BusinessLaw QB PDF

Question
ICAP
Bank
Business Law
Third edition published by
Emile Woolf Limited
Bracknell Enterprise & Innovation Hub
Ocean House, 12th Floor, The Ring
Bracknell, Berkshire, RG12 1AX United Kingdom
Email: info@ewiglobal.com
www.emilewoolf.com
© Emile Woolf International, September 2017
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, without
the prior permission in writing of Emile Woolf Publishing Limited, or as expressly permitted by law, or under
the terms agreed with the appropriate reprographics rights organisation.
You must not circulate this book in any other binding or cover and you must impose the same condition on
any acquirer.
Notice
Emile Woolf International has made every effort to ensure that at the time of writing the contents of this study
text are accurate, but neither Emile Woolf International nor its directors or employees shall be under any
liability whatsoever for any inaccurate or misleading information this work could contain.
© Emile Woolf International ii The Institute of Chartered Accountants of Pakistan

Certificate in Accounting and Finance
Business Law
C
Contents
Page
Question and Answers Index v
Questions
Section A Multiple choice questions 1
Section B Part A Mercantile Law - Objective test and long-form questions 11
Part B Company Law - Long-form questions 23
Answers
Section C Multiple choice answers 35
Section D Part A Mercantile Law - Objective test and long-form answers 39
Part B Company Law - Long-form answers 71
© Emile Woolf International iii The Institute of Chartered Accountants of Pakistan

Business Law
© Emile Woolf International iv The Institute of Chartered Accountants of Pakistan

Business Law
I
Index to Objective test and long-form
questions and answers
Question Answer
page page
Mercantile Law
Chapter 1 - Introduction to the legal system
1 Federal Shariat Court 11 39
2 Courts 11 39
3 Binding precedent 11 40
4 High courts 11 40
5 Civil law and criminal law 11 40
6 Process of legislation 11 40
7 Basis of legal system 11 41
8 Company Court and Company bench 11 41
Chapter 2 - Introduction to law of contract
9 Essential elements of a contract 12 41
Chapter 3 - Offer and acceptance
10 Acceptance 12 43
11 Lapse of an offer 12 43
12 Revocation of proposal 12 44
13 Offer and acceptance 12 44
Chapter 4 - Capacity of parties
14 Minor 12 44
Chapter 5 – Consideration
15 Consideration 1 12 45
16 Consideration 2 12 45
© Emile Woolf International v The Institute of Chartered Accountants of Pakistan

Business Law
Question Answer
page page
Chapter 6 – Free consent
17 Coercion 12 45
18 Fraud 13 45
19 Misrepresentation 13 46
20 Mistake 13 46
21 Rescind the contract 13 47
Chapter 7 - Legality of Object and consideration and agreements
opposed to public policy
22 Legality of object 13 47
23 Opposed to public policy 13 48
Chapter 8 – Void agreement
24 Legality of consideration 13 48
25 Exceptions of void agreements 13 48
Chapter 9 – Contingent contracts
26 Contingent contracts 14 49
27 Rules of contingent contracts 14 50
Chapter 10 – Quasi contracts
28 Quasi contracts 1 14 50
29 Quasi contracts 2 14 50
Chapter 11 – Performance of a contract
30 Tender and essentials of tender 14 51
31 Time and place of performance 14 51
32 Devolution of liabilities 14 52
33 Joint promisor and promisee 15 52
34 Reciprocal promises 15 52
35 Appropriation 15 52
Chapter 12 – Discharge of a contract
36 Discharge by mutual agreement 15 53
37 Supervening impossibility 16 53
38 Discharge of a contract 16 53
Chapter 13 – Remedies for breach of contract
39 Remedies for breach of contract 16 54
40 Damages 16 54
Chapter 14 – Indemnity and guarantee
41 Indemnity 16 54
42 Guarantee 1 16 55
© Emile Woolf International vi The Institute of Chartered Accountants of Pakistan

Index to questions and answers
Question Answer
page page
46 Rights of surety 17 56
Chapter 15 – Bailment and pledge
47 Duties of bailor 17 56
48 Particular lien 17 56
49 Termination of bailment 17 57
50 Finder of goods 17 57
51 Pledge 1 17 57
52 Pledge 2 17 58
53 Rights of pawnor 18 58
54 Rights of Pawnee and Pawnor 18 58
Chapter 16 – Agency
55 Ratification 18 59
56 Duties of an agent 18 60
57 Duties of agent toward principal 18 60
58 Rights 18 61
59 Misconduct by agent 18 61
60 Substituted agent 18 61
61 Irrevocable agency 19 61
Chapter 17 – Partnership Act
62 Duties of partner 19 61
63 Rights of outgoing partner 19 62
64 Mutual rights and liabilities 19 62
65 Liabilities 19 63
66 Implied authority 19 63
67 Holding out 19 63
68 Transfer of interest 19 64
69 Partnership property 19 64
70 Minor 20 64
71 Rights and disabilities 20 64
72 Existence of partnership 20 65
Chapter 18 – Negotiable instruments Act
73 Promissory notes 20 66
74 Presumptions of negotiable instrument 21 66
75 Inchoate stamped instrument 21 66
76 Ambiguous Instruments 21 67
© Emile Woolf International vii The Institute of Chartered Accountants of Pakistan

Business Law
Question Answer
page page
77 Payment in due course 21 67
78 Cheque 21 67
79 Bill of Exchange 21 68
Holder, Holder in due course, Payment in
80 21 68
due course
81 Material alteration 21 69
82 Negotiation and Indorsement 21 69
Provisions of the Negotiable Instruments
83 22 70
Act
Company Law
Chapter 19 – Company
84 Subsidiary and holding co. 23 71
85 Association not for profit–1 23 71
86 Association not for profit–2 23 71
87 Private company 23 72
88 KRL 23 72
Chapter 20 – Incorporation of company
89 Alteration in registered office clause 24 72
90 Member 24 72
91 Zouk 24 72
92 Commencement of business 24 73
MOA – object, registered office and
93 24 73
alteration
94 Articles of association 24 73
95 MOA – Nil capital 24 74
96 Incorporation 24 74
97 Name 25 75
98 Disallowed name 25 75
Chapter 21 – Share capital – types and variations
99 Increase in authorized capital 25 75
100 Variation of shareholders’ rights - 1 25 75
101 Purchase of own shares 25 76
102 Objections 25 76
103 Variation of shareholders’ rights - 2 25 76
104 Prospectus - consent of expert 25 77
Chapter 22 – Share capital – prospectus
105 Prospectus – publication and availability 26 77
106 Prospectus – registration 26 77
© Emile Woolf International viii The Institute of Chartered Accountants of Pakistan

Index to questions and answers
Question Answer
page page
107 Issuance of prospectus 26 78
Chapter 23 – Mortgages and charges
108 Mortgages and charges 1 26 78
111 Mortgages 26 79
Chapter 24 – Meetings
112 AGM timeline 26 79
113 Ordinary vs. special 27 80
114 Polling 27 80
115 Minutes 27 80
116 Meetings – commencement and EGM 27 80
117 Quorum 27 81
118 Members and meetings 27 81
119 Circulation 28 81
120 Representation and proxy 28 82
121 EOGM 28 82
122 Special business 28 83
123 Auditor’s certificate 28 83
124 Commission GM 28 83
125 Circumstances in which proceedings of a
28 83
General Meeting may be declared invalid
Chapter 25 – Management
126 Subsequent CEO 28 84
127 CEO – removal and competitors 29 84
128 Casual vacancy 29 84
129 Election 29 84
130 Presence 29 85
131 Number, remuneration and assignment 29 85
132 Fresh elections 29 85
133 Loans 29 86
134 Power 29 86
135 Number and casual vacancy 30 86
136 First and subsequent directors 30 87
137 Removal 30 87
138 Loan repayment 30 87
139 General notice of interest 30 87
© Emile Woolf International ix The Institute of Chartered Accountants of Pakistan

Business Law
Question Answer
page page
140 Interest free loan 31 88
141 Appointment of a Chief Executive 31 88
Chapter 26 – Investments and dividends
142 Associated company 31 88
143 Dividend restriction 31 89
144 Investment restriction 31 89
145 Payment of dividend 31 89
146 Dividend amendment 31 90
147 Investment in associate company 32 90
148 Interim Dividend 32 90
Chapter 27 – Accounts and audit
149 Qualification 32 91
150 Removal – change of auditor 32 91
151 Books of accounts 32 91
152 Registrar 32 91
153 Directors' report 32 92
154 Signing the financial statements 33 92
155 The auditors’ report 33 92
156 Appointment of auditor 33 92
157 Auditor and the AGM 33 93
158 Auditor disqualification 33 93
159 Appointment by SECP 33 93
Rights/duties of an auditor, casual
160 33 94
vacancy and signature in the audit report
161 Appointment of a first auditor 33 94
162 Rights and duties of the auditors 34 94
© Emile Woolf International x The Institute of Chartered Accountants of Pakistan

Business Law
SECTION
A
Multiple choice questions
MCQ1 – LEGAL SYSTEM OF PAKISTAN
Based on the Legal System of Pakistan, identify the correct answer of the following:
1 District magistrate is appointed by the:

(a) President
(b) chief justice
(c) federal government
(d) provincial government
2 The Civil Court does NOT have jurisdiction over:

(a) contract and tort claims
(b) disputes concerning land
(c) blackmailing cases
(d) bankruptcy cases
3 Choose the INCORRECT statement:

Following must be considered when examining a precedent before it can be applied to a case:
(a) the precedent must be a proposition of law
(b) the precedent must form part of the obiter dicta of the case
(c) the material facts of each case must be the same
(d) the preceding court must have had a superior status to the later court, such that its decisions are
binding on the later court
4 The family courts deal with:

(a) divorce cases.
(b) family property cases.
(c) proceedings relating to wardship, guardianship, adoption, etc.
(d) all of the above.
© Emile Woolf International 1 The Institute of Chartered Accountants of Pakistan

Business Law
5 The federal Shariat court consists of:

(a) at least eight Muslim Judges including the Chief Justice and out of these, not more than three
shall be Ulema who should be well versed in Islamic Law.
(b) not more than eight Muslim Judges including the Chief Justice who are appointed by the
President. Out of the number of Judges not more than three shall be Ulema having at least
fifteen years of experience.
(c) eight Muslim Judges including the Chief Justice and all of them shall be Ulema who should be
well versed in Islamic law.
(d) not more than eight Judges including the Chief Justice who are appointed by the President. Out
of the number of judges not more than three shall be Ulema who should be well versed in Islamic
law.
6 The Federal Shariat court examines and decides the question whether or not any law or provision of
law is repugnant to the Injunctions of Islam on:
(a) its own motion.
(b) the petition of a citizen of Pakistan.
(c) the petition of Federal/Provincial Government.
(d) initiation from any of the above.
7 A court of first instance is the court:

(a) where the case is originally heard in full.
(b) which has given its first verdict.
(c) where the original decision is reversed.
(d) of magistrates.
8 A High Court has a supervisory role over other courts subordinate to it. It may issue a writ of habeas
corpus which is an order:
(a) to prevent a court or tribunal from exceeding its jurisdiction.
(b) to submit the record of the subordinate court’s proceedings to the High Court for review.
(c) for the release of a person wrongfully detained.
(d) to carry out a public duty.

Section A Question bank: Multiple choice questions
MCQ2 – CONTRACT ACT 1872

In view of the provisions of Contract Act, 1872 identify the correct answer:
1 Wasi, with intent to deceive Tipu, falsely represented that twenty thousand motorcycles are
manufactured annually at his factory and induced him to buy the factory. The contract is:
(a) void
(b) voidable
(c) illegal
(d) valid
2 The term “Quid pro quo” means:

(a) something in return
(b) something important
(c) something of value
(d) something relevant
3 Which of the following is not an essential element of a valid contract:

(a) adequacy of consideration
(b) capacity to contract
(c) free consent
(d) none of the above
4 If a contract provides for the payment of a certain amount on breach of a contract, such payment is
termed as:
(a) special damages
(b) nominal damages
(c) liquidated damages
(d) compensatory damages
5 Karim borrowed Rs. 500,000 from Bashir in 2002. The debt became time-barred under the limitation
law. However, Karim met Bashir in 2009 and verbally acknowledged his liability to the extent of Rs.
300,000. Can Bashir hold Karim liable?
(a) No, the promise should be for entire debt.
(b) Yes, the promise is valid as an exception to agreement without consideration.
(c) No, because it is not a written and signed promise.
(d) Yes, he admitted his liability partly in satisfaction of whole debt.
6 The effect of refusal to accept a properly made offer of performance is that:

(a) the promisor is not responsible for non-performance and can sue the promisee for the breach of
contract.
(b) such offer lapses on rejection by the offeree.
(c) the contract is rendered voidable at the option of promisor.
(d) the contract is discharged by anticipatory breach.

Business Law
7 A surety is NOT discharged from his liability:

(a) if terms of contract are varied without his consent.
(b) if the creditor gives time to the principal debtor without his consent.
(c) if the creditor releases the other co-surety.
(d) if the creditor releases the principal debtor.
8 Which of the following case is not covered by the concept of supervening impossibility?
(a) Destruction of subject matter
(b) Death or incapacity of the promisor
(c) Outbreak of war
(d) Difficulty of performance
9 Abdul Majid contracted to supply a specialized machine at Sultan’s factory in Lahore. Sultan informed
him that if the machine does not reach his factory on time, he will incur an average loss of Rs. 20,000
per day. Abdul Majid delivered the machine a week after the agreed time owing to his other
commitments. Due to this delay, Sultan lost a contract which could have generated a profit of Rs.
250,000. Sultan is entitled to receive from Abdul Majid a compensation of:
(a) Rs. 250,000
(b) Rs. 140,000
(c) Rs. 390,000
(d) any amount which the Court deems fit subject to a maximum of Rs. 390,000
10 In which of the following circumstances a contract can be treated as discharged under the concept of
supervening impossibility?
(a) spurt in prices
(b) change in import policy
(c) non-receipt of raw material from the supplier
(d) shortage of working capital
11 Under the Contract Act, 1872 a person is said to be of sound mind for the purpose of making a contract
if:
(a) he is not illiterate and can read and understand the terms of the contract.
(b) he is capable of understanding the contract and forming a rational judgement as to its effect upon
his interests.
(c) he is of the age of majority and is not disqualified from contracting by any law to which he is
subject.
(d) he is not suffering from any mental disease or distress.
12 Pervaiz contracted with Dilbar, a comedian, for performance in a live show and paid Rs. 200,000 in
advance. Before the show, Dilbar had an accident and was hospitalized. He could not appear in the
show due to which Pervaiz suffered a loss of Rs. 500,000. Dilbar is liable to pay Pervaiz:
(a) Rs. 200,000
(b) Rs. 500,000
(c) Rs. 700,000
(d) nothing as his absence was not wilful.

13 A positive assertion, in a manner not warranted by the information of the person making it, of that which
is not true, though he believes it to be true is said to be a:
(a) fraud
(b) misrepresentation
(c) mistake
(d) misinterpretation
14 A minor can:
(a) be an agent
(b) be a principal
(c) both
(d) none
15 The consent is said to be free when:

(a) two or more persons agree upon same thing in the same sense.
(b) all parties to the contract benefit from the contract.
(c) it is not the result of coercion or undue influence or fraud or misrepresentation or mistake.
16 Liquidated damages mean:

(a) A sum calculated at the time of breach of contract, equivalent to difference between the contract
price and market price, at the place of performance.
(b) A sum fixed at the time of entering into a contract which compensates the aggrieved party for
direct/indirect loss arising from the breach.
(c) A sum fixed as compensation for any loss or damage which the parties knew, when they made
the contract, to be the likely result from the breach of contract.
(d) None of the above.
17 The fundamental principle of awarding damages is:

(A) to punish the guilty party for breach of contract.
(B) to compensate the innocent party.
(C) to put the innocent party in the same position as if the contract had been carried out correctly.
(a) (B) only.
(b) (C) only.
(c) (B) and (C).
(d) (A), (B) and (C).
18 C refused to sell certain goods to D at the previously agreed price of Rs. 240 thousand. D sued C for
breach of contract. If identical goods are readily available in the market at a price of Rs. 220 thousand,
which one of the following is correct?
(a) D is entitled to an order of specific performance, forcing C to carry out the contract.
(b) D is entitled to damages of Rs. 20,000.
(c) D is entitled to nominal damages only.
(d) D is not entitled to damages.

Business Law
19 A owns some land, part of which is woodland. He sells the land to B who covenants in the contract that
he will not cut down the trees. One year later, B prepares to cut down the trees. What remedy can A
seek?
(a) damages.
(b) specific performance.
(c) injunction.
(d) rescission.
20 Which of the following may employ an agent?

(a) any person who is capable of understanding the contract and forming a rational judgment as to
its effect upon his interest.
(b) any person who is engaged in business or profession.
(c) any person who is of the age of majority according to the law to which he is subject and who is of
sound mind.
21 Choose the incorrect statement:

To constitute a wager, following elements should be present in the agreement:
(a) Uncertain event
(b) Each party must pay in a win or lose situation
(c) Neither party should have any contract over the event
(d) There should be a promise to pay money only

MCQ3 – PARTNERSHIP ACT 1932

In the light of the provisions of Partnership Act, 1932 select the correct answer:
1 Public notice is NOT required to be given in case of:

(a) insolvency of a partner
(b) retirement of a partner
(c) expulsion of a partner
(d) dissolution of a registered firm.
2 X and Y formed a partnership firm to undertake construction of a shopping plaza. Such a partnership is
called:
(a) limited partnership
(b) particular partnership
(c) partnership at will
(d) implied partnership
3 The implied authority of a partner does NOT empower him to:

(a) submit a business dispute to arbitration
(b) withdraw a suit filed on behalf of the firm
(c) open a banking account on behalf of the firm
(d) all the above
4 A firm is liable to make good the loss of third party if:

(a) one of the partners acting within his apparent authority misapplies the money or property
received from a third party.
(b) one of the partners misapplies the money or property received from a third party by the firm in the
course of its business while it is in the custody of the firm.
(c) by the wrongful act or omission of a partner acting in the ordinary course of the business of a
firm, loss or injury is caused to any third party.
5 The conclusive evidence of a partnership is:

(a) mutual agency
(b) sharing of profit and loss
(c) mutual understanding
(d) capital contribution
6 Subject to contract between the partners, a change may be made in the nature of business of the firm:
(a) with the consent of active partners managing the business.
(b) with the consent of majority of partners.
(c) with the consent of all the partners.
(d) with the consent of all the partners and Registrar of Firms.

Business Law
7 In a ‘partnership at will’, a partner may retire:

(a) with the consent of all other partners.
(b) in accordance with an express agreement between the partners.
(c) by giving notice in writing to all the other partners, of his intention to retire.
(d) in any one of the manners described above.
8 Emmad and Faraz are partners in cloth trading business. In the presence of Faraz, his friend Ghalib
boasted that he is also a partner in the business, in front of Haroon, a customer. Haroon gave this
information to Ismail and on this belief, Ismail supplied cloth on credit to the firm. Can Ismail make
Ghalib liable for the unpaid amount in this transaction?
(a) No, as Ghalib did not present himself as a partner, in front of Ismail.
(b) Yes, as Ismail gave credit to the firm on the faith of Ghalib’s representation.
(c) No, as Ghalib is not a partner in the firm.
(d) Yes, as Ghalib did it intentionally to deceive others.
9 Partnership is:
(a) the relationship between persons who have agreed to share the profits of jointly owned property
managed by all or any of them acting for all.
(b) the relationship created by an agreement between a banking company and person(s) providing
for sharing of profit and loss arising from the finance provided to such person(s).
(c) both of the above.
(d) the relation between persons arising from a contract who have agreed to share the profits of a
business carried on by all or any of them acting for all.

MCQ4 – NEGOTIABLE INSTRUMENTS ACT 1881

In the light of the provisions of Negotiable Instruments Act, 1881 select the correct answer:
1 Which of the following is NOT a material alteration of a negotiable instrument?

(a) A new party is added to the instrument.
(b) The sum payable is changed in the instrument.
(c) The crossing of an uncrossed cheque.
(d) Tearing off the material part of the instrument.
2 An instrument is said to be ambiguous if:

(a) no time for payment is specified in it.
(b) it may be construed either as a promissory note or a bill of exchange.
(c) the amount in figures differs from the amount in words.
3 Sohail issued a cheque of Rs. 500,000 payable to Tanveer at sight. Sohail had sufficient funds at the
bank to meet this payment. However, Tanveer presented the cheque at the bank after two weeks by
which time the bank had failed. Can Tanveer recover the amount from Shoail?
(a) Yes, as the debt is not discharged.
(b) Yes, as Sohail has not suffered actual damage through any delay in presenting the cheque.
(c) Yes, as Sohail did not advise Tanveer to encash the cheque immediately.
(d) No, Sohail is discharged and Tanveer can now claim the amount of cheque from the bank.
4 Ghalib accepted for honour a bill of exchange which has been noted and protested for non-acceptance.
If his acceptance does not express for whose honour it is made, then such acceptance is:
(a) invalid.
(b) deemed to be made for the honour of the drawee.
(c) deemed to be made for the honour of the drawer.
(d) for the honour of any party to the bill

Business Law

Business Law
SECTION
B
Part A - Mercantile Law
Objective test and
long-form questions
CHAPTER 1 – INTRODUCTION TO THE LEGAL SYSTEM
1 Federal Shariat Court
Briefly describe the kind of cases handled by the Federal Shariat Court and the procedures
followed in the discharge of these cases.
2 Courts
(a) What is the composition and tenure of Federal Shariat Court?
(b) What does court of first instance mean? List the areas of jurisdiction of the High Court.
3 Binding precedent
What are the requisites of a binding precedent?
4 High courts
How does the High Court exercise its supervisory role over subordinate courts? Describe the three
types of prerogative orders that it may issue.
5 Civil law and criminal law

Distinguish between civil law and criminal law giving two examples of each.
6 Process of legislation
How is a law promulgated when national assembly is not in session? Is such law in any way
different from an Act of parliament? What is its tenure?
7 Basis of legal system

Identify the basis of legal system and explain the main sources of law in Pakistan.
8 Company court and Company bench

(a) Briefly describe the terms ‘Company court’ and ‘Company bench’.
(b) The doctrine of binding precedent suggests that ‘a judge, subject to the fulfilment of certain
conditions, is bound to apply decisions from earlier cases to the facts of the case before him’.
Identify the situation(s) in which a judge is not bound to follow the precedent.

Business Law
CHAPTER 2 – INTRODUCTION TO LAW OF CONTRACT

9 Essential elements of a contract
What are the essential elements of a valid contract?
CHAPTER 3 – OFFER AND ACCEPTANCE

10 Acceptance
Briefly describe the essential conditions for the acceptance of an offer to be valid, under the Contract
Act, 1872.
11 Lapse of an offer
Discuss the circumstances under which an offer lapses and stands revoked
12 Revocation of proposal
Identify the circumstances under which a proposal may be revoked under the Contract Act, 1872.
13 Offer and acceptance

Bader, who is the owner of Mashoor Associates, sent one of his employees Aftab in search of his pet
horse which had been missing for 5 days. Bader advertised a reward of Rs. 20,000 in a newspaper for
anyone who finds his missing horse. Aftab, unaware of the newspaper advertisement, traced the horse.
Subsequently, on knowing about the reward Aftab claimed it from Bader.
Under the provisions of the Contract Act, 1872 identify the type of offer which was made by Bader. Also
state whether Aftab would be able to claim the amount of reward under the circumstances.
CHAPTER 4 – CAPACITY OF PARTIES

14 Minor
Discuss the position of agreements by a minor.
CHAPTER 5 - CONSIDERATION
15 Consideration 1
Mohsin promised Ahsan that he will pay his university fee. Later Mohsin suffered losses in his
business and refused to pay the fee. Mohisn is of the view that since the agreement was without
consideration, it does not constitute a valid contract. However, Ahsan believes that the agreement is
enforceable under law as it meets certain other conditions.
You are required to narrate the conditions which Ahsan may be referring to.
16 Consideration 2
Describe the circumstances under which an agreement made without consideration is considered
valid and binding under the Contract Act, 1872.
CHAPTER 6 – FREE CONSENT

17 Coercion
Arif told Bano, his wife, that he would divorce her, if she does not transfer her personal assets to
him. She agreed to transfer her assets to him. Can Bano avoid the contract?

Section B: Part A - Mercantile Law Question bank: Objective test and long-form questions
18 Fraud
What constitutes fraud under the provisions of Contract Act, 1872?
19 Misrepresentation
Explain the acts which constitute misrepresentation under the contract act, 1872 and describe the
circumstances in which the party whose consents is obtained by misrepresentation loses right of
rescission of contract?
20 Mistake
Explain what effects following have on the validity of the contract:
(a) Unilateral mistake of law in force in Pakistan
(b) Unilateral mistake as to matter of fact
(c) Mutual mistake of foreign law
21 Rescind the contract

(a) Shafiq bought Abad’s motorcycle factory in Faisalabad on Abad’s representation that fifty
thousand motorcycles are assembled at his factory annually. Shafiq later found that the factory
has a capacity to manufacture thirty five thousand motorcycles only per annum. Shafiq now
wants to rescind the contract on the ground that his consent was obtained by misrepresentation.
Under the provisions of the Contract Act, 1872 list the circumstances under which Shafiq may
not be able to rescind the contract.
(b) What do you understand by the terms ‘Ordinary damages’, ‘Special damages’ and ‘Exemplary
damages’? Briefly describe the rules relating to the award of each of the above types of damages
under the Contract Act, 1872.
CHAPTER 7 – LEGALITY OF OBJECT AND CONSIDERATION AND AGREEMENTS

OPPOSED TO PUBLIC POLICY
22 Legality of object
What is an agreement? When is an agreement considered to be void? State the circumstances
under which the object of an agreement is considered to be unlawful.
23 Opposed to public policy

Enumerate the agreements which are opposed to public policy.
CHAPTER 8 – VOID AGREEMENT

24 Legality of consideration
Asif stole cash and merchandise from the ABC Store. Basit, the owner of store, initiated legal
proceedings against him. Asif contacted Basit with an offer to return the stolen cash and
merchandise if Basit withdraws the suit. Basit accepted the offer. Is it a valid agreement? Discuss.
25 Exceptions of void agreements

Certain agreements have expressly been declared to be void under the Contract Act, 1872. List
such agreements along with exceptions, if any.

Business Law
CHAPTER 9 – CONTINGENT CONTRACTS

26 Contingent contracts
Asim agreed to construct a bungalow for Ali at a cost of Rs. 50 million. However, it was agreed that
payment would only be made on completion of the project. Is this a contingent contract under the
Contract Act, 1872? Give reasons. Also list the requisite characteristics of a contingent contract.
27 Rules of contingent contracts

Discuss the rules regarding the performance of the contingent contracts
CHAPTER 10 – QUASI CONTRACTS

28 Quasi contracts 1
Sami rented his house to Qurban for a period of one year at an agreed sum of Rs. 10,000 per month.
After the first two months, Qurban defaulted in making payment of the rent. Baqir, a neighbour, being
concerned with the strained relationship between Sami and Qurban, paid the rent with good intention.
Subsequently, on Qurban’s refusal to reimburse the amount, Baqir filed a suit against him on the
grounds that he made the payment to Sami which Qurban was legally bound to make and being a quasi
contract Baqir is entitled to the reimbursement.
Explain whether Baqir is justified in his suit.
Explain the term “Quasi contract”. Briefly describe different types of relationships commonly
referred to as quasi contracts under the Contract Act, 1872.
CHAPTER 11 – PERFORMANCE OF A CONTRACT

30 Tender and essentials of tender
Mehboob, a promisor and Saulat, a promisee, entered into a valid contract. However, when Mehboob
made an offer of performance, Saulat refused to accept the same. Briefly state the rights and
responsibility of Mehboob against such refusal. Also state the essentials of a valid offer of
performance under the provisions of Contract Act, 1872.
31 Time and place of performance

Briefly describe the rules specified in the Contract Act, 1872 in respect of the following.
(a) Time and place for performance where these have not been specified in the contract;
(b) Order of performance of reciprocal promises; and
(c) Effect of release by promisee of one of the joint promisors.
32 Devolution of liabilities
Sohail and Afaq lent Rs. 2.0 million to Mohsin, Laila and Faizan jointly. On due date Laila became
insolvent. Without informing Sohail, Afaq wants Mohsin to repay the full amount to him.
Under the provisions of Contract Act, 1872 explain:
(a) whether Mohsin can be compelled to pay the full amount to Afaq; and
(b) what rights are available to Mohsin, if he repays the full amount.

33 Joint promisor and promisee

Binyamin borrowed Rs. 1 million from Hatim and Tahir jointly and promised to repay the amount on
March 1, 2011. With reference to the Contract Act, 1872, state who can claim performance in the
following situations.
(a) Both Hatim and Tahir are alive on due date
(b) Hatim dies before due date
(c) Both Hatim and Tahir die before the due date
34 Reciprocal promises
Maimar promised to manufacture and deliver to Nasir, remote-controlled toy helicopters of agreed
specifications in first week of March 2011. Nasir in turn promised to pay for them by second week
of March 2011. Maimar did not deliver the toys according to his promise. Should Nasir keep his
promise and what remedy, if any, is available to him?
35 Appropriation
(a) Following is the statement on August 4, 2011 of sums payable by Ubaid on account of cloth
supplied by Bilal:
Date of transaction Rupees Remarks
01/01/2008 37,000 Time barred under Limitation Act.
02/03/2009 20,000
30/08/2010 50,000 Guaranteed by Wasim.
28/04/2011 63,000
170,000
Ubaid sent a cheque for Rs. 70,000 on August 5, 2011. There being no instructions from
Ubaid, Bilal adjusted the payment against the following:
Date of transaction Rupees
01.1.2008 37,000
02.3.2009 20,000
28.4.2011 13,000
70,000
The guarantor (Wasim) objected to such appropriation and claimed that since the amount of Rs.
37,000 was time barred, it should not be adjusted and the full amount guaranteed by him should
be fully adjusted. Is the objection of Wasim valid?
(b) Discuss how the above payment of Rs. 70,000 should be applied under each of the
following independent circumstances, according to the provisions of the Contract Act, 1872:
(i) The following words were written on the back of the cheque:
(20,000 + 50,000 = 70,000)
(ii) No instructions about appropriation of payment were given by Ubaid. Bilal did not make
any appropriation either.
CHAPTER 12 – DISCHARGE OF A CONTRACT

36 Discharge by mutual agreement
Talib was indebted to Bashir for Rs. 10,000. On Talib’s request Bashir agreed to accept Jahangir as his
debtor, in place of Talib. Jahangir failed to make payment on due date. Under the provisions of Contract
Act, 1872 you are required to explain whether Bashir can now demand payment from Talib.

Business Law
37 Supervening impossibility
State the grounds in which a contract is discharged by supervening impossibility.
38 Discharge of a contract
(a) What is meant by discharge of a contract? Briefly describe the modes of discharging a contract
by mutual agreement under the provisions of the Contract Act, 1872.
(b) Murad offered his car to Sanum for Rs. 400,000. Sanum accepted the offer and enclosed a pay
order of Rs. 150,000 with a promise to pay the balance in monthly instalments of Rs. 62,500
each.
Under the provisions of the Contract Act, 1872 explain whether it is a valid contract.
CHAPTER 13 – REMEDIES FOR BREACH OF CONTRACT

39 Remedies for breach of contract
Bushra entered into a contract with Akhtar, the manager of a radio programme, to conduct a show,
twice a week, during the next three months. Bushra did not appear for the sixth show. She conducted
the next show but soon thereafter Akhtar rescinded the contract and informed her that her services
were no longer required as she failed to conduct the sixth show.
Narrate the rights of Akhtar and Bushra in the above situation.
40 Damages
Describe the principles of determining compensation for loss or damages caused due to breach of
contract.
CHAPTER 14 – INDEMNITY AND GUARANTEE

41 Indemnity
What is a contract of indemnity as defined under the Contract Act, 1872?
42 Guarantee 1
Bashir supplies goods worth Rs. 100,000 each month to Anwar under a contract which is due to
expire on December 31, 2009. Ameen has guaranteed that he will compensate Bashir in case of
default by Anwar.
On August 29, 2008 the amount due to Bashir is Rs. 325,700. Ameen intends to revoke his
guarantee. Can he do so? Discuss.
43 Guarantee 2
Raheel leased a building from Atif, on five years term, for a rent of Rs. 200,000 per annum and the
payment was guaranteed by Kamal. Raheel defaulted in payment of the rent in the third year. Atif sued
Kamal and recovered the rent from him. Later, Kamal gave a notice to Atif for revoking his guarantee
for the remaining period of lease.
Under the Contract Act, 1872 discuss whether Kamal is justified in doing so.
44 Guarantee 3
Amin, Imran and Shahid agreed to act as sureties for Emmad to Saleem and agreed to pay Rs. 20,000,
Rs. 30,000 and Rs. 40,000 respectively in case of default by Emmad. On such surety Saleem lent
Rs. 90,000 to Emmad. Emmad repaid Rs. 6,000 only. Saleem called upon the sureties to pay the
balance of Rs. 84,000. Discuss keeping in view the Contract Act, 1872 how much should each surety
pay.

45 Guarantee 4
(a) Faiz had sold goods on credit to Gulzar for Rs. 5 million on guarantee of Haseeb. Gulzar has
also mortgaged his shop as a security against the above amount. Haseeb was unaware of this
mortgage and honoured his guarantee when Gulzar failed to make the payment. What rights are
available to Haseeb under the Contract Act, 1872?
(b) When and how a continuing guarantee is revoked?
46 Rights of surety
Bunny extended a credit of Rs. 500,000 to Sohail on the surety of Majid and Rahat.
On the date of payment, Sohail defaulted and Majid settled the debt.
Under the provisions of the Contract Act, 1872 briefly describe the rights available to Majid and Rahat
against Sohail and Bunny and also between themselves.
CHAPTER 15 – BAILMENT AND PLEDGE

47 Duties of bailor
Sara planned to spend her vacations in Islamabad with her parents. She therefore, requested her
neighbour, Farha to take care of her pet cat during this period. On her return from vacations, Farha
informed Sara that she had to spend Rs. 500 on usual feeding and grooming of the cat and Rs. 1,000
on medical expenses as the cat fell sick, without any negligence on Farha’s part.
You are required to state the amount, if any, which Sara needs to reimburse to Farha in each of the
situations given below. Justify your answer with reasons under the provisions of Contract Act, 1872.
(a) No remuneration was agreed to be paid to Farha for the safe custody of the pet.
(b) Sara had agreed to remunerate Farha for her services.
48 Particular lien
Majid gave a piece of fabric to Stylish Suiting for sewing a coat at a consideration of Rs. 5,000. On
completion, Majid paid the whole amount; however, Stylish Suiting refused to deliver the coat until the
payment of previous dues of Rs. 3,000.
Explain under the provisions of Contract Act, 1872, whether Stylish Suiting is justified in refusing to
deliver the coat.
49 Termination of bailment
Under what circumstances a contract of bailment may be terminated?
50 Finder of goods
Discuss the rights of the finder of goods under the Contract Act, 1872.
51 Pledge 1
Explain the term “pledge”. Identify the circumstances under which a pledge made by a non-owner will
be considered valid even if the owner has not authorized him to pledge the goods.-
52 Pledge 2
Shahid pledged gold with Mehreen against a loan of Rs. 100,000 at a markup of 15% per annum.
Being concerned with the growing incidences of burglary in the city, Mehreen insured the gold. At the
time of repayment, Mehreen claimed the cost of insurance cover in addition to the principal sum due
and interest thereon.
In the light of Contract Act, 1872 briefly explain whether Mehreen is justified in her claim.

Business Law
53 Rights of Pawnor
Ramla borrowed Rs. 100,000 from Ovais for a period of three months and kept her jewellery with
Ovais as a security. On due date, Ramla defaulted in repayment. In view of the provisions of Contract
Act, 1872 describe the remedies available to Ovais under the circumstances.
54 Rights of Pawnee and Pawnor

(a) Sobia borrowed Rs. 300,000 from Meher against a gold necklace as security. She agreed to
return the amount to Meher after one month. However, on due date Sobia defaulted in payment.
In view of the provisions of the Contract Act, 1872 identify and describe the type of contract Sobia
and Meher entered into. Also enumerate the rights available to Sobia and Meher in the above
circumstances.
(b) Under certain special conditions, obligations resembling those created by a contract are imposed
by law although the parties have never entered into a contract. In view of the provisions of the
Contract Act, 1872 describe the conditions which must be fulfilled for claiming the amount in each
of the following cases:
(i) Baqir supplied a jacket to Sultan in order to save him from cold weather. Sultan who was
a minor agreed to pay Rs. 2,000 for the jacket although its market price was Rs. 1,500.
(ii) Rohi, who paid the electricity bill of Saulat without being asked, is now demanding
payment from Saulat.
(iii) Sami, a coolie picked up the goods purchased by Nadia from the supermarket and took
them to her car. Nadia did not object to it. Sami demanded service charges from Nadia.
CHAPTER 16 - AGENCY
55 Ratification
(a) Explain the term ratification in relation to the contract of agency under the Contract Act, 1872.
What is the effect of a valid ratification?
(b) List down the conditions necessary for a valid ratification.
56 Duties of an agent
Briefly state the duties of an agent towards his principal.
57 Duties of agent toward principal

Narrate the duties of an agent towards his principal as specified in the Contract Act, 1872.
58 Rights
Explain the following as described under the Contract Act, 1872.
(a) Agent’s authority in an emergency
(b) Agent’s right of retainer
(c) Agent’s right of lien
59 Misconduct by agent
Aslam appointed Zakir to recover Rs. 7.0 million from Naveed. Zakir misbehaved with Naveed as a
result of which Naveed sued Aslam. Later, Aslam sued Zakir claiming reimbursement of the cost
incurred by him in defending the suit filed by Naveed. Explain whether Aslam is justified in his claim.
60 Substituted agent
Briefly explain the term ‘substituted agent’ in the light of Contract Act, 1872. Is the (original) agent
responsible to the principal for the acts of a substituted agent?

61 Irrevocable agency
When may an agent’s authority be revoked by the principal under the Contract Act, 1872? Also narrate
the exceptions to the above provision.
CHAPTER 17 – PARTNERSHIP ACT

62 Duties of partner
Sohail, Talha, Umair & Co., a partnership concern is engaged in trading of cloth. The firm bought a
plot of land from Shining Star Limited. After some time Talha and Umair on their own account
bought three more plots of land in the same locality and made good profits. Sohail on becoming aware
of such profits sued Talha and Umair for his share.
Under the provisions of Partnership Act 1932, explain whether Talha and Umair are liable to share
such profits with Sohail.
63 Rights of outgoing partner

Obaid, Raheel and Pervez were partners in a firm. On September 1, 2009 Pervez retired from the
partnership. The remaining partners continued the business, with the property of the firm, without final
settlement of accounts as between them and Pervez.
In the light of the Partnership Act, 1932, describe the rights of Pervez, in the above circumstances.
64 Mutual rights and liabilities

Rafiq, Bari and Furqan have decided to establish a partnership business for trading in medical
equipments. In the absence of any express contract, advise them of their mutual rights and liabilities
under the provisions of the Partnership Act, 1932.
65 Liabilities
Describe the liabilities of:
(a) a partner for the acts of the firm.
(b) the firm for wrongful acts of a partner.
(c) the firm for misapplication of money or property by a partner.
66 Implied authority
The authority of a partner to bind the firm is called “Implied Authority.” List the acts which cannot be
exercised by a partner as his implied authority.
67 Holding out
Explain the concept of “Holding out” as described in the Partnership Act, 1932.
68 Transfer of interest
Sameer, Fauzia and Sualat are partners in a firm. Fauzia transferred her interest in the firm absolutely
to her son Adil. In the light of the provisions of Partnership Act, 1932 would Adil be considered a new
partner in the firm? Also describe the rights and restrictions on Adil in view of such transfer.
69 Partnership property
Kashif, Irfan and Shujaat are partners in a firm. Irfan bought a shop in his own name. He issued a
cheque from the partnership account and debited his account with the purchase price. He rented out
the shop and credited the receipts of rent in his capital account. Kashif has objected to this practice and
asked Irfan to register the shop in the firm’s name contending that the shop is partnership’s property.
Irfan disagrees.
Explain what constitutes partnership property under the Partnership Act, 1932 and whether the shop is
partnership property or not.

Business Law
70 Minor
A, B and C, partners of a firm, admitted D, a minor to the benefits of the firm. D attained majority on 6th
March 2007. He became aware of the fact that he has been admitted to the benefits of the firm on 16th
August 2007. Being undecided about the situation he preferred to wait for some time before announcing
his decision about joining the firm.
On 27th February 2008, the firm suffered heavy losses due to an unforeseen event. A, B and C
informed D that on account of such losses, his capital in the firm has been reduced by 40%. Discuss
the rights and liabilities of D in the above situation.
71 Rights and disabilities

(a) Maqbool, Rufi and Sham are the partners in Zeeshan Builders (ZB), a firm engaged in the
business of constructing industrial and residential projects in Balochistan. Sham is also the owner
of a cottage industry in Quetta. Sham has obtained a long term loan for his cottage industry from
Dostana Bank Limited by transferring his interest in ZB to the bank by way of a mortgage.
Under the provisions of the Partnership Act, 1932 describe the rights and disabilities, if any, of
Dostana Bank Limited in the above circumstances.
(b) In the above partnership business, Rufi intends to acquire a plot of land for the firm with his own
money. However, he is not certain whether the plot would be considered as partnership property.
Under the provisions of the Partnership Act, 1932 advise Rufi as what is considered to be
included in the partnership property and how it is to be applied.
72 Existence of partnership
Munaf, a sole proprietor, engaged in the business of selling cooking oil to wholesalers agreed to admit
Lari in his business on the following terms:
That Lari shall not bring any capital and shall not be liable for any losses of the firm. However, he shall
be entitled to receive Rs. 150,000 on introducing any new client to the business, share 40% of the
profits and have the right to exercise all the powers of a partner in the firm.
Analyse the above situation and advise whether a partnership is constituted between Munaf and Lari
under the provisions of the Partnership Act, 1932.
Meher, Abid, Rani and Azra were partners in Abid Associates, a firm of town planners and consultants.
Bari Builders supply goods to Abid Associates on credit. Abid died on 5 January 2015. Meher, Rani and
Azra decided to continue the business in the old firm’s name. However, neither the surviving partners
nor the representative of Abid gave public notice to this effect.
Due to insolvency of a major client, Abid Associates was facing difficulty in making payment to Bari
Builders. When Bari Builders investigated the matter, they came to know about the death of Abid. They
have now filed suits for the recovery of outstanding balance, severally against Abid’s estate and Meher,
as the credit was extended on the faith of Abid and Meher.
In view of the provisions of the Partnership Act, 1932 explain whether Bari Builders are justified in filing
the above suits and would they succeed in recovering the outstanding amount under the above
circumstances.
CHAPTER 18 – NEGOTIABLE INSTRUMENTS ACT

73 Promissory notes
Based on the provisions of Negotiable Instruments Act, 1881 briefly explain whether the following
are promissory notes or not.
(i) I promise to pay Rahat on demand Rs. 5,000 at my convenience.
(ii) On demand, I promise to pay Sonu or order Rs. 5,000, for value received.
(iii) I promise to pay Adil or order Rs. 5,000 and 500 shares of Sigma Limited.
(iv) I promise to pay Mahi or order Rs. 5,000 with interest calculated at quarterly rests.

(v) I promise to pay you or your successors on demand Rs. 10,000.

(vi) I promise to pay Rafi or order Rs. 10,000 seven days after Salik’s death.
(vii) I am liable to pay Ahmad Rs. 5,000.
74 Presumptions of negotiable instrument

State the presumptions that are applicable to all negotiable instruments unless the contrary is proved.
75 Inchoate stamped instrument

In the light of Negotiable Instruments Act, 1881 explain the provisions relating to the enforceability of
inchoate stamped instruments. Also discuss the extent to which the person signing the instrument is
liable upon such instrument.
76 Ambiguous Instruments
Explain the term “ambiguous instruments” giving at least two examples. Can such instruments be
negotiated?
77 Payment in due course

A cheque is drawn payable to 'B or order'. It is stolen and B's endorsement is forged. The banker pays
the cheque in due course. Is the banker discharged from liability? Would it make any difference if the
drawer's signature were forged?
78 Cheque
(a) Explain the term “Cheque” as defined in the Negotiable Instruments Act, 1881 and list down the
essential elements of a valid cheque.
(b) Who can cross the cheque after its issue? Also describe the manner in which it can be crossed.
79 Bill of Exchange
What liabilities does the drawer of a bill of exchange incur under the Negotiable Instruments Act, 1881?
80 Holder, Holder in due course, Payment in due course

Explain the following terms as given in the Negotiable Instrument Act, 1881:
(a) payment in due course
(b) holder
(c) holder in due course
81 Material alteration
Any material alteration to a negotiable instrument renders the instrument void. What are the exceptions
to this rule?
82 Negotiation and Indorsement

(a) Under the provisions of the Negotiable Instruments Act, 1881 briefly describe the terms
‘Negotiation’ and ‘Indorsement’.
(b) Sarwat owes Rs. 500,000 to Zain. The amount is payable on 11 August 2016. Sarwat intends to
issue a negotiable instrument to Zain in satisfaction of her debt.
Under the provisions of the Negotiable Instruments Act, 1881 advise Sarwat about the type of
negotiable instrument which may be issued to Zain, assuming that Sarwat does not want to
involve a third party in making the payment. Also prepare a draft of the said instrument.
(You may make assumptions wherever you consider necessary)
(c) Under the provisions of the Negotiable Instruments Act, 1881 describe the purpose of crossing a
cheque. Also state whether a cheque can be crossed specially more than once.

Business Law
83 Provisions of the Negotiable Instruments Act
Specimen of a Negotiable Instrument

Rs. 100,000/- only Date: September 12, 2015
Please pay on demand to Tauseef or to his order the sum of Rupees One Hundred Thousand
only, for value received.
Accepted
Laila
To Sd/- _______________
Laila Laeeq
Busy Road Saddar
Karachi Karachi
(a) Identify the type of above negotiable instrument and briefly describe its essential characteristics
under the provisions of the Negotiable Instruments Act, 1881.
(b) Salma drew a cheque for Rs. 50,000 in favour of her landlord Zoaib. The cheque was not
presented for payment by Zoaib within a reasonable time of its issue. Salma suffered damage of
Rs. 30,000 through the delay because the bank failed.
Under the provisions of the Negotiable Instruments Act, 1881 describe whether Zoaib can
recover the money in the above circumstances.

Business Law
SECTION
B
Part B - Company Law
Long-form questions
CHAPTER 19 – COMPANY
84 Subsidiary and holding co.
Identify the situations specified under the Companies Act, 2017 in which a company shall be considered
to be a subsidiary of another company.
85 Association not for profit–1

Alfalah Associates is an association of persons. It wants to register itself as a limited company but does
not wish to include the word “Limited” in its name.
In view of the provisions of the Companies Act, 2017 you are required to explain the conditions that
need to be satisfied before the Commission may issue it a licence and allow it to dispense with the word
“Limited” from its name.

‘Organizations working for useful objects of the society often need protection of limited liability for such
work.’ However, there are certain conditions subject to the fulfilment of which an exemption may be
granted to an entity from using the word ‘Limited’ to its name. Describe those conditions and also
specify the authority who may grant such exemption under the Companies Act, 2017.
87 Private company
State the conditions which make a company a private company or a public company under the
Companies Act 2017
88 KRL
Kaghan Resham Limited” (KRL) holds 60 percent shares out of total paid up capital of another public
company named “Narran Silk Limited” (NSL). NSL further owns 14 percent shares of “Thandiyani Ice-
creams Limited” (TIL). NSL has also entered into an agreement with other shareholders of TIL to
appoint four out of seven directors on the board of directors of TIL.
Explain their relationships with each other under Companies Act 2017.

Business Law
CHAPTER 20 – INCORPORATION OF COMPANY

89 Alteration in registered office clause
The Directors of Muntaqil Limited are considering to re-locate company’s registered office from Karachi
to Islamabad to carry on business more economically.
Advise Company Secretary about the steps which must be taken to re-locate the registered office under
the provisions of the Companies Act, 2017.
90 Member
What is meant by the term ‘Member’ as described under the provisions of the Companies Act, 2017?
91 Zouk
(a) Mr. Zouk is an employee in a brokerage house and he wants to prepare some reports on request
of some potential investors for a company named as “Arizona Grill Limited”. For the preparation
of the report he requires Memorandum & Articles of association of the company.
State whether he can obtain such copies of Memorandum & Articles of Association from “Arizona
Grill Limited” and explain why?
(b) What do you understand by the term "special resolution" as explained in the Companies Act,
2017?
92 Commencement of business
Explain the provisions specified in the Companies Act, 2017 relating to requirements to be completed
before the commencement of business by a public company.
93 MOA – object, registered office and alteration

(a) Briefly describe the provisions of Companies Act, 2017 relating to alteration of the objects of
a company.
(b) In the annual general meeting of Paramount Limited, a shareholder objected to the shifting of the
registered office from Multan to Lahore without obtaining confirmation from the Commission.
Explain whether the objection is valid.
(c) The alteration in the memorandum shall not take effect until it is confirmed by the Commission.
State the conditions a company is required to fulfill in order to obtain confirmation from the
Commission and the procedure to be followed on confirmation.
94 Articles of association
A Malaysian company is interested in incorporating a limited liability company in Pakistan.
Discuss provisions of the Companies Act, 2017, relating to the following:
(a) Contents, printing and signature of the Articles of Association
(b) Registration of the Articles of Association
(c) Alteration of the Articles of Association after its registration
95 MOA – Nil capital

What are the main clauses of a Memorandum of Association of a company limited by guarantee and
not having a share capital?
96 Incorporation
What are the criteria based on which the registrar shall incorporate any company and grant a certificate
of incorporation?

Section B: Part B - Company Law Question bank: Objective test and long-form questions
97 Name
Certain names cannot be given to the company. Explain what such names are and explain who the final
authority is, regarding allowance or disallowance, of any name given to a company.
98 Disallowed name
Discuss the powers of registrar when a company is registered with a name not allowed by the Act.
CHAPTER 21 – SHARE CAPITAL – TYPES AND VARIATION

99 Increase in authorized capital
The directors of Sherwani Limited wish to increase the authorized capital of the company from Rs 100
million to Rs 200 million. You are required to inform them about the relevant provisions regarding
increase in authorized capital, contained in the Companies Act, 2017.
100 Variation of shareholders’ rights - 1

Paradise Limited, upon passing a special resolution on August 20, 20X3 made amendments in its
Articles of Association affecting substantial rights associated with class “B” shares of the company. Few
aggrieved shareholders having objection on the special resolution intend to file an application in the
Court, for the cancellation of the above resolution.
Discuss the relevant provisions of the Companies Act, 2017 specifying the following:
(a) The conditions which the aggrieved shareholders will have to comply with, to be eligible for filing
an application in the court for the cancellation of the above resolution.
(b) The matters which the Court would consider while making a decision on the above application.
101 Purchase of own shares

Companies are not allowed to purchase their own shares nor the shares of their holding companies -
explain.
102 Objections
Who has the right to object to resolutions passed for variation in rights of any particular class of the
shareholders and what shall the procedure be for lodging such an objection?

Paid up capital of Sigma Limited comprises of two classes of ordinary shares, A and B, having different
rights. The directors approved a resolution in their meeting granting the same rights to both the classes
of shareholders. Later, the members in a general meeting approved the resolution by altering the
articles of association to give effect to the variation in the rights of shareholders. Under the provisions of
the Companies Act, 2017:
(i) What do you understand by variation of shareholders’ right?
(ii) A small group of members holding class A shares is objecting to the variation in their rights.
Discuss how these aggrieved members can challenge the variation of their rights and ask for its
cancellation.
CHAPTER 22 – SHARE CAPITAL – PROSPECTUS

104 Prospectus – consent of expert
Quite often, a prospectus inviting persons to subscribe for shares in a company contains a statement
from person(s) who are experts in their respective fields.
(a) Describe the term “Expert” as explained in Companies Act, 2017 in the above context.
(b) Narrate the conditions that a company should comply with if its prospectus contains a statement
by an expert.

Business Law
105 Prospectus – publication and availability

(a) Deo Limited (DL) has published a prospectus on March 1, 20X4. The subscription list is due to
open on April 5, 20X4. Explain whether the company is in compliance with the provisions of the
Companies Act, 2017 regarding the publication of its prospectus. What relaxation can DL avail, in
this regard?
(b) Identify the places where DL is required to make available the copies of its prospectus.
106 Prospectus – registration

The registrar shall not register a prospectus unless certain requirements of the Companies Act, 2017
are complied with. You are required to list such requirements.
107 Issuance of prospectus

The Board of Directors of Tanveer Limited, a listed company, has decided to invite general public for
the subscription of its securities and therefore, intends to issue/publish a prospectus.
Under the provisions of the Securities Act, 2015 advise the directors about:
(i) the time frame within which approval for the issuance of prospectus may be obtained and the
time for which the prospectus may remain valid after approval.
(ii) the requirement(s) which must be satisfied before registration of the prospectus.
CHAPTER 23 – MORTGAGES AND CHARGES

108 Mortgages and charges 1
(a) List the mortgages and charges which, if not registered by the company, shall be considered as
void.
(b) Explain the circumstances under which the registrar has the power to make entries of satisfaction
and release of charge, in the register of mortgages and charges, without intimation from the
company.

Explain the procedure described by the Companies Act, 2017 for registration of payment or satisfaction
of mortgage.

On 15 August 2015, Masoom Limited repaid the short-term running finance facility it had obtained from
AB Bank Limited against a floating charge on the stock-in-trade and book debts of the company.
In view of the provisions of the Companies Act, 2017 briefly describe the duties of Masoom Limited and
the registrar under the above circumstances.
111 Mortgages
Briefly describe the term ‘Mortgage’ as stated in the Companies Act, 2017.
CHAPTER 24 – MEETINGS
112 AGM timeline
Explain the exceptions to the following provisions as specified under the Companies Act, 2017:
Every company shall hold its annual general meeting within a period of four months following the close
of its financial year.

113 Ordinary vs. special

(a) In a general meeting, ordinary as well as special businesses are put up for consideration of
members. Distinguish between ordinary business as opposed to special business.
(b) State the requirements that a company needs to satisfy, as regards notice of the meeting, in case
a special business is to be transacted at a general meeting of the company.
114 Polling
Mr. Shakeel has significant shareholdings in various public and private companies. He is not satisfied
with some of the resolutions passed by such companies by show of hands. You are required to advise
him as regards the following:
(a) What conditions would he need to satisfy if Mr. Shakeel wishes to request for a poll?
(b) Explain whether a company is required to oblige him if he wishes to satisfy himself about the
validity of the results of voting by poll.
115 Minutes
Discuss the provisions contained in the Companies Act, 2017 relating to maintenance of minutes of the
general meetings of the company.
116 Meetings – commencement and EGM

Explain whether or not the following statements are in accordance with the provisions of the Companies
Act, 2017 and support your answer with reasons:
(a) All limited companies are required to hold statutory meeting within 6 months of incorporation.
(b) Notice of an extraordinary general meeting should always be sent to the shareholders, at least 21
days before the date of the meeting.
117 Quorum
The Board of Directors of Classic Paints Limited, a public listed company, has called an Extraordinary
General Meeting on the requisition of the shareholders holding 10% of the voting power of the
company. Approximately twenty minutes before the commencement of the meeting, the Chairman of
the Board of Directors informed the Company Secretary of his inability to attend the meeting due to the
death of a close relative.
Required:
(a) What would be the quorum of the above meeting?
(b) Mention the latest time by which the quorum of the meeting should be present. What would be
the impact if quorum is not present within the prescribed time?
(c) Who could chair the meeting in the above situation?
118 Members and meetings

(a) Mr. Dinshaw holding 13.5% shares in ABC Limited gave notice of a resolution to the company on
May 22, 20X4, proposing to appoint M & T Associates in place of the existing share registrar of
the company. The resolution was to be considered at the annual general meeting scheduled for
May 30, 20X4. The company could not circulate the proposed resolution among its members.
(i) Evaluate the above situation in the light of the provisions of the Companies Act, 2017.
(ii) Explain whether Mr. Dinshaw is entitled to inspect and require the minutes of general
meeting of the company.
(b) What is the legal status of a resolution passed at any adjourned meeting of the creditors of a
company?

Business Law
119 Circulation
The annual general meeting of Iqra Industries Limited (IQL), a listed company, is to be held on October
25, 20X3. In addition to the normal businesses, the company is planning to discuss a strategic business
plan for the approval of the shareholders. Explain the requirements of Companies Act, 2017 as
regards the circulation of information/documents to various stake holders, prior to the above meeting.
120 Representation and proxy

Green Leaf Limited, a listed company, has sent a notice of the forth coming Annual General Meeting, to
the Company Secretary of Red Rose Limited which is also a listed company. Red Rose Limited has
recently acquired 100,000 shares in Green Leaf Limited and you are required to advise its directors
about the following, in the light of Companies Act, 2017:
(a) Who can represent Red Rose Limited in the annual general meeting of Green Leaf Limited?
(b) What are the essential characteristics of an instrument of proxy to be submitted to Green Leaf
Limited and what is the deadline for its submission?
121 EOGM
Peach Panther Ltd (PPL) is planning to call an Extra Ordinary General Meeting (EOGM) to transact
certain businesses due to an emergency faced by the company. You are required to answer the
following:
(i) Which meetings are called EOGM?
(ii) What is the minimum notice period for calling an EOGM? Can PPL hold such meeting on a
shorter notice?
122 Special business

Explain the term “special business” with reference to the Companies Act, 2017. Give at least two
examples
123 Auditor’s certificate

Companies are required to obtain certificates from auditors in regard to the matters contained in a
statutory report. You are required to elaborate on the matters for which auditors certificates are
required.
124 Commission GM
Under what circumstances does the Commission have the power to call a general meeting of the
company?
125 Circumstances in which proceedings of a General Meeting may be declared invalid

The 21st annual general meeting (AGM) of NokeJhoke Limited was held on 20 August 2015. Two of the
shareholders, Mateen and Ragib were not satisfied with the conduct of the meeting. One week after the
meeting, they submitted a complaint to the chairman of the board of directors, requiring him to
invalidate the proceedings of the 21st AGM.
In view of the provisions of the Companies Act, 2017 explain the circumstances in which Mateen and
Ragib would succeed in their contention.
CHAPTER 25 – MANAGEMENT
126 Subsequent CEO
Act, 2017. Support your answer with reasons.
A chief executive, other than the first chief executive of the company, is appointed by the shareholders
in the annual general meeting of the company, for a period up to the next annual general meeting.

127 CEO – removal and competitors

(a) Mr. Zameer is the first chief executive of Ryan Industries Limited, a public company. The
directors of the company are not satisfied with his performance. In view of the provisions of the
Companies Act, 2017 specify the term of office of Mr. Zameer and explain how he can be removed
before expiry of the above term.
(b) Describe the provisions of the Companies Act, 2017 which restrict the chief executive of a public
company from carrying on any business competing with the company’s business.
128 Casual vacancy

Abid, Qasim and Tariq were the only members of Alpha Securities Limited, a public company and
were elected as directors on 30 June 20X9. Qasim expired on 2 February 20Y4 in a road accident.
Briefly describe the provisions of the Companies Act, 2017 relating to the casual vacancy as described
above.
129 Election
Narrate the provisions of the Companies Act, 2017 relating to a private company in respect of:
(a) Appointment of the first directors and their tenure.
(b) Procedure for election of subsequent directors.
130 Presence
Explain the exception to the following provisions as specified under the Companies Act, 2017.
In a meeting of the board of directors, no director shall take any part in the discussion of, or vote on,
any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if he is
in any way, whether directly or indirectly, concerned or interested in the contract or arrangement, nor
shall his presence count for the purpose of forming a quorum at the time of any such discussion or vote;
and if he does vote, his vote shall be void.
131 Number, remuneration and assignment

Act, 2017.
(a) A company may change the number of directors to be elected at least 21 days before the date of
general meeting at which the election is to be held.
(b) Directors’ remuneration for performance of extra services including the holding of office of the
chairman or attending the board meeting is decided by the chief executive.
(c) A director of a listed company cannot assign his office to another person under any
circumstances.
132 Fresh elections

Explain the conditions specified in the Companies Act, 2017 under which a person may request a
listed company to hold election of directors prior to the end of the term of the present board of
directors.
133 Loans
In view of the provisions of the Companies Act, 2017 explain the conditions which are required to be
complied with, if a company wishes to grant loan to its director.
134 Power
At the annual general meeting of Rahbar Refineries Limited (RRL), certain shareholders have raised
objections on matters related to the use of the company’s funds. In the opinion of those shareholders
the board have exceeded the authority vested upon them by the Companies Act, 2017. Identify
those powers of board which the shareholders of RRL may be referring to.

Business Law
135 Number and casual vacancy

Lalazar Limited, a pubic unlisted company has a paid up capital of Rs 100 million consisting of shares
having face value of Rs 10 each. Last election of its Board of Directors was held on April 15, 20X3 in
which eight directors were elected. Four of the directors belonged to the same family. The remaining
directors were Mr. Javed, Mr. Bader, Mr. Qasim and Mr. Dawood. They secured 600,000, 350,000,
480,000 and 220,000 votes respectively. The remaining votes were equally distributed among the four
directors of the family. Mr. Javed died on May 30, 20X3 and Mr. Aslam was appointed as a director on
June 15, 20X3 to fill in the casual vacancy.
Explain the following in the light of the provisions of the Companies Act,2017:
(a) Is Lalazar Limited in compliance with the requirements of minimum number of directors?
Who shall fix the number of directors to be elected and by what time such number should be
fixed? Is it possible for the company to change the number of directors once fixed?
(b) Who is responsible to fill the casual vacancy in the Board and when would Mr. Aslam’s term of
office be completed?
136 First and subsequent directors

Alpha Technologies Limited (ATL) is in the process of being incorporated as a public limited company.
Further, ATL has plans to have its stock listed on Pakistan stock exchange within a period of one year
of its incorporation.
Required:
Write briefing notes for the promoters of ATL, on behalf of Best Financial Services who are their
consultants, advising them about appointment authority and the terms of holding of office of the
following:
(i) the first and subsequent directors; and
(ii) the first and subsequent chief executive.
137 Removal
Lalazar Limited, a pubic unlisted company has a paid up capital of Rs 100 million consisting of shares
having face value of Rs 10 each. Last election of its Board of Directors was held on April 15, 20X3 in
which eight directors were elected. Four of the directors belonged to the same family. The remaining
directors were Mr. Javed, Mr. Bader, Mr. Qasim and Mr. Dawood. They secured
600,000, 350,000, 480,000 and 220,000 votes respectively. The remaining votes were equally
distributed among the four directors of the family. Mr. Javed died on May 30, 20X3 and Mr. Aslam was
appointed as a director on June 15, 20X3 to fill in the casual vacancy.
Explain the following in the light of the provisions of the Companies Act, 2017.
The conditions required to be fulfilled if a person desires to remove the following directors:
(i) Mr. Aslam
(ii) Mr. Bader
138 Loan repayment

The directors of Shahzada Limited, a listed company, have offered Mr. Shams who is presently working
as General Manager Operations, to become the Chief Executive of the company. Last year Mr. Shams
obtained a loan amounting to Rs 1.2 million in accordance with the company's employment rules, out of
which Rs 0.8 million is still outstanding. Mr. Shams has agreed to take the position of Chief Executive
but is not in a position to repay the loan immediately.
Discuss the requirements of the Companies Act, 2017 which Mr. Shams will need to comply with.
139 General notice of interest

What is the procedure for filing a general notice of interest by a director and what would such a general
notice include?

140 Interest free loan

Azad Limited (AL) is a listed company engaged in the business of manufacturing and supply of
electrical appliances. Mr. Majnou, a director of AL, has applied for an interest free loan from the
company to be repayable in five years.
In view of the provisions of the Companies Act, 2017 describe the circumstances under which AL may
grant loan to Mr. Majnou.
141 Appointment of a Chief Executive

(a) Tabdily (Pvt) Limited (TPL) has recently been converted into a public listed company and the
directors intend to appoint a new Chief Executive of the company.
Under the provisions of the Companies Act, 2017 briefly explain the requirement(s) for the
appointment of a Chief Executive. Also state the restrictions, if any, on the appointment of a Chief
Executive.
(b) One of the directors while retaining his directorship in TPL is contemplating to start his own
business which is likely to take most of his time for the next few years.
Under the provisions of the Companies Act, 2017 the director is seeking your advice on the
matters due to which he may ipso facto cease to hold office of the director of TPL.
CHAPTER 26 – INVESTMENTS AND DIVIDENDS

142 Associated company
Describe the term “associated company” in accordance with the Companies Act, 2017.
143 Dividend restriction

Act, 2017. Support your answer with reasons.
There is no restriction on the declaration of dividend and the chief executive may declare dividend in
the general meeting of the company out of any kind of profit.
144 Investment restriction

Describe the restrictions that have been imposed by the Companies Act, 2017 in respect of investment
by a company in its associated undertaking.
145 Payment of dividend

Explain the exception to the following provisions as specified under the Companies Act, 2017.
Where a dividend is declared by a company but is not paid within the period specified in the
Companies Act, 2017, the chief executive of the company shall be punishable with imprisonment for a
term which may extend to two years and with fine which may extend to five million rupees.
146 Dividend amendment

The board of directors of Dinar Ltd, a listed company, had recommended a final dividend @ 100% for
the year ended June 30, 20X3. Just a week after the notice for AGM had been dispatched the company
suffered huge losses due to certain unanticipated events and incurred heavy liabilities. The company is
now considering the following options:
(i) Reducing the dividend to 25%.
(ii) Deferring the payment of 75% of the dividend, for six months.
Explain whether the company can exercise the above options, under the Companies Act, 2017.

Business Law
147 Investment in associate company

(a) Ironside Limited (IL) owns 51% voting shares in Snow Storm Limited (SSL) and 52% voting
shares in Flipper (Pvt) Limited (FPL). SSL intends to make an investment of Rs. 200 million in
FPL.
Under the provisions of the Companies Act, 2017:
(i) State the type of relationship, if any, which exists between SSL and FPL.
(ii) Describe the conditions which SSL must fulfil before making any investment in FPL.
(b) ‘Companies Act, 2017 requires that all the investments of the company must be made and held
in the name of the company itself and not in someone else’s name.’
State the exception(s) to this general rule.
148 Interim Dividend

On 31 July 2015, the Directors of Clove Engineering Limited (CEL), a listed company, declared an
interim dividend of Rs. 5 per share. However, before making payment of the dividend, the company
suffered huge losses due to a massive fire in the factory. The CFO has informed the board of directors
about CEL’s inability to pay the dividend in time.
Under the provisions of the Companies Act, 2017 briefly describe:
(a) When an interim dividend is deemed to have been declared by CEL.
(b) The consequences of non-payment of dividend within the stipulated time.
(c) The circumstances under which CEL may not be responsible to pay dividend to certain
shareholders.
CHAPTER 27 – ACCOUNTS AND AUDIT

149 Qualification
Act, 2017 and support your answer with reasons.
A person who holds shares in a company cannot be appointed as the auditor of such company.
150 Removal – change of auditor

Narrate the responsibilities of a company or of its directors in the following circumstances.
A notice is given to a listed company by a member of the company, 17 days before the annual general
meeting, proposing for a change in the auditors of the company.
151 Books of accounts

SQL Plastics Limited is a wholly owned subsidiary of a foreign company and has its registered office in
Karachi.
(a) List the books of account the company is required to maintain.
(b) State the conditions which the directors shall be required to comply with if they want to keep the
books of account at SQL’s factory located in Peshawar.
152 Registrar
Describe the formalities to be completed by an unlisted company, not being a private company having
paid up capital of less than Rs. 7.5 million, before and after the annual general meeting, with respect to
the annual audited accounts, under the Companies Act, 2017.
153 Directors’ report
Describe the contents of the Directors’ Report to be attached with the balance sheet of a public
company, as specified under Companies Act, 2017.

154 Signing the financial statements

The chief executive of Raza Enterprises Limited (REL), a listed company, is out of the country at the
time of finalization of annual accounts. Explain the provisions related to signing and authentication of
the annual accounts as contained in the Companies Act, 2017 which REL would have to comply with, in
the above situation.
155 The auditors’ report

Explain the provisions of the Companies Act, 2017 in respect of the following:
(a) Reading and inspection of auditors’ report.
(b) Signature on the audit report.
156 Appointment of auditor

Sahara Pakistan Limited (SPL) is a multinational company listed on the Karachi and Lahore Stock
Exchanges. Mr. Brown, a major shareholder of the company, wants to appoint ABC & Company,
Chartered Accountants, as the new auditors in place of the retiring auditors of SPL.
Narrate the procedure that Mr Brown would have to follow and the responsibilities of the Company in
the context of provisions of the Companies Act, 2017 for change of auditors.
157 Auditor and the AGM

Discuss the provisions of the Companies Act, 2017 related to the attendance of the auditors in the
general meeting of the company.
158 Auditor disqualification

On April 30, 20X3 the Board of Directors of MIL informed the CFO that it wishes to change the auditors
of the company. The interim audit for the year ended June 30, 20X3 is due to commence shortly.
As the CFO of the company, advise the Board about the provisions contained in the Companies Act,
2017 as regards:
Restrictions imposed on the appointment of certain persons as auditors of the company.
159 Appointment by SECP

Narrate the circumstances in which SECP becomes empowered to appoint auditors under the
Companies Act, 2017.
160 Rights/duties of an auditor, casual vacancy and signature in the audit report
Under the provisions of the Companies Act, 2017 explain the following:
(a) the rights/duties of an auditor with regard to the general meeting of the company.
(b) how a casual vacancy in the office of the auditor may be filled.
(c) provisions relating to the signing of an audit report.
161 Appointment of a First Auditor

Tawana (Pvt.) Limited (TPL) was incorporated on 10 July 2015 with a paid up capital of Rs. 5,000,000.
TPL’s management intends to appoint Mr. Fakhir as the first auditor of the company.
Under the provisions of the Companies Act, 2017 advise the directors:
(a) Whether Mr. Fakhir can be appointed as the first auditor of TPL.
(b) Who may appoint the first auditor and fix their remuneration. Also state the time frame within
which such auditor may be appointed.

Business Law
162 Rights and duties of the auditors

Under the Companies Act, 2017 what are the rights and duties of the auditors.

Business Law
SECTION
C
Multiple choice answers

Business Law
MCQ1 – LEGAL SYSTEM OF PAKISTAN

(1) (d)
(2) (c)
(3) (b)
(4) (d)
(5) (b)
(6) (d)
(7) (a)
(8) (c)
MCQ2 – CONTRACT ACT 1872

(1) (b)
(2) (a)
(3) (a)
(4) (c)
(5) (c)
(6) (a)
(7) (c)
(8) (d)
(9) (b)
(10) (b)
(11) (b)
(12) (a)
(13) (b)
(14) (a)
(15) (c)
(16) (c)
(17) (c)
(18) (c)
(19) (c)
(20) (c)
(21) (d)

Section C Answer bank: Multiple choice answers
MCQ3 – PARTNERSHIP ACT 1932

(1) (a)
(2) (b)
(3) (d)
(4) (d)
(5) (a)
(6) (c)
(7) (c)
(8) (b)
(9) (d)
MCQ4 – NEGOTIABLE INSTRUMENTS ACT 1881

(1) (c)
(2) (b)
(3) (d)
(4) (c)

Business Law

Business Law
SECTION
D
Part A - Mercantile Law
Objective test and
long-form answers
1 Federal Shariat Court

(a) The Federal Shariah Court may, either of its own motion or on the petition of citizen of Pakistan
or the Federal or Provincial Government, examine and decide the question whether or not any
law or provision of law is repugnant to the Injunctions of Islam.
(b) If the court decides that a particular law is repugnant to the injunctions of Islam, it should
specify the extent to which it is so repugnant.
(c) Appeal: If any party in any proceedings before the Federal Shariat Court is aggrieved by the
final decision of the court, he may prefer an appeal to the Supreme Court.
2 Courts
(a) The Federal Shariat Court:
The Federal Shariat Court consists of not more than eight Muslim Judges including the
Chief Justice which are appointed by the President in accordance with Article 175A.
Out of the number not more than three shall be Ulema having at least fifteen years’
experience in Islamic law, research or instruction and not more than four each one of
them
x is or
x has been or
x is qualified
to be a Judge of High Court.
The judges hold office for a period of three years. However, the President may, extend
such period.
(b) Court of first instance:
A court of first instance is the court where the case is originally heard in full.
Areas of jurisdiction of the High Court:
Following are the five areas of jurisdiction of the High Court.
(i) Original civil jurisdiction;

Business Law
(ii) Appellate civil jurisdiction;

(iii) Appellate criminal jurisdiction;
(iv) Supervisory jurisdiction;
(v) Constitutional jurisdiction.
3 Binding precedent
For a precedent to be binding it must meet the following requirements:
(i) The ratio decidendi (reason for judgment) is clearly identified;
(ii) The material facts of the case must be similar;
(iii) The status of the court which set the precedent must be such as to bind the present court.
4 High courts
The High Court exercises its supervisory role in the following manner:
(i) It may issue a writ of habeas corpus. That is, it may order for the release of a person
wrongfully detained by a court subordinate to it or any government agency.
(ii) It may issue prerogative orders against sub-ordinate courts, tribunals and other bodies such as
local authorities in so far as they have a duty to exercise a decision fairly.
There are three types of prerogative orders:
Mandamus requires the court or other body to carry out a public duty.
Prohibition prevents a court or tribunal from exceeding its jurisdiction.
Certiorari is exercised when an inferior court has acted illegally by exceeding its
jurisdiction or reached its decision contrary to the principles of natural justice without
giving the person concerned the right to know and reply to the case against him.
Essentially it is a review of what has been done after it has been done.
5 Civil law and criminal law

Civil law regulates the disputes in respect of rights and obligations between persons dealing with
each other.
The court does not punish the wrong doers but imposes a settlement, either by awarding damages or
granting injunctions or other orders.
Examples of civil laws are:
(i) company law (ii) rent law (iii) commercial law
(iv) family laws (v) employment law
Criminal law is a body of law:
defining conduct prohibited by law against the community at large;
regulating how suspects are investigated, charged and tried and;
establishing punishments for convicted offenders / accused
Criminal law deals with crimes such as murder, violence, terrorism, theft, robbery etc.
6 Process of legislation
If the President deems necessary to take an immediate action, he has the power to promulgate an
ordinance if the Senate or National Assembly is not in session. Such ordinances have the same force
and effect as an Act of the Parliament. The Ordinance stands repealed after one hundred twenty days
if it is not passed by the National Assembly or by National Assembly and Senate both as the case
may be. However, National Assembly may extend it for another period of one hundred twenty days.
Thereafter it will stand repealed.

Section D: Part A - Mercantile Law Answer bank: Objective test and long-form answers
7 Basis of legal system

The legal system in Pakistan is based on the Constitution of Pakistan 1973 as well as Islamic law
(Sharia).
Main sources of law in Pakistan:
Following are the main sources of law in Pakistan:
(i) Legislation:
It is the law created by the Parliament of the country and other bodies to whom it has delegated
authority.
(ii) Precedent:
Precedent is a judgment or decision of a superior Court which are binding on the subordinate
Courts.
(iii) Custom:
Certain customs practices and beliefs are so vital and intrinsic part of a social and economic
system that they are treated as if they were laws.
(iv) Agreement:
Parties in their agreement stipulate terms for themselves which constitute law for the
contracting parties.
8 Company court and Company bench

(a) Company court:
A company court is the High Court which has jurisdiction under the Companies Ordinance,
1984. Its jurisdiction is in the place at which the registered office of the company is situated.
Company bench:
Company bench(s) is/are one or more benches constituted in each High Court by the chief
justice of the High Court.
The Federal Government may empower any civil court to exercise all or any of the jurisdictions
by the Companies Ordinance, 1984.
(b) How can precedents be avoided?
A judge is not bound to follow the precedent under the following circumstances:
(i) Overruling a precedent:
A precedent established by a lower court can be overruled by a higher court. The higher
court sets aside the decision of the lower court, and the precedent ceases to apply.
(ii) Making a distinction between cases:
A judge may avoid a precedent by identifying facts in the current case that make it
different from a previous case. If the facts are sufficiently different, the judge in the
current case does not have to follow the precedent of the previous case.
9 Essential elements of a contract

Section 10 of the Contract Act
1. Essential elements of a valid contract
A valid contract must have following essential elements:
a) Offer and acceptance
There must be an agreement between parties to create a valid contract. An agreement
involves a valid offer and acceptance.

Business Law
b) Legal relationship
A contract to become valid must have 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.
c) Competency of parties
The parties to an agreement must be competent to contract. In other words, the
person must be
Major
Person of sound mind and
Not declared as disqualified from contracting by any law to which he is subject.
d) Consideration
An agreement must be supported by lawful consideration. Gratuitous promises are not
enforceable at law. Consideration requires not only requires presence of consideration
but also lawfulness of consideration.
e) Free Consent
An agreement must be made between parties by free consent. In other words, the
consent must not be obtained from following:
Coercion
Undue influence
Fraud
Misrepresentation
Mistake
f) Lawful Object
The object of an agreement must be lawful. An object is said to be unlawful when:
[Section 23]
It is forbidden by law
Is of such a nature that if permitted would defeat the provisions of any law
It is fraudulent
It involves an injury to the person or property of another
The court regards it as immoral, or opposed to public policy
g) Not declared as void
An agreement which is not enforceable by law is called void agreement. There are
certain agreements which have been expressly declared as void such as: [Section 24 to
30]
agreement, the object or consideration of which is unlawful
agreement, without consideration is void
agreement in restraint of marriage
agreement in restraint of legal proceedings
agreement in restraint of trade
agreement is void if meaning of which is uncertain
Wagering agreement

h) Certainty
An agreement may be void on the grounds of uncertainty. The meaning of the
agreement must be certain or capable of being certain. [Section 29]
i) Possibility of performance
The terms of the agreement must be capable of being performed else it is void.
[Section 56]
j) Legal formalities
An oral contract is a perfectly valid contract, except in certain cases where a contract
must comply with the necessary formalities as to writing, registration and stamping.
10 Acceptance
Section 2(b) and 7 of the Contract Act
When the person to whom the proposal is made signifies his assent to the offer, the proposal is
said to be accepted.
(i) Acceptance must be absolute and unqualified.
(ii) It must be expressed in some usual and reasonable manner, unless the proposal prescribes
the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to
be accepted, and the acceptance is not made in such manner, the proposer may, within a
reasonable time after the acceptance is communicated to him, insist that his proposal shall
be accepted in the prescribed manner and not otherwise, but if he fails to do so, he accepts
the acceptance.
(iii) Acceptance must be made by the offeree i.e. by the person(s) to whom offer was made and
only such person or a person with his authority must communicate the acceptance to the
offeror.
(iv) Acceptance must be given within a reasonable time and before the offer lapses and/or is
revoked.
(v) Acceptance must succeed the offer.
11 Lapse of an offer
An offer is lapsed in following ways:
Revocation
An offer may be revoked before its acceptance by the offeree.
Lapse of time
An offer will come to an end if it is not accepted within the time specified or within a reasonable time
where no time is specified. What is the reasonable time is a question of fact depending upon the
subject matter and circumstances.
Death or insanity
An offer comes to an end by the death or insanity of the offeror if the fact of his death or insanity
comes to the knowledge of the acceptor before acceptance.
Non-fulfilment of condition precedent
An offer comes to an end when the acceptor fails to fulfil the conditions precedent to the offer.
Counter offer
An offer comes to an end if the counter offer is made.
Non-acceptance according to requirement
An offer comes to an end if it is not accepted according to the requirement (if any) of the offeror.

Business Law
Non-acceptance / Rejection
An offer comes to an end if it is not accepted by the offeree. An offer is said to be rejected if the
offeree expressly rejects.
Subsequent illegality or destruction
An offer comes to an end if it becomes illegal or the subject matter is destroyed before its acceptance.
12 Revocation of proposal
Section 5 and 6 of the Contract Act
Revocation of a proposal
A proposal may be revoked at any time before the communication of its acceptance is complete as
against the proposer, but not afterwards. A valid proposal comes to an end upon happening of any
one of the following:
(a) by communication of notice of revocation by the proposer.
(b) by the lapse of time prescribed in such proposal for its acceptance, or if no time is prescribed,
by the lapse of a reasonable time, without communication of the acceptance.
(c) by failure of the acceptor to fulfill a condition precedent to acceptance.
(d) by the death or insanity of the proposer, if the fact of his death or insanity comes to the
knowledge of acceptor before acceptance.
(e) if a counter proposal is made by the acceptor to the proposor.
(f) if the proposal is not accepted in some usual or reasonable manner, where no mode is so
prescribed.
(g) subsequent illegality or destruction of subject matter.
(h) rejection of proposal by the offeree.
13 Offer and acceptance:

It is the case of a general offer as it was made to the public. A contract is made with the person who
having the knowledge of the offer comes forward and acts according to the conditions of the offer.
However, under the given circumstances, Aftab cannot claim the amount of reward from Bader as there
was lack of communication of the offer and Aftab did not know about the reward when he found the
missing horse. Aftab could have accepted the offer only when he knew about it because an offer
accepted without its knowledge does not confer any legal rights on the acceptor.
14 Minor
Section 10, 11 and 68 of the Contract Act
Section 30 of the Partnership Act
The position of agreements with a minor is given below:
An agreement with a minor is void ab-initio.
Where an infant / minor represents fraudulently that he is of the age of majority and induces
another to enter into a contract with him, he will not be liable
Since ratification has a retrospective application it is necessary that the minor must be
competent to contract at the time when the contract is entered into. Therefore, an agreement
with a minor cannot be ratified subsequently after he attains majority
If a minor enters into an agreement jointly with a major person than such agreement can be
enforced against the major person who has jointly promised to perform.
A minor can be admitted for the benefits of partnership with the consent of all the partners. He
cannot be a partner until he attains majority.

A minor can be agent but cannot be a principal

A minor cannot be declared insolvent because he is incompetent to contract.
A minor can file a suit but cannot be sued.
If the guardian or manager of the minor entered into on behalf of a minor being within the scope
of the authority and for the benefit of the minor than such agreements can be enforced by or
against the minor.
A person who supplied necessaries to a minor is entitled to be reimbursed from the property of
such minor. Such claim is against the property of the minor but not against the minor
personally.
15 Consideration 1
The conditions under which the said contract is enforceable are:
Mohsin and Ahsan stand in near relation to one another.
The agreement is out of natural love and affection.
The said contract is in writing.
16 Consideration 2
Validity of an agreement made without consideration
An agreement without consideration is considered valid in any of the following circumstances:
(i) it is expressed in writing and registered under the law for the time being in force for the
registration of documents and is made on account of natural love and affection between
parties standing in a near relation to each other.
(ii) it is a promise to compensate wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable to do.
(iii) it is a promise, made in writing and signed by the person to be charged therewith, or by his
agent generally or specially authorized in that behalf, to pay wholly or in part a debt which is
barred by the law for the limitation of suits.
(iv) any gift which is actually made as between the donor and the donee.
(v) no consideration is necessary to create an agency.
(vi) remission by the promisee of the performance of the promise. A creditor can agree to give up
either the whole or part of his claim or may agree to extend time for the performance of the
promise and no consideration is required for such an agreement.
(vii) a promise to contribute to charity, though gratuitous, would be enforceable, provided the
promisee on the faith of such promise undertakes a liability not exceeding the amount so
promised.
17 Coercion
Yes, Bano can avoid the contract as her consent was caused by coercion.
18 Fraud
Fraud – Fraud means acts committed by a party to a contract, or with his connivance, or by his agent
with intent to deceive another party thereto or his agent, or to induce to enter into the contract and
includes any of the following:

Business Law
(i) the suggestion, as a fact of that which is not true by one who does not believe it to be true;
(ii) the active concealment of a fact by one having knowledge or belief of the fact;
(iii) a promise made without any intention of performing it;
(iv) any other act fitted to deceive;
(v) any such act or omission as the law specially declares to be fraudulent.
19 Misrepresentation
Following are the acts which constitute misrepresentation:
(a) Unwarranted statement
When a person makes a positive statement that a fact is true when his information does not
warrant it to be so, though he believes it to be true this amounts to misrepresentation.
(b) Breach of duty
Any breach of duty which
without an intent to deceive,
gains an advantage to the person committing it, or
anyone claiming under him, by misleading another
to his prejudice or
to the prejudice of anyone claiming under him.
(c) Inducing mistake about subject matter (Innocent misrepresentation)
A party to an agreement induces (however innocently) the other party to make a mistake as to
the nature or quality of the subject of the agreement.
Following are the circumstances were a party whose consent has been obtained by
misrepresentation cannot rescind the contract:
(i) where the party whose consent was caused by misrepresentation had the means of
discovering the truth with ordinary diligence;
(ii) where the party gave the consent in ignorance of misrepresentation;
(iii) where the party after becoming aware of the misrepresentation, takes a benefit under the
contract;
(iv) where an innocent third party, before the contract is rescinded, acquires for consideration
some interest in the property passing under the contract;
(v) where the parties cannot be restored to their original position.
20 Mistake
Section 20 to 22 of the Contract Act
The effects on the validity of the contract are given below:
(a) In case of unilateral mistake of law in force in Pakistan the contract is not voidable.
(b) In case of unilateral mistake of fact the contract is not voidable
(c) In case of mutual mistake of foreign law the agreement is void.

21 Rescind the contract

(a) Shafiq may not be able to rescind the contract under the following circumstances:
If Shafiq had the means of discovering the truth with ordinary diligence; or
Abad’s misrepresentation was not the basis for Shafiq’s consent; or
After becoming aware of the misrepresentation Shafiq may have taken benefit under the
contract; or
If an innocent third party had acquired for consideration and in good faith some interest in
the property; or
Shafiq and Abad cannot be restored to their original positions.
(b) Ordinary damages:
Ordinary damages are those which arise naturally in the usual course of things from the breach
itself.
Special damages
Special damages are due to special losses which are in the reasonable contemplation of the
parties at the time of formation of contract.
Exemplary damages
Exemplary (vindictive) damages are those which are awarded with a view to punish the wrong
doer and not primarily with an idea of awarding compensation to the injured party.
Rules relating to award of above damages:
Ordinary Damages
These damages can be awarded if the following two conditions are fulfilled:
The aggrieved party must suffer by breach of contract, and
The damage must be a direct consequence of the breach of contract
Special damages
Special damages can be awarded for the special loss which the parties:
Knew about
At the time they made the contract
As likely to result from such breach of contract
Exemplary damages
The court may award these damages in cases such as:
a breach of promise to marry, where damages shall be calculated on the basis of mental injury
sustained by the aggrieved party.
wrongful dishonour of a cheque by a banker. In case of wrongful dishonour of a cheque, the
smaller the amount of the cheque, larger will be the amount of damages awarded. A trader
may recover such damages as wrongful dishonour of cheque shall adversely affect his
goodwill but a non-trader whose cheque is wrongfully dishonoured will have to prove the loss
of goodwill before claiming such damages.
22 Legality of object
Section 2(e), (g), 23 and 24 of the Contract Act
Agreement
Every promise and every set of promises, forming the consideration for each other, is an agreement.
An agreement not enforceable by law is said to be void.

Business Law
Circumstances in which an object of an agreement is considered unlawful:

The object of an agreement is unlawful when:
(i) it is forbidden by law; or
(ii) is of such a nature that, if permitted, it would defeat the provisions of any law; or
(iii) is fraudulent; or
(iv) involves or implies injury to the person or property of another; or
(v) the court regards it as immoral, or opposed to public policy.
23 Opposed to public policy

The agreements which are opposed to public policy are the following:
Trading with enemy
A person cannot enter into an agreement with an alien enemy during the period of war.
Stifling prosecution
Criminals should be prosecuted and punished; hence an agreement for stifling prosecution is illegal.
Maintenance and champerty
Maintenance is an agreement where a person promises to maintain a suit in which he has no interest.
Champerty is an agreement whereby one party agrees to assist another in recovering property and
in turn is to share in the proceeds of the action.
Sale of public offices
The agreements of sale of public offices are illegal as they promote corruption.
Restraint of parental rights
An agreement which prevents a parent to exercise his right of guardianship is void.
Restraint of personal liberty
An agreement which unduly restricts the personal liberty of a person is void.
Agreement to create monopoly
An agreement to create monopoly is void.
Marriage brokerage agreement
An agreement in which a person promises for reward to procure marriage for another is void.
24 Legality of consideration
Section 23
No, the agreement is void as its object is unlawful.
25 Exceptions of void agreements

Section 11, 20, 23 to 30, 36 and 56 of the Contract Act
The agreements which have been expressly declared to be void and exception thereto are as follows:
1. Contracts with minor or a person of unsound mind.
2. When both parties to an agreement are under a mistake of fact essential to an agreement.
3. An agreement of which the consideration or object is unlawful: includes any agreement which
the court regards as immoral or opposed to public policy.
4. If consideration or object is unlawful in part.

5. An agreement without consideration is unlawful
Exceptions:
The agreement is in writing and registered and made on account of natural love and
affection.
It is a promise to compensate for something done.
It is a promise written and signed to pay a debt barred by limitation law.
6. Agreements in restraint of marriage of any person.
Exception:
Agreement in restraint of marriage of minor.
7. Agreements in restraint of a lawful profession, trade or business;
Exception:
When goodwill has been sold, reasonable limits to carry on similar business can be imposed
8. Agreements in restraint of legal proceedings;
Exception:
Two parties may agree to refer any dispute to arbitration and avoid legal proceedings
9. Agreements, the meaning of which is uncertain or not capable of being made certain;
10. Wagering Agreements;
Exception:
Subscription/contribution to horse-racing.
11. Agreements contingent upon impossible events whether known or not at the time of the
agreement;
12. Agreements to do impossible acts.
Exception:
Where one party knows about an impossible act, he may be liable to compensate the innocent
party.
26 Contingent contracts
Contingent Contract
No, this is not a contingent contract as the condition i.e. construction of a bungalow is not collateral to
the contract; but in itself forms a consideration and is thus an integral part of the contract.
Essentials of a contingent contract

The following are the essential characteristics of a contingent contract:
(i) the performance of such a contract depends upon the happening or non-happening of some
future event;
(ii) the event must be uncertain;
(iii) the event must be collateral i.e. incidental to the contract.

Business Law
27 Rules of contingent contracts

The rules regarding the performance of the contingent contracts are given below:
Contracts contingent upon the happening of an uncertain future event
A contract the performance of which is contingent on the happening of an uncertain future event
cannot be enforced by law unless and until that event has happened. If the event becomes
impossible, such contracts become void.
Contracts contingent upon the non-happening of a certain future event
A contract of performance of which is contingent on the non-happening of a certain future event can
be enforced when the happening of that event becomes impossible and not before.
Contracts contingent upon the future conduct of a living person
If the future event on which a contract is contingent is the way in which a person will act at an
unspecified time, the event shall be considered to become impossible when such person does
anything which renders it impossible that he should so act within any definite time or otherwise than
under further contingencies.
Contracts contingent upon the happening of an uncertain specified event within a fixed time
Contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed
time become void if at the expiration of the time fixed such event has not happened or if before the
time fixed happening of such event becomes impossible.
Contracts contingent upon the non-happening, of an uncertain specified event within a fixed
time
A contract of performance of which is contingent on the non-happening of a specified uncertain event
within a fixed time may be enforced by law:
When the time fixed has expired and such event has not happened or
If (before the expiry of the time fixed) it becomes certain that such event will not happen.
Agreements contingent upon impossible events
Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether
the impossibility of the event is known or not to the parties to the agreement at the time when it is
made.
Reimbursement of person paying money due by another, in payment of which he is interested
No, however, Baqar may recover the amount, if he has his interest in the payment.
To constitute a quasi contract and be entitled for reimbursement, following conditions must be
satisfied:
(a) the person who made the payment must have his own interest in the payment; and
(b) the other person must be bound by law to pay.
Quasi contract:
A quasi contract is a relation resembling to those created by a contract by which one party is bound
to pay money in consideration of something done or suffered by the other party, though; no
contractual relation exists between the parties. As a result of the above, certain legal rights and
obligations are created between the concerned parties. Such type of relations resembles those
created by the contract and such a contract is called Quasi contract.

It is an obligation based on the principle of equity and justice, which the law creates in the absence of
any formal agreement.
Different types of relationships causing Quasi Contract:
There are five kinds of quasi contractual obligations given in Contract Act. These are discussed
below:
(a) Supply of necessaries: – If a person incapable of entering into a contract, or anyone whom he is
legally bound to support, is supplied by another person with necessaries suited to his condition
in life the person who has furnished such supplies is entitled to be reimbursed from the property
of such incapable person.
(b) Payment of lawful dues by interested persons: – A person, who is interested in the payment of
money which another is bound by law to pay, and who therefore pays it, is entitled to be
reimbursed by the other.
(c) Obligation of a person enjoying benefit of a non-gratuitous act / goods Where a person lawfully
does anything for another person, or delivers anything to him, not intending to do so gratuitously
and such other person enjoys the benefit of it, the latter is bound to make compensation to the
former in respect of, or to restore, the thing so done or delivered.
(d) Responsibility of finder of goods: – A person, who finds goods belonging to another and takes
them into his custody, is subject to the same responsibility as a bailee.
(e) Liability of a recipient of goods delivered by mistake or under coercion: – A person to whom
money has been paid or anything delivered, by mistake or under coercion, must repay or return
it.
30 Tender and essentials of tender

Rights and responsibilities of Mehboob:
Mehboob would not be responsible for non-performance;
he will not lose his rights to claim damages under the contract, for instance he will be entitled
to compensation and contract will become voidable at his option;
in case of performance by Saulat on Mehboob’s demand, Mehboob will be responsible to
perform his promise.
Essentials of a valid offer of performance:
(i) it must be unconditional;
(ii) it must be made at a proper time and place, and under such circumstances that the person to
whom it is made may have a reasonable opportunity of ascertaining that the person by whom it
is made is able and willing there and then to do the whole of what he is bound by his promise
to do;
(iii) if the offer is an offer to deliver anything to the promisee, the promisee must have reasonable
opportunity of seeing that the thing offered is the thing which the promisor is bound by his
promise to deliver.
An offer to one of several joint promisees has the same legal consequences as an offer to all of
them.
31 Time and place of performance

(a) Time and place of performance not specified in contract:
If according to the contract, a promisor is to perform his promise without application by the
promisee, and no time for performance is specified, the promise must be performed within a
reasonable time.

Business Law
When a promise is to be performed without application by the promisee, and no place is fixed
for the performance, it is the duty of the promisor to apply to the promisee to appoint a
reasonable place for the performance of the promise, and to perform it at such place.
The question “what is reasonable time and place” is, in each particular case, a question of fact.
(b) Order of performance of reciprocal promises
The promises must be performed in the order expressly fixed by the contract, and where the
order is not expressly fixed, they must be performed in the order which the nature of
transaction requires.
(c) Effect of release of one joint promisor
Where two or more persons have made a joint promise, release of one such promisor by the
promisee does not discharge the other joint promisor(s); neither does it free the joint promisors
so released from responsibility to the promisor who was not released.
32 Devolution of liabilities
(a) Afaq alone cannot compel Mohsin to make payment unless a contrary intention appears from
the contract. The right to claim performance rests with all the promisees jointly and a single
promisee cannot demand performance.
(b) Mohsin may compel every other joint promisor to contribute equally with himself to the
performance of the promise, unless a contrary intention appears from the contract.
Therefore, Faizan must share the loss arising from default of Laila equally with Mohsin.
33 Joint promisor and promisee

Unless a contrary intention appears from the contract, the right to claim performance rests:
(a) with Hatim and Tahir jointly
(b) after the death of Hatim, with the representative of Hatim jointly with Tahir
(c) after the death of both Hatim and Tahir, with the representative(s) of both, jointly.
34 Reciprocal promises
No, Nasir need not perform his promise to pay and Maimar must compensate Nasir for any loss which
Nasir may sustain due to Maimar’s non-performance.
35 Appropriation
(a) The payment is correctly applied by Bilal and the objection of Wasim is not valid. In the
absence of any intimation from debtor or circumstances indicating to which debt payment is to
be applied, the creditor is free to use his discretion and apply it to any lawful debt actually due
and payable to him from the debtor whether its recovery is or is not barred by the law in force
for the time being as to the limitation of suits.

(b) (i) The payment should be applied in discharging the following debts:
Debt of Rupees
March 2, 2009 20,000
August 30, 2010 50,000
70,000
As Ubaid has written the break-up of payment at the back of the cheque, it implies that
payment should be applied to discharge those particular debts.
(ii) The payment should be applied in discharging the debts in the order in which they
became due.
It is irrelevant whether the debts are or are not barred by the law in force for the time
being as to limitation of suits.
36 Discharge by mutual agreement

Effect of alteration of contract
If the parties to a contract agree to substitute a new contract for it the original contract need not be
performed.
Since Bashir accepted Jahangir as his debtor in place of Talib, so now he cannot demand payment
from Talib. Consent of all the parties is essential.
37 Supervening impossibility
A contract is discharged by supervening impossibility in the following cases:
Destruction of subject matter
If the subject matter of the contract is destroyed after the formation of the contract without any fault of
either party then a contract is said to be discharged.
Death or Personal incapacity (Doctrine of Frustration)
If a contract is of personal nature then on the death / incapacity / illness of a person a contract is said
to be discharged.
Declaration of war
At the time of declaration of war the contracts with alien enemies are either suspended or declared as
void.
Change of law
If the performance of the contract becomes impossible or unlawful due to change in law after the
formation of the contract than the contract is said to be discharged.
Particular state of things ceases to exist or occur
The contract is discharged if that particular state of thing which forms the basis of a contract ceases to
exist or occur.
38 Discharge of a contract
(a) Discharge of a contract:
A contract is said to be discharged when contractual relations between the parties to a contract
are terminated or come to an end.
Discharge by agreement:
A contract can be discharged by mutual agreement in any of the following ways:

Business Law
(i) Novation:
Novation means the substitution of a new contract for an existing one.
This new contract may be between the same parties with new terms, or
between new parties with old or new terms.
(ii) Rescission:
Rescission is the cancellation of a contract by mutual agreement.
(iii) Alteration:
Alteration means a variation made in the language or terms of a contract with mutual
agreement. When this occurs the original contract is discharged and a new contract is
created. The parties in alteration remain same.
(iv) Remission:
Remission means acceptance of a lesser amount or lesser degree of performance than
what was contracted for in full discharge of the contract. 0
(v) Waiver:
Waiver is a unilateral act of one person that results in the surrender of a legal right.
Thus, it amounts to releasing a person of certain legal obligation under a contract.
(vi) Promisee’s refusal/neglects:
If any promisee neglects or refuses to afford the promisor reasonable facilities for the
performance of his promise, the promisor is excused by such neglect or refusal as to
any non-performance caused thereby.
(b) Acceptance must be absolute:
An acceptance should be unconditional assent by the offeree to all the terms of the offer. In
this case, since the offer has been accepted with a variation it would be regarded as a qualified
acceptance. Therefore, a contract between Murad and Sanum has not been formed.
However, if Murad accepts the counter offer made by Sanum then it would be a binding
contract.
39 Remedies for breach of contract

Akhtar cannot rescind the contract as he has affirmed the contract when he allowed Bushra to
conduct the seventh show. However, he may be entitled to compensation for damage sustained by
him through Bushra’s failure to conduct the sixth show.
If Akhtar puts an end to the contract then it will amount to breach of contract and remedies of breach
of contract would be available to Bushra.
40 Damages
The party who suffers from breach of contract is entitled to receive compensation for any loss or
damage caused to it, which naturally arose from the usual course of things from such breach, or
which the parties knew, when they made the contract to be likely to result from such breach.
Such compensation is not to be given for any remote or indirect loss or damage sustained by reason
of the breach.
41 Indemnity
A contract, by which one party promises to save the other from loss caused to it by the conduct of the
promisor himself, or by the conduct of any other person, is called a “contract of indemnity”.

42 Guarantee 1
The guarantee given by Ameen is a continuing guarantee. It can be revoked by Ameen (surety) at any
time as to future transactions but he will remain liable to Bashir for Rs. 325,700.
43 Guarantee 2
Revocation of a Continuing guarantee:
No, Kamal is not competent to revoke his guarantee. Where a guarantee is given for an entire
consideration, the contract is not divisible and the guarantee is considered as a specific guarantee. In
this case also, the contract is not one of a continuing guarantee because “lease for five years” is an
entire or indivisible consideration and not a fragmented one.
44 Guarantee 3
Co-sureties who are bound in different sums are liable to pay equally as far as limits of their
respective obligations permit.
Therefore, the co-sureties should pay:
Rupees
Amin 20,000
Imran 30,000
Shahid 34,000
84,000
45 Guarantee 4
(a) Haseeb upon payment of guaranteed amount is invested with all rights which Faiz (the creditor)
had against Gulzar (the principal debtor).
Haseeb the surety is entitled to the benefit of every security which Faiz (the creditor) has against
Gulzar (the principal debtor) at the time when the contract of suretyship is entered into whether
Haseeb knows of the existence of such security or not.
He is entitled to recover from Gulzar (the principal debtor) whatever sum he has rightfully paid
under the guarantee, but no sums which he has paid wrongfully.
(b) Section 62, 130, 131, 133 to 135, 139 and 141 of the Contract Act
A continuing guarantee may at any time be revoked by the surety, as to future transactions by
notice to the creditor.
(i) In the absence of any contract to the contrary, the death of the surety results in the
revocation of a continuing guarantee, as regards future transactions.
Other modes of revocation of a continuing guarantee:
(ii) If the terms of the contract are changed by the creditor and the principal debtor by a
contract without the consent of the surety.
(iii) When a creditor discharges principal debtor from the liability.
(iv) When the creditor makes a composition with, or promises to give time to, or not to sue
the principal debtor, without the consent of the surety.
(v) When a creditor’s act or omission impairs the eventual remedy of a surety.
(vi) When a creditor loses security under the contract, the surety gets discharged to the
extent of the value of the security.

Business Law
46 Rights of surety
Rights of surety (Majid and Rahat) against principal debtor (Sohail):
Right to indemnity:
In every contract of guarantee there is an implied promise by the principal debtor to indemnify the
surety. Therefore, Majid and Rahat are entitled to recover from Sohail whatever amount they have
rightfully paid including the amount of interest.
Right to subrogation:
After making payment and discharging the liability of Sohail, Majid and Rahat are invested with all
the rights of creditor (Bunny), which he had against Sohail.
Rights of surety (Majid and Rahat) against creditor (Bunny):
Rights to securities
Majid and Rahat are entitled to the benefit of every security which Bunny has against Sohail at the
time when the contract of suretyship is entered into, whether Majid and Rahat are aware of the
existence of such security or not and if Bunny loses, or, without the consent of Majid and Rahat,
parts with such security, Majid and Rahat are discharged to the extent of the value of the security.
Right to claim set off
Majid and Rahat have a right to claim set off if any which Sohail had against Bunny.
Rights against co-sureties (Majid and Rahat):
Right to claim contribution
Since Majid paid the full amount to Bunny in settlement of Sohail’s debt, he has a right to claim
contribution from the other co-surety Rahat. Following are the rules of contribution between Majid
and Rahat:
In the absence of any contract, Majid and Rahat are liable to contribute equally in case of
Sohail’s default.
If Majid and Rahat have agreed to guarantee different sums than they are liable to contribute
equally, subject to the maximum amount guaranteed by each one of them.
If Bunny releases one of the co-sureties, for instance Majid, it does not discharge Rahat,
neither does it free Majid from his responsibility to Rahat.
47 Duties of bailor
Repayment by bailor of necessary expenses
(a) No remuneration is to be paid to Farha for the safe custody of pet:
Sara should reimburse Rs. 1,500 to Farha, as where, by the conditions of the bailment, the
goods are to be kept or to be carried, or to have work done upon them by the bailee for the
bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the
necessary expenses incurred for the purpose of the bailment.
(b) Farha is to be remunerated for her services:
Sara should reimburse Rs. 1,000 to Farha, as where, under the terms of the bailment, the
bailee is to receive remuneration for his services; it is the duty of the bailor to bear
extraordinary expenses only, if any, incurred by the bailee in relation to the thing bailed.
48 Particular lien
Stylish Suiting is not justified to refuse delivery of the coat to Majid, because a bailee who renders a
service involving the exercise of labour or skill in respect of the goods bailed which improves the value
of the article, is entitled to a right of particular lien, and not a general lien until and unless agreed for it.

49 Termination of bailment
A contract of bailment may be terminated under the following circumstances:
(i) If the bailee does any act with regard to the goods bailed, which is inconsistent with the terms
of bailment, the bailment may be terminated by the bailor even though the term of bailment has
not expired or the purpose of bailment has not been accomplished.
(ii) If the bailment is gratuitous, and involves lending of goods, it may be terminated by the bailor
at any time, even before the specified time or before the purpose is achieved; however, where
such termination causes loss in excess of benefit actually derived by the bailee, the bailor must
indemnify the bailee.
A contract of bailment may also be terminated:
(iii) If the bailment is for specific period, on expiry of the stipulated period.
(iv) If the bailment is for a specific purpose, on fulfilment of the purpose.
(v) If gratuitous, on the death either of the bailor or of the bailee.
50 Finder of goods
Right of Reward
The finder of goods may retain the goods for the expenses incurred by him to preserve the goods and
to find out the owner, until he receives compensation, and where the owner has offered a specific
reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until
he receives it.
The finder of goods may sell the goods if the owner cannot be found or he refuses to pay lawful
charges of the finder:
(a) and the goods are in danger of perishing or losing the greater part of their value; or
(b) when the lawful charges amount to 2/3rd of its value.
51 Pledge 1
Section 30 of the Sales of Goods Act
Pledge
The bailment / delivery of goods as security for payment of a debt or performance of a promise is
called a pledge.
Under the following circumstances a pledge can be made by non-owners:
1. Pledge by mercantile agent

If a mercantile agent is in possession of goods or the title documents with the consent of the
owner and he pledges the goods while acting in the ordinary course of business of a mercantile
agent, the pledge shall be valid, provided that the pawnee acts in good faith.
2. Pledge by person in possession under voidable contract

When the pawnor has obtained possession of the goods pledged by him under a voidable
contract but the contract has not been rescinded at the time of pledge, he can make a valid
pledge provided the pledgee acts in good faith.
3. Pledge where pawnor has only a limited interest

Where a person pledges goods in which he has only a limited interest, the pledge is valid to the
extent of that interest.

Business Law
4. Seller in possession of goods after sale

If a seller is, left in possession of the goods sold, a pledge created by him will be valid, provided
the pawnee acted in good faith and had no notice of the sale of goods to the buyer.
5. Buyer in possession of goods under an “agreement to sell”

Where a buyer has acquired possession of goods under an ‘agreement to sell’ wherein the
goods are to become the property of the buyer on fulfillment of certain conditions, a pledge
created by him is valid, provided the pledgee acted in good faith.
52 Pledge 2
Right to extra ordinary expenses:
The pawnee is entitled to receive from the pawnor extraordinary expenses incurred by him for the
preservation of the goods pledged.
Therefore, Mehreen is entitled to claim the cost of insurance, in addition to the principal and interest.
53 Rights of pawnor
Pawnee’s right where pawnor makes default:
On default in payment of debt by Ramla, Ovais may:
(a) bring a suit against Ramla upon the debt and retain the goods pledged as a collateral security;
or
(b) he may sell the jewellery pledged on giving Ramla reasonable notice of the sale.
If the proceeds of such sale are less than the amount due in respect of the debt, Ramla would still be
liable to pay the balance.
If the proceeds of the sale are greater than the amount so due, Ovais shall pay over the surplus to
Ramla.
54 Rights of Pawnee and Pawnor

(a) Pledge:
The above contract is in the nature of pledge.
Pledge is the bailment of goods as a security for the payment of a debt or performance of a
promise.
Sobia in this case is the ‘Pawnor’ and Meher is the ‘Pawnee’.
Rights of Meher (Pawnee)
Meher may bring a suit against Sobia for recovery of the debt.
She can retain the necklace pledged as a collateral security.
She may sell the necklace on giving a reasonable notice of the sale.
If the proceeds of such sale are less than Rs. 300,000 (i.e. the amount due in respect of the
debt), Sobia is still liable to pay the balance.
Rights of Sobia (Pawnor)
Sobia was unable to pay in time but she may redeem the necklace pledged at any
subsequent time before its actual sale.
But in such a case Sobia must pay, in addition, any expenses which have arisen from her
default.

In case of sale of necklace by Meher, if the proceeds are greater than Rs. 300,000, Sobia
is entitled to receive the excess amount from Meher.
(b) (i) Claim for necessaries supplied to person incapable of contracting, or on his
account:
Baqir can recover the amount from Sultan if following conditions were satisfied:
(1) the jacket supplied was the necessity suited to Sultan’s condition in life.
(2) Baqir can recover the reasonable market value of Rs. 1,500 only from Sultan’s
property. He cannot recover Rs. 2,000 which Sultan had agreed to pay to Baqir as
Sultan, being an incompetent person was not in the capacity to contract.
(ii) Reimbursement of person paying money due by another in payment of which he is
interested:
Rohi can recover the amount of electricity bill from Saulat only if the following two
conditions were satisfied:
(1) Rohi who made the payment had interest in such payment.
(2) the payment must be such which Saulat was bound by law to pay.
(iii) Obligation of person enjoying benefit of non-gratuitous act:
Sami can recover the amount of service charges from Nadia if following conditions were
satisfied:
(1) Sami had lawfully done the service for Nadia, i.e. Nadia had the option to accept
or reject the services rendered by Sami.
(2) Sami did not have an intention to act gratuitously and Nadia had enjoyed the
benefits of the service so provided by Sami.
55 Ratification
(a) Ratification
Ratification means the subsequent adoption and acceptance of an act originally done without
authority.
Where acts are done by one person on behalf of another, but without his authority, he may
elect to ratify or to disown such acts. If he accepts them, the same effects will follow as if they
had been performed by his authority.
(b) Essentials of a valid ratification:
A valid ratification must fulfill the following conditions:
(i) The agent must purport to act as agent for a principal who is in contemplation and is
identifiable at the time of contract.
(ii) The principal must be in existence at the time of contract.
(iii) The principal must be competent to contract both at the time of the contract and at the
time of ratification.
(iv) The act to be ratified must not be void, or illegal.
(v) Ratification must be made with full knowledge of all material facts.
(vi) The principal must signify his unconditional acceptance of the act.
(vii) Ratification must be made within a reasonable time.
(viii) Ratification must be of whole transaction.
(ix) Ratification must be communicated.
(x) Ratification must not injure a right of third person.

Business Law
56 Duties of an agent
Section 209, 211 to 218 of the Contract Act
Duties of an agent towards his principal
1. Duty to follow principal’s directions / instructions / mandate / orders or customs
2. Duty to carry out the work with reasonable skill and diligence
3. Duty to render accounts
4. Duty to communicate with the principal, in cases of difficulty, for obtaining his instructions.
5. Duty not to deal on his own account.
6. If an agent, without the knowledge of his principal, deals in the business on his own account the
principal is entitled to claim any benefit which may have resulted to him from the transaction.
7. Duty not to make profit on his own account or to make secret profit.
8. When an agency is terminated on the death of the principal or on his becoming of unsound
mind, the agent must take, all reasonable steps for the protection and preservation of the
interests of his late principal’s representatives.
9. Duty not to delegate authority subject to certain exceptions.
10. Duty to act with ordinary prudence in case of emergency in order to protect the principal from
loss.
57 Duties of agent toward principal

Section 209, 211 to 218 of the Contract Act
The main duties of an agent towards his principal are:
(i) To conduct the business of his principal according to the directions given by the principal, or, in
the absence of any such directions according to the custom which prevails in doing business of
the same kind at the place where the agent conducts such business.
(ii) To conduct the business with as much skill as is generally possessed by persons engaged in
similar business and to act with reasonable diligence. In the absence of any special skill, the
agent should use such skill as he possesses.
(iii) To render proper accounts to his principal on demand.
(iv) In cases of difficulty, to use all reasonable diligence in communicating with his principal and in
seeking to obtain his instructions.
(v) An agent must not deal on his own account in the business of agency; i.e. he must not himself
buy from or sell to his principal goods he is asked to sell or buy on behalf of his principal
without obtaining the consent of his principal and after disclosing all material facts to him.
(vi) The agent is bound to pay his principal all sums received on his account subject to deductions
such as all moneys due to him in respect of advances made or expenses properly incurred and
his agreed remuneration.
The agent should not make secret profit.
(vii) When an agency is terminated by the principal dying or becoming of unsound mind, the agent
must take, on behalf of the representatives of his late principal, all reasonable steps for the
protection and preservation of the interests entrusted to him.
(viii) Subject to certain exceptions, an agent must not further delegate his authority to another
person, but perform the work of agency himself.

58 Rights
(i) Agent’s authority in an emergency
An agent has authority, in an emergency to do all such acts for the purpose of protecting his
principal from loss as would be done by a person of ordinary prudence, in his own case, under
similar circumstances.
(ii) Agent’s right of retainer
An agent may retain, out of any sums received on account of the principal in the business of
the agency, all moneys due to himself in respect of advances made or expenses properly
incurred by him in conducting such business, and also such remuneration as may be payable
to him for acting as agent.
(iii) Agent’s right of lien
In the absence of any contract to the contrary, an agent is entitled to retain goods, papers and
other property, whether movable or immovable, of the principal received by him, until the
amount due to himself for commission, disbursements and services in respect of the same has
been paid or accounted for to him.
59 Misconduct by agent
It is the duty of an agent to act diligently as a man of ordinary prudence. He must compensate his
principal in respect of the direct consequences of his negligence. Zakir being an agent of Aslam is
responsible for his misconduct due to which Aslam had to pay Naveed. Therefore, Aslam is justified in
his suit.
60 Substituted agent
Where an agent, holding an express or implied authority to name another person to act for the
principal in the business of the agency, has named another person accordingly, such person is a
substituted agent, and an agent of the principal for such part of the business of the agency as is
entrusted to him.
The original agent is not responsible to the principal for the acts or negligence of the substituted agent
so selected if he has exercised in selecting such agent the same amount of discretion as a man of
ordinary prudence would exercise in his own case.
61 Irrevocable agency
The principal may revoke the authority of the agent, at any time before the agent has exercised his
authority so as to bind the principal.
However, the following are the exceptions to the above provision:
(a) Where an agent has himself an interest in the property forming subject matter of the agency.
(b) Where the agent has partly exercised the authority
(c) Where an agent has incurred a personal liability the agency becomes irrevocable.
62 Duties of partner
Section 16(a) of the Partnership Act
Personal profits earned by partners
No, Talha and Umair are not liable to share such profits with Sohail as this transaction was not within
the scope of the partnership.

Business Law
Subject to the contract between the partners, the partner shall account for that profit and pay it to the
firm, which:
(a) he derives for himself, from any transaction of the firm, or from the use of the property or
business connection of the firm or the firm’s name; or
(b) he made for himself, from carrying on any business of the same nature as and competing with
that of the firm.
63 Rights of outgoing partner

Right of Pervez to share subsequent profits
In the absence of a contract to the contrary, Pervez has an option either:
(a) to claim such share of the profits of the firm, earned after he ceased to be a partner, as may
be attributable to the use of his share of the property of the firm; or
(b) to claim interest at the rate of six percent per annum on the amount of his share in the
property of the firm.
64 Mutual rights and liabilities

Mutual rights and liabilities of partners
In the absence of any express contract:
(i) every partner has a right to take part in the conduct of the business;
(ii) every partner shall have the right to express his opinion before a matter is decided. Any
difference arising as to ordinary matters connected with the business may be decided by a
majority of the partners, but no change may be made in the nature of the business without the
consent of all the partners;
(iii) every partner has a right to have access to and to inspect and copy any of the books of the
firm;
(iv) a partner is not entitled to receive remuneration for taking part in the conduct of the business;
(v) the partners are entitled to share equally in the profits earned and shall contribute equally to
the losses sustained by the firm;
(vi) where a partner is entitled to interest on the capital subscribed by him such interest shall be
payable only out of the profits;
(vii) a partner making, for the purposes of the business, any payment or advance beyond the
amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six
percent per annum;
(viii) the firm shall indemnify a partner in respect of payments made and liabilities incurred by
him:
in the ordinary and proper conduct of the business, and
in doing such act, in an emergency, for the purpose of protecting the firm from loss, as
would be done by a person of ordinary prudence, in his own case, under similar
circumstances; and
(ix) a partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct
of the business of the firm.

65 Liabilities
Section 25 to 27 of the Partnership Act
(i) Liability of a partner for acts of the firm
Every partner is liable jointly with all the other partners and also severally for all acts of the firm
done while he is a partner.
(ii) Liability of the firm for wrongful acts of a partner
Where, by the wrongful act or omission of a partner acting in the ordinary course of the business
of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any
penalty is incurred, the firm is liable to the same extent as the partner.
Although the firm is liable to the third party for the loss caused to him (third party) by fraud
committed by a partner, but, as between the partners, the same must be borne by the partner
committing the fraud and cannot be shared among all the partners.
(iii) Liability of firm for misapplication of money or property by a partner
The firm is liable to make good the loss where:
A partner acting within his apparent authority receives money or property from a third party
and misapplies it, or
A firm in the course of its business receives money or property from a third party, and the
money or property is misapplied by any of the partners while it is in the custody of the firm.
66 Implied authority
Partner’s act not under implied authority
In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does
not empower him to:
(a) submit a dispute relating to the business of the firm to arbitration,
(b) open a banking account on behalf of the firm in his own name,
(c) compromise or relinquish any claim or portion of a claim by the firm,
(d) withdraw a suit or proceeding filed on behalf of the firm,
(e) admit any liability in a suit or proceeding against the firm,
(f) acquire immovable property on behalf of the firm,
(g) transfer immovable property belonging to the firm, or
(h) enter into partnership on behalf of the firm.
67 Holding out
If a person represents to the outside world by words spoken or written or by his conduct or by lending
his name, that he is a partner in a certain partnership firm, he becomes liable as a partner in that firm
to anyone who has on the faith of such representation granted credit to the firm, whether the person
representing himself or allowing himself to be so represented does or does not know that the
representation has reached the person so giving credit.
The doctrine of holding out or estoppel does not extend to:
Where after a partner’s death the business is continued in the old firm name the continued use of that
name or of the deceased partner’s name as a part thereof shall not of itself make his legal
representative or his estate liable for any act of the firm done after his death.

Business Law
68 Transfer of interest
Rights of transferee of a partner’s interest
Where a partner’s interest is transferred, the transferee does not become a partner and similarly the
transferor does not cease to be a partner. Therefore, Adil would not be considered as a partner in the
firm.
Rights of Adil:
Adil would be entitled only to receive the share of the profits of the firm to which Fauzia is entitled. He
would be bound to accept the account of profits agreed to by the partners.
Upon dissolution of the firm or, in case, if Fauzia ceases to be a partner, Adil would be entitled, as
against the remaining partners, to receive the share of the assets of the firm, to which Fauzia was
entitled and for the purpose of ascertaining that share he would be entitled to ask for the accounts as
from the date of the dissolution.
Restrictions on Adil:
Adil would not be entitled, during the continuance of the partnership:
(i) to interfere in the conduct of the business; or
(ii) to require accounts; or
(iii) to inspect the books of the firm.
69 Partnership property
The property of the firm
Subject to the contract between the partners, the property of the firm includes:
(i) all property and rights and interests in property originally brought into the stock of the firm or
(ii) all property acquired by purchase or otherwise, by or for the firm or for the purposes and in the
course of the business of the firm.
(iii) the goodwill of the business.
(iv) property and rights and interests in property acquired with money belonging to the firm unless
the contrary intention appears.
The shop is not property of the firm as Irfan has bought it with the firm’s money and by debiting it in
his account, he showed his intention of taking the money as loan.
70 Minor
D becomes a partner in the firm after 6 months of the date on which he became aware of the fact that
he was entitled to the benefits in the firm i.e. on 16th February 2008. Therefore, he shall be liable to
share the losses of the firm, incurred thereafter. His failure to announce his decision will have no
bearing on the situation.
71 Rights and disabilities

(a) Rights of Dostana Bank Limited:
Following rights are available to the bank:
(i) entitlement to receive the share of the profits of Sham (the transferring partner).
(ii) On the dissolution of the firm or on retirement of Sham the bank is entitled to receive:
the share of the assets of the firm to which Sham is entitled.

an account from the date of the dissolution for the purpose of ascertaining the share.
Disabilities of Dostana Bank Limited:
The bank shall not be treated as a partner in the firm and during the continuance of the
partnership, shall not be entitled, to:-
interfere in the conduct of the business of the firm.
require accounts.
inspect the books of the firm.
challenge the accounts of profits agreed to by the partners.
sue for dissolution of the firm.
(b) Property of the firm:
Subject to contract between the partners, the property of the firm includes:
All property originally brought into the common stock of the firm;
All rights or interest in the property originally so brought;
All property acquired, by purchase or otherwise, by the firm or for the firm and all rights and
interest in any property so acquired; and
Goodwill of the business of the firm;
Unless, any contrary intention appears any property purchased with partnership money
with or without other partners consent will be deemed to be partnership property.
Therefore, the plot of land which Rufi intends to acquire for the firm with his own money shall
become firm’s property only if partners intend to make it so.
Application of the property of the firm:
Subject to contract between the partners, the property of the firm shall be held and used by the
partners exclusively for the purposes of the business.
72 Existence of partnership
(a) Mode of determining existence of partnership:
In determining whether Munaf and Lari constitute a partnership, regard shall be had to the
real relation between the parties, as shown by all relevant facts taken together.
The essentials of a partnership are:
(i) There should be a relationship by agreement between two or more persons;
(ii) They should run a business with the intention of sharing profits; and
(iii) The business should be run by all, or by any one of them acting for all.
The Partnership Act does not require that a partner must contribute money or capital.
Similarly the partners may also agree that any one of them shall not be liable for losses.
Thus, in the presence of the above essentials and the fact that Lari is entitled to exercise all
the powers of a partner Munaf and Lari are said to have constituted a partnership.
(b) Liability of a partner for acts of the firm:
Where after a partner’s death, the business is continued in the old firm name, the continued
use of that name or of the deceased partner’s name as a part thereof shall not of itself make
his legal representative or his estate liable for any act of the firm done after his death. Bari
Builders cannot sue Abid’s estate for the recovery of the outstanding amount of the credit
which was extended after Abid’s death.
However, Bari Builders can recover the outstanding amount from Abid’s estate only if the
credit was extended to the firm before Abid’s death.

Business Law
Moreover, since every partner is liable, jointly with all the other partners and also severally,
for all acts of the firm done while he is a partner, Bari Builders may file a suit against Meher
for the recovery of outstanding balance and succeed, provided Meher was a partner in the
firm at the time when credit was extended to the firm.
73 Promissory notes
Section 4 of the Negotiable Instruments Act
(i) It is not a promissory note as promise to pay is not “unconditional”.
(ii) It is a valid promissory note containing all the essential elements.
(iii) It is not a promissory note as the payment is not in terms of money only.
(iv) It is not a promissory note as the amount payable under it is not certain.
(v) It is not a promissory note as the payee in the instrument is not certain.
(vi) It is a valid promissory note. It is not considered to be conditional, for it is certain that Salik will
die, though the exact time of his death is uncertain.
(vii) It is not a promissory note as it lacks unconditional undertaking. There is only an
acknowledgement of indebtedness.
74 Presumptions of negotiable instrument

Section 118 to 119 of the Negotiable Instruments Act
Unless the contrary is proved, the following presumptions shall be assumed in respect of all
negotiable instruments:
(i) Consideration: that every negotiable instrument whenever made, drawn, accepted,
endorsed, negotiated or transferred, was accepted, endorsed or transferred for consideration;
(ii) Date: that every negotiable instrument bearing a date was made / drawn on such date;
(iii) Time of acceptance: that every accepted bill of exchange was accepted within a reasonable
time after its date and before its maturity;
(iv) Time of transfer: that every transfer of a negotiable bill of exchange was transferred within a
reasonable time after its date and before its maturity;
(v) Order of endorsements: that the endorsements appearing on a negotiable instrument were
made in the order in which they appear thereon;
(vi) Stamps: that a lost promissory note, bill of exchange or cheque was duly stamped;
(vii) That the holder is a holder in due course;
Provided that, where the instrument has been obtained from any person in lawful custody
thereof by means of an offence or fraud or for unlawful consideration, the burden of proving
that the holder in due course lies upon him (the holder).
(viii) Presumption on proof of protest: In a suit upon an instrument which has been dishonoured,
the court shall, on proof of the protest, presume the fact of dishonour, unless and until such
fact is disproved.
75 Inchoate stamped instrument

Enforceability of Inchoate stamped instruments
If a person becomes a party to an inchoate stamped instruments before its completion, inchoate
stamped instrument may on completion, be enforceable against such person provided it is filled up
within a reasonable time and strictly in accordance with the authority given.

Provided that if any such instrument after completion is negotiated to a holder in due course, it shall
be valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up
within a reasonable time and strictly in accordance with the authority given.
Extent of liability
The person so signing shall, subject to the above provisions, be liable upon such instrument, in the
capacity in which he signed the same, to any holder in due course, for the amount specified in the
instrument or filled upon therein.
Provided that no person other than a holder in due course shall receive from the person so signing the
paper anything in excess of the amount intended by him to be paid there under.
76 Ambiguous Instruments
Where an instrument may be construed either as a promissory note or a bill of exchange, it is called
an ambiguous instrument.
Yes, ambiguous instruments are negotiable.
Examples:
(i) Where the drawer and drawee are the same person.
(ii) Where the drawee is a fictitious person.
(iii) Where the drawee is incompetent to contract.
77 Payment in due course

Where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee is
discharged by payment in due course. Therefore the banker is discharged from liability as a banker is
not expected to know the signatures of payees who are not the clients of the bank.
On the other hand, a banker paying a cheque on which the drawer's signature is forged is responsible
and should bear the loss.
78 Cheque
(a) Cheque
A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand.
Essential elements of a valid cheque:
Following are the essential elements of a valid cheque.
(i) It must be in writing,
(ii) It must contain an unconditional order to pay,
(iii) It must contain an order to pay in terms of money,
(iv) It must contain an order to pay a definite amount of money,
(v) The parties to the cheque must be certain (real),
(vi) It must be signed by the drawer,
(vii) It must be drawn on a specified banker,
(viii) It must be payable on demand.

Business Law
(b) Who can cross the cheque after issue

Following persons can cross the cheque:
(i) Holder
(ii) Banker
Crossing of cheque after issue
(i) Where a cheque is uncrossed, the holder may cross it generally or specially.
(ii) Where a cheque is crossed generally, the holder may cross it specially.
(iii) Where a cheque is crossed generally or specially, the holder may add the words “not
negotiable”.
(iv) Where a cheque is crossed specially, the banker to whom it is crossed may again
cross it specially to another banker, his agent, for collection.
(v) When an uncrossed cheque, or a cheque crossed generally, is sent to a banker for
collection, he may cross it specially to himself.
79 Bill of Exchange
The liabilities incurred by the drawer of a bill are as follows:
(i) on due presentment, the bill shall be accepted and paid according to its tenor, and that
(ii) if the bill is dishonoured, the drawer shall compensate the holder or any endorser who is
compelled to pay it, provided that due notice of dishonour of the bill is given to or received by
the drawer.
(iii) Until acceptance, the drawer is liable thereon as principal debtor.
80 Holder, Holder in due course, Payment in due course

(a) Payment in due course
Payment in due course implies the following:
The payment is in accordance with the apparent tenor of the instrument.
The payment is made in good faith and without negligence.
The payment is made to a person in possession of the instrument
The payment is honestly made in the bonafide belief that the person demanding payment
is legally entitled to it.
(b) Holder
The ‘holder’ of a negotiable instrument means
any person entitled to the possession of the instrument in his own name
and to receive or recover the amount due thereon from the parties liable thereto.
(c) Holder in due course
Holder in due course means any person who for consideration becomes the possessor of a
promissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee
thereof, if payable to order, before it becomes overdue, without notice that the title of the
person from whom he derived his own title was defective.

81 Material alteration
Section 20, 87 and 89 of the Negotiable Instruments Act
In the following situations, the alteration does not prejudice the rights and liabilities of the parties to a
negotiable instrument :
(i) Alteration made for the purpose of correcting a mistake or a clerical error.
(ii) Alteration made to carry out the common intention of the original parties.
(iii) Alteration made with the consent of the parties liable on the instrument.
(iv) Conversion of bearer cheque into an order cheque.
(v) Crossing of an uncrossed cheque.
(vi) Filling blanks in the case of inchoate or incomplete instruments
(vii) Conversion of blank endorsement into an endorsement in full.
(viii) Making qualified acceptance.
(ix) Alteration which is the result of an accident, e.g., mutilation by washing, ravages by white
ants, document torn by a child, document burnt in part by the hot end of a cigarette.
(x) Alternation made before the instrument is issued.
82 Negotiation and Indorsement

(a) Negotiation:
When a promissory note, bill of exchange or cheque is transferred to any person, so as to
constitute that person the holder of it, the instrument is said to be negotiated.
Indorsement:
When the maker or holder of a negotiable instrument signs the same, otherwise than as
maker, for the purpose of negotiation on the back or face of it or on a slip of paper annexed
thereto, or so signs for the same purpose a stamped paper intended to be completed as a
negotiable instrument he is said to indorse the same and is called the indorser.”
(b) Sarwat would issue a promissory note to Zain.
Draft of the promissory note
Date: March 12, 2016

Rs. 500,000/- only
Five months after date I promise to pay Zain or to his order the sum of Rupees Five
Hundred Thousand, for value received
To Sd/-
Zain Sarwat
ABC Road New Town
Karachi Karachi
(c)
Purpose of crossing a cheque:
The purpose of crossing a cheque is to direct the drawee (banker) to pay the amount of the
cheque only to a banker so that the party who receives the payment can easily be traced.
Can a Cheque be Crossed Specially more than Once:
Yes. It is allowed when a banker in whose favour a crossing is made, once again crosses it
specially in favour of his agent (another banker) for collection.

Business Law
83 Provisions of the Negotiable Instruments Act

(a) Bill of Exchange:
The above negotiable instrument is a bill of exchange.
Essential characteristics of a bill of exchange:
Following are the essential characteristics of a bill of exchange:
(i) In writing
A bill of exchange is required to be in writing.
(ii) Order to pay
The drawer orders the drawee to pay money to the payee. Mere request does not
constitute an order.
(iii) Definite and unconditional
The order to pay should not depend upon a condition or upon the happening of an
uncertain event.
(iv) Signed by drawer
The instrument must be signed by the maker (drawer) and accepted by the drawee.
(v) Certain parties
All the parties must be certain i.e. indicated in a bill of exchange with reasonable
certainty.
(vi) Sum payable must be legal tender
The order must be to pay money and money only.
(vii) Sum Payable must be certain
It is essential that sum of money ordered to be payable must be certain and definite.
However, it may include future interest or return in any other form or is payable at an
indicated rate of exchange, or is payable at the current rate of exchange or the sum
payable being subject to adjustment for profit or loss of the business of the maker.
(viii) Time for payment
The time for payment may be on demand or at a fixed or determinable future time.
(ix) It must be delivered:
A bill of exchange is incomplete until it is delivered to the payee
(b) When cheque not duly presented and drawer damaged thereby:
It was the duty of Zoaib to present the cheque for payment within reasonable time of its
issue. But he failed to present it and in the meantime the bank failed causing an actual
damage of Rs. 30,000 to Salma due to this delay.
In this case, Salma is discharged from her liability to the extent of her damage i.e. Rs.
30,000.
However, Zoaib can still recover Rs. 20,000 from Salma.
Zoaib, after the discharge of Salma, is now the creditor of the bank in lieu of Salma to the
extent of Rs. 30,000 and can recover Rs. 30,000 from the bank.

Business Law
SECTION
D
Part B - Company Law
Long-form answers
84 Subsidiary and holding co.
A company shall be deemed to be a subsidiary of another when:
(i) that other company directly or indirectly:
controls the composition of the board; or
exercises or controls more than one-half of its voting securities either by itself or together with
one or more of its subsidiary companies: : or
(ii) the first mentioned company is a subsidiary of any company or body corporate which is that
other’s subsidiary

The Commission may grant a licence for a period to be specified and direct that the Alfalah Associates
be registered as a company with limited liability, without the addition of the words "Limited", to its
name, if Alfalah Associates satisfies the following conditions:
(i) It should be capable of being formed as a limited company.
(ii) It should be formed for promoting commerce, art, science, religion, health, education, research,
sports, protection of environment, social welfare, charity or any other useful object.
(iii) It applies or intends to apply its profits/income in promoting its objects.
(iv) It prohibits the payment of any dividend to its members.
(v) such company’s objects and activities are not and shall not, at any time, be against the laws,
public order, security, sovereignty and national interests of Pakistan;

The Securities and Exchange Commission of Pakistan, on such conditions and subject to such
regulations as it thinks fit allow an association which has been formed or is capable of being formed
as a limited liability company to register as a limited company without the addition of word ‘Limited’ or
(Guarantee) Limited etc. to its name, subject to the following:
(i) Such association has been set up for promoting:
commerce Art science
Religion Health social welfare
Education Protection of Environment
Research
Sports

Business Law
charity any other useful object

(ii) Such association applies or intends to apply its profits, if any, or other income in promoting its
objects, and
(iii) Such association prohibits the payment of any dividend to its members.
87 Private company
A private company is a company which, by its articles of association
Restricts the right of members to transfer the shares
Restricts the right of members to fifty
Prohibits the invitation of subscriptions against its shares or debentures or redeemable capital
from general public.
And any company which is not a private company, is a public company
88 KRL
Kaghan Resham Limited (KRL) is the holding company of Naran Silk Limited (NSL) as KRL holds
more than 50 percent shares of NSL
NSL is the holding company of Thandyani Ice-creams Limited (TIL) as NSL can appoint more than
fifty percent directors of TIL and hence control the composition of its board.
So as per the definition of the holding and subsidiary company under the Act, KRL is also the holding
company of TIL
89 Alteration in registered office clause

For alteration in the registered office, Muntaqil Limited shall:
(i) pass a special resolution.
(ii) When Muntaqil Limited actually shifts its registered office, it shall inform the registrar within 15
days of the date of such change.
90 Member
Member means, in relation to a company having share capital, a subscriber to the memorandum of
the company and every person to whom is allotted, or who becomes the holder of, any share, scrip or
other security which gives him a voting right in the company and whose name is entered in the
register of members, and, in relation to a company not having a share capital, any person who has
agreed to become a member of the company and whose name is so entered;
91 Zouk
(a) The Companies Act 2017 requires the company to forward a copy of Memorandum of
Association and Articles of Association on the request of a member only on payment of certain
fixed fee. Any unconcerned person cannot demand such copies from the company. So
“Arizona Grill Limited” is not bound to provide such copies to Mr Zouk.
(b) Special Resolution (Section 2)
Special resolution means a resolution which has been passed by a majority of not less than
three-fourths of such members at a general meeting of which not less than twenty-one days’
notice specifying the intention to propose the resolution as a special resolution has been duly
given.
If all the members entitled to attend and vote at any such meeting so agree, a resolution may
be proposed and passed as a special resolution at a meeting of which less than twenty-one
days’ notice has been given.

Section D: Part B - Company Law Answer bank: Objective test and long-form answers
92 Commencement of business
A company shall not commence any business or exercise any borrowing powers unless:
(i) Shares held subject to the payment of the whole amount thereof in cash have been allotted to
an amount not less in the whole than the minimum subscription;
(ii) Every director of the company has paid to the company full amount on each of the shares taken
or contracted to be taken by him;
(iii) No money is or may become liable to be repaid to applicants for any shares or debentures
which have been offered for public subscription.
(iv) There has been filed with the registrar a duly verified declaration by the chief executive or one of
the directors and the secretary in the prescribed from that the aforesaid conditions have been
complied with and the registrar has issued a certificate of commencement of business; and
(v) In the case of a company which has not issued a prospectus inviting the public to subscribe for
its shares, a statement in lieu of prospectus has been filed with the registrar.
93 MOA – object, registered office and alteration

(a) A company may carry on or undertake any lawful business or activity and do any act or enter
into any transaction being incidental and ancillary thereto which is necessary in attaining its
business activities, provided that the principal line of business of the company shall be
mentioned in the memorandum of association of the company which shall always
commensurate with the name of the company, if there is any change in the principal line of
business shall be reported to the registrar within thirty days from the date of change.
(b) The shareholder’s objection is not valid, because an alteration to change the place of registered
office of a company from one city or town in a province to another does not require confirmation
by the Commission.
(c) For approval of Commission the company shall file an application to the Commission on the
basis of special resolution as discussed above. The Commission must be satisfied that:
The circumstances, as discussed above for the alteration of object and registered office
clauses of the memorandum, exist and
Sufficient notice regarding alteration of memorandum has been given by the company to
every creditor and member of the company.
The Commission may make an order confirming the alteration either wholly or in part, and on
such terms and conditions as it thinks fit.
A copy of duly certified order of SECP shall be forwarded to the company and to the registrar
within 7 days from the date of the order.
A certified copy of the order confirming the alteration and a printed copy of the altered
memorandum are required to be filed with registrar within thirty days from the date of the order
for registration. The period of thirty days may be extended by the Commission
Registrar shall register it and issue a certificate which shall be conclusive evidence of
compliance with the above rules.
94 Articles of association
(a) Section 36 & 37,Companies Act, 2017
(i) The company may adopt all or any of the regulations specified in Table A in the First
Schedule to the Companies Act, 2017in its articles of association.
(ii) The articles of the company shall be explicit and without ambiguity and also list and
enumerate the voting and other rights attached to the different classes of shares and
other securities to be issued by it.
(iii) The Articles of Association shall be:
Printed

Business Law
divided into paragraphs numbered consecutively

signed by each subscriber
dated
(b) Section 36, Companies Act, 2017
The articles of association sets out regulations for the company and are required to be
registered along with the memorandum, with the registrar. These must be signed by the
subscribers to the memorandum.
(c) Section 38 & 40, Companies Act, 2017
(i) Subject to the conditions of the company’s memorandum the Articles of Association
are allowed to be altered after its registration. A company may by passing a special
resolution make alteration or addition to its articles. Any alteration or addition made is
as valid as if originally contained in the articles.
(ii) Where such alteration affects the substantive rights or liabilities of members or of a
class of members, the special resolution shall be passed only if a majority of at least
three-fourths of the members or of the class of members affected by such alteration,
vote for such alteration, personally or through proxy.
(iii) A copy of the articles of association as altered shall within thirty days from the date of
passing of the resolution, be filed by the company with the registrar.
(iv) When an alteration is made in the articles of a company, such changes are required
to be made in every copy of the articles issued after the date of the alteration.
95 MOA – Nil capital

The memorandum of association of a company limited by guarantee shall include the following clauses.
a. Name clause
The first clause of the memorandum is the name clause of the company which contains the name
of the company with the addition of the words Guarantee Limited in case of a company limited by
guarantee.
b. Registered office clause
For registered office clause the province or the part of Pakistan not forming part of a province, as
the case may be, in which the registered office of the company is to be situated.
c. Principal line of business clause
The principal line of business will be mentioned, for existing companies the object at serial line 1
will be the principal line of business, if it is not, then the company shall intimate the registrar
within the specified time.
An undertaking as may be specified
d. Liability clause
In case of a company limited by guarantee, the liability clause states that ‘the liability of the
members is limited’.
In case of a company limited by guarantee, an additional sentence is added to clarify the extent
of liabilities of the members of that company in the event of its being wound up.
96 Incorporation
Registration of a company is actually registration of the certificate of memorandum of the company as
the memorandum is actually a charter of the company. For registration of a memorandum of
association, a memorandum and articles of association signed by all the subscribers shall be filed with
the registrar of companies. A declaration of compliance with requirements of the Act in getting the
company registered shall be provided to the registrar along with the memorandum.

Registrar shall register the memorandum of association only if it is satisfied thatall the requirements of
this Act and the rules made thereunder have been complied with in respect of registration.
If the registrar of companies for any reason refuses the registration of the memorandum, the company
may file an appeal before commission within 30 days of such refusal.
97 Name
When selecting the name it should be considered that the name:
is not inappropriate, undesirable or deceptive;
is not designed to exploit or offend the religious sentiments of the people;
Is not a name identical with the name of the company already registered and does not closely
resemble with the name of the company already registered under the Act.
Whatever name is proposed, the final authority to decide whether or not a name is in line with the
provisions of the Act lies with the Commission.
98 Disallowed name
Where a company has, due to any reason, been registered with a name which is not permitted by the
Act, the company may, on its own, change the name with the approval of the registrar.
The registrar may also direct the company, after giving it an opportunity to be heard, to change its name
within twenty one (21) days of the receipt of such directions. In case the company does not take the
required actions after the expiry of the 21 days period the registrarmay enter in the register of member
a new name selected by him and issue a certificate of incorporation on the change of name .
99 Increase in authorized capital

Section 85
The company, if allowed by its articles and by passing a special resolution can alter the capital clause
of its memorandum of association so as to
Increase the authorized capital whenever it requires;
Cancel that part of its authorized capital which has not been paid up till the date of cancellation
and such cancellation shall not affect the rights of paid up shareholders;
Consolidate the share capital into shares of a larger amount;or
Divide and subdivide the share capital into shares of an amount smaller than the one fixed by
the memorandum of association initially.
The company is required to file the resolution and the related documents i-e altered copy of the
memorandum of association with the registrar within fifteen days of passing the same, failing which the
resolution shall not be effective and shall ultimately lapse.
Further due to the consolidation or subdivision of shares, the rights attaching to the shares shall not be
affected in any way and the new shares issued by the company shall rank equally with the existing
shares of the company.

(a) The following conditions would have to be complied with by the aggrieved shareholders:
(i) Their holding should be at least ten percent of the total class ‘B’ shares.
(ii) Application must be filed within thirty days of the date of passing of special resolution.
(b) The Court shall pass an order for cancellation of the resolution only if it is satisfied that
some facts having impact on the decision of the shareholders were withheld by the company
in getting the special resolution passed or, the variation in rights would unfairly prejudice the
shareholders of the class represented by the applicant.

Business Law
101 Purchase of own shares

Companies are not allowed to purchase their own shares nor the shares of their holding companies.
However there are certain exceptions to these restrictions
Restrictions Exceptions
Purchasing Listed Company is allowed to but back its own shares (as per Sec 88)
own shares
Purchasing If subsidiary company carries on a business of brokerage, on behalf of its clients
the shares of (shall not exercise voting rights on shares of holding company)’
holding Subsidiary company acting as a trustee (unless holding company is beneficially
company interested in the trust); or
If shares are held by a company by operation of law.
102 Objections
The resolution to vary the rights of the members needs approval by three fourth majority of the
members of the particular class affected by the variation. However, any member or members of the
affected class representing at least ten percent shareholding of that class may apply to the court for an
order against the resolution varying their rights. The court has got the powers to declare the resolution
null and void if it feels that either;
the company withheld certain facts while getting the resolution passed. Had the members been in
knowledge of those facts, they would not have passed the resolution varying the rights of a
particular class; or
the change is otherwise prejudicial to the interest of members.
Such application for getting an order against the resolution should be filed by the persons aggrieved by
the change within 30 days of the date of resolution. The company is required to file a copy of the order
of the court to the registrar within fourteen days of receipt of the order.

(a) (i) Variation of shareholders’ rights:
Variation of shareholders’ rights means changing of the rights i.e. reducing, enhancing or
cancelling the rights of the shareholders.
(ii) Petition to cancel variation of rights:
The aggrieved members who are objecting to the variation in their rights must not be less
than 10% of the class of aggrieved members. i.e. members holding A class shares.
The aggrieved members may apply to the Court for an order cancelling the resolution
varying their rights.
The application shall be made within 30 days of the date of such resolution.
The aggrieved members shall have to show to the Court’s satisfaction, that:
Some facts which would have had a bearing on the decision of the shareholders
were withheld by Sigma Limited in getting the special resolution passed, or
The variation would unfairly prejudice the interest of the members.
The above application may also be made by any one or more of the aggrieved members
who are authorised in writing by the group of aggrieved members in this behalf.
The decision of the Court on any such application shall be final.
(b) Registration of payment or satisfaction of charges:
It shall be the duty of Masoom Limited to inform the registrar about the full payment or
satisfaction of the charge created on the stock-in-trade and book debts of the company within
30 days from the date of the payment or satisfaction of the charge in full.

The registrar shall register the satisfaction of charge only after verifying the repayment of
running finance facility from the holder of the charge, provided if a no objection certificate by the
holder, is filed alongwith the application for the discharge of the charge then no such verification
will be necessary.
The holder of the charge is required to inform the registrar about any objection within a time not
exceeding 14 days as specified by the registrar.
If no objection is filed by the holder of the charge, the registrar shall register the satisfaction of
the charge as requested by Masoom Limited.
In case of any objection from the holder of the charge, the registrar shall record a note to that
effect in the register and communicate it to Masoom Limited.
If the period mentioned above is breached then satisfaction of charge will be recorded upon the
payment of late fee.
104 Prospectus – consent of expert

(a) “Expert” includes banker, securities advisor, engineer, valuer, accountant, lawyer and any other
person whose profession gives authority to a statement made by him.
(b) A prospectus which includes a statement made by an expert shall not be issued, unless the
expert has given his written consent to the issue thereof with the statement included in the form
and context in which it is included and has not withdrawn such consent before the delivery of a
copy of the prospectus. for registration:
105 Prospectus – publication and availability

(a) The advertisement of a prospectus is required to be published in a newspaper not less than
seven days and not more than thirty days before the subscription list, is due to open.
Since, Deo Limited published the prospectus on March 1, 20X4, which is more than 30 days before
the subscription list was due to open i.e. April 5, 20X4. The Company is in violation of the
requirements of above provision of Law.
However, the Commission may, for special reasons, allow the company to publish the
prospectus more than thirty days before the subscription list is due to open.
(b) Deo Limited is required to make available sufficient number of copies of its prospectus at the
following places:
(i) registered office of the company,
(ii) with all the stock exchanges of the countries; and,
(iii) with the bankers to the issue,
(iv) the concerned share registrar
(v) the concerned balloter
(vi) the concerned credit rating agency, if any.
106 Prospectus - registration

The registrar shall not register a prospectus unless the following requirements have been complied
with:
(i) Prospectus is dated.
(ii) It shall state the matters and reports specified in the Second Schedule.
(iii) Experts whose statements are included have not been connected with the formation, promotion
or management of the company.

Business Law
(iv) Experts whose statements are included in the prospectus have given written consent for issue of
such statements.
(v) All requirements regarding approval, issue and registration have been complied with.
(vi) The prospectus is accompanied by the written consent of the auditor, legal adviser, attorney,
solicitor, banker and the broker who have agreed to act in that capacity.
107 Issuance of prospectus

(i) Time frame within which approval may be obtained:
TL must apply to the Commission for approval of the issuance of prospectus to the public, by
submitting a copy of the prospectus not less than twenty one days before the proposed date of
publication of the prospectus.
Time for which the prospectus may remain valid after approval:
A prospectus approved by the Commission shall be valid for a period of sixty days from the date
of such approval. However, this time period may be extended by the Commission for reasons to
be recorded.
(ii) Requirement(s) which must be satisfied before registration of the prospectus:
The registrar shall not register a prospectus unless the following requirements have been
complied with:
Prospectus is dated.
Prospectus is signed by every person who is named therein as a director or proposed
director or by his agent authorised in writing.
It shall state the matters and reports specified in the Second Schedule.
Experts whose statements are included have not been connected with the formation,
promotion or management of the company.
Experts whose statements are included in the prospectus have given written consent for
issue of such statements.
All requirements regarding approval, issue and registration have been complied with.
The prospectus is accompanied by the written consent of the auditor, legal adviser,
attorney, solicitor, banker and the broker who have agreed to act in that capacity.

(a) The following mortgages and charges, if not registered, would be treated as void:
(i) for the purpose of securing any issue of debentures.
(ii) on uncalled share capital of the company.
(iii) on any immovable property wherever situated, or any interest therein.
(iv) on any book debts of the company.
(v) on any movable property of the company.
(vi) on a ship or aircraft or any share in a ship or aircraft.
(vii) on goodwill or on any intellectual property.
(viii) On other interest based on agreement for the issue of any instrument in the nature of
redeemable capital.
(ix) on other interest based on a hire-purchase or leasing agreement for acquisition of fixed
assets.
(x) floating charge on the undertaking or property of the company, including stock-in-trade.

(b) The registrar can enter in the register of mortgages and charges a memorandum of satisfaction
or release of charge without receiving any intimation from the Company, on evidence being given
to his satisfaction with respect to any registered charge, that the:
(i) debt for which the charge was given has been paid or satisfied in whole or in part, or
(ii) part of the property or undertaking charged has been released from the charge or has
ceased to form part of the company's property or undertaking;

Procedure for registration of the payment or satisfaction of mortgage
(i) A company must give intimation to the registrar of the payment or satisfaction, in full, of any
mortgage created by the company and requiring registration, within thirty days from the date of
the payment or satisfaction, in full, thereof.
(ii) The registrar, on receiving such intimation, will send a notice to the holder of the mortgage,
calling upon him to show-cause, within fourteen days of the notice, as to why the payment or
satisfaction of the charge or mortgage should not be recorded, provided no such notice will be
issued if an NoC from the holder is provided by the company.
(iii) If no objection is raised by the holder of the charge, the registrar shall order that a memorandum
of satisfaction be entered in the register.
(iv) If any objection is received, the registrar shall record a note to that effect in the register, and shall
inform the company about the same

It shall be the duty of Masoom Limited to inform the registrar about the full payment or satisfaction of
the charge created on the stock-in-trade and book debts of the company within 30 days from the date
of the payment or satisfaction of the charge in full.
The registrar shall register the satisfaction of charge only after verifying the repayment of running
finance facility from the holder of the charge, provided if a no objection certificate by the holder, is filed
alongwith the application for the discharge of the charge then no such verification will be necessary.
The holder of the charge is required to inform the registrar about any objection within a time not
exceeding 14 days as specified by the registrar.
If no objection is filed by the holder of the charge, the registrar shall register the satisfaction of the
charge as requested by Masoom Limited.
In case of any objection from the holder of the charge, the registrar shall record a note to that effect in
the register and communicate it to Masoom Limited.
If the period mentioned above is breached then satisfaction of charge will be recorded upon the
payment of late fee.
111 Mortgages
A “mortgage or charge” means an interest or lien created on the property or assets of a company or any
of its undertakings or both as security.
112 AGM timeline

In the case of a listed company, the Commission and in any other case, the registrar, may for any special
reason extend the time within which any annual general meeting, shall be held, by a period not exceeding
thirty days.

Business Law
113 Ordinary vs. special

(a) The following businesses transacted at a general meeting are considered as ordinary
businesses:
(i) consideration of the financial statements
(ii) The presentation of the reports of the directors and auditors,
(iii) declaration of any dividend,
(iv) appointment and fixation of remuneration of auditors
(v) election or appointment of directors
Any business other than those specified above is termed as special business.
(b) Where any special business is to be transacted at a general meeting, a statement setting out all
material facts concerning such business, including, the nature and extent of interest, whether
directly or indirectly, therein of every director, must be annexed to the notice of the meeting.
Further, where any business transaction requires an approval to any document by the meeting,
the time when and the place where the document may be inspected must be specified in the
statement annexed to the notice.
114 Polling
(a) If Mr. Shakeel intends to make a request for a poll, the chairman of the meeting would be
required to accept his request provided the request is supported by members having at least
10% of voting power
(b) When a poll is taken, the chairman or his nominee and a representative of the members
demanding the poll i.e. Mr. Shakeel and members requesting the poll, shall scrutinize the votes
given on the poll. However, the results of the poll shall be announced by the chairman of the
meeting.
115 Minutes
Every company shall enter a fair and accurate summary of copies of all resolutions of members
passed otherwise than at general meetings and the minutes of all proceedings of general
meetings in the properly maintained minute book along with the names of those participating in
the meetings.
Minute are required to be signed by the chairman of the general meeting or by the chairman of the
next succeeding meeting, in order to be evidence of the proceedings.
The books containing minutes of proceedings of the general meetings must be kept at the registered
office of the company simultaneously in physical and electronic form and must be preserved for at least
twenty years in physical form and permanently electronically.
The minute’s book may be allowed/open for inspection of members without charge for not less than two
business hours in each day Subject to reasonable restrictions imposed through its articles of
association or in general meeting.
Any member shall at any time after seven days from the meeting be entitled to be furnished, with a
certified copy of the minutes of any general meeting at such charge not exceeding the prescribed
amount as may be fixed by the company.
The company shall provide, within seven days after member has made a request in this respect, a
certified copy of the minutes.
116 Meetings – commencement and EGM

(a) The statement is incorrect because only public companies having share capital are required to
hold statutory meetings. Moreover, the statutory meeting is to be held within a period of 180
days, from the date at which the company is entitled to commence business or nine months from
the date of its incorporation whichever is earlier.

(b) In the case of an unlisted company if all the members entitled to attend and vote at the meeting
so agree, the EOGM may be held at a shorter notice.
117 Quorum
(a) Being a public listed company, the quorum of the meeting is not less than 10 members
present personally or through video link who represent not less than 25% of the total voting
power, either of their own account or as proxies, unless the articles provide for a larger number.
(b) The quorum of the meeting should be present within half an hour from the time for the meeting
otherwise the meeting shall be dissolved as it has been called on the requisition of members.
(c) Since chairman of the board of directors cannot attend the meeting therefore, any one of the
directors present may be elected to be chairman.
(d) However, if none of the directors is present or is unwilling to act as chairman, the members
present shall choose one of the members to be the chairman.
118 Members and meetings

(a) (i) Section 140 (1) & (2),Companies Act,2017
Any member having not less than ten percent voting power in the company may give
notice of a resolution and such resolution together with the supporting statement, if any, is
required to be forwarded in such a way so as to reach the company at least fifteen days
before the meeting.
Mr. Dinshaw holds 13.5% shares in the company i.e. more than 10% hence he is
entitled to submit the resolution to the company. However, since the notice given by
Mr. Dinshaw did not reach the company in the prescribed time, the company cannot
be held liable for its failure to circulate the resolution.
(ii) Section 152,Companies Act,2017
The books containing the minutes of proceedings of the general meetings shall be open to
inspection by members without charge during business hours, subject to such reasonable
restrictions as imposed by the company through its articles of association or in the
general meeting, but not less than two hours in each day be allowed for inspection.
Any member shall at any time after seven days from the meeting be entitled to obtain
a certified copy of the minutes of any general meeting, which shall be provided to him
within seven days after he has made a request to the company, at charges not exceeding
the amount fixed by the company.
Therefore, Mr. Dinshaw is entitled to inspect and receive the certified copy of the minutes
of the general meeting.
(b) Resolution passed at adjourned meeting-Section 146, Companies Act, 2017
Where a resolution is passed at an adjourned meeting of the creditors of a company, the
resolution shall, for all purposes, be treated as having been passed on the date on which it
was in fact passed, and shall not be deemed to have been passed on any earlier date.
119 Circulation
Following information/ documents are required to be circulated to various stake holders at least twenty
one days prior to the meeting.
(i) Notice of meeting specifying the place and the day and hour of the meeting along with a
statement of the business to be transacted at the meeting and in respect of the special business,
statement setting out all material facts concerning the business, including, in particular the nature
and extent of the interest therein, if any, of every director
Every notice of a meeting of a company shall be accompanied by a proxy form.

Business Law
The notice shall be sent to the following:

All the members;
All the directors;
Any person entitled to a share in consequence of death of a member if the interest of such
person is known to the company;
The auditor or auditors of the company.
(ii) Copies of draft resolutions, which are proposed for consideration in the meeting.
There shall be annexed to the notice of the meeting all material facts concerning that
strategic business plan.
(iv) Every company shall also send:
copy of audited financial statements
copy of auditors report
Directors report
Chairman’s report, in case of listed companies
The above, in case of a listed company, should be sent to the following:
the registered address of every member of the company
Securities & Exchange Commission
Stock exchange
Registrar.
The above shall also be uploaded on the company’s website
120 Representation and proxy

(a) A company which is a member of another company may by resolution of the board or other
governing body may authorize any of its officials or any other person to act as its representative
at the meeting of that other company.
(b) The instrument appointing a proxy shall:
be in writing and
be under company seal or be signed by an officer or an attorney duly authorized.
The proxy shall be lodged with the company not later than forty-eight hours before the time of the
meeting.
121 EOGM
(i) All general meetings of a company other than Annual General Meeting and Statutory Meeting
shall be called EOGM.
(ii) The minimum notice period for calling an EOGM is 21 days.
In case of emergency affecting the business of a company other than a listed company, if all the
members entitled to attend and vote in the meeting agree, then an EOGM can be held at such
shorter notice.

122 Special business

All businesses transacted at an extraordinary general meeting or annual general meeting, shall be
treated as “special business” except the following:
declaration of dividend,
consideration of the financial statements and the reports of the directors and auditors,
election of directors,
appointment and fixing of the remuneration of auditors.
Examples:
(i) Disposal of a significant business segment of company.
(ii) Investment in associated undertaking.
123 Auditor’s certificate

Auditors’ certificates on statutory report
The statutory report should be accompanied by an auditor’s certificate in respect of correctness or
otherwise of:
allotment of shares
cash received against share allotted and
receipts and payments account of the company.
124 Commission GM
Commission has got the powers to call general meetings of the company, either on its own motion or on
application of any director or member, if the company fails to
a) Call an annual general meeting
b) Call a statutory meeting or
c) Call an extraordinary general meeting on the requisition of the members.
125 Circumstances in which proceedings of a General Meeting may be declared invalid

In the given scenario, Mateen and Ragib would not succeed in their contention as they have filed the
complaint with the chairman of the board of directors.
In order to succeed, Mateen and Ragib are required to file a petition in the Court and must have 10% or
more of the voting power in the company.
The petition must be made within thirty days of the impugned meeting.
The Court may declare the proceedings of a general meeting or part thereof invalid and direct holding
of a fresh meeting on the following grounds:
By reason of any material defect or omission in the notice; or
Irregularity in the proceedings of the meeting which prevented Mateen and Ragib from using
their rights.

Business Law
126 Subsequent CEO

The statement is incorrect.
Any chief executive (other than the first chief executive of the company) is appointed by the directors
within fourteen days from the date of their election or within fourteen days of the office of the chief
executive falling vacant.
The chief executive, other than the first chief executive of the company, is appointed for a period not
exceeding three years, a chief executive appointed against a casual vacancy shall be appointed till the
directors elected in the next election appoint a chief executive.
127 CEO – removal and competitors

(a) Mr. Zameer being appointed as the first chief executive of Ryan Industries Limited, will hold
office up to the first annual general meeting of the company or if a shorter period is fixed by the
directors at the time of his appointment, on expiry of such period unless he earlier resigns or
ceases to hold office.
Since the directors are not satisfied with the performance of Mr. Zameer they can remove him by
a resolution passed by not less than three-fourths of the total number of directors for the time
being, or by passing a special resolution in the general meeting of the company, notwithstanding
anything contained in the articles or in any agreement between the company and Mr. Zameer.
(b) Chief executive of a public company shall not directly or indirectly engage in any business which
is of the same nature as and directly competes with the business carried on by the company of
which he is the chief executive or by a subsidiary of such company.
A business shall be deemed to be carried on indirectly by the chief executive if the same is
carried on by his spouse or any of his minor children.
Every person who is appointed as chief executive of a public company shall forthwith on such
appointment disclose to the company in writing the nature of such business and interest therein.
128 Casual vacancy

Alpha Securities Limited (ASL) is a public company and is required to have at least three members as
well as three directors On the death of Qasim, the number of members and directors of ASL has been
reduced to two which is in contravention of the provisions of the Companies Act 2017.
The casual vacancy arising due to the death of Qasim may be filled up by Abid and Tariq and the
person so appointed would hold office for the remainder of the term of Qasim in whose place he is
appointed.
129 Election
(a) The number and names of the first directors of the company shall be decided by the subscribers
of memorandum and their particulars shall be submitted along with the documents for
incorporation.
The number of first directors may be increased by appointing additional directors by the
members in the general meeting. The first directors shall hold office until the election of directors
in the first annual general meeting of the company.
(b) The following procedure should be followed by a private company while holding its election of
directors:
(i) The existing directors of a company must fix the number of elected directors of the
company at least thirty-five days before the convening of the general meeting at which
directors are to be elected. The number of directors so fixed cannot be changed except,
with the prior approval of a general meeting of the company.
(ii) The notice of the general meeting at which election of directors is to be held must state:
the number of elected directors fixed for election.
the names of the retiring directors.

(iii) The company must receive a notice of intention to offer themselves for election as a
director, from the persons who seek to contest an election, whether they are a retiring
director or otherwise, at least 14 days before the date of the general meeting at which
elections are to be held.
Any such person may at any time before the holding of election withdraw such notice.
(iv) All notices received by the company must be circulated among the members, not later than
seven days before the date of the general meeting in the manner provided by the company
for sending of a notice of general meeting.
(v) The directors of the company having a share capital shall, unless the number of persons
who offer themselves to be elected is not more than the number of directors fixed, be
elected by the members of the company in general meeting in the following manner,
A member shall have such number of votes as is equal to the product of the number
of voting shares or securities held by him and the number of directors to be elected.
A member may give all his votes to a single candidate or divide them between more
than one of the candidates in such manner as he may choose; and
The candidate who gets the highest number of votes shall be declared elected as
director and then the candidate who gets the next highest number of votes shall be
so declared and so on until the total number of directors to be elected has been so
elected.
130 Presence
This rule is not applicable to:
(i) a private company which is neither a subsidiary nor a holding company of a public company;
(ii) any contract of indemnity or insurance coverage executed by the company in favour of
interested director against any loss which he may suffer or incur by reason of becoming or
being a surety for the company or while undertaking any transaction on behalf of the
company, provided the company shall only insure the liability of interested director where
such liability arises out of a transaction validly approved by the board or the members of the
company as the case may be.
131 Number, remuneration and assignment

(a) The statement is not in accordance with the provisions of the Companies Act 2017 because the
directors shall fix the number of directors to be elected not later than thirty-five days before the
convening of the general meeting at which directors are to be elected, and the number so fixed
shall not be changed except with the prior approval of a general meeting of the company.
(b) The statement is not in accordance with the provisions of the Companies Act 2017. The
directors’ remuneration for performing extra services, including the holding of the office of
chairman, is determined by the directors or the company in general meeting in accordance with
the provisions in the articles of association of the company.
(c) The statement is in accordance with the provisions of the Companies Act 2017. Any such
appointment shall be void ab initio.
132 Fresh elections

A member having requisite shareholding to get him elected as a director on the board of a company
not being a listed company, may require the company to hold fresh election of directors in accordance
with the procedure laid down in section 159, provided that the number of directors fixed in the
preceding election shall not be changed.
A listed company for the purpose of fresh election of directors under this section shall follow such
procedure as may be specified by the Commission.

Business Law
133 Loans
A company shall not:
make a loan to a director of the company or of its holding company; or to any of his relatives;
give a guarantee or provide security in connection with a loan made by any person to such a
director; or to any of his relatives;
unless the transaction has been approved by a resolution of the members of the company, provided
that in case of a listed company, approval of the Commission shall also be required before sanctioning
of any such loan.
134 Power
Powers of Board.
The shareholders seem to be referring to the following powers of the board of RRL:
(i) Borrow moneys otherwise than on debentures.
(ii) Invest the funds of the company.
(iii) Make loans.
(iv) Incur capital expenditure on any single item or dispose of a fixed asset, in accordance with the
limits prescribed.
(v) Undertake obligations under leasing contracts exceeding one million rupees.
(vi) Issue shares
(vii) Issue debentures or any other instrument in the nature of redeemable capital.
(viii) Declare interim dividend
(ix) Write off bad debts, advances and receivables
(x) Write off inventories and other assets of the company
(xi) To authorize sale, purchase or supply contracts with interested companies and firms
(xii) To approve financial statements.
(xiii) To approve bonus to employees
(xiv) to take over a company or acquire a controlling or substantial stake in another company
(xv) any other matter which is specified .
135 Number and casual vacancy

(a) Section 154 & 159(1),Companies Act,2017
Every public company other than a listed company shall not have less than three directors. As
Lalazar Limited has eight directors on their board, therefore they are in compliance with the
requirements of law.
The directors of a company shall fix the number of elected directors of the company not later
than 35 days before the convening of the general meeting at which directors are to be elected.
The number of directors so fixed shall not be changed except with the prior approval of a
general meeting of the company.
(b) Section 161(2),Companies Act,2017
Any casual vacancy occurring among the directors may be filled up by the directors. Mr. Aslam
shall hold office for the remainder of the term of the director Mr. Javed in whose place he has
been appointed.

136 First and subsequent directors

First Directors
The names of the first directors shall be decided by the subscribers of memorandum and their
particulars shall be submitted along with the documents for incorporation.
The first directors shall hold office until the election of directors in the first annual general meeting.
However, the members in subsequent meetings may increase the number of first directors
Subsequent Directors
Subsequent directors are elected in the first general meeting of the company. The directors so elected,
hold office for a period of three years.
First Chief executive
Name of first chief executive shall be determined by subscribers of MOA. His specified particulars
shall be submitted along with the documents of incorporation.
First chief executive can be appointed for a period of maximum up to the first AGM. He may earlier
resign or be removed from his office.
Subsequent Chief Executive
Subsequent CEO is also appointed by the Directors, but such appointment shall not be for a period
exceeding three years from the date of appointment.
137 Removal
Removal of Directors
A company may by resolution in a general meeting remove a director appointed to fill in the casual
vacancy or a director appointed by members in a general meeting of the company.
(i) The situation relates to the removal of director appointed to fill in the casual vacancy. Therefore,
the number of votes cast against the resolution should not be equal to or exceed the total
number of votes for the time being computed in a manner similar to the method used for
directors’ election divided by the number of directors, which in this case would be 10,000,000 x 8
÷ 8 = 10,000,000.
(ii) Mr. Badar can be removed from his office only when the votes cast against the resolution are
less than 220,000 i.e. the minimum number of votes through which the director was elected in
the immediately preceding election of directors.
138 Loan repayment

The loan becomes immediately payable unless the company it is approved by the resolution of the
company and also the approval of the Commission has been obtained.
139 General notice of interest

General notice of ownerships and directorships
Instead of making a disclosure at separate intervals on transaction by transaction basis, the director
may give a general notice regarding his directorships in other body corporate or partnership in firms so
that he may be considered as interested in any transaction, contract or arrangement entered into with
these businesses.
Such notice should be given at the directors' meeting or the concerned director may take reasonable
steps to ensure that the notice is read by the other directors.
This general notice shall expire at the end of the financial year in which it is given and may be replaced
by fresh notice to be given in last month of financial year.

Business Law
140 Interest free loan

Loans to directors:
AL cannot, directly or indirectly, grant any loan to its director, Mr. Majnou unless it has been approved
by the members of AL and also approval of commission has been obtained.
141 Appointment of a chief executive

(a) Appointment of subsequent chief executive:
The requirements for the appointment of a Chief Executive are as under:
Within fourteen days from the date of election of directors under the Act or the office of the
chief executive falling vacant, as the case may be, the directors of TPL shall appoint any
person, including an elected director, to be the chief executive, but such appointment shall
not be for a period exceeding three years from the date of appointment.
On the expiry of his term of office under the Act, a chief executive shall be eligible for
reappointment.
The chief executive retiring under the Act shall continue to perform his functions until his
successor is appointed unless non-appointment of his successor is due to any fault on his
part or his office is expressly terminated.
Restriction on appointment of chief executive:
No person who is ineligible to become a director of TPL under the Act shall be appointed or
continue as the chief executive of TPL.
(b) Vacation of office by the directors:
The director shall ipso facto cease to hold office If he becomes subject to any of the ineligibilities:
(i) if he absents himself from three consecutive meetings of the directors, without leave of
absence from the directors;
(ii) if he or any firm of which he is a partner or any private company of which he is a director:
without the sanction of the company in general meeting accepts or holds any office of
profit under the company other than that of chief executive or a legal or technical
adviser; or
accepts a loan or guarantee from the company in contravention of the provisions of
the Act.
In addition to above, if TPL has provided any clause(s) in its Article to get the office of the
director vacated, and the director becomes subject to such clause(s).
142 Associated company

“Associated companies” mean any two or more companies or a company and an undertaking,
interconnected with each other in the following manner, namely:
(a) If a person who is the owner or a partner or director of a company or undertakings, or who,
directly or indirectly, holds or controls shares carrying not less than twenty percent of the voting
power in such company or undertaking, is also the owner or partner or director of another
company or undertaking, or directly or indirectly, holds or controls shares carrying not less than
twenty percent of the voting power in that company or undertaking; or
(b) If the companies or undertakings are under common management or control or one is the
subsidiary of another; or
(c) If the undertaking is a modaraba managed by the company; and a person who is the owner of or
a partner or director in a company or undertaking or, who also holds or controls shares carrying
not less than ten percent of the voting power in a company or undertakings, shall be deemed to
be an “associated person” of every such other person and of the person who is the owner of or a
partner or director in such other company or undertaking, or who so holds or controls such
shares in such other company or undertaking.

Provided that shares shall be deemed to be owned, held or controlled by a person if they are
owned, held or controlled by that person or by the spouse or minor children of the person.
Provided further that -
(i) directorship of a person or persons by virtue of nomination by the Federal Government or a
Provincial Government or a financial institution directly or indirectly owned or controlled by
such Government; or
(ii) directorship of a person appointed as an “independent director”; or
(iii) Shares owned by the National Investment Trust or the Investment Corporation of Pakistan
or a financial institution directly or indirectly owned or controlled by the Federal Government
or a Provincial Government or shares registered in the name of a central depository;
Shall not be taken into account for determining the status of a company, undertaking or person
as an associated company, associated undertaking or associated person.
143 Dividend restriction

The statement is incorrect and contains the following errors.
The chief executive of the company does not declare the dividend. He informs the shareholders about
the percentage/amount of the dividend as recommended by the directors. The dividend is approved by
the members but the dividend so approved shall not exceed the amount as recommended by the
directors.
No dividend shall be declared or paid by a company out of the profits of the company made from the
sale or disposal of any immovable property or assets of a capital nature comprised in the
undertaking(s), unless the business of the company consists, whether wholly or partly, of selling and
purchasing any such property or assets, except after such profits are set off or adjusted against losses
arising from the sale of any such immovable property or assets of a capital nature.
144 Investment restriction

A company shall not make any investment in any of its associated companies or associated
undertakings except under the authority of a special resolution which shall indicate the nature, period
and amount of investment and terms and conditions attached thereto.
Provided that the return on investment in the form of loan shall not be less than the higher of borrowing
cost of investing company or such rate as may be prescribed by the Commission.
The directors of the investing company shall certify that the investment is made after due diligence and
financial health of the borrowing company is such that it has the ability to repay the loan as per the
agreement.
145 Payment of dividend

The Chief Executive will not be punishable in the following cases:
(i) where the dividend could not be paid by reason of the operation of any law.
(ii) where a shareholder has given directions to the company regarding the payment of the
dividend and those directions could not be complied with.
(iii) where there is a dispute regarding the right to receive the dividend.
(iv) where the dividend has been lawfully adjusted by the company against any sum due to it
from the shareholder.
(v) where for any other reason the failure to pay the dividend or to post the warrant within the
period aforesaid was not due to any default on the part of the company.
And the commission has allowed the company to withhold or defer the payment of dividend
against an application made by the company within 45 days from the date of declaration of
dividend.
Company may also withhold the payment of dividend of a member where the member has not
provided the complete information or documents as specified by the Commission.

Business Law
146 Dividend amendment

(i) Once the dividend is recommended by the Board of Directors, it may be reduced by approval of
members, in the AGM.
(ii) When a dividend has been declared, it shall not be lawful for the directors to defer its payment for more
than 30 days. Hence the company cannot defer it for six months.
147 Investment in associate company

(a) (i) SSL and FPL are associated companies as both of them are under common control of IL.
(ii) SSL shall not make any investment in its associated company:
except under the authority of a special resolution which shall indicate the nature,
period and amount of investment and terms and conditions attached thereto.
provided that the return on investment in `the form of loan shall not be less than the
higher of borrowing cost of investing company (SSL) or such other rate as the
commission may specify.
the directors of the investing company shall certify that the investment is made after
due diligence and financial health of the borrowing company is such that it has the
ability to repay the loan as per the agreement
(b) Investments of company to be held in its own name - Exceptions
Following are exception to this general rule of keeping the investments of company in its own
name:
If a company has made equity investments in any other company and due to this
investment it enjoys the right to appoint any person as director of the investee company
then the investor company is allowed to hold the qualification shares in the name of that
nominee of the investor company
A holding company may hold any shares in its subsidiary company in the name of its
nominees if the number of members of the subsidiary company has reduced below
required minimum number of members for that company.
A company may hold investment in the name of a central depository company.
148 Interim Dividend

Period for payment of dividend:
(a) Declaration of interim dividend:
Interim dividend is deemed to have been declared:
on the date of commencement of closing of share transfer for purposes of determination of
entitlement of dividend; and
where register of members is not closed for such purpose, on the date on which such
dividend is approved by the directors.
(b) Consequences of non-payment of dividend:
Where a dividend has been declared by a company but is not paid within the stipulated
time, the chief executive of the company shall be punishable with imprisonment for a term
which may extend to two years and with fine which may extend to five million rupees.
A chief executive convicted as above shall from the day of the conviction cease to hold the
office of chief executive of the company and shall not, for a period of five years from that
day, be eligible to be the chief executive or a director of that company or any other
company.

(c) Circumstances under which CEL may not be responsible to pay dividend to certain
shareholders:
CEL may withhold dividend after obtaining prior approval of Commission within 45 days of
declaration of dividend. The Commission may grant the permission after providing an opportunity
to the shareholder, entitled to receive the dividend, of making representation against the
proposed action.
CEL may not be responsible to pay dividend in the following cases, namely-
(i) where the dividend could not be paid by reason of the operation of any law;
(ii) where a shareholder has given directions to CEL regarding the payment of the dividend
and those directions cannot be complied with;
(iii) where there is a dispute regarding the right to receive the dividend;
(iv) where the dividend has been lawfully adjusted by CEL against any sum due to it from the
shareholder; or
(v) where, for any other reason, the failure to pay the dividend or to post the warrant within
the stipulated period was not due to any default on the part of CEL.CEL may also withheld
dividend if the eligible member has not provided the complete information and documents
recommended by the Commission.
149 Qualification
The statement is correct however, if a person holds shares prior to his appointment as auditor, he can still
be appointed as auditor provided he disinvests such shares within ninety days of his appointment.
150 Removal – change of auditor

The Company shall forthwith send a copy of such notice to the retiring auditor and shall also be posted
on its website.
151 Books of accounts

(a) SQL Plastic Limited must keep proper books of account and other relevant books and papers and
financial statements for every financial year which give a true and fair view of the state of the
affairs of the company. in the case of a company engaged in production, processing,
manufacturing or mining activities, such particulars relating to utilisation of material or labour or
the other inputs or items of cost shall also be maintained.
(b) As the directors of SQL Plastic Limited intend to keep the books of account at a place other than
the registered office, SQL Plastic Limited must file with the registrar a notice in writing within
seven days of the decision, giving the full address of the other place.
152 Registrar
An unlisted company not being a private company having a paid up capital of less than Rs. 7.5 million,
must complete the following necessary formalities before and after the AGM:
(i) Before the AGM:
Notice of an annual general meeting must be sent to every shareholder at least 21 days before
the date of AGM along with a copy of such financial statements so audited together with a copy
of the auditor’s report and the director’s report and shall keep a copy at the registered office of
the company for the inspection of the members of the company during a period of at least
twenty-one days before that meeting.
(ii) After the AGM:
Unlisted companies are required by law to send one copy of its financial statements which are
adopted in the annual general meeting along with reports and documents required to be annexed
to same, signed as per the requirements of act, to the registrar within 15 days of the said annual
general meeting.

Business Law
If the general meeting to which such accounts and reports are presented does not adopt these
accounts and reports, the fact shall be mentioned to the registrar along with the copies of
documents to be filed as above.
153 Directors’ report

The contents of the directors’ report of a public company, as specified in the Companies Act, 2017 are
as follows:
(i) the names of the persons who, at any time during the financial year, were directors of the
company;
the principal activities and the development and performance of the company’s business
during the financial year;
a description of the principal risks and uncertainties facing the company;
(ii) disclosure of material changes and commitments affecting the financial position of the company
since the end of the financial year to which the balance-sheet relates and the date of the report;
(iii) any changes concerning the nature of the business of the company or of its subsidiaries, or in
the classes of business in which the company has interest;
(iv) the details in respect of adequacy internal financial controls;
(v) fullest information and explanation regarding any reservation, observation, qualification or
adverse remarks contained in the auditor’s report;
(vi) the pattern of shareholding;
(vii) name and country of incorporation of its holding company, if any, where such holding company
is established outside Pakistan;
(viii) earnings per share;
(ix) reasons for incurring loss and a reasonable indication of future prospects of profit, if any;
(x) information about defaults in payment of debts, if any, and reasons thereof.
(xi) Any other specified information
154 Signing the financial statements

When the chief executive is for the time being not in Pakistan, then the financial statements of the
company shall be signed by not less than two directors for the time being in Pakistan, and since it is a
listed company the financial statements shall also be signed by the CFO.
155 The auditors’ report

(a) The auditor’s report shall be read before the company in general meeting and shall be open to
inspection by any member of the company.
(b) The auditor’s report shall only be signed, by the person appointed as auditor of the company, or
where a firm is so appointed, by the partner in the firm practicing in Pakistan.
The auditor’s report shall be dated and indicate the place, at which it is signed.
156 Appointment of auditor

Procedure for change of auditor and company’s responsibilities
(i) Mr Brown should have at least 10% voting power to exercise the right given below.
(ii) Mr. Brown (the proposer of the change) shall give a notice to SPL not less than fourteen days
before the annual general meeting for passing a resolution at the company’s annual general
meeting for appointment of ABC & Co. Chartered Accountants as the auditor in place of the
retiring auditor.

(iii) The company shall forthwith send a copy of notice to the retiring auditor and shall also upload on
its website
(iv) Where retiring auditor makes with respect thereto a representation in writing to the company at
least two days before the date of the meeting, it shall be read in the meeting before the agenda
for the appointment of auditor is considered.
(v) The company shall, within fourteen days from the date of appointment of the auditor, send to the
registrar the following:
intimation of such appointment,
consent in writing of the auditor concerned.
157 Auditor and the AGM

The auditor of a company shall be entitled to attend any general meeting of the company. However, in
the case of a listed company, it is mandatory for an auditor or a person authorized by him in writing, to
be present in the general meeting in which the financial statements and the auditor’s report are to be
considered.
158 Auditor disqualification

Following persons shall not be appointed as auditor of a company.
A person who is or at any time during the preceding 3 years was a director, other officer or
employee of the company.
Partner or employee of a director, officer or employee of the company.
The spouse of a director of the company.
A person who is indebted to the company.
a person who has given a guarantee or provided any security in connection with the
indebtedness of any third person to the company other than in the ordinary course of business of
such entities;
a person or a firm who, whether directly or indirectly, has business relationship with the company
other than in the ordinary course of business of such entities;
A person who have been convicted by a court of an offence involving fraud and a period of ten
years has not elapsed from the date of such conviction;
A body corporate.
a person who is not eligible to act as auditor under the code of ethics as adopted by the Institute
of Chartered Accountants of Pakistan and the Institute of Cost and Management Accountants of
Pakistan; and
A person or his spouse or minor children or in case of audit firm, all partners of such firm who
hold shares of the company or any of its associated companies.
159 Appointment by SECP

In the following circumstances SECP becomes authorized to appoint the auditors of a company:
(i) The first auditors are not appointed within ninety days of the date of incorporation of the
company, or
(ii) No auditors are appointed at an annual general meeting, or
(iii) Auditors appointed at an annual general meeting are unwilling to act as auditors of the company.
or
(iv) A casual vacancy in the office of an auditor is not filled within thirty days after the occurrence of
the vacancy.

Business Law
160 Rights/duties of an auditor, casual vacancy and signature in the audit report
(a) Auditors’ rights with regard to the general meeting of the company:
Following rights are available to the auditors of a company with regard to the general meeting:
(i) The auditor is entitled to attend any general meeting of the company, and
(ii) Receive all notices of any general meeting which any member is entitled to receive, and
(iii) Receive any communications relating to any general meeting which any member is entitled
to receive, and
(iv) To be heard at any general meeting which he attends on any part of the business which
concerns him as auditor.
(v) In the case of a listed company, the auditor or the person authorised by him in writing shall
be present in the general meeting in which the financial statements and the auditors’ report
are to be considered.
(vi) the retiring auditor, subject to certain conditions, has a right to require the company to read
out his representation at such meeting.
(b) Filling of casual vacancy:
Casual vacancy in the office of the auditor shall be filled by the board within a period of 30 days,
however, the auditors appointed will be with the approval of the Commission.
(c) Signature of an audit report:
The person appointed as auditor shall sign the auditors’ report and if a firm is appointed in the
firm’s name as auditors, the report must be signed by the engagement partner.
The report shall carry a date and shall indicate the place at which it is signed.
161 Appointment of first auditors

(a) Yes Mr. Fakhir can be appointed as the first auditor of TPL, provided he is a Chartered
Accountant within the meaning of the Chartered Accountants Ordinance, 1961 (X of 1961).
(b) Who may appoint the first auditors and the time frame:
The first auditor of TPL shall be appointed by the board within ninety days of the date of
incorporation of TPL.
If the first auditors are not appointed by the company in the general meeting within ninety days of
date of incorporation of TPL, the Commission may appoint a person to fill the vacancy.
Who may fix auditor’s remuneration:
The remuneration of the first auditor of TPL shall be fixed by:
(i) By the directors if the auditor was appointed by the directors; or
(ii) By the Commission if the auditor was appointed by the Commission; and
(iii) In all other cases, by TPL in general meeting or in such manner as the general meeting
may determine.
162 Rights and duties of the auditors

Every auditor of a company shall have a right of access at all times to the books, papers, accounts and
vouchers of the company, whether kept at the registered office of the company or elsewhere, and shall
be entitled to require from the company and the directors and other officers of the company such
information and explanation as he thinks necessary for the performance of the duties of the auditors.
The auditor shall make a report to the members of the company on the accounts and books of
accounts of the company and on the financial statements, which are laid before the company in general
meeting during his tenure of office,
It is the duty of the person appointed as auditor of the company to sign the auditor's report or sign or
authenticate any other documents of the company required by law to be signed or authenticated by the
auditor.

BusinessLaw QB PDF

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

BusinessLaw QB PDF

Încărcat de

Drepturi de autor:

Formate disponibile

Question

© Emile Woolf International, September 2017

© Emile Woolf International ii The Institute of Chartered Accountants of Pakistan

Question and Answers Index v

© Emile Woolf International iii The Institute of Chartered Accountants of Pakistan

© Emile Woolf International iv The Institute of Chartered Accountants of Pakistan

© Emile Woolf International v The Institute of Chartered Accountants of Pakistan

© Emile Woolf International vi The Institute of Chartered Accountants of Pakistan

© Emile Woolf International vii The Institute of Chartered Accountants of Pakistan

© Emile Woolf International viii The Institute of Chartered Accountants of Pakistan

© Emile Woolf International ix The Institute of Chartered Accountants of Pakistan

© Emile Woolf International x The Institute of Chartered Accountants of Pakistan

1 District magistrate is appointed by the:

2 The Civil Court does NOT have jurisdiction over:

3 Choose the INCORRECT statement:

4 The family courts deal with:

© Emile Woolf International 1 The Institute of Chartered Accountants of Pakistan

5 The federal Shariat court consists of:

7 A court of first instance is the court:

© Emile Woolf International 2 The Institute of Chartered Accountants of Pakistan

MCQ2 – CONTRACT ACT 1872

2 The term “Quid pro quo” means:

3 Which of the following is not an essential element of a valid contract:

6 The effect of refusal to accept a properly made offer of performance is that:

© Emile Woolf International 3 The Institute of Chartered Accountants of Pakistan

7 A surety is NOT discharged from his liability:

© Emile Woolf International 4 The Institute of Chartered Accountants of Pakistan

15 The consent is said to be free when:

16 Liquidated damages mean:

17 The fundamental principle of awarding damages is:

© Emile Woolf International 5 The Institute of Chartered Accountants of Pakistan

20 Which of the following may employ an agent?

21 Choose the incorrect statement:

© Emile Woolf International 6 The Institute of Chartered Accountants of Pakistan

MCQ3 – PARTNERSHIP ACT 1932

1 Public notice is NOT required to be given in case of:

3 The implied authority of a partner does NOT empower him to:

4 A firm is liable to make good the loss of third party if:

5 The conclusive evidence of a partnership is:

© Emile Woolf International 7 The Institute of Chartered Accountants of Pakistan

7 In a ‘partnership at will’, a partner may retire:

© Emile Woolf International 8 The Institute of Chartered Accountants of Pakistan

MCQ4 – NEGOTIABLE INSTRUMENTS ACT 1881

1 Which of the following is NOT a material alteration of a negotiable instrument?

2 An instrument is said to be ambiguous if:

© Emile Woolf International 9 The Institute of Chartered Accountants of Pakistan

© Emile Woolf International 10 The Institute of Chartered Accountants of Pakistan

5 Civil law and criminal law

7 Basis of legal system

8 Company court and Company bench

© Emile Woolf International 11 The Institute of Chartered Accountants of Pakistan

CHAPTER 2 – INTRODUCTION TO LAW OF CONTRACT

CHAPTER 3 – OFFER AND ACCEPTANCE

13 Offer and acceptance

CHAPTER 4 – CAPACITY OF PARTIES

CHAPTER 6 – FREE CONSENT

© Emile Woolf International 12 The Institute of Chartered Accountants of Pakistan

21 Rescind the contract

CHAPTER 7 – LEGALITY OF OBJECT AND CONSIDERATION AND AGREEMENTS

23 Opposed to public policy

CHAPTER 8 – VOID AGREEMENT

25 Exceptions of void agreements

© Emile Woolf International 13 The Institute of Chartered Accountants of Pakistan