Mercantile law paper 2010

MERCANTILE LAW

FEDERAL PUBLIC SERVICE COMMISSION

COMPETITIVE EXAMINATION FOR
RECRUITMENT TO POSTS IN BPS-17 UNDER
THE FEDERAL GOVERNMENT, 2010

PART – I (MCQ)
(COMPULSORY)

Q.1. Select the best option/answer and fill in the appropriate box on the Answer
Sheet. (20)

(i) A signs promissory instrument in the following terms:

(a) Mr. B I.O.U. Rs.1000
(b) I promise to pay Rs. 500 seven days after my marriage with C
(c) I acknowledge to be indebted to B in Rs.1000 to be paid on demand, for value
received
(d) I promise to pay Rs. 500 to B and to deliver my black horse on 1st January next
(e) None of these

(ii) How many parties are there to a “Promissory note” and a “bill of exchange”?
(a) There are three parties to a “Promissory note” and four to a “bill of exchange”
(b) There are four parties to a “Promissory note” and three to a “bill of exchange
(c) There is one party to a “Promissory note” and two to a “bill of exchange”
(d) There are two parties to a “Promissory note and three to a bill of exchange”
(e) None of these

(iii) In a cheque issued by A to B, amount is stated differently in figures and in

words:
(a) the amount stated in words shall be the amount ordered to be paid
(b) the amount stated in figures shall be the amount ordered to be paid
(c) the cheque will be returned to the bearer by the banker for correction by the
drawer
(d) None of these

(iv) When consent to an agreement is caused by coersion, fraud or mis-

representation, the agreement is:
(a) valid 
(b) void
(c) voidable at the option of a party whose consent was so caused (d) partially void
(e) None of these

(v) A voidable contract is:

(a) An illegal agreement 
(b) Partly valid agreement
(c) void ab initio
(d) None of these

(vi) A minor in a firm enjoys the following rights:

(a) He may be admitted to the benefits of partnership
(b) He cannot have access to and inspect and copy any of the accounts of the firm
(c) None of these

(vii) A fully paid share-warrant of a company limited by shares is to be treated like

a:
(a) Cheque 
(b) negotiable instrument 
(c) Bill of Exchange 
(d) None of these

(viii) A private company can be incorporated by:

(a) 2 persons 
(b) 3 persons 
(c) 7 persons 
(d) None of these

(ix) A public company must have at least:

(a) 5 persons 
(b) 7 persons 
(c) 9 persons 
(d) None of these

(x) A private company cannot have more than:

(a) 20 members 
(b) 30 members 
(c) 50 members 
(d) None of these

(xi) Eliason V. Hamshaw (1819) Sup Ct US 4 wheaton 225 deals with:

(a) Counter proposed 
(b) Implied acceptance 
(c) Manner of acceptance 
(d) None of these

(xii) A and B contract to marry each other. Before the time fixed for the marriage A
goes mad. In such a case the contract is:
(a) Void 
(b) Voidable 
(c) Valid 
(d) None of these

(xiii) The maxim of Caveat Emptor in a contract of sale means:

(a) The seller guarantees the quality or fitness for any particular purpose supplied
(b) The buyer himself takes the risk as to the quality and condition of the goods
(c) There is an implied condition that the buyer can repudiate the contract at his
option
(d) None of these

(xiv) A agrees to sell to B “”a hundred tons of oil” –the agreement is:
(a) Valid 
(b) Void 
(c) Voidable
(d) Partially valid 
(e) None of these

(xv) An agreement entered into before marriage between a Muslim wife and
husband that the wife shall be at liberty to live with her parents after marriage is:
(a) Valid 
(b) Void
(c) Voidable at the option of husband 
(d) None of these

(xvi) A promises to obtain for B an employment in the Public Service and promises
to pay rupees 1000 to A. The agreement is:
(a) Valid
(b) Void 
(c) Voidable 
(d) None of these

(xvii) A void contract is:

(a) An illegal agreement 
(b) Partly valid agreement
(c) Ceased to be a valid agreement 
(d) None of these

(xviii) An agreement to pay one hundred rupees to a holy man for prayers for the
success of a suit in a court is:
(a) Valid 
(b) Void 
(c) Voidable
(d) Partially Valid 
(e) None of these

(xix) A, for natural love and affection, promises to give his son B, Rs.100,000, and
puts his promise to B into writing and registers it. Will the contract be:
(a) Valid 
(b) Void 
(c) Partially Valid 
(d) None of these
(xx) A contract B to sell his horse for Rs.500 by 10th January 2010. The horse so
contracted dies on 8th January 2010. The contract is:
(a) Valid 
(b) Void
(c) B can sue A for compensation
(d) A is liable for damages 
(e) None of these 

Q2. what is the difference between Memorandum and Article of association of a

company?is it essential to register the article of association signed by the
subscribers to the memorandum?what is the alternative if these are not registered?

Q3. loans by a Co. Ltd by shares,other than a Pvt Co.,on the security of its own
shares to a person to enable him to purchase its own shares is strictly
prohibited.what are its exceptions?what action can be taken in case of a
contravention?

Q4. a-what do you understand by the expression Caveat-emptor?

b-define a “warranty” & distinguish it from a “condition” with reference to a contract
of the Sales of Goods Act?

Q5. define dissolution of a firm.explain various modes of dissolution of a firm?

Q6. state the rules for determining partner’s mutual relations.explain fully.

Q7. what are void and voidable agreements?state fully,quoting law.

FEDERAL PUBLIC SERVICE COMMISSION

COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS IN BPS-17
UNDER THE FEDERAL GOVERNMENT, 2009

MERCANTILE LAW

TIME ALLOWED: (PART-I) 30 MINUTES MAXIMUM MAMKS:20

(PART-II) 2 HOURS & 30 MINUTES MAXIMUM MARKS:80

NOTE: (i) First attempt PART-I (MCQ) on separate Answer Sheet which shall be
taken back
after 30 minutes. (ii) Overwriting/cutting of the options/answers will not be given
credit.
.................................................. ...................................
PART-I(MCO) (COMPULSORY)
Q.I. Select the best option/answer and fill in the appropriate box on the Answer
Sheet. 

(i) Select the correct answer:

(a) Promisee and Offeree are one and same party
(b) Offeree is a party who propose an agreement while promisee accepts it
(c) None of these

(ii) Every agreement forbidding marriage of any adult person is void except of a
minor:
(a) Yes (b) No (c) Partly correct (d) None of these

(iii) Can a contract executed in Saudi Arabia be enforced in courts in Pakistan?

(a) Yes (b) No (c) None of these

(iv) The effect of coercion on a contract is that the contract becomes:

(a) void (b) voidable (c) valid (d) None of these

(v) The members of partnership carrying out business of banking must not exceed:
(a) 10 (b) 20 (c) 50 (d) None of these

(vi) The minimum number of members required for forming private company is:
(a) 1 (b) 3 (c) 5 (d) None of these

(vii) The minimum number of members required for forming public company is:
(a) 7 (b) 50 (c) 5 (d) None of these

(viii) After its incorporation, the ordinary General Meeting of a company must be
held within:
(a) One year (b) the year of incorporation
(c) Eighteen months from the date of incorporation (d) None of these

(ix) What type of tax is referred to in the sale of Goods Act, 1930?
(a) Income tax (b) Wealth tax (c) Customs duty
(d) Sales tax (e) None of these

(x) The carrier holds the goods in transit as:

(a) Trustee (b) Agent (c) Bailee (d) None of these

(xi) For how much days, a promissory note is entitled to days of grace to be at
maturity when it is not
expressed to be either payable on demand or otherwise?
(a) 30 days (b) 15 days (c) 3 days (d) None of these

(xii) A promissory note is at maturity on Sunday, being public holiday. Whether

such promissory note will be deemed to be due on: (a) the next preceding business
day (b) The next succeeding business day (c) None of these 

(xiii) Can a minor become a payee of a negotiable instrument?

(a) Yes (b) No (c) Not himself but his guardian

(xiv) Life Insurance Policy cannot be called in question by an insurer on the ground
of inaccurate or false immaterial statement made in the proposal for insurance
after:
(a) one year (b) two years (c) three years (d) None of these

(xv) Willfully making statement false in any document required under Insurance
Act. 1938, shall be punishable with imprisonment upto:
(a) five years (b) four years (c) three years
(d) fine only (e) None of these

(xvi) Whether a minor can be appointed as nominee to Life Insurance Policy?

(a) Yes (b) No (c) His guardian only (d) None of these

(xvii) Caveat emptor:

(a) is a person who institutes pre-emption suit
(b) is seller who discloses defects in the goods being sold
(c) is the buyer who is supposed to be aware of the suitability of the goods (d) is
owner of an empty cave (e) None of these

(xviii) Penalty provided for driving uninsured vehicle is:

(a) imprisonment upto 5 years and fine upto Rs. 1000/- or both
(b) imprisonment upto 1 year and fine upto Rs. 100/- or both
(c) Imprisonment upto 3 months or fine upto Rs. 500/- or with both
(d) fine upto Rs. 10000/- only
(e) none of these

xix) Can a compoundable criminal case be referred to arbitration?

(a) Yes (b) No (c) None of these as only civil matters can be referred to

xx) Within how much period, the arbitrators are legally required to make their
award after entering on the reference?

(a) one month (b) two months (c) three months

(d) four months (e) None of these

PART - II

NOTE:
(i) PART-II is to be attempted on the separate Answer Book.
(ii) Attempt ONLY FOUR questions from PART-II. All questions carry EQUAL marks. 
(iii) Extra attempt of any question or any part of the attempted question will not be
considered.

Q.2. a) All contracts are agreements but all agreements are not contracts. Please
justify. (10)

b) Give five examples of such agreements which are declared to be void under the
contract Act, 1872. ' (10)

Q.3 a) When will consent of a party to a contract be deemed to have been caused
by coercion? (10)

b) Whether threat to commit suicide by. husband will amount to coercion against
wife in a contract between them? Comment. (10) 

Q.4 a) A and B contract to marry each other. Before the time fixed for the
marriage, A goes mad. What type of contract it becomes? (10)

b) (i) Can A, who is pleader, recover fee from his client B, when there was no
express agreement as to the remuneration for the services rendered? Justify your
reply. (5)
(ii) A, gratuitously saves B's property from fire. Is A entitled to any compensation
for it from
B? (5)

Q.5 a) Jewellery was pledged with a money lender as security. The lender gave it
to his wife
for putting it on a marriage. While returning from the ceremony, she was attacked
by dacoits
and robbed of it. Was the money lender liable for making good the loss to the
loanee after such
incident? Comment. (10)

b) What are the rights of the Pawnee in respect of the thing pledged? (10) 

Q.6 What statutory restrictions are imposed on the alteration of articles of

association of a company? (20)

Q.7 a) What remedies are available to a buyer when the seller delivers him goods
less than/or more than the quantity contracted? (10)
b) A purchased a pole for his carriage from B, While A was driving the pole due to a
latent defect, broke and the horses got frightened and injured. Is any remedy
available to A in such a case? Comment" (10)

Q.8 a) In what cases, a party to the arbitration agreement may appoint his own
appointed arbitrator to act as sole arbitrator in the reference? (10)

b) Define the following: (10)

(i) Drawee (ii) Payee (iii) Accommodation Bills (iv) Blank instrument (v) Cross
cheque

Mercantile Law Paper 2008

Mercantile Law Paper 2008

Q-1 Select the best option and fill in the appropriate box on the answer sheet

I- If the consideration for an agreement is inadequate, the agreement is:

(a) Valid (b) Void (c) Voidable (d) None

II- On a contract by an agent on the behlf of undisclosed principal, the principal:

(a) May sue on contact (b) Cannot sue (c) Is hit by privity of contact (d) None 

III- Carlill v Carbolic Smoke Ball Co. Ltd. deals with:

(a) Counter proposal (b) Implied acceptance (c) Implied revocation (d) None

IV- What is the amount of care a bailee is required to take in respect of goods
bailed to him:
(a) Extraordinary (b) Ordinary (c) Reasonable (d) None

V- A void contract is:

(a) An illegal agreement (b) Partly valid agreement (d) None

VI- X agrees not to carry on a similar business with Y for two years in consideration
of Rs.50,000/- as good will. The agreement is:
(a) Void due to restraint of trade (b) Valid (c) Against X's fundamental rights (d)
None

VII- Whihc one of the following cannot be called an Act of God:

(a) An unprecedented rainfall (b) An earthquake (c) Fire not caused by lightening
(d) None

VIII- An obligation arises from:

(a) A contract (b) From a wrongful act (c) Both a & b (d) None
IX- The rule nemo dat quod non habet means:
(a) No one should interfere in another's business (b) No one should be retained in a
partnership against his will (c) No one can give what he has not got (d) None

X-In a public company the shares are subscribed by:

(a) Government (b) Management (c) Creditors (d) None

XI- Can a minor be:

(a) Admitted as partner in a firm (b) Admitted to the benefits of partnership (c)
Admitted as a sleeping partner (d) None

XII- Transfer of property means:

(a) Delivery of goods (b) Transfer of possession (c) Transfer of ownership (d) None

XIII- Caveat Emptor rule means:

(a) Employer beware (b) Seller beware (c) Creditor beware (d) None

XIV- A liquidator is a person:

(a) Who is chairman of board of directors (b) Promoter of a company (c) Who winds
up a company (d) None

XV- Which one of the following clauses is considered vital in a memorandam of

association of a public company:
(a) Name clause (b) Object clause (c) Capital clause (d) None

XVI- A subsidiary company means:

(a) A supporting company (b) A non entity (c) An unregistered company (d) None

XVII-Which of the following actions an unpaid seller cannot take against a buyer:
(a) Exercise the right og lien (b) Stoppage of goods in transit (c) Sale (d) None

XIX- X is involved in some business; he transfers his share without the consent of
all its members. He is working in:
(a) A company (b) A firm (c) A private company (d) None

XX- At times a contract is discharged under the doctrine of frustration. Does it

mean:
(a) Discharge by performance (b) Discharge by agreement (c) Discharge by breach
(d) None

Q-2 X agreed in writing to sell 120 acres of land to Y for Rs. 3 Million. The purchase
price was to be paid in three installments: a first of 1.6 million Rs., followed in
twelve months by a second of Rs. 0.7 Million and then, after further twelve months
by a final payment of Rs. 0.7 million. It was further provided that 'on the occasion
of each completion a propotionate part of theland shall be released forthwirh to Y'.
The parties provided no machinary for the allocation of the propotionate parts.
What is the legal effect of the agreement? Support your answer with arguments
discussing the question of law involved.

Q-3 Ahmad who was admitted in a hospital, was required to undergo a surgery,
before his operation he agreed to sell his house which was already listed for sale, to
his doctor for Rs. 9.7 million. The market price of the house was Rs. 10 million.
After the successful operation Ahmad rescinded the agreement alleging "Undue
influence" by the doctor. Can he succeed? Explain keeping in view the ingredients
of undue influence as laid down in the Contract Act, 1872.

Q-4 JK goes to the show room of Nasir a car dealer, and after looking at various
models, he agrees to buy a Honda Civic car. The car breaks down four times during
the first month and JK wished to know whether he has any remedies against Nasir.
Advise him in the light of Sales of Goods Act, 1930.

Q-5 Describe the general principle in determining the existence of partnership?

Compare the principle with the rule laid down in Cox v. Hickman.

Q-6 R signed a document in these terms 'in consideration of the loan of Rs. 1000/-
from W; I, R agree to repay W the sum of Rs.1000/- on or before December 31,
2007". Whether the above document can be treated as a promissionary note? Give
the specifics of a promissionary note.

Q-7 Explain the status and significance of Articles of Association of a company. The
articles of a private company provided that 'every member who intends to transfer
shares shall inform the Directors who will take the said shares ... at a fair price'.
The plaintiff held 725 fully paid up shares of Rs.10/- each and he asked the
directors to buy them but they refused. Were the directors bound to take the
shares? Give reasons?

Q-8 Explain the essentials of a valid award. A ship called Tanais was chartered for a
voyage between Canada and Italy. A clause in the charter party provided for
disputes to be settled in London. A dispute arouse and the owners of the Tanais
asked the charterers to agree on an arbitrator but the charterers would not concur
in an appointment. Suggest solution

2000

Mercantile Law

TIME ALLOWED: 3 HOURS MAXIMUM MARKS: 100 

NOTE: Attempt FIVE questions in all, including Question No.8 which is Compulsory.
All questions carry equal marks.

1. What are the various kinds of shares? Briefly give distinctive features of each.

2. Under what circumstances will a banker be justified in dishonoring a cheque of a

customer?

3. Discuss advantages and disadvantages of registration and non registration of a

firm.

4. (a) Explain 'consideration' as an element in a valid contract. State the exceptions

to the rule that an agreement without consideration is void.

(b) Should consideration always move from the promisee?

5. State the various modes in which a contract may be discharged and the modes in
which a man may be discharged from the obligations of a contract.

6. (a) Explain the position and rights of a minor under the law of partnership.

(b) What are the powers and duties of an arbitrator?

7. Explain the general rule that no one can give a better title than he himself
possesses. Discuss and illustrate the exceptions to this rule.

COMPULSORY QUESTION

8. Write only the correct answers in the Answer Book. Don’t reproduce the
questions.

(1) Payment can be made on a Bill of Exchange to:

(a) Its bearer (b) Only to a person specified therein (c) None of these.

(2) How a cheque is treated by a banker among the following when the balance at
credit of drawer is found insufficient"

(a) Be dishonored. (b) Be honored partly

(c) Be treated a request for loan by way of an overdraft.

(3) 'Accommodation Party’ is a person who has signed a negotiable instrument:

(a) On receiving the value thereof. (b) Without receiving the value thereof.
(c) None of these.

(4) Which of the following is correct:

(a) A Provincial Government can constitute a Corporate Law Authority. (b) The
minimum number of members of the Corporate Law Authority is five (c) None of
these. 

(5) Which of the following is correct:

(a) Any member of a Public limited Company can appoint more than one proxy to
attend any meeting. (b) A proxy must be member of the company (c) None of
these.

(6) Good will:

(a) can be sold separately from other property of a firm. (b) cannot be sold
separately. (c) is not saleable commodity. 

(7.) When undue influence is used in a contract by one party against the other, the
contract becomes:

(a) void (b) void able (c) illegal

(8) Which of the following is correct:

(a) The bailee can mix the goods of the bailor with his own goods under the law:
(b) cannot mix 

(9) Pledgor or Pawnor are:

(a) same persons (b) different persons

(10) The principal must ratify the contract:

(a) as a whole (b) in part.

(11) A dormant partner is one:

(a) who is found sleeping during meeting of a firm.

(b) whose name does not appear in any way as partner.

(c) is not liable for the debts of the partnership.

(d) none of these.

(12) Caveat Emptor means:

(a) Preemptor against sale of goods.

(b) the seller is duty bound to point out the defects in the goods.

(c) The buyer should be aware of the suitability of goods for his purpose.

(13) If the seller of immovable property has effected a fire insurance policy in
respect of the property, the purchaser, of the property:
(a) cannot claim any benefit of it. (b) can claim benefit as transferee of the
property.

(14) The delivery of the insurance policy to the assured is:

(a) essential to make binding contract. (b) not essential 

(c) to accept the terms of the policy by the insurer. (d) none of these.

(15) The grace period for every instrument payable at a specified period after date
or after sight is:

(a) 15 days (b) 3 months (c) 3 days.

(16) Special Resolution is passed at a general meeting of a Public Company when

not less than the following notice has been given: 

(a) 30 days notice (b) 15 days notice

(c) None of these.

(17) One of the special privileges of a Private Limited Company is that:

(a) there is restriction on the right of members to transfer their shares.

(b) there is no restriction on the transfer of shares.

(18) A company shall be eligible for registration as a Modaraba Company if its paid-
up capital is not less than:

(a) 2 million rupees. (b) 3 million rupees. (c) 2.5 million rupees.

(19) A and B are partners. A buys land with partnership moneys for his sole benefit.
Thereafter, A debits himself in the firm books and becomes a debtor to the firm for
the amount of the purchase money. The purchased property is:

(a) partnership property.

(b) not partnership property.

(20) Whether a partner has got power to assign his partnership interest to any
other person so as to make him a partner in the business?

(a) Yes (b) No

Mercantile Law Paper 2001

FEDERAL PUBLIC SERVICE COMMISSION

COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS
 IN BPS – 17 UNDER THE FEDERAL GOVERNMENT, 2001.

MERCANTILE LAW

TIME ALLOWED: THREE HOURS MAXIMUM MARKS:100

NOTE: Attempt FIVE questions in all, including question No. 8 which is

COMPULSORY. All questions carry EQUAL marks.

1. Discuss the importance of free consent in contrasts. When do you think, consent
is said to be ‘not free’, and what effect will such a consent have on contracts?

2. Define in detail remedies for breach of a contract given to a seller against the
buyer in the Sale of Goods Act.

3. Define partnership, and discuss the essential elements of partnership in detail. 

4. What do you understand by the words ‘negotiation’ and ‘negotiable’? There are
special rules of evidence retailing to negotiable instruments. What are they?

5. What is arbitration? How an arbitrator is appointed, and what are his powers
under the Arbitration Act?

6. Explain the nature of a contract of insurance. Distinguish between life insurance

and other kinds of insurances.

7. Write short notes on the following:

(a) Surety
(b) Warranties
(c) Bailment
(d) Award

COMPULSORY QUESTION

8. Write only the correct answer in the Answer Book. Do not reproduce the
questions.

(1) A proposes, by a letter sent by post, to sell his house to B. The acceptance of
the proposal is complete:
(a) the moment the letter is posted by A
(b) the moment the letter is received by B.
(c) None of these

(2) In order to convert a proposal into a promise, the acceptance must be:
(a) Conditional
(b) Unconditional 
(c) None of these
(3) A voidable contract may be turned by the option of the party at a loss into:
(a) A void contract
(b) A valid contract
(c) None of these

(4) The maximum number of members in a private company is:

(a) 60
(b) 50
(c) Unlimited

(5) The maximum number of partners in a firm is:

(a) 18
(b) 25
(c) None of these

(6) The Companies Ordinance, 1984:

(a) Applies to a Cooperative Society.
(b) Insurance Companies
(c) None of these

(7) A Company is subsidiary of another Company:

(a) If the other company holds more than 50% of its voting shares
(b) Less than 50% of its voting shares
(c) None of these

(8) P appoints A as his agent. A is not a person of full age:

(a) The appointment of A is not valid
(b) The appointment of A is valid
(c) None of these

(9) Statutory meeting of a Company is held:

(a) Once in a life time of the Company
(b) Every year 
(c) None of these

(10) Publication of Prospectus is compulsory by:

(a) A Private Company
(b) A Firm
(c) None of these

(11) Award is a decision given by:

(a) A Court
(b) An arbitrator
(c) None of these

(12) A lends some ornaments to B to be used in a marriage. The transaction is:

(a) A bailment 
(b) A pledge
(c) None of these

(13) A partner may be expelled from a partnership by:

(a) A majority of partners
(b) Orders of the Court
(c) None of these

(14) Third Party Insurance is an Insurance Relating to:

(a) Motor vehicles’ accidents
(b) Injuries due to war
(c) None of these

(15) A Bill of Exchange has:

(a) Two parties
(b) Three parties
(c) None of these

(16) A minor:
(a) Can make, draw, accept, or indorse a negotiable instrument
(b) Cannot make, draw, accept, or indorse a negotiable instrument
(c) None of these

(17) A void as well as an illegal contract is:

(a) Similar in effect
(b) Not familiar in effect
(c) None of these

(18) In the Companies Ordinance, 1984, there are:

(a) Kinds of shares
(b) No kinds of shares
(c) None of these

(19) Like a cheque, a bill of exchange may be:

(a) Crossed
(b) Cannot be crossed
(c) None of these

(20) An executor consideration takes the form of:

(a) A promise to be performed in future
(b) Relates to the present act made for a promise
(c) None of these

Mercantile Law Paper 2002

FEDERAL PUBLIC SERVICE COMMISSION

COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS
 IN BPS – 17 UNDER THE FEDERAL GOVERNMENT, 2002.
MERCANTILE LAW

TIME ALLOWED: THREE HOURS MAXIMUM MARKS:100

NOTE: 1. Attempt FIVE questions in all, including question No. 8 which is

COMPULSORY. All questions carry EQUAL marks.
2. In each of the following cases give your decision and state the legal
principal that applies. Your answer must correctly identify the relevant
areas of law, accurately discover and apply the appropriate principles,
case-law and statute law, and should be well structured and argued.
Please refrain from (1) Reproducing the facts of the cases; (2)
Unnecessary and irrelevant details; (3) Unreadable handwriting.

1. Jamal Khan and Kamal Khan have planned to start a business of groceries in
partnership. They have agreed that in case of any future dispute between them
they will never go to a court of law for decision instead they will do their utmost to
get their disputes settled by some means outside the court. What do you think how
can they seek their purpose? How would you advise them?

2. Gama, Maja and Billoo were in partnership as hairdressers. On 8th April, 2002,
Billoo retired from the partnership. A few days later, Gama and Maja bought in the
firm’s name an expansive laser hairdressing machine to replace their traditional
machines. On 17th April, a van arrived with a delivery of seven hairdressing chairs.
The van driver showed them a purchase order in the firm’s name, dated 3rd April
and signed Billoo. Gama and Maja are refusing to pay for the chairs. They have also
failed to pay for the laser hairdressing machines and the firm is in severe financial
difficulties. Both suppliers are threatening. Are they bound to pay for both of the
transactions? Discuss.

3. Jamal steals a bill of exchange and forges the signature of the payee on the
reverse of the bill. He then transfers it for value to Bilal who takes it in good faith
without being aware of the forgery. Bilal transfers the bill to Kamal. The payee
discovers that Kamal is in possession of the bill and he demands that Kamal return
it to him. Who is legally entitled to the bill and why? Would it make any difference
to your answer if the payee had been aware that Jamal had taken the bill but had
done nothing about it until he heard that Kamal was in possession of it?

4. Dilawar Khan and Badam Gul are in partner Ship running an extremely
successful computer software business. Sanobar Khan has decided to join the
business and is able to invest a substantial amount of capital. They have decided
that the business should be incorporated as a private limited company. Dilawar
Khan, Badam Gul and Sanobar Khan will each hold one third of the shares and they
will be the directors of the company. Please advise them on the advantages of a
limited company as compared with a partnership:

A. With regard to obtaining finance for further business expansion

B. With regard to the liability of shareholders in the event of the winding up of the
company.

5. The National Association of Photo Exporter (NAPE) requires additional storage

space. It advertises for tenders to erect new storage facilities. It receives eight
tenders and the Board decides to accept the tender of Imam Bakhsh & CO. The
Chief Executives, Mr. Shehbaz Chatha is required to accept and to notify the others
that they were unsuccessful Mr. Chatha asked his secretary to type up the letters. A
mistake is made in the typing and the name of another tenderer, Badam Gul & CO.
is replace for Imam Bakhsh & CO. The letter is signed and delivered to Badam Gul
& CO. The next day when the M.D. of Badam Gul & CO. phoned Mr. Chatha to
discuss some details of the work to be done Mr. Chatha realized that there had
been a mistake. Is there a binding contract between NAPE and Badam Gul & CO?

6. On 1 September Baber contracted for the purchase of 50 computers from Sardar.

The contract stated that the computers were to be delivered on 5 September.
Despite the fact that Baber persistently pressed Sardar for delivery, the computers
had still not been delivered by the end of the month while Sardar had repeatedly
assured Baber that the computers would be delivered by the first of October at the
latest. Baber then told Sardar that if the computes were not delivered by the 5
October, the contract would be terminated. Sardar did not attempt to deliver until
10 October. Having bought other computes on the 6 October, Baber refused to take
delivery. Was he justified in refusing the delivery? Discuss.

7. Mr. Brown agreed to sell his computer of a specified mark and model to Mr.
Green for Rs. 30,000. When Mr. Green went to him to pay him the price and pick
up the computer he found that Brown had already sold such computer to someone
else. He threaten to sue Brown for the Breach of Contract but later on the same day
he bought a computer of the same mark, model and specification for a Rs. 20,000.
Should he sue Brown for the Breach of Contract? Is there any benefit for him in
bringing such action against Brown?

COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the
questions.
(1) Portage Ltd wishes to alter its memorandum to state that all of the company’s
shareholders must hold a minimum of 200 shares. Can Brian, who currently owns
100 shares, be bound by this alteration?
(a) Yes, if the alteration is done by special resolution
(b) Yes, if the alteration is done by ordinary resolution
(c) Yes, but only if he gives his written consent.
(d) None of these

(2) Gama offers to sell his care to Maja for Rs. 550,000/-, Maja accepts the offer
but states that he would buy it for Rs. 500,000/-. The statement of Maja is:
(a) A conditional acceptance
(b) A counter offer
(c) Rejection to the offer
(d) None of these

(3) Kala Khan agreed to supply onion to Sodagar Khan six months after the date of
contract and Kala Khan agreed to pay for such supply. Two months after the
conclusion of the contract Kala Khan refused to supply. In such case which of the
following facts is correct?
(a) Sodagar Khan cannot sue Kala Khan until the expiry of six months after the
date of the contract. 
(b) Sodagar Khan cannot sue Kala Khan any time because he has not yet paid him
for the onions.
(c) Sodagar Khan can validly sue Kala Khan any time after he refused to supply
onions.
(d) None of these

(4) Sharafat Hussain offererd to sell his tonga to Sadaqat Hussain for Rs. 35,000/-
but Sadaqat Hussain did not answer and nearby standing Kiramat Hussain accepted
the offer. Kiramat Hussain’s answer to the offer is:
(a) A conditional acceptance
(b) A counter offer
(c) An offer
(d) None of these

(5) The appointment of a person of the minor age as an agent is:

(a) Void
(b) Valid
(c) Voidable
(d) None of these

(6) Third party insurance is an insurance for:

(a) Motor vehicles’ accidents
(b) Injuries in war time
(c) None of these

(7) A bill of exchange involves

(a) One party
(b) Three parties
(c) More than three parties
(d) None of these

(8) A bearer instrument may be negotiated by:

(a) Mere delivery
(b) Endorsement and delivery
(c) Delivery with a separate written contract.
(d) None of these

(9) An order instrument may be negotiated by:

(a) Mere delivery
(b) Endorsement and delivery
(c) Delivery with a separate written contract.
(d) None of these

(10) A partnership business is unlawful if the number of partners in it is:

(a) More than seven
(b) More than ten
(c) More than twenty
(d) None of these

(11) The relation between the partners of a firm is of:

(a) Employer and Employee
(b) Trustee and Beneficiary
(c) Principal and Agent
(d) None of these

(12) An unregistered contract of partnership is:

(a) Valid
(b) Void
(c) Unenforceable
(d) None of these

(13) A decision made by arbitrators is called

(a) Sentence
(b) Award
(c) Judgment
(d) None of these

(14) An empire in an arbitration reference is appointed when the number of

arbitrators is:
(a) Odd
(b) Even 
(c) None of these

(15) The minimum number of members in a Private Limited Company is:

(a) Seven
(b) Two
(c) Fifty
(d) None of these

(16) A Public Limited Company must have:

(a) Ten directors
(b) Seven directors
(c) Two directors
(d) None of these

(17) Which of the following rights a company cannot have:

(a) Right to own immovable property
(b) Right to vote in the general elections of the state.
(c) Right of sue in its own name.
(d) None of these

(18) The maximum age for a person who concludes a contract of sale of goods is:
(a) Twenty years
(b) Sixteen years
(c) Eighteen years
(d) None of these

(19) It is essential for the validity of a contract of sale of goods that the price must
be paid.
(a) In advance
(b) Three days after the delivery
(c) None of these

(20) If the delivery of goods under a contract of sale of goods is late.

(a) The buyer is not bound to accept the delivery.
(b) The buyer is bound to accept the delivery.
(c) None of these