CAF03 Business Law QB

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ICAP
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Business Law
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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 - Objective test and long-form questions 25
Answers
Section C Multiple choice answers 41
Section D Part A Mercantile Law - Objective test and long-form answers 45
Part B Company Law - Objective test and long-form answers 83
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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 45
2 Courts 11 45
3 Binding precedent 11 46
4 High courts 11 46
5 Civil law and criminal law 11 46
6 Process of legislation 11 47
7 Basis of legal system 11 47
8 Company Court and Company bench 11 47
Chapter 2 - Introduction to law of contract
9 Essential elements of a contract 12 48
Chapter 3 - Offer and acceptance
10 Acceptance 12 49
11 Lapse of an offer 12 50
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Question Answer
page page
12 Revocation of proposal 12 50
13 Offer and acceptance 12 51
Chapter 4 - Capacity of parties
14 Minor 12 51
Chapter 5 – Consideration
15 Consideration 1 12 52
16 Consideration 2 13 52
Chapter 6 – Free consent
17 Coercion 13 52
18 Fraud 13 52
19 Misrepresentation 13 53
20 Mistake 13 53
21 Rescind the contract 13 54
Chapter 7 - Legality of Object and consideration and

agreements opposed to public policy
22 Legality of object 13 55
23 Opposed to public policy 13 55
Chapter 8 – Void agreement
24 Legality of consideration 14 56
25 Exceptions of void agreements 14 56
Chapter 9 – Contingent contracts
26 Contingent contracts 14 57
27 Rules of contingent contracts 14 57
Chapter 10 – Quasi contracts
28 Quasi contracts 1 14 58
29 Quasi contracts 2 14 58
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Index to questions and answers
Question Answer
page page
Chapter 11 – Performance of a contract
30 Tender and essentials of tender 14 59
31 Time and place of performance 15 59
32 Devolution of liabilities 15 60
33 Joint promisor and promisee 15 60
34 Reciprocal promises 15 60
35 Appropriation 15 60
Chapter 12 – Discharge of a contract
36 Discharge by mutual agreement 16 61
37 Supervening impossibility 16 61
38 Discharge of a contract 16 61
Chapter 13 – Remedies for breach of contract
39 Remedies for breach of contract 16 62
40 Damages 16 62
Chapter 14 – Indemnity and guarantee
41 Indemnity 17 63
42 Guarantee 1 17 63
46 Rights of surety 17 64
Chapter 15 – Bailment and pledge
47 Duties of bailor 17 65
48 Particular lien 18 65
49 Termination of bailment 18 65
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Question Answer
page page
50 Finder of goods 18 65
51 Pledge 1 18 66
52 Pledge 2 18 66
53 Rights of pawner 18 67
54 Rights of Pawnee and Pawnor 18 67
Chapter 16 - Agency
55 Ratification 19 68
56 Duties of an agent 19 69
57 Duties of agent toward principal 19 69
58 Rights 19 70
59 Misconduct by agent 19 70
60 Substituted agent 19 70
61 Irrevocable agency 19 70
Chapter 17 – Partnership Act
62 Duties of partner 20 71
63 Rights of outgoing partner 20 71
64 Mutual rights and liabilities 20 71
65 Liabilities 20 72
66 Implied authority 20 72
67 Holding out 20 73
68 Transfer of interest 20 73
69 Partnership property 20 74
70 Minor 21 74
71 Rights and disabilities 21 74
72 Existence of partnership 21 75
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Question Answer
page page
Chapter 18 – Negotiable instruments Act
73 Promissory notes 22 76
Presumptions of negotiable
74 22 76
instrument
75 Inchoate stamped instrument 22 76
76 Ambiguous Instruments 22 77
77 Payment in due course 22 77
78 Cheque 22 77
79 Bill of Exchange 22 78
Holder, Holder in due course,

80 22 78
Payment in due course
81 Material alteration 23 79
82 Negotiation and Indorsement 23 79
Provisions of the Negotiable

83 23 80
Instruments Act
Company Law
Chapter 19 – Company
84 Subsidiary and holding co. 25 83
85 Association NFP 25 83
86 Private company 25 84
87 KRL 25 84
88 Associations not for profit 25 84
Chapter 20 – Incorporation of company
89 Fajita 26 85
90 Zouk 26 85
91 Company registration exceptions 26 85
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Question Answer
page page
92 Commencement of business 26 86
93 MOA – object and registered office 26 86
94 MOA – alteration 26 87
95 Articles of association 27 87
96 MOA – Nil capital 27 88
97 MOA – Alteration (office and objects) 27 88
98 Incorporation 27 89
99 Name 27 89
100 Disallowed name 27 89
Chapter 21 – Share capital – types and variations
101 Increase in authorized capital 27 90
102 Variation of shareholders’ rights 27 90
103 Purchase of own shares 28 90
104 Objections 28 90
105 Member 28 91
106 Variation of shareholders’ rights 28 91
Chapter 22 – Share capital – prospectus
107 Prospectus - consent of expert 28 92
Prospectus – publication and

108 29 92
availability
109 Prospectus – registration 29 93
110 Prospectus – relief from liability 29 93
111 Minimum subscription 29 94
112 Face of prospectus 29 94
113 Issuance of prospectus 29 94
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Question Answer
page page
Chapter 23 – Mortgages and charges
114 Mortgages and charges 1 30 95
115 Mortgages and charges 2 30 95
116 Mortgages 30 96
Chapter 24 – Meetings
117 AGM timeline 30 96
118 Ordinary vs. special 30 96
119 AGM and EGM 30 96
120 Polling 30 96
121 Minutes 31 97
122 Meetings – commencement and EGM 31 97
123 Quorum 31 97
124 Members and meetings 31 98
125 Circulation 31 99
126 Representation and proxy 32 99
127 EOGM and special business 32 100
128 Special resolutions 32 100
129 Auditor’s certificate 32 100
130 Commission GM 32 100
131 Circumstances in which proceedings

of a General Meeting may be declared 32 101
invalid
Chapter 25 – Management
132 Subsequent CEO 32 101
133 CEO – removal and competitors 33 101
134 Casual vacancy 33 101
135 Election 33 102
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Question Answer
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136 Presence 33 103
Number, remuneration and

137 33 103
assignment
138 Fresh elections 34 103
139 Loans 34 103
140 Power 34 104
141 Number and casual vacancy 34 104
142 First and subsequent 34 105
143 Removal 34 105
144 Loan repayment 35 105
145 General notice of interest 35 106
146 Interest free loan 35 106
147 Appointment of a Chief Executive 35 106
Chapter 26 – Investments and dividends
148 Associated company 36 107
149 Dividend restriction 36 108
150 Investment restriction 36 108
151 Payment of dividend 36 108
152 Dividend amendment 36 109
153 Investment in associate company 36 109
154 Interim Dividend 37 109
Chapter 27 – Accounts and audit
155 Qualification 37 110
156 Removal – representation 37 110
157 Removal – change of auditor 37 110
158 Books of accounts 37 110
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Question Answer
page page
159 Registrar and the director’s report 37 111
160 Signing the accounts 38 112
161 The auditors’ report 38 112
162 Appointment of auditor 38 112
163 Auditor and the AGM 38 113
164 Auditor disqualification 38 113
165 Appointment by SECP 38 113
Rights/duties of an auditor, casual

166 vacancy and signature in the audit 38 114
report
167 Appointment of a First Auditor 39 114
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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.
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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.

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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.

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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.

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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

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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’.

Business Law
(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.
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.

Section B: Part A - Mercantile Law Question bank: Objective test and long-form questions
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?
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

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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.
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

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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.
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.

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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.
53 Rights of Pawner
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.

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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.

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
(a) 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.

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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.
83 Provisions of the Negotiable Instruments Act

(a)
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
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.

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Business Law
SECTION
B
Part B - Company Law
Objective test and
long-form questions
CHAPTER 19 – COMPANY
84 Subsidiary and holding co.
Identify the situations specified under the Companies Ordinance, 1984 in which a
company shall be considered to be a subsidiary of another company.
85 Association NFP
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 Ordinance, 1984 you are required to explain
the conditions:
(a) 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.
(b) under which the licence may be revoked and its consequences.
86 Private company
State the conditions which make a company a private company or a public company
under the Companies Ordinance 1984
87 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 Ordinance 1984.
88 Associations not for profit

(a) ‘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

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‘Limited’ to its name. Describe those conditions and also specify the authority
who may grant such exemption under the Companies Ordinance, 1984.
(b) 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 Ordinance, 1984.
CHAPTER 20 – INCORPORATION OF COMPANY

89 Fajita
Fajita Specialists” is a joint family business of Warsi family. The business has grown up
in a very short time and there are more than 50 branches of it in the city. You being the
corporate advisor, have been approached by the family to give an opinion on whether
or not the business is required to get itself registered as a limited liability company.
Advise them under the relevant provisions of Companies Ordinance 1984.
90 Zouk
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?
91 Company registration exceptions

Any association, partnership or company consisting of more than twenty persons,
cannot be formed for the purpose of carrying on any business for acquisition of gain
unless it is registered as a company under the Companies Ordinance, 1984.
You are required to list down the exceptions to the above rule.
92 Commencement of business
Explain the provisions specified in the Companies Ordinance, 1984 relating to
requirements to be completed before the commencement of business by a public
company.
93 MOA – object and registered office

(a) Briefly describe the provisions of Companies Ordinance, 1984 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.
94 MOA – alteration
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.

Section B: Part B - Company Law Question bank: Objective test and long-form questions
95 Articles of association
A Malaysian company is interested in incorporating a limited liability company in
Pakistan.
Discuss provisions of the Companies Ordinance, 1984, 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
96 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?
97 MOA – Alteration (office and objects)

What are the main reasons that a company may proceed to alter the conditions of its
Memorandum as to the registered office of the company, or as to the objective of the
company?
98 Incorporation
What are the criteria based on which the registrar shall incorporate any company and
grant a certificate of incorporation?
99 Name
Certain names cannot be given to the company. Explain what such names are and
explain who the final authority is, regarding allowance of disallowance, of any name
given to a company.
100 Disallowed name

Discuss the powers of registrar when a company is registered with a name not allowed
by the Ordinance.
CHAPTER 21 – SHARE CAPITAL – TYPES AND VARIATION

101 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 Ordinance, 1984.
102 Variation of shareholders’ rights

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 Ordinance, 1984 specifying the
following:

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(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.
103 Purchase of own shares

Companies are not allowed to purchase their own shares nor the shares of their
holding companies - explain.
104 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?
105 Member
(a) What is meant by the term ‘Member’ as described under the provisions of the
Companies Ordinance, 1984?
(b) Paband Limited is in the process of incorporation and has filed an application
with the registrar’s office for registration of its memorandum of association.
However, the registrar has refused to register the memorandum.
Under the provisions of the Companies Ordinance, 1984 state the possible
reasons for such refusal. Also advise the options available to Paband Limited in
the above circumstances.

(a) 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 Ordinance, 1984:
(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.
(b) 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 Ordinance, 1984 briefly describe the
duties of Masoom Limited and the registrar under the above circumstances.
CHAPTER 22 – SHARE CAPITAL – PROSPECTUS

107 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 Ordinance, 1984 in the
above context.
(b) Narrate the conditions that a company should comply with if its prospectus
contains a statement by an expert.
108 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 Ordinance, 1984 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.
109 Prospectus - registration

The registrar shall not register a prospectus unless certain requirements of the
Companies Ordinance, 1984 are complied with. You are required to list such
requirements.
110 Prospectus – relief from liability

Mr. Zafar a director of Hilltop Limited, a listed company, has received a notice making
him responsible for incorrect information contained in the prospectus issued by the
company and also on account of the company’s failure to meet certain requirements
related to the issue of prospectus.
You are required to list the relevant provisions of the Companies Ordinance, 1984 on
the basis of which Mr. Zafar can claim relief from any liability.
111 Minimum subscription

Under the second schedule to the Companies Ordinance 1984, what are the contents
of the prospectus as regards minimum subscription?
112 Face of prospectus

What are the matters to be stated on the face of the prospectus under the Companies
Ordinance 1984?
113 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.

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CHAPTER 23 – MORTGAGES AND CHARGES

114 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 Ordinance, 1984 for registration of
payment or satisfaction of mortgage.
116 Mortgages
Briefly describe the term ‘Mortgage’ as stated in the Companies Ordinance, 1984.
CHAPTER 24 – MEETINGS
117 AGM timeline
Explain the exceptions to the following provisions as specified under the Companies
Ordinance, 1984:
Every company shall hold its annual general meeting within a period of four months
following the close of its financial year and not more than fifteen months after the
holding of its last preceding annual general meeting.
118 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.
119 AGM and EGM

Briefly explain the exceptions to the following provisions as specified under the
(a) An annual general meeting shall, in the case of a listed company, be held in the
town in which the registered office of the company is situated.
(b) Notice of an extraordinary general meeting shall be sent to the members at least
twenty-one days before the date of the meeting, and in the case of a listed
company shall also be published in the prescribed manner.
120 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.
121 Minutes
Discuss the provisions contained in the Companies Ordinance, 1984 relating to
maintenance of minutes of the general meetings of the company.
122 Meetings – commencement and EGM

Explain whether or not the following statements are in accordance with the provisions
of the Companies Ordinance, 1984 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.
123 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?
124 Members and meetings

(a) Mr. Dinshaw holding 13.5% shares in ABC Limited gave notice of a resolution to
the company on May 17, 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
Ordinance, 1984.
(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?
125 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 Ordinance, 1984 as regards the
circulation of information/documents to various stake holders, prior to the above
meeting.

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126 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 Ordinance, 1984:
(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?
127 EOGM and special business

(a) 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?
(b) Explain the term “special business” with reference to the Companies Ordinance,
1984. Give at least two examples.
128 Special resolutions

What do you understand by the term "special resolution" as explained in the
Companies Ordinance, 1984?
129 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.
130 Commission GM
Under what circumstances does the Commission have the power to call a general
meeting of the company?
131 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 Ordinance, 1984 explain the circumstances
in which Mateen and Ragib would succeed in their contention.
CHAPTER 25 – MANAGEMENT
132 Subsequent CEO
of the Companies Ordinance, 1984. 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.
133 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 Ordinance, 1984 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 Ordinance, 1984 which restrict the chief
executive of a public company from carrying on any business competing with the
company’s business.
134 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 Ordinance, 1984 relating to the casual
vacancy as described above.
135 Election
Narrate the provisions of the Companies Ordinance, 1984 relating to a private
company in respect of:
(a) Appointment of the first directors and their tenure.
(b) Procedure for election of subsequent directors.
136 Presence
Explain the exception to the following provisions as specified under the Companies
Ordinance, 1984.
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.
137 Number, remuneration and assignment

of the Companies Ordinance, 1984.
(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.
(c) 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.
(d) A director of a listed company cannot assign his office to another person under
any circumstances.

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138 Fresh elections

Explain the conditions specified in the Companies Ordinance, 1984 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.
139 Loans
In view of the provisions of the Companies Ordinance, 1984 explain the conditions
which are required to be complied with, if a company wishes to grant loan to its director.
140 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 directors have exceeded the authority
vested upon them by the Companies Ordinance, 1984. Identify those powers of
directors which the shareholders of RRL may be referring to.
141 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 Ordinance,1984:
(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?
142 First and subsequent

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 all the three stock
exchanges in the country 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.
143 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 Ordinance, 1984:
The conditions required to be fulfilled if a person desires to remove the following
directors:
(i) Mr. Aslam
(ii) Mr. Bader
144 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 Ordinance, 1984 which Mr. Shams will
need to comply with.
145 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?
146 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 Ordinance, 1984 describe the
circumstances under which AL may grant loan to Mr. Majnou.
147 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 Ordinance, 1984 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 Ordinance, 1984 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.

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CHAPTER 26 – INVESTMENTS AND DIVIDENDS

148 Associated company
Describe the term “associated company” in accordance with the Companies Ordinance,
1984.
149 Dividend restriction

of the Companies Ordinance, 1984. 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.
150 Investment restriction

Describe the restrictions that have been imposed by the Companies Ordinance, 1984
in respect of investment by a company in its associated undertaking.
151 Payment of dividend

Explain the exception to the following provisions as specified under the Companies
Ordinance, 1984.
Where a dividend is declared by a company but is not paid within the period
specified in the Companies Ordinance, 1984, 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 one million rupees.
152 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
Ordinance, 1984.
153 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 Ordinance, 1984:
(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 Ordinance, 1984 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.

154 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 Ordinance, 1984 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

155 Qualification
Explain whether or not the following statements are in accordance with the provisions of
the Companies Ordinance, 1984 and support your answer with reasons:
A person who holds shares in a company cannot be appointed as the auditor of
such company.
156 Removal - representation

Briefly explain the exceptions to the following provisions as specified under the
If a copy of the representation received from the retiring auditor is not sent to every
member of the company because it was received too late or because of the
company’s default, the auditor may, without prejudice to his right to be heard in
person, require that the representation shall be read out at the meeting.
157 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.
158 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.
159 Registrar and the directors’ report

(a) 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 Ordinance, 1984.

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(b) Describe the contents of the Directors’ Report to be attached with the balance
sheet of a public company, as specified under Companies Ordinance, 1984.
160 Signing the accounts

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
Ordinance, 1984 which REL would have to comply with, in the above situation.
161 The auditors’ report

Explain the provisions of the Companies Ordinance, 1984 in respect of the following:
(a) Reading and inspection of auditors’ report.
(b) Signature on the audit report.
162 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 Ordinance, 1984 for
change of auditors.
163 Auditor and the AGM

Discuss the provisions of the Companies Ordinance, 1984 related to the attendance of
the auditors in the general meeting of the company.
164 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 Ordinance, 1984 as regards:
Restrictions imposed on the appointment of certain persons as auditors of the
company.
165 Appointment by SECP

Narrate the circumstances in which SECP becomes empowered to appoint auditors
under the Companies Ordinance, 1984.
166 Rights/duties of an auditor, casual vacancy and signature in the audit report
Under the provisions of the Companies Ordinance, 1984 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.

167 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 Ordinance, 1984 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.
(c) About the powers and duties of the auditors.

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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)

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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.

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(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;
(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

Section D: Part A - Mercantile Law Answer bank: Objective test and long-form answers
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.
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.

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(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.
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.

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(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.
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 are 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

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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:
(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

Business Law
(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.
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.

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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.
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.

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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.
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.

Business Law
(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:
(i) Novation:
Novation means the substitution of a new contract for an existing one.

Business Law
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.

Business Law
(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.
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
(a) Repayment by bailor of necessary expenses
(i) 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.
(ii) 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) 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.

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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 pawner 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 pawner 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.
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 pawner 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 pawner
Pawnee’s right where pawner 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.

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(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.

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.

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(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.
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;

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(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.
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.

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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.
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.

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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,

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(vii) It must be drawn on a specified banker,

(viii) It must be payable on demand.
(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

Business Law
(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.
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

Business Law
SECTION
D
Part B - Company Law
Objective test and
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:
owns or holds or control more than fifty percent of its voting securities or
has power to elect and appoint more than fifty percent of its directors: or
(ii) the first mentioned company is a subsidiary of any company or body corporate
which is that other’s subsidiary
85 Association NFP
(a) The Commission may grant a licence 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, sports,
social services, 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) A licence may be granted on such conditions and regulations as the
Commission thinks fit and those conditions and regulations shall be
binding on the association and shall, if the Commission so directs, should
be inserted in the memorandum and articles, or in one of those
documents.
(b) The licence may be revoked at any time by the Commission after giving a notice
in writing of its intention and shall afford Alfalah Associates an opportunity of
submitting a representation in opposition to the revocation. On revocation of the
licence, the registrar shall enter the word Limited at the end of the name of the
Alfalah Associates in the register, and Alfalah Associates will be required to use
the name as entered in the register.

Business Law
86 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 securities from general
public.
And any company which is not a private company, is a public company
87 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
So as per the definition of the holding and subsidiary company under the Ordinance,
KRL is also the holding company of TIL
88 Associations not for profit

(a) 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 or (Private) Limited etc. to its name, subject to the following:
(i) Such association has been set up for promoting:
commerce art science
religion sports social services
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.
(b) Alteration in registered office clause
For alteration in the registered office, Muntaqil Limited shall:
(i) pass a special resolution.
(ii) obtain approval of Commission within sixty days of the date of
resolution.
(iii) forward a copy of the approval of Commission to the registrar of new
and old province within ninety days of receiving the order. If such
alteration is not made within ninety days, the alteration shall not be
effective however, Commission may extend this time period for another
ninety days.
(iv) When Muntaqil Limited actually shifts its registered office, it shall inform
the registrar within 28 days of the date of such shifting.

Section D: Part B - Company Law Answer bank: Objective test and long-form answers
89 Fajita
June 10, 2010
Warsi family
Fajita Specialists
Subject: Opinion regarding incorporation of “Fajita Specialists” as a Limited
Liability Company
Respected members of the Warsi family
As per company’s ordinance 1984, any association, partnership or company formed
for the purpose of carrying on any business shall be required to be registered as a
company under the Ordinance if it consists of more than twenty persons. However if
the association or company is a joint family carrying on joint family business then
they shall not be required to be registered as a Company under the Companies
Ordinance 1984.
As your business is a joint family business carried on by a joint family, it shall not be
required to be registered as a company even if its number of members exceeds
twenty.
If you require any further information regarding the matter, the undersigned shall be
pleased to assist.
Kind regards
Corporate Advisor
90 Zouk
The Companies Ordinance 1984 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.
91 Company registration exceptions

Any association partnership or company consisting of more than twenty members
cannot be formed for the purpose of carrying on any business for acquisition of gain
unless it is registered as a company under the Companies Ordinance, 1984, except in
the following cases:
(i) Any society, body or association other than a partnership, formed or
incorporated under any other Pakistani law.
(ii) A joint family carrying on joint family business.
(iii) A partnership of two or more joint families where the total number of
members of such families, excluding the minor members, does not
exceed twenty.
(iv) Partnership formed to carry on practice of any profession where practice as a
limited liability company is not permitted under the relevant laws or regulations
for such practice.
Obligation to register certain associations, partnerships, etc. as a company
(Section 14)

Business Law
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 by reason of any
failure to apply for or to obtain permission for the shares or debentures to be
dealt in on any stock exchange.
(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 and registered office

(a) (i) According to the Companies Ordinance, 1984 a company may alter the
memorandum with respect to the objects of the company so far as may
be required to enable it to:
carry on its business more economically or more efficiently; or
attain its main purpose by new or improved means; or
enlarge or change the local area of its operations; or
carry on some business, not being a business specified in its
memorandum, which may conveniently or advantageously be
combined with the business of the company; or
restrict or abandon any of the objects specified in the memorandum;
or
sell or dispose of the whole or any part of the undertaking of the
company; or
amalgamate with any other company or body of persons.
(ii) A Special Resolution authorising the change has to be passed.
(iii) The alteration shall not take effect until and except in so far as it is
confirmed by the Commission.
Before confirming the alteration, the Commission must be satisfied:
that sufficient notice has been given to every holder of debentures of
the company, and to any person or class of persons whose interest
will, in the opinion of the Commission, be affected by the alteration;
and

that, with respect to every creditor who in the opinion of the

Commission is entitled to object and who signifies his objection in
manner directed by the Commission, either his consent to the
alteration has been obtained or his debt or claim has been
discharged or determined, or has been secured to the satisfaction of
the Commission.
(iv) A certified copy of the order of the commission along with the altered
memorandum is required to be filed with the registrar, within 90 days of
the order.
(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.
94 MOA – alteration
The commission may confirm the alteration in the memorandum of association of the
company if it is satisfied that:
(i) Sufficient notice has been given to every debenture holder of the company,
and to any person or class of persons whose interest will, in the opinion of the
Commission, be affected by the alteration; and
(ii) With respect to every creditor who in the opinion of the Commission is entitled
to object, and who signifies his objection in the manner directed by the
Commission either his consent to the alteration has been obtained or his debt
or claim has been discharged or determined, or has been secured to the
satisfactions of the Commission.
On confirmation of the alteration in the memorandum, the company shall file with the
registrar, a certified copy of the order confirming the alteration, together with a printed
copy of the memorandum as altered, within ninety days, from the date of the order.
95 Articles of association
(a) Section 26 & 27,Companies Ordinance, 1984
(i) The company may adopt all or any of the regulations specified in Table A in
the First Schedule to the Companies Ordinance, 1984 in 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
divided into paragraphs numbered consecutively
signed by each subscriber
dated
(b) Section 26, Companies Ordinance, 1984
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.

Business Law
(c) Section 28 & 36, Companies ordinance, 1984

(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) 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.
96 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. Object clause
This clause of the memorandum clause contains the objects of the company and,
except in the case of a trading corporation the territories to which they extend.
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, the
following additional sentences are added, ‘that each member undertakes to
contribute to the assets of the company in the event of it being wound up while
he is a member or within one year afterwards, for payment of the debts and
liabilities of the company contracted before he ceases to be a member, and of
the costs, charges and expenses of winding up, and for adjustment of the rights
of the contributories among themselves such amount as may be required, not
exceeding a specified amount.
97 MOA – Alteration (office and objects)

As per the Ordinance a company can alter the object or registered office clause of its
memorandum of association only if any of the following can be proved to the
satisfaction of the Commission:
to carry on its business more economically or more efficiently; or
to attain its main purpose by new or improved means; or
to enlarge or change the local area of its operations; or

to carry on some business, not being a business specified in its memorandum,

which may conveniently or advantageously be combined with the business of the
company; or
to restrict or abandon any of the objects specified in the memorandum; or
to sell or dispose of the whole or any part of the undertaking of the company; or
to amalgamate with any other company or body of persons.
The alteration shall not take effect until and except in so far as it is confirmed by the
Commission on petition of the company filed for this purpose.
98 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, it shall be filed with the registrar of companies. A
declaration of compliance (on Form 1) with requirements of the Ordinance 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 that:
the company is being formed for lawful purposes,
none of its objects stated in the memorandum is inappropriate or deceptive or
insufficiently expressive and
All the requirements of this Ordinance 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 a registrar higher in rank or
ultimately to the commission if no relief is received against such a refusal. Order of
Commission on such appeal shall be final.
99 Name
When selecting the name it should be considered that the name:
is not inappropriate 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 Ordinance, except where the company in existence, is in the course of
being dissolved and signifies its consent in granting its name to the new company
in such manner as the registrar requires.
Whatever name is proposed, the final authority to decide whether or not a name is in
line with the provisions of the Ordinance lies with the Commission.
100 Disallowed name

Where a company has, due to any reason, been registered with a name which is not
permitted by the Ordinance, the company may, on its own, change the name with the
approval of the registrar.
The registrar may also direct the company to change its name within thirty (30) days of
the receipt of such directions. The registrar cannot issue any direction in this regard
after the expiration of three years from the date of registration of the name of the
company.
The registrar shall give to the company an opportunity of being heard before issuing
such direction.

Business Law
101 Increase in authorized capital

Section 92 and 94
The company may increase the authorized capital subject to the following conditions:
(i) Increase is allowed under the articles of association.
(ii) Alter the capital clause of memorandum of association.
(iii) Pass a special resolution.
(iv) File a notice of the increase of capital along with the special resolution with the
registrar within 15 days of passing of resolution. The notice shall include
particulars of the shares to be affected and the conditions, if any, subject to
which the new shares are issued.

(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.
103 Purchase of own shares

Company is not entitled to buy its shares from the members. Further, company is also
forbidden to buy the shares of its holding company. However as an exception, If
subsidiary carries on a bona fide business of brokerage, then company can deal in the
shares of its holding company but in this case as well, the company shall not exercise
voting rights on the shares of the holding company held by it.
As a further exception, if a subsidiary company provides service of a trustee for shares
and people buy the shares and place them in the subsidiary company as trustee then
such subsidiary, while acting as a subsidiary can hold the shares of the holding
company in trust as well but beneficial ownership of those shares should not be in the
name of the subsidiary company itself or the holding company.
104 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, r 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 decision
of the court on such matter shall be final and appeal cannot be filed against such
decision and 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.
105 Member
(a) 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;
(b) Registration of memorandum of association:
Grounds of refusal:
The registrar may refuse to register the memorandum of association of Paband
Limited, if he is of the opinion that:
(i) The company is being formed for unlawful purposes;
(ii) All or any of the objects stated in the memorandum are inappropriate or
deceptive or insufficiently expressive; and
(iii)All the requirements of the Companies Ordinance, 1984 and the Rules
made thereunder in respect of registration and matters precedent and
incidental thereto have not been complied with.
Options available to Paband Limited:
In case of refusal of registrar to register the memorandum, the subscribers of
the memorandum or any one of them authorised by them in writing may either
(i) Supply the deficiency and remove the defect pointed out by the registrar;
or
(ii) Within 30 days of the order of refusal prefer an appeal-
where the order of refusal has been passed by an additional registrar,
a joint registrar, a deputy registrar or an assistant registrar, to the
registrar; and
where the order of refusal has been passed, or up-held in appeal, by
the registrar, to the Commission.
An order of the Commission as stated above shall be final and shall not be
called in question before any Court or other authority.

(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.

Business Law
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 21 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.
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.
107 Prospectus – consent of expert

(a) "Expert" includes an engineer, a valuer, an accountant and every 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:
(i) 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; and
(ii) A statement that he has given and has not withdrawn his consent as
aforesaid appears in the prospectus.
108 Prospectus – publication and availability

(a) Section 53(2), Companies Ordinance,1984
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) Section 53 (1A),Companies Ordinance,1984
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 the stock exchange at which the company is listed or proposed to be
listed; and,
(iii) with the bankers to the issue,
109 Prospectus - registration

Section 52, 53 , 54, 55, 57
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.
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.
110 Prospectus – relief from liability

Mr. Zafar shall not incur any liability by reason of any non-compliance with, or
contravention of, any of the requirements of Companies Ordinance, 1984 related to the
prospectus, if
(a) he proves that he had no knowledge regarding the matter not disclosed;
(b) he proves that the non-compliance or contravention arose from an honest mistake
of fact on his part; or
(c) that non-compliance or contravention was in respect of matters which, in the
opinion of the registrar or officer dealing with the case, were immaterial, or was
otherwise such as ought, in the opinion of that registrar or officer, as the case may
be, having regard to all the circumstances of the case, reasonably to be excused.

Business Law
111 Minimum subscription

The amount of minimum subscription must be stated in the prospectus. This includes:
Purchase price of property to be purchased.
Preliminary expenses including underwriting commissions etc.
Repayment of any money borrowed for above matters.
Working capital.
Any other expenditure.
If the company intends to meet all or any of the above needs from any source
other than the issue of shares, such source shall be disclosed.
112 Face of prospectus

Following matters shall be stated on the face of the prospectus:
That a copy of this prospectus has been filed with the registrar for registration
purpose.
List of documents or a reference to any note in the prospectus containing the list
of documents that were filed with the registrar along with the copy of the
prospectus when it was filed for registration.
That an application for listing of the shares or debentures offered under the
prospectus has been filed or shall be filed with the stock exchange.
113 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 (not being a pledge).
(vi) on a ship or any share in a ship.
(vii) on goodwill, on a patent or licence under a patent, on trade mark, or
copyright or licence under a copyright.
(viii) or other interest based on agreement for the issue of any instrument in the
nature of redeemable capital.
(ix) or other interest based on a Musharika agreement.
(x) or other interest based on a hire-purchase or leasing agreement for
acquisition of fixed assets.
(xi) 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 twenty-one 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.
(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

Business Law
116 Mortgages
A mortgage is the transfer of an interest in specific immovable property for the purpose
of securing the payment of money advanced or to be advanced by way of a loan or the
performance of an engagement which may give rise to a financial liability.
117 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, not being
the first such meeting, shall be held, by a period not exceeding thirty days.
118 Ordinary vs. special

(a) The following businesses transacted at a general meeting are considered as
ordinary businesses:
(i) consideration of the accounts and balance-sheets
(ii) The presentation of the reports of the directors and auditors,
(iii) declaration of a 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.
119 AGM and EGM

The exception to the statements given in the question are as under:
(a) The Commission for any special reason may on the application of such
company allow the company to hold a particular meeting at any other places.
(b) In the case of an emergency affecting the business of the company the
registrar may on the application of the directors authorize such meeting to be
held at such shorter notice as he may specify.
120 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:
(i) in the case of a public company, by at least five members having the right
to vote on the resolution and present in person or by proxy;
(ii) in the case of a private company, by one member having the right to vote
on the resolution and present in person or by proxy if not more than seven
such members are personally present, and by two such members present
in person or by proxy if more than seven such members are personally
present.

(iii) by any member or members present in person or by proxy and having not
less than one-tenth of the total voting power in respect of the resolution.
(iv) by any member or members present in person or by proxy and holding
shares in the company conferring a right to vote on the resolution, being
shares on which an aggregate sum has been paid up which is not less than
one-tenth of the total sum paid up on all the shares conferring that right.
(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.
121 Minutes
Every company shall enter a fair and accurate summary of 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
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.
122 Meetings – commencement and EGM

(a) The statement is incorrect because private companies are not required to hold
statutory meetings. Moreover, the statutory meeting is to be held within a period
of not less than three months, or more than six months, from the date at which
the company is entitled to commence business.
(b) In the case of an emergency affecting the business of the company, the registrar
may, on the application of the directors, authorize EOGM to be held at such
shorter notice as he may specify.
123 Quorum
(a) Being a public listed company, the quorum of the meeting is not less than 10
members present personally 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.

Business Law
(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.
124 Members and meetings

(a) (i) Section 164 (1) & (2),Companies Ordinance,1984
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 173 (6) & (7),Companies Ordinance,1984
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.
(iii) Section 173 (1) & (4),Companies Ordinance,1984
A fair and accurate summary of the minutes of all proceedings of general
meetings and meetings of its directors and committee of directors is
required to be maintained by every company. The names of the
participants of the meetings should also be entered in properly
maintained books.
The minutes book of the proceedings of the general meetings and directors’
meetings of the company are required to be kept at the registered office of
the company.
(b) Resolution passed at adjourned meeting-Section 169, Companies
Ordinance, 1984
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.

125 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.
The notice shall be sent to the following:
All the members;
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) Being a listed company, such notice shall also be published at least in one daily
newspaper in English language and a daily newspaper in Urdu language having
circulation in the Province in which the stock exchange on which the company is
listed is situated.
(iii) Copies of draft resolutions, which are proposed for consideration in the meeting.
(iv) Every company shall also send:
copy of audited balance sheet and Profit and loss account
copy of auditors report
Directors report
The above should be sent to the following:
the registered address of every member of the company
Securities & Exchange Commission
Stock exchange
Registrar.
Section 158, 160, 161 and 164
126 Representation and proxy

(a) A company which is a member of another company may by resolution of the
directors, authorize any of its officials or any other person to act as its
representative at the meeting of that other company.
Representation of corporation at meetings of companies
(Section 162)
(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.
Proxies Section 161 (3b & 5)

Business Law
127 EOGM and special business

(a) (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 the company, the registrar
may on the application of the directors, authorize such meeting to be held
at such shorter notice as he may specify.
Calling of extra ordinary general meeting, (Section 159-7)
(b) 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 accounts, balance sheet 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.
Provisions as to the meetings and votes, (Section 160 - b)
128 Special resolutions

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.
129 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.
130 Commission GM
Commission has got the powers to call general meetings of the company if the
company fails to
a) Call a general meeting
b) Call a statutory meeting or
c) Call an extraordinary general meeting on the requisition of the members.

131 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.
132 Subsequent CEO

The statement is incorrect.
Any chief executive (first or subsequent) 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.
133 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.
134 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 Ordinance 1984.

Business Law
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.
135 Election
(a) The number and names of the first directors of the company shall be determined
in writing by the majority of subscribers of the memorandum of the company and
until so determined, all the subscribers of the memorandum, who are natural
persons, shall be deemed to be the directors of the company.
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.

136 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 against any loss which the directors, or any one or
more of them, may suffer by reason of becoming or being sureties or a
surety for the company;
(iii) any contract or arrangement entered into or to be entered into with a public
company, in which the interest of the director aforesaid consists solely in his
being a director of such company and the holder of no more than such
shares therein as are requisite to qualify him for appointment as a director
thereof, he on being nominated as such director by the sending company.
137 Number, remuneration and assignment

(a) The statement is not in accordance with the provisions of the Companies
Ordinance 1984 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
Ordinance 1984. 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 not in accordance with the provisions of the Companies
Ordinance 1984. The assignment of office is possible provided it is allowed
under the articles of association of the company and assignment is approved by
a special resolution passed by the shareholders at the general meeting of the
company.
138 Fresh elections

Any person who is holding not less than 12.5% voting shares of the company, in his
own name, may apply to the Commission for requiring the company to hold fresh
election of directors in accordance with the procedure laid down under the Companies
Ordinance, 1984 in the forthcoming annual general meeting of the company.
The Commission may, if it deems appropriate in the interest of the company, its
minority shareholders or the capital markets generally, direct the company to hold the
election of directors in the manner provided under section 178, and the company shall
comply with such direction.
The person on whose request such elections are held shall not sell or otherwise
dispose of the shares acquired by him for at least one year from the date of election
of directors.
139 Loans
The company may grant loan to a director if he is in the whole time employment of the
company. Such loan may be granted after getting prior approval from the
Commission.

Business Law
The purpose for which a company may grant the loan are as follows:
(a) For acquisition or construction of a dwelling house or land therefore
(b) For defraying the cost of any conveyance for personal use or household
effects
(c) For defraying any expense on his medical treatment or the medical treatment
of any relative as are ordinarily made or provided by the company to its
employees.
140 Power
Powers of Directors.
The shareholders seem to be referring to the following powers of the directors of
RRL:
(i) Make calls on shareholders in respect of moneys unpaid on their shares.
(ii) Borrow moneys otherwise than on debentures.
(iii) Invest the funds of the company.
(iv) Make loans.
(v) Incur capital expenditure on any single item or dispose of a fixed asset, in
accordance with the limits prescribed.
(vi) Undertake obligations under leasing contracts exceeding one million rupees.
(vii) Issue shares
(viii) Issue debentures or any other instrument in the nature of redeemable
capital.
(ix) Declare interim dividend
(x) Write off bad debts, advances and receivables
(xi) Write off inventories and other assets of the company
(xii) To authorize sale, purchase or supply contracts with interested companies
and firms
(xiii) To approve annual, half yearly or other periodical accounts to be circulated to
members.
(xiv) To approve bonus to employees
141 Number and casual vacancy

(a) Section 174 & 178(1),Companies Ordinance,1984
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 180(2),Companies Ordinance,1984

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.
142 First and subsequent

First Directors
The names of the first directors shall be determined in writing by a majority of the
subscribers of the memorandum until so determined; all the subscribers of the
memorandum shall be deemed to be the directors of the company.
The first directors shall hold office until the election of directors in the first annual
general meeting.
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
The directors shall appoint any individual to be the chief executive of the Company
who shall hold office up to the first annual general meeting of the company or, if a
shorter period is fixed by the directors as the time of his appointment, for such period.
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.
143 Removal
Removal of Directors-Section 181,Companies Ordinance,1984
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.
144 Loan repayment

Section 184(1) and Section 195(4)
If the loan is obtained for the purpose of:
acquisition or construction of dwelling house;
defraying the cost of any conveyance;
defraying the cost of any household;
defraying any expense on his medical treatment;
defraying any expense on his relative’s medical treatment.

Business Law
Then Mr. Shams shall within fourteen days of his appointment as chief executive of
the company file with the registrar the particular of the loan taken, prior to his
becoming chief executive which could not have been taken without the prior approval
of the Commission.
If the loan is not obtained for the above purposes, then he will be required to repay the
loan before the acceptance of the position of CEO.
145 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.
146 Interest free loan

Loans to directors:
AL cannot, directly or indirectly, grant any loan to its director, Mr. Majnou.
However, with the approval of Commission, AL may make a loan to Mr. Majnou,
provided he is in the whole-time employment of AL. The loan may be granted:
for the purpose of acquisition or construction of a dwelling house or land thereof;
or
for paying the cost of any conveyance for personal use or household effects; or
For paying any expense on his medical treatment or the medical treatment of
any relative as are ordinarily made or provided by the company to its employees.
147 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
Ordinance 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 Ordinance, a chief executive
shall be eligible for reappointment.
The chief executive retiring under the Ordinance 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 Ordinance
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:
(i) if he or his spouse engages in the business of brokerage, or if he sponsors,
or becomes a director or officer of a corporate brokerage house or loses
fiduciary behaviour.
(ii) if he absents himself from three consecutive meetings of the directors or
from all the meetings of the directors for a continuous period of three
months, whichever is the longer, without leave of absence from the
directors;
(iii) 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 a banker; or
accepts a loan or guarantee from the company in contravention of the
provisions of the Ordinance.
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).
148 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

Business Law
(ii) 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, where such shares
are beneficially owned by the 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.
149 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.
150 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
borrowing cost of investing company.
No change in the nature of an investment or the terms and conditions attached thereto
shall be made except under the authority of a special resolution.
151 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.

152 Dividend amendment

(i) Once the dividend is recommended by the Board of Directors, it may be reduced by
approval of members, in the AGM. Certain restrictions on declaration of dividend
Section 248(1)
(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.
153 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 borrowing cost of investing company (SSL).
unless it complies with the regulations made by the Commission in
this regard.
(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.
An investment company whose principal business is the purchase and
sale of securities can make and keep its investments in someone else’s
name.
154 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 one million rupees.

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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.
155 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.
156 Removal - representation

It shall not be necessary to read out the representation received from the retiring auditor,
at the meeting if on the application either of the company or of any other aggrieved
person the registrar is satisfied that the rights conferred by this section are being abused
to secure needless publicity for defamatory matter;
157 Removal – change of auditor

The Company shall forthwith send a copy of such notice to the retiring auditor and
shall also give thereof to its members not less than seven days before the date fixed
for the annual general meeting and shall also publish it at least in one issue each of a
daily newspaper in English Language and a daily newspaper in Urdu Language
having circulation in the Province in which the stock exchange on which the company
is listed is situated.
158 Books of accounts

(a) SQL Plastic Limited must keep proper books of account with respect to:
(i) all sums of money received and expended by the company;
(ii) all sales and purchases of goods by the company;
(iii) all assets of the company;

(iv) all liabilities of the company; and

(v) in the case of a company engaged in production, processing, manufacturing
or mining activities, such particulars relating to utilization of material or
labour or other inputs or items of cost, or any other particulars as required
by the Commission through a general or special order to be included in the
books of accounts.
(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.
159 Registrar and the directors’ report

(a) 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 balance-
sheet and profit and loss account 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:
The company must file with the registrar two copies of the balance-sheet
and profit and loss account that have been laid before the company at the
annual general meeting and signed by the chief executive, directors,
chairman of directors or the auditors of the company in the prescribed
manner, within thirty days from the date of AGM.
(b) The contents of the directors’ report of a public company, as specified in the
Companies Ordinance, 1984 are as follows:
(i) report on the company’s affairs;
(ii) the amount of recommended dividend;
(iii) amount proposed to be carried to the Reserve Fund, General Reserve or
Reserve Account;
(iv) 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;
(v) 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;
(vi) fullest information and explanation regarding any reservation, observation,
qualification or adverse remarks contained in the auditor’s report;
(vii) the pattern of shareholding;
(viii) name and country of incorporation of its holding company, if any, where
such holding company is established outside Pakistan;
(ix) earnings per share;

Business Law
(x) reasons for incurring loss and a reasonable indication of future prospects
of profit, if any;
(xi) information about defaults in payment of debts, if any, and reasons
thereof.
160 Signing the accounts

When the chief executive is for the time being not in Pakistan, then the balance-sheet
and profit and loss account or income and expenditure account of the company shall
be signed by not less than two directors for the time being in Pakistan, but in such a
case there shall be subjoined to the balance-sheet and profit and loss account or
income and expenditure account a statement signed by such directors explaining the
reasons on account of which the accounts could not be signed by the Chief
Executive.
161 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.
162 Appointment of auditor

Procedure for change of auditor and company’s responsibilities
(i) 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.
(ii) The company shall forthwith send a copy of notice not less than seven days
before the date fixed for the annual general meeting to the following:
retiring auditor
its members and
(iii) being a listed company, SPL shall also publish notice at least in one issue each
of a daily newspaper in English language and a daily newspaper in Urdu
language having circulation in the Provinces (Sind & Punjab) in which the stock
exchanges on which the company is listed are situated.
(iv) Where retiring auditor makes with respect thereto a representation in writing to
the company and requests its communication to the members of the company,
the company shall,
in any notice of the resolution given to members of the company, state the
fact of the representation having been made; and
send a copy of the representation to every member of the company to
whom notice of the meeting is sent by the company and if copy is not sent
as aforesaid because it was received too late or because of a company’s
default, the auditor may require that the representation shall be read out
at the meeting.

(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.
(vi) The company shall, within fourteen days from the date of retirement of the
previous auditor send intimation thereof to the registrar.
163 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 balance-sheet and profit and loss account and the auditor’s report are to be
considered.
164 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 body corporate.
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.
Powers and duties of auditors
Section 254(3)
165 Appointment by SECP

Section 252(6)
In the following circumstances SECP becomes authorized to appoint the auditors of a
company:
(i) The first auditors are not appointed within one hundred and twenty 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, or
(v) Auditors are removed by the company before the expiry of their term.

Business Law
166 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
balance-sheet and profit and loss account and the auditors’ report are to
be considered.
(vi) the retiring auditor, subject to certain conditions, has a right to be heard
at the general meeting where new auditor is to be appointed or may
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 in the following
manner:
the directors may fill any casual vacancy in the office of an auditor; but,
while any such vacancy continues, the surviving or continuing auditor or
auditors, if any, may act.
if the directors fail to fill the casual vacancy within thirty days after the
occurrence of the vacancy, the commission may appoint a person to fill
the vacancy.
however, in the above case, the company shall within one week of the
Commission’s power becoming exercisable, give notice of that fact to 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, any of the partners practicing in
Pakistan may sign the report.
The report shall carry a date and shall indicate the place at which it is signed.
167 Appointment of a 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 directors within sixty days of
the date of incorporation of TPL.
If the directors fail to exercise their powers within the stipulated time, the
company in the general meeting may appoint the first auditor.

If the first auditors are not appointed by the company in the general meeting
within 120 days of date of incorporation of TPL, the Commission may appoint a
person to fill the vacancy.
However, under such circumstances TPL shall inform the Commission within
one week of the Commission’s power becoming exercisable.
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.
(c) Powers 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.

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© Emile Woolf International, September 2016

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

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

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

1 Federal Shariat Court 11 45

5 Civil law and criminal law 11 46

7 Basis of legal system 11 47

8 Company Court and Company bench 11 47

Chapter 2 - Introduction to law of contract

9 Essential elements of a contract 12 48

Chapter 3 - Offer and acceptance

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

13 Offer and acceptance 12 51

Chapter 4 - Capacity of parties

Chapter 6 – Free consent

21 Rescind the contract 13 54

Chapter 7 - Legality of Object and consideration and

23 Opposed to public policy 13 55

Chapter 8 – Void agreement

25 Exceptions of void agreements 14 56

Chapter 9 – Contingent contracts

27 Rules of contingent contracts 14 57

Chapter 10 – Quasi contracts

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

Chapter 11 – Performance of a contract

30 Tender and essentials of tender 14 59

31 Time and place of performance 15 59

33 Joint promisor and promisee 15 60

Chapter 12 – Discharge of a contract

36 Discharge by mutual agreement 16 61

Chapter 13 – Remedies for breach of contract

39 Remedies for breach of contract 16 62

Chapter 14 – Indemnity and guarantee

Chapter 15 – Bailment and pledge

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

54 Rights of Pawnee and Pawnor 18 67

57 Duties of agent toward principal 19 69

Chapter 17 – Partnership Act

63 Rights of outgoing partner 20 71

64 Mutual rights and liabilities 20 71

71 Rights and disabilities 21 74

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

Chapter 18 – Negotiable instruments Act

75 Inchoate stamped instrument 22 76

77 Payment in due course 22 77

Holder, Holder in due course,

82 Negotiation and Indorsement 23 79

Provisions of the Negotiable

84 Subsidiary and holding co. 25 83

88 Associations not for profit 25 84

Chapter 20 – Incorporation of company

91 Company registration exceptions 26 85

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

93 MOA – object and registered office 26 86

96 MOA – Nil capital 27 88

97 MOA – Alteration (office and objects) 27 88