A.

Fill in the blanks with the appropriate answers: (a) Legal sources are the means by which the law is currently brought into existence. There are four current sources of law in Pakistan: Holy Quran OR Agreement, Precedent, Legislation and Custom. (b) Obiter dicta in a judgment means the statements which are not essential to the decision in a case but are things said by the way. (c) The right of appeal in criminal cases is given by law both to the accused convicted of criminal charges and to the prosecution. (d) The statement of law on which the judge bases his decision is called ratio decidendi. (e) There are four types of precedents namely; Original precedent, Declaratory precedent, Binding precedent and Persuasive precedent.

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A.2

(a) 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. (b) Agreement in restraint of legal proceedings No, Rafiq is not justified in his contention. As every agreement, by which any party thereto is restricted absolutely from enforcing his right under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent. Exception: A contract however, shall not be rendered illegal, where there is a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration.

A.3

(a) (i)

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.

(ii) 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. (b) 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) (ii) (iii) (iv) (v) the suggestion, as a fact of that which is not true by one who does not believe it to be true; the active concealment of a fact by one having knowledge or belief of the fact; a promise made without any intention of performing it; any other act fitted to deceive; any such act or omission as the law specially declares to be fraudulent.

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A.4

(a) (i)

Agents 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. Agents 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.

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(ii)

(iii) Agents 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. (b) Since the knowledge regarding the ownership of the generator was not obtained by Rais in the course of the business transacted by him, Sami may set off the debt owed to him by Atif against the price of the generator. Any notice given to or information obtained by the agent, provided it be given or obtained in the course of the business transacted by him for the principal, shall, as between the principal and third parties, have the same legal consequences as if it had been given to or obtained by the principal.

A.5

(a) Novation When the parties to a contract mutually agree to substitute a new contract for an existing contract, it is called novation of a contract. Novation takes place when: (i) a new contract is substituted for an existing one between the same parties; or (ii) parties to the contract are substituted by the new contracting parties while the terms of the contract remain the same. Difference between novation and alteration In case of novation there may be a change of parties also while in case of alteration parties remain the same, only the terms of a contract are altered. (b) Free Consent Consent is said to be free when it is not caused by: (i) coercion, or (ii) undue influence, or (iii) fraud, or (iv) misrepresentation, or (v) mistake. Various modes of discharge of contract: Following are the various modes in which a contract may be discharged. (i) Discharge by agreement (ii) Discharge by operation of law (iii) Discharge by breach of contract (iv) Discharge by performance (v) Discharge by subsequent impossibility (vi) Discharge by lapse of time

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MERCANTILE LAW Suggested Answers Foundation Examinations Spring 2010 A.6 (a) (i) Delivery of wrong quantity: Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered he shall pay for them at the contract rate. Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or if the goods delivered are such that it is difficult or time consuming to separate the quantity contracted for, he may reject the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them at the contract rate. Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or may reject the whole. The above provisions are subject to any usage of trade, special agreement or course of dealing between the parties. (ii) Implied conditions in a contract for sale by sample that the bulk shall correspond with the sample in quality; that the buyer shall have a reasonable opportunity of comparing the bulk with the sample; that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample. (b) Goods sent on approval or on sale or return Farhan would be justified to record the sale of jewellery when the property in the goods passes to Sonia. When goods are delivered to the buyer on approval or on sale or return or other similar terms, the property in the goods passes to the buyer --(i) when he/she signifies his/her approval or acceptance to the seller or does any other act adopting the transaction; (ii) if he/she does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time and if no time has been fixed on the expiration of a reasonable time.

A.7

(a) Mutual rights and liabilities of partners In the absence of any express contract: (i) (ii) every partner has a right to take part in the conduct of the business; 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; every partner has a right to have access to and to inspect and copy any of the books of the firm; a partner is not entitled to receive remuneration for taking part in the conduct of the business; 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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(iii)

(iv) (v)

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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; 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;

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(vii)

(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.

(b) Rights of transferee of a partners interest Where a partners 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. (c) A contract of partnership like any other contract may be rescinded on the ground of fraud or misrepresentation. Therefore, Basit who was mislead by Danish has a right to rescind the partnership contract and is entitled to the following rights, without prejudice to any other right: (i) to a lien on, or a right of retention of, the surplus or the assets of the firm remaining after the debts of the firm have been paid, for any sum paid by him for the purchase of a share in the firm and for any capital contributed by him; (ii) to rank as a creditor of the firm in respect of any payment made by him towards the debts of the firm; and (iii) to be indemnified by the partner or partners guilty of the fraud or misrepresentation against all the debts of the firm.

A.8

(a) 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
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within a reasonable time and strictly in accordance with the authority given.

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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. (b) Holders right to duplicate of lost bill Zohair, being the holder of a bill of exchange may apply to Zahid, the drawer, to give him another bill of the same tenor, giving security to Zahid, if required, to indemnify him against all persons, in case the bill alleged to have been lost shall be found again. If Zahid on request as aforesaid refuses to give such duplicate bill, he may be compelled to do so. A.9 (a) (i) (ii) Carrier includes the owner or the charterer who enters into a contract of carriage with a shipper. Goods includes goods, wares, merchandises, and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried. Carriage of goods covers the period from the time when the goods are loaded on to the time when they are discharged from the ship.

(iii)

(b) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, or if the loss or damage be not apparent, within three days, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. OR Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within 3 days of the delivery. OR Removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, is prima facie evidence of the delivery of the goods by the carrier as described in the bill of lading, unless notice of the loss or damage and the general nature of such loss or damage is given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods. If the loss or damage is not apparent, the notice must given within 3 days of the delivery.

A.10 (a) Revocation of Trust Sufi may revoke the trust only if it has not been communicated to the creditors. However, if the creditors are parties to the arrangement, the trust can only be revoked with their consent. (b) Liability of beneficiaries The beneficiary becomes liable for the breach of trust under the following circumstances. Where one of several beneficiaries: (i) joins in committing breach of trust, or (ii) knowingly obtains any advantage there from, without the consent of the other beneficiaries, or (iii) becomes aware of breach of trust committed or intended to be committed, and either actually
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conceals it, or does not within a reasonable time take proper steps to protect the interests of the other beneficiaries, or (iv) has deceived the trustee and thereby induced him to commit a breach of trust. (THE END)

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