agreed b/w A, B and C that B shall henceforth accept
C as his debater instead of A. The old debt of A to B is at end and a new debt from C to B has been
contracted.

II. Parties may substituted new contract for the old one.
e.g. A owes B Rs. 10,000. A enters into an agreement with B, and gives B a mortgage of his (As)
estate for Rs. 5,000 in the place of the debt of Rs. 10,000. This is a new contract, which
extinguishes the old one.

B) By Accord and Satisfaction

According to Contract Act 1872 When a lesser sum is actually paid than what is due under an
existing contract, the new contract is called accord & the actual payment is called Satisfaction.

e.g. Ali has an postpaid mobile connection of Ufone. A bill of his mobile is of Rs. 1245.00, which
he seems more than the actual bill.
Thus, he register a complaint with Ufone. The Ufone officials offers him to pay Rs. 1200 as a
settlement. Here Rs. 1245.00 is accord & Rs. 1200.00 is satisfaction.

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C) By Remission and Waiver
Waiver means to leave the rights. According to Contract Act 1872 When a party to the contract
to leave or waiver his rights, the contract is discharged.

e.g. A promise to paint picture for B. B afterwards forbid him to do so. A is no longer bound to
perform the promise.

D) By Remission and Waiver

Waiver means to leave the rights. According to Contract Act 1872 When a party to the contract
to leave or waiver his rights, the contract is discharged.

e.g. A promise to paint picture for B. B afterwards forbid him to do so. A is no longer bound to
perform the promise.
By Rescission (unmaking)
According to Contract Act 1872 When a person at whose option a contract is voidable decision
it, the other party thereto need not perform his promise. He is discharged from his liability under
the contract.
Eg: A induces B to enter into a contract by fraud. The contract is voidable at the option of B.

3. By Impossibility of performance.
According to Contract Act 1872 When the performance of a contract becomes subsequently impossible,
the contract becomes void. It means that an agreement to do an act impossible in itself is void

E.g. A promises B to sell his horse on 1st June, but before the day, the horse dies. Now it is impossible to
fulfill the promise due to impossibility of performance.

4. By Promisee failing to offer facilities for performance.

According to Contract Act 1872 If the promisee neglect or refuses to afford the promisor reasonable
facilities for the performance of his promise, the promisor is excused by such neglect or refusal to any non-
performance caused thereby.

E.g. Ali contracts with Ahmed to repairs Ahmeds house. Due to fake information of area of Ahmeds home
Ali refused the contract.

5. By Death
According to contract Act 1872 Where a contract is personal in character, or where personal skill or
ability is involved, death of the promisor discharge the contract.

E.g. A promises to paint a picture for B by a certain day. A dies before the day. The contract cannot be
enforced either by As representative or by B.

6. By Refusing tender of performance.

According to Contract Act 1872 If a party offers to perform his promise and the offer has not been
accepted by the other party, the promisor is not responsible for non-performance.

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7. By Unauthorized material alteration of contract.
In cases of material alteration by one party to the contract without the consent of the other party, the
contract is discharged.

E.g. A and B have a contract of partnership, according to contract the profit share would be distributed in
the ratio of 50:50. Without the consent of B, A made an alteration in the contract and change the shares in
ratio 60:40 or introduce a new partner C.
In this case the contract get discharged & B is free from any type of obligations & has right to sue A.

8. Discharge by lapse of time.

Contract is discharge also by lapse of time. If the creditor does not file a suit to recover his debt amount
from a debtor within a period of limitation as laid down under the Limitation Act, his remedy is debarred.
The contract is terminated by virtue of the Limitation Act and the creditor cannot recover his debt.

For example the period of limitation to file a money suit is 3 years. If within 3 years the creditor fails to
file a suit to recover his amount, the debtor is discharged.

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 Chapter No. 03
Q1: What are the essentials of sale contract explain with examples?

Two parties:
There must be 2 distinct parties i.e., a buyer and a seller
Examples

Goods:
Goods, which form the subject matter of the contract of sale, must be movable.
Examples

Price:
The consideration for the contract of sale, called price, must be money
Examples

Essential elements of a valid contract:

A contract made by an offer to buy or sell goods for a price and the acceptance of such offer.
Examples

Q2: What is the different between Condition and Warranty?

Sec 12(2) of Sales Of Goods Act, 1930 has defined Condition as:
A condition is a agreed essential to the main purpose of the contract, the breach of which gives rise to a
right to treat the contract as repudiated.

Sec 12(3) of Sale Of Goods Act, 1930 has defined Warranty as :

A warranty is agreed collateral to the main purpose of the contract, the breach of which gives rise to only
claim for damages but not to a right to reject the goods and treat the contract as repudiated.
Distinction between 'Condition' and 'Warranty'

Condition Warranty
1. A condition is agreement (in a 1. A warranty is a agreement, which
contract), which is essential to is only collateral or subsidiary to
the main purpose of the contract. the main purpose of the contract.

2. A breach of condition gives the 2. A breach of warranty gives only

aggrieved party a right to sue for the right to sue for damages. The
damages as well as the right to contract cannot be repudiated.
repudiate the contract.
3. A breach of warranty cannot be
3. A breach of condition may be treated as a breach of condition.
treated as a breach of warranty
in certain circumstances.

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Q3: What is the rule of Auction Sale?

A sale by auction is a public sale where different intending buyers try to outbid each other.
The goods are ultimately sold to the highest bidder.
The auctioneer who sells the goods by the auction is an agent of the seller, i.e. the owner.

Rules Of Auction Sale

Completion of sale:-
The sale is complete when the auctioneer announces its completion by the fall of the hammer or in
some other customary manner like one two three or going going, gone

Right of Seller To Bid

A right to bid may be reserved expressly by or on behalf of the seller. Where such right is expressly
reserved, the seller or any one person on his behalf may bid at the auction.

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 Q33: Explain: (any four) a) Wealth Tax b) Income Tax c) Taxation of Dividend d) Residence e)
Tax year in Pakistan.

Answer: (B) INCOME SEC.2(29)

The term "Income" includes:
(a). Any Income, profit or gain chargeable to tax under the Income Tax Ordinance, 2001 The income
chargeable to tax may be classified under any of the following heads.
(i) Salary (U/S 12);
(ii) Income from property (U/S 15);
(iii) Income from business (U/S 18);
(iv) Capital Gains (U/S 37);
(v) Income from other sources (U/S 39);
(b). Any loss from such income, profit or gain:
In case of (a) above there is possibility of loss while amount chargeable to tax is being calculated. A such
loss is duly considered by the law so it has also been included in the definition of income.
(c). Any amount subject to collection or deduction of tax at source on:
(i) Imports (Section 148);
(ii) Payment of supply of goods or services rendered (Section 153);
(iii) Exports (Section 154);
(iv) Prizes & winning (Section 156);
(v) Transporters in respect of the vehicles owned by them [Section234 (5)];
(d) Any amount received or received able which is deemed to be income under any provision of the
Income Tax Ordinance 2001.
Note: Any bonus share or the amount of any bonus declared, issued or paid by the company to the
shareholders with a view to increase its paid up share capital shall not be an income in the hands of
shareholder.
(D) RESIDENCE
For the purpose of income tax, all the taxpayers are grouped under two types:

(1) Resident
(2) Non-Resident
RESIDENT INDIVIDUAL SEC, 82
Any individual would be considered resident of Pakistan in a particular tax year fulfills any one of the
following conditions:
(i) A Person, who stays in Pakistan for period or periods of 183 days or more in Pakistan.
(ii) He is an employee or official of the Government posted abroad in the tax year.
Explanations:
a. An individual will become a resident of Pakistan, if he stays 183 days or more in a particular tax
year. It is not required by law that he should stay continuously but the aggregate of his stay should
be 183 days or more in a particular tax year Moreover, the purpose of stay and the place of stay in
Pakistan is immaterial in this regard.
RESIDENT COMPANY SEC, 83
A company will be resident in Pakistan under ITO 2001, in a particular tax year if it fulfills any one of the
following conditions:
(i) It is incorporated or formed by or under any law in Pakistan;
(ii) The control and management of whose affairs is situated wholly in Pakistan at any time during the
year;
(iii) It is a provincial government or local authority in Pakistan.

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 Explanations:
a. In case a company is incorporated in Pakistan, it will always be a resident in Pakistan.
b. In case of other companies, they will become resident in Pakistan only if their control and management is
wholly situated in Pakistan. Partial control is not sufficient for this purpose.
RESIDENT INDIVIDUAL SEC, 84
An association of persons (AOP) shall be resident for any tax year if the control and management of the
affairs of the association is situated wholly or partly in Pakistan at any time in the year.
Explanations:
a. In case of AOP even partial control is sufficient to become a resident for tax purpose.
b. It is not necessary that the control should be exercised for the whole year. It means that an AOP will not be
a resident if its control and management is completely outside Pakistan during the year.
(E) TAX YEAR IN PAKSITAN
TAX YAR SEC.2(68)
The Income Tax Ordinance 2001 recognized the following different types of tax year:
1. Normal Tax Year;
2. Special Tax Year;
3. Transitional Tax Year;
1. Normal Tax Year:
The Tax Year is a period of twelve months which ends on the 30th June.

EXAMPLE OF NORMAL TAX YEAR

Starting Date Ending Date
01-07-2012 30-06-2013
01-07-2013 30-06-2014
2. Special Tax Year:
Special Tax Year is a period of twelve months which is different from normal tax year is allowed to
have Special Tax Year under the following cases:
(i) Where the Board has fixed a tax year under Income Tax Ordinate 2001 different from the
normal year;
(ii) Where the commissioner has allowed a person (on his application) to use the Special Tax
Year.

EXAMPLES OF SPECIAL TAX YEAR

Classes of Tax Payers Starting Dates Ending Date
st
Companies manufacturing 01 October 30th September
Sugar or cotton textiles
All persons exporting rice 1st January 31st December

All persons carrying on 1st September 31st August

business of cotton ginning

3. Transitional Tax Years:

Whenever a person changes his tax year from normal tax year to a special tax year or vice versa, then
he is allowed to use the period between the end of the last tax year prior to the change and the date on
which the change tax year commences shall be known as Transitional Tax Year.

Example:
(a) Normal Tax Year (Previously in Practice):
1st July to 30th June 2014
(b) Special Tax Year (Previously in Practice):
1st October 2014 to 30th September 2015
(c) Transitional Tax Year (Previously in Practice):
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 1st July 2014 to 30th September 2014

Explanations:
b. An individual will become a resident of Pakistan, if he stays 183 days or more in a particular tax
year. It is not required by law that he should stay continuously but the aggregate of his stay should
be 183 days or more in a particular tax year Moreover, the purpose of stay and the place of stay in
Pakistan is immaterial in this regard.

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