B.law Past Papers JJ

Certificate in Accounting and Finance Stage Examination
The Institute of 5 September 2023

Chartered Accountants 3 hours – 100 marks
of Pakistan Additional reading time – 15 minutes
Business Law
Instructions to examinees:
(i) Answer all TEN questions.
(ii) Answer in black pen only.
(iii) Multiple Choice Questions must be answered in answer script only.
Q.1 Select the most appropriate answer from the options available for each of the following
Multiple Choice Questions.
(i) Asbestos Aerospace (AA) plans to introduce a new spaceship model. AA engaged
Usama, a renowned aeronautical engineer, to design the structure of the new model.
On 10 March 2023, Usama promised to deliver the design by 21 August 2023. AA
informed Usama that a delay cost of Rs. 80,000 would be imposed if the design was not
received by the agreed-upon date.
Tragically, on 10 August 2023, Usama suffered a severe accident resulting in the loss
of his children and significant personal injuries. Due to the trauma and its impact on
his mental health, Usama was unable to fulfil his commitment. Consequently, AA
incurred a delay cost of Rs. 250,000.
Under the Contract Act, 1872, can AA claim damages of Rs. 250,000 from Usama?
(a) Yes, because AA had informed Usama of the damages on 10 March 2023
(b) Yes, because Usama was competent to enter the contract on 10 March 2023
(c) No, because Rs. 250,000 cannot be considered as reasonable damages when
compared to the initially agreed upon Rs. 80,000
(d) No, because the contract subsequently became void due to unforeseen
circumstances (1.5)
(ii) Under the Prevention of Electronic Crimes Act, 2016, which of the following could be
a reason for designating private or government infrastructure as critical infrastructure?
(a) Meeting national security objectives
(b) Enhancing personal data protection
(c) Potential economic growth
(d) Contributing to social welfare (01)
(iii) Glass Sea (GS), the operator of multiple aquariums, entered into a contract with Timber
Fishes (TF) on 5 August 2023 and made a payment of USD 5 million. TF agreed to
supply either 8 dolphins locally sourced from Indus River or 5 dolphins imported from
Japan. The contract stipulated a delivery date of 30 September 2023.
However, on 5 September 2023, TF communicated to GS that the contract cannot be

performed due to a government-imposed ban on capturing dolphins from Indus River,
which became effective on 10 August 2023.
Under the Contract Act, 1872, can GS hold TF liable for non-performance of the
contract?
(a) No, because part of the contract’s object is unlawful
(b) No, because the contract cannot be enforced in light of government directives
(c) Yes, because the legal branch of the alternative promise is enforceable
(d) Yes, because it is a valid contingent contract (1.5)
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(iv) Which of the following statements is true regarding a bill in respect of any matter, other
than money bill?
(a) The bill must be originated in the National Assembly
(b) The bill must be originated in the Senate
(c) The bill must be originated simultaneously in both the National Assembly and
the Senate
(d) The bill may originate in either the National Assembly or the Senate (01)
(v) In the context of the Arbitration Act, 1940, which of the following is considered as a
‘legal representative’?
(a) A lawyer appointed to represent a deceased’s family disputes
(b) A person who has no relation to the deceased but handles their financial affairs
(c) A person who intermeddles with the estate of the deceased
(d) A person who briefly assists in managing the estate of a deceased (01)
(vi) Sadia sold leather garments worth Rs. 500,000 to Concrete Textiles (CT) with an agreed
payment date of 1 August 2023. However, CT missed the payment, causing Sadia to
be unable to settle her own Rs. 500,000 debt to Ash Leathers (AL), which was due on
15 August 2023. As a result, AL sent a notice to Sadia demanding payment of
Rs. 500,000 along with an additional Rs. 25,000 for damages and Rs. 2,000 as
miscellaneous charges.
On 5 September 2023, when Sadia finally received payment of Rs. 500,000 from CT,
she demanded that CT should also pay compensation to her.
Under the Contract Act, 1872, which of the following amounts is Sadia entitled to claim
from CT?
(a) Interest accrued on Rs. 500,000 from 1 August 2023 till 4 September 2023
(b) Interest accrued on Rs. 500,000 from 15 August 2023 till 4 September 2023
(c) Rs. 25,000 on account of damages payable to AL by Sadia
(d) Rs. 27,000 on account of damages and miscellaneous charges payable to AL by
Sadia (1.5)
(vii) Under the Competition Act, 2010, which of the following practices can NOT be
deemed as a deceptive marketing practice?
(a) Packaging a new product exactly the same as a competitor’s renowned product
(b) Comparing different brands based on the nutritional value of ingredients
(c) Spreading false information to harm business interests of another undertaking
(d) Unauthorised use of competitor’s trademark for promotional purposes (01)
(viii) Fahad emailed Alia an offer to sell his brick factory for Rs. 1,500,000. He requested a
signed letter of acceptance to be sent to him through post by 5 July 2023.
On 4 July 2023, Alia emailed Fahad, in which she communicated her acceptance to
purchase the factory and mentioned that she cannot send a signed letter as she is
travelling to a remote area in South Africa for a month. Fahad read Alia’s email on the
same day but did not reply. On 4 August 2023, Fahad received the signed letter through
post.
Under the Contract Act, 1872, can Fahad refuse to sell his factory to Alia?
(a) Yes, because Alia sent a counter offer on 4 July 2023
(b) Yes, because Alia sent the signed letter of acceptance after 5 July 2023
(c) No, because Alia sent the signed letter of acceptance within reasonable time
(d) No, because Fahad did not insist for acceptance through letter after he received
Alia’s email on 4 July 2023 (1.5)
Business Law Page 3 of 6
(ix) Under the Partnership Act, 1932, which of the following actions falls within the implied
authority of a partner?
(a) Transferring immovable property of the partnership firm
(b) Borrowing money on behalf of the partnership firm
(c) Entering into a new partnership on behalf of the partnership firm
(d) Purchasing immovable property on behalf of the partnership firm (01)
(x) In the partnership firm, Marble Resorts (MR), with Salman and Yasir as partners, an
incident occurred during a corporate event on 1 August 2023. The cinematic projector
for displaying documentaries developed a fault. Salman promptly purchased a
replacement projector worth Rs. 500,000 using his personal credit card. His action
successfully resolved the emergency, resulting in MR earning a profit of Rs. 150,000
from the event. Additionally, a five-year contract was secured with the client for hosting
future corporate events.
On 1 September 2023, Yasir attempted to reimburse Salman from MR’s bank account.
However, Salman not only sought reimbursement for the projector’s cost but also for
the credit card charges of Rs. 12,500. Further, he demanded compensation for his
extraordinary efforts.
Under the Partnership Act, 1932, determine the maximum amount that Salman can
claim from MR.
(a) Rs. 500,000 (b) Rs. 502,500 (c) Rs. 512,500 (d) Rs. 515,000 (02)
(xi) With reference to ‘coercion’, as explained in the Contract Act, 1872, which of the
following statements is NOT true?
(a) It must be applied in a place where the Pakistan Penal Code is enforced
(b) It includes threatening to commit an act forbidden by the Pakistan Penal Code
(c) It must be applied with the intention of causing a person to enter into an
agreement
(d) It includes unlawfully detaining any property to the prejudice of a person (01)
(xii) Under the Contract Act, 1872, which of the following is a void agreement?
(a) Farah verbally agrees to compensate her brother Shahid for her hospitalization
expenses paid voluntarily by Shahid on her behalf
(b) Kashif appoints a minor, Mona, as his agent for his garment business
(c) After death of Fatima’s parents, her guardian signed an agreement for good
consideration, under which Fatima cannot be married till she is a minor
(d) Zain promised that he would not open his fast food outlet in Gulberg in exchange
of Rs. 200,000 paid to him by Primer Foods (01)
Q.2 Identify the basis of legal system and explain the main sources of law in Pakistan. (05)
Q.3 (a) Granite Tiles (GT) is engaged in the business of designing and manufacturing tiles.
Hakim was a partner at GT, and when he passed away in December 2022, his minor
son Wasim was admitted to the benefits of GT.
Under the Partnership Act, 1932, provide guidance to Wasim concerning his rights and
limitations pertaining to GT. (03)
(b) On 1 November 2023, Wasim will attain the age of majority, and he intends to become
GT’s partner.
Under the Partnership Act, 1932, state the course of action that Wasim should take to
become GT’s partner. Also, advise Wasim about his duties, mutual rights and
liabilities, concerning GT after becoming a partner. (08)

Q.4 (a) Consider the following independent situations:
(i) In a contract, a specific provision dictates that in the event of a default,

Rs. 10 million shall be payable to the aggrieved party by the defaulting party.
(ii) A constructive contract lacks a pre-established determination of the damages to

be paid in the event of a default.
Under the Contract Act, 1872, advise how the compensation payable would be
determined in each of the above situations after a default is committed. (03)
(b) Fatima, a doctor by profession, purchased a five-storey building for Rs. 50 million,
owned and constructed by Hammad. At the time of purchase, Fatima asked Hammad
to inform her of any structural issues with the building that might require repair.
Hammad did not respond to the question, allowing Fatima to believe that the building
is in good condition.
Fatima opened her hospital in the building. Shortly thereafter, she came to know about
numerous structural issues in the building. An independent contractor has provided an
estimate of Rs. 5 million to fix these issues.
Under the Contract Act, 1872, discuss the remedies available to Fatima. (04)
Q.5 Lime Cement (LC) operates as a medium-scale cement manufacturer and distributor. The
following pertains to LC’s operations:
(a) Daniyal, recently appointed as a delivery supervisor at LC, has been tasked with
overseeing the following orders:
(I) An order from Rubber Paints (RP) for 50 bags of cement, scheduled for delivery
on 30 September 2023. Upon reviewing the order details, he noted the absence
of specific information regarding the time and place of delivery. Under the
Contract Act, 1872, advise Daniyal about time and place of delivery for RP’s order. (03)
(II) An order jointly placed by Fahim Hussain and Karim Hussain for 60 bags of
cement, for building a farm house in Faisalabad. Under the Contract Act, 1872,
identify the conditions that Daniyal must fulfil to make a valid delivery offer. (04)
(b) LC received an offer to export 50,000 bags of cement to Europe. According to the offer
document, LC is required to send two sample cement bags to the customer.
LC’s production team is carrying out a detailed feasibility check while its head of sales
is aggressively pushing for the offer acceptance to be sent immediately.
Under the Contract Act, 1872, identify the possible situations in which the offer would
be revoked. (04)
Q.6 (a) Saad and Abid are close friends and avid cricket enthusiasts. Saad opened a sports
equipment store in Karachi, and Abid extended his support in setting up the business,
by introducing him to Malik, a major supplier of cricket gear.
Subsequently, Saad, representing Abid as his partner, purchased cricket gear from
Malik, promising to pay on 31 August 2023. However, he failed to pay the amount on
time.
Under the Partnership Act, 1932, discuss whether Malik can recover his dues from
Abid. (04)
(b) Under the Partnership Act, 1932, explain the circumstances under which an individual,
entitled to a share of up to 50% of the annual profits of a partnership firm, would still
not be recognized as a partner within that firm. (03)
Q.7 (a) Straw Farms (SF) is famous for its organically grown peaches. In July 2022, SF decided
to build a processing facility for freezing peaches. In August 2022, SF awarded two
separate contracts to Gypsum Builders (GB) as follows:
(I) Construction of a factory building by August 2023 for processing the peaches to
be harvested in September 2023. SF informed GB that when the building is ready,
a processing plant will be installed for freezing peaches to be exported to Europe,
from which SF expects to earn a profit of Rs. 10 million.
(II) Construction of a head office building by August 2023 for administrative work.
SF informed GB that the staff will be shifted to this building in December 2023.
GB initially planned to construct both buildings by July 2023; however, due to labour
issues, construction could not be completed on either site till date. GB needs a further
30 days to finish the remaining work.
Under the Contract Act, 1872, evaluate SF’s position, and discuss the remedies
available to SF. (07)
(b) Rizwan engaged Bamboo Designers (BD) to completely renovate his bungalow by
31 August 2023 for Rs. 5 million. The renovation work included civil works, painting,
plumbing and tiling. Rizwan informed BD that he would arrange imported marble tiles
to be fixed in the bungalow.
BD completed the renovation work on 31 August 2023 except for fixing of the tiles.
Due to transit issues, the cargo of tiles ordered by Rizwan reached Pakistan on
5 September 2023. Upon receiving the tiles, Rizwan asked BD to proceed with the
completion of the renovation work.
However, BD refused to deploy labour until the contract price to the extent of work
completed is paid, and Rizwan declined to make the payment as the bungalow was not
ready as per agreed specifications.
Under the Contract Act, 1872, evaluate BD’s position, and discuss the remedies
available to BD. (04)
Q.8 (a) Define the term ‘financial institution’ under the Anti-Money Laundering Act, 2010. (06)
(b) Under the Arbitration Act, 1940, state any four powers of arbitrator. (04)
Q.9 (a) Babar owns Steel Electronics (SE), a retail store of electronic equipment. He typically
buys the equipment from wholesale suppliers on credit and pays invoices by cheque
within 60 days, always attaching a letter specifying which invoice(s) the cheque covers.
When Babar fell ill, his son, Junaid, managed SE. Upon returning, Babar learned that
Junaid had sent several cheques to Farrukh, a major supplier, without specifying the
relevant invoices.
Under the Contract Act, 1872, advise Babar how the cheques sent by Junaid should be
applied to Farrukh’s outstanding invoices. (04)
(b) Under the Contract Act, 1872, identify the following:

(i) Any four differences between ‘contingent contract’ and ‘wagering agreement’. (04)
(ii) Circumstances in which an agreement without consideration is considered to be
a valid contract. (05)

Q.10 (a) Zareen has signed the following instruments:
(i) I promise to pay Rs. 5 million to Maria and further undertake to deliver her my
car with registration number FNT-23 on 30 September 2023, for value received.
(ii) Zainab, pay Rs. 20 million to Saeed as early as possible.
(iii) I acknowledge that I am indebted to Mehreen for USD 200,000 to be paid on
demand, for value received.
Under the Negotiable Instruments Act, 1881, comment on the type and validity of each
of the above instruments. (03)
(b) Rustom issued a cheque payable to 'Laiba or order'. Rizwan, by falsifying Laiba's
endorsement on the cheque, managed to receive payment from the bank.
Under the Negotiable Instruments Act, 1881, discuss whether the bank would be liable
towards Rustom for making the payment to Rizwan. (03)
(c) Under the Negotiable Instruments Act, 1881, identify four differences between
promissory note and bill of exchange. (04)
(THE END)
Suggested Answer of this attempt is not uploaded by icap

yet!
The Institute of 7 March 2023

Business Law
(i) Which part of the Constitution of the Islamic Republic of Pakistan 1973 includes
articles related to distribution of revenues between the Federation and the Provinces?
(a) Part II - Fundamental Rights and Principles of Policy
(b) Part III - The Federation of Pakistan
(c) Part V - Relations between Federation and Provinces
(d) Part VI - Finance, Property, Contracts and Suits (01)
(ii) Starling Clinics (SC), an animal care clinic, is a partnership firm in which Zia and
Sohail are partners. SC purchases medical equipment from Rizwan Medicals (RM).
On 6 March 2023, Zia contacted RM to purchase an automatic wheelchair worth

Rs. 900,000 for his disabled son and promised to make payment after three weeks. RM
delivered the wheelchair. Sohail was not aware of the order placed by Zia.
Can RM hold SC liable for Rs. 900,000 if Zia subsequently refuses to pay?
(a) Yes, because the wheelchair was purchased in the ordinary course of business
(b) Yes, because SC is bound by the act of its partner Zia
(c) No, because the wheelchair was purchased without Sohail’s consent
(d) No, because the wheelchair was not purchased in the ordinary course of business (1.5)
(iii) Which of the following statements related to the President of Pakistan is NOT true?
(a) A person elected as the President represents the unity of the republic
(b) A person is eligible for re-election as the President for three consecutive terms
(c) The President must be a Muslim
(d) The President is elected for a term of five years (01)
(iv) Saima, Murtaza and Zahid are partners in Eagle Enterprises (EE), a bridal boutique.
The operations of EE are run by Murtaza and Zahid. On 1 March 2023, one of EE’s
customers, Farah, paid an advance of Rs. 500,000 to Murtaza for 10 customised bridal
dresses to be delivered on 6 March 2023. However, EE did not deliver the dresses on
agreed date.
On EE’s default to deliver the dresses on time, Farah wants to send a legal notice to
claim damages. In order to serve the notice to EE, Farah:
(a) may have the notice served to any of the three partners
(b) may have the notice served to either Murtaza or Zahid
(c) must have the notice served to Murtaza and Zahid
(d) must have the notice served to Zahid (1.5)

(v) Sidra Farms (SF) agreed to supply 500 kg of fresh meat at Rs. 800 per kg to Canary
Foods (CF) on 5 March 2023. It was mutually agreed that in case of breach, defaulting
party shall pay the compensation of Rs. 200,000. SF estimated to earn a profit of
Rs. 100,000 from the contract.
On 1 March 2023, SF’s farms were destroyed due to floods. CF came to know about
this fact through the newspaper and immediately placed the order with another vendor.
On 5 March 2023, SF purchased 500 kg meat from the market at Rs. 600 per kg and
reached CF’s designated location. CF refused to take the delivery. SF sold the
consignment for Rs. 650 per kg and incurred additional transportation charges of
Rs. 10,000.
In the above scenario, CF’s liability towards SF would be:

(a) Rs. 10,000 (b) Rs. 85,000 (c) Rs. 100,000 (d) Rs. 200,000 (02)
(vi) Kamal and Jamal are brothers who live in identical bungalows constructed side-by-side.
Kamal engaged Aqib to paint the servant quarters of his bungalow and showed him the
location. On 5 March 2023, Aqib arrived at the location while Kamal was away on a
business trip. Aqib mistakenly entered Jamal’s bungalow and started painting the
servant quarters. Jamal saw Aqib but did not stop him.
Can Aqib recover his service charges from Jamal?

(a) Yes, because it was an honest mistake on the part of Aqib
(b) Yes, because Jamal accepted Aqib’s offer impliedly
(c) No, because Jamal was not a party to the contract between Aqib and Kamal
(d) No, because the price was not agreed between Aqib and Jamal (1.5)
(vii) Shahid owns an antique lamp. On 15 February 2023, he agreed to sell and deliver the
lamp to Zoya for Rs. 150,000 on 31 March 2023. Subsequently, Zoya came to know
that Shahid had sold and delivered the lamp to his friend Ahsan on 5 March 2023.
Can Zoya claim damages from Shahid for non-performance of the contract before
31 March 2023?
(a) Yes, because Shahid has made it impossible for himself to perform the contract
(b) Yes, because Shahid has made a misrepresentation to Zoya
(c) No, because Shahid can purchase any similar lamp and perform the contract
(d) No, because Zoya can enforce the contract on or after 31 March 2023 (1.5)
(viii) On 5 February 2023, Nadia agreed to sell her Mercedes Benz to her brother Fahad.
Nadia wanted to sell the car at market price and Fahad wanted to purchase it at cost
price. They decided that the sale price shall be determined by their eldest brother
Noman. On 20 February 2023, Noman decided the price in Fahad’s favor.
In the above scenario, can Nadia refuse to sell her car to Fahad?
(a) Yes, because Nadia was unduly influenced to make the contract
(b) Yes, because Nadia has not given consent to the sale price
(c) No, Nadia is bound to sell the car under the contract dated 5 February 2023
(d) No, Nadia is bound to sell the car under the contract dated 20 February 2023 (1.5)
(ix) Which of the following instruments issued by Mohsin is a valid negotiable instrument?
(a) I promise to pay Maria Rs. 50,000 as soon as possible
(b) I promise to pay Maria Rs. 50,000 and all fines according to the rules
(c) I promise to pay Maria Rs. 50,000 one month after my marriage with Zainab
(d) I promise to pay Maria Rs. 50,000 two months after Furqan’s death (01)
(x) Ali owed Rs. 500,000 to Bilal which was due on 26 February 2023. Bilal requested Ali
to send the payment through cheque by post to his residential address in Hyderabad.
On 26 February 2023, Ali posted the cheque to Bilal on the given address.
On 1 March 2023, Bilal received the cheque and deposited it in the bank on the same
day. The funds were credited to Bilal’s bank account on 2 March 2023. Bilal, on the
same day, sent a letter to Ali by post, acknowledging the receipt of payment. The letter
was received by Ali on 6 March 2023.
Under the provisions of the Contract Act, 1872, Ali’s debt would be considered to have
been discharged on:
(a) 26 February 2023 (b) 1 March 2023
(c) 2 March 2023 (d) 6 March 2023 (01)
(xi) Farooq Brothers (FB) is a trading firm having five partners. FB is engaged in the
business of imported electronic equipment. Under the mutual agreement of all the
partners, two partners Farooq and Zohaib share the responsibility of managing the
firm’s business.
FB normally imports washing machines and air conditioners only. Farooq has been
evaluating the option to import electric induction cookers due to huge demand on
account of gas shortages. Farooq shared his plan with Zohaib, who objected on the
basis that the gas shortage is a temporary problem.
Which of the following statements is NOT true?

(a) Farooq can import induction cookers if Zohaib gives consent
(b) Farooq can import induction cookers if any other partner gives consent
(c) Farooq can import induction cookers if majority partners give consent
(d) Farooq can import induction cookers if all the partners give consent (1.5)
Q.2 Doves & Co. (DC) is a partnership firm engaged in the selling of various species of pet birds.
The firm’s operations are managed by two partners namely Faizan and Usama.
Following matters are under consideration of the firm:
(a) Haroon, a specialist bird-keeper, owns an aviary where he keeps exotic birds. In order
to source exotic birds from abroad, Faizan plans to appoint Haroon as DC’s agent in
Faisalabad for purchasing 100 birds per week and keeping them in custody until the
birds are sold. Under the provisions of the Contract Act, 1872, briefly explain Haroon’s
authority in respect of DC’s business. (04)
(b) In February 2023, Usama attended an exhibition where he met Sarah, a well-known
animal enthusiast and social media influencer. Usama requested Sarah to join DC as a
partner at a monthly remuneration of Rs. 100,000. Sarah agreed and joined DC as a
partner on 6 March 2023. Under the provisions of the Partnership Act, 1932, describe
Sarah’s acts which would bind DC. Also identify the restrictions on Sarah’s implied authority
as a partner. (08)
(c) On 1 March 2023, DC supplied 50 finch birds to Raven Parks (RP) for Rs. 200,000.
Rizwan, RP’s owner, holds a bill of exchange originally issued to him for Rs. 200,000
which is due to mature on 31 March 2023. He has offered to endorse the aforesaid bill
of exchange in DC’s favour. Under the provisions of the Negotiable Instruments Act, 1881,
discuss the essentials which must be ensured by DC before accepting the bill of exchange. (04)
(d) Assume that in (c) above, Rizwan is a holder in due course in respect of the bill of
exchange which has been offered to be endorsed in DC’s favour. Under the provisions of
the Negotiable Instruments Act, 1881, discuss the conditions to be fulfilled by a person to
become a holder in due course. (03)
Q.3 Describe how an Ordinance is promulgated in Pakistan and explain the effect of such
Ordinance. (04)
Q.4 On 1 December 2022, Sparrow Traders (ST) decided to install a solar energy system at its
factory in an effort to reduce operational expenditures. On 4 December 2022, ST entered into
a contract with Parrot Electrics (PE) for the acquisition of an imported solar system at a price
of Rs. 12 million. The project details agreed by both the parties are as follows:
Project milestone Due Date Payment terms

Delivery of solar panels 31 December 2022 50% of contract price
Commissioning of the system 31 January 2023 20% of contract price
Smooth running of the system for one month 28 February 2023 30% of contract price
Under the agreement, PE agreed to pay Rs. 5,000 per day, on the failure to meet any of the
project milestones. Similarly, ST agreed to pay a penalty of 1% per month, on the failure to
pay the amount on due dates.
On the date of the agreement, there were no statutory taxes levied on the import of solar
panels. However, effective from 10 December 2022, the Government imposed 16% custom
duty on the import of solar panels. On 26 December 2022, the consignment of solar panels
arrived in Pakistan. PE shared the new duty structure with ST and demanded an additional
amount of Rs. 1.5 million to proceed further.
Under the provisions of the Contract Act, 1872, discuss the relative positions of ST and PE
under each of the following independent situations. Also identify the remedies, if any,
available to both ST and PE.
(I) On 27 December 2022, ST refused to pay the custom duty and barred PE from accessing
the commissioning site due to the price dispute. (06)
(II) PE threatened to cancel the contract if ST fails to reimburse the custom duty to PE.
ST, with no other option available, reimbursed custom duty of Rs. 1.5 million to PE
after which PE installed the solar system on agreed date. On 28 February 2023, ST
informed PE that it will make the final payment only after PE agrees to the deduction
of Rs. 1.5 million as PE had employed coercion by threatening to cancel the contract. (04)
Q.5 (a) Karim, a 90 year old farmer, resides in a remote village. Karim’s son Wajid, who resides
abroad, has appointed Zain to look after his aging father. Zain’s duties include
managing Karim’s household affairs and handling all the operations of Karim’s farm.
Zain advised Karim to sell a portion of his barren land in the outskirts Karim’s farm as
it is losing its value with the passage of time. Karim sold the barren land to Zain for
Rs. 500,000.
On 28 February 2023, Wajid visited his father and came to know that the land
purchased by Zain from his father had a market value of Rs. 5 million at the time of
sale. Wajid convinced Karim to file a suit against Zain. To support his father, Wajid
agreed to pay the professional fees of lawyers and all related expenses.
Under the provisions of the Contract Act, 1872, discuss whether Karim can file a suit
against Zain. (03)
(b) Assume that in (a) above, Karim gets the land back alongwith the damages equal to the
expenses incurred in respect of the suit filed against Zain. Karim promised Wajid that
he will transfer the land to him and will also reimburse him the expenses in respect of
the suit.
Under the provisions of the Contract Act, 1872, discuss the validity of Karim’s
promises. (03)
Q.6 Under the provisions of the Contract Act, 1872:
(a) explain any four rules regarding the performance of reciprocal promises. (04)
(b) discuss the enforceability of an agreement when consent is caused by mistake. (04)
Q.7 (a) After graduating from Pelican College of Arts and Design (PCAD), Kamran Shah
opened an art gallery in Karachi to showcase his paintings. However, the gallery did
not generate much public interest despite his extensive efforts. Kamran discussed the
matter with his professor, Adil Adeeb, the owner of PCAD, emphasizing on his
aspirations to achieve recognition for his paintings. Kamran requested Adil to display
his paintings in the PCAD’s upcoming annual exhibition scheduled for 31 March 2023.
Adil informed Kamran that he has already invited various artists for displaying their
work in the exhibition, however, one of the artists namely Sohail Khan has still not
responded. Adil proposed to Kamran that if Sohail refuses to participate in the
exhibition, then Kamran can display his paintings on the following terms:
▪ Kamran will pay Rs. 50,000 to PCAD for every painting sold.
▪ Subsequent to the exhibition, Kamran will not sell any of his paintings in Karachi.
▪ In case of any dispute, the decision taken by Adil shall be final which cannot be
challenged by Kamran in any manner.
▪ Kamran must submit the details of his paintings fifteen days before the exhibition,
which is a compulsory requirement to be adhered to by all the participating artists.
Kamran agreed to the above terms and signed the contract on 5 March 2023. Adil did
not receive any response from Sohail till that date.
Under the provisions of the Contract Act, 1872, discuss the enforceability of the
contract between PCAD and Kamran. (06)
(b) Assume that in (a) above, Kamran subsequently comes to know before the date of
exhibition that his paintings would be displayed in the exhibition without any mention
of his credentials, despite the fact that at the time of signing the contract, Adil had
promised to display his paintings under the category of ‘Emerging artists’ alongwith
prominent credentials.
Under the provisions of the Contract Act, 1872, discuss the possible effect(s) of the
information subsequently received by Kamran, on the enforceability of the contract. (05)
Q.8 (a) Saiqa and Alia decided to open a tailoring shop. To manage the opening expenses, they
jointly borrowed Rs. 300,000 from Faizan on 28 February 2022. The loan was to be
repaid on 28 February 2023.
Under the provisions of the Contract Act, 1872, advise the respective positions of
Faizan and Saiqa in respect of the loan amount, in each of the following independent
situations:
(I) On the due date, Saiqa approached Faizan and paid back Rs. 150,000 mentioning
that she has paid her share and now he should claim the remaining amount from
Alia. Faizan met Alia for recovery of the remaining loan amount but she refused
to pay it. (03)
(II) On the due date, Alia approached Faizan and informed him that she cannot pay
the loan as the entire amount was utilized by Saiqa. Alia also mentioned that
Saiqa has refused to give Alia her share in the shop. Considering the situation,
Faizan released Alia in respect of the loan. (02)
(b) Under the provisions of the Contract Act, 1872, list the acceptable grounds of
supervening impossibility. (03)
Q.9 (a) List any four circumstances under which the State Bank of Pakistan may revoke the
designation of a designated payment system under the provisions of the Payment
Systems and Electronic Fund Transfers Act, 2007. (04)
(b) Under the provisions of the Competition Act, 2010:

(i) explain ‘Product market’ and ‘Geographic market’. (04)
(ii) identify the practices that are considered as deceptive marketing practices. (04)
Q.10 Under the provisions of the Partnership Act, 1932:
(a) define the principle of ‘Holding out’ and state its exception(s). (04)
(b) identify the assets which are included in the property of a partnership firm. (03)
(THE END)
Business Law
Suggested Answer
Certificate in Accounting and Finance – Spring 2023
A.1 (i) (d) (ii) (d) (iii) (b)

(iv) (b) (v) (b) (vi) (b)
(vii) (a) (viii) (c) (ix) (d)
(x) (a) (xi) (b)
A.2 (a) With respect to DC’s business, Haroon shall have the express authority to do every
lawful thing necessary to purchase the birds and act as their custodian until the birds are
sold. An agent having an authority to carry on a business has the authority to do every
lawful thing necessary for the purpose, or usually done in the course of conducting such
business.
Further, in case of an emergency, Haroon shall have the authority, to take all necessary
actions for the purpose of protecting DC from any potential loss as would be done by a
person of ordinary prudence, in his own case, under similar circumstances.
(b) While Sarah is DC’s partner, DC shall be bound by Sarah’s acts done while:
▪ Carrying on, in the usual way, business of the kind carried on by DC i.e. selling of
various species of pet birds;
▪ Taking actions, in an emergency, to protect DC from any potential loss as would
be done by a person of ordinary prudence, in his own case, acting under similar
circumstances;
▪ Acting in DC’s name, or in any other manner expressing or implying an intention
to bind DC;
▪ Acting on behalf of DC which falls within Sarah’s implied authority, unless the
person with whom she is dealing knows of the restriction or does not know or
believe Sarah to be DC’s partner.
Restrictions on Sarah’s implied authority as DC’s partner

In the absence of any usage or custom of trade to the contrary, Sarah’s implied authority
as DC’s partner, would not empower her to:
▪ submit a dispute relating to DC’s business to arbitration
▪ open a banking account on behalf of DC in her own name
▪ compromise or relinquish any claim or portion of a claim by DC
▪ withdraw a suit or proceeding filed on behalf of DC
▪ admit any liability in a suit or proceeding against DC
▪ acquire immoveable property on behalf of DC
▪ transfer immoveable property belonging to DC
▪ enter into partnership on behalf of DC
(c) DC must ensure that the bill of exchange (B/E) which was issued to Rizwan and is
going to be endorsed in DC’s favour is valid i.e. it fulfills all of the following essentials
of a negotiable instrument and endorsement:
▪ B/E contains an unconditional order to pay;
▪ Drawer name is appearing on B/E and B/E is properly stamped;
▪ B/E is signed by the drawer and the drawee;
▪ All the parties mentioned on the B/E are certain;
▪ If B/E contains any material alteration, the same is confirmed by the appropriate
party through signature;
▪ Rizwan is entitled to the possession of B/E in his name;
▪ The sum payable under B/E must be certain and contain legal tender only;
▪ Rizwan is entitled to receive/recover Rs. 200,000 from the parties liable under the
B/E;
▪ Rizwan has endorsed B/E in DC’s favor on the instrument itself for the purpose of
negotiation;
▪ B/E is delivered to DC with the intention of passing the property in it.
Page 1 of 7
(d) Following conditions are required to be fulfilled by Rizwan in order to become a holder
in due course:
▪ He must fulfill all essentials of a holder and must be a holder for valuable
consideration;
▪ He should receive the B/E before its maturity; and
▪ He should take the B/E without any negligence on his part and in good faith
without having any reason to believe that any defect existed in the title of the
transferor. If there is any suspicion and he takes the B/E without making proper
inquiries, he cannot be said to be acting in good faith.
A.3 Promulgation of an Ordinance in Pakistan and its effect

The President, if deems necessary to take immediate action, has power to make an Ordinance
when the Senate or the National Assembly are not in session.
Such Ordinance promulgated thus, shall have the same force and effect as an Act of the
Parliament.
The Ordinance shall stand repealed after 120 days if it is not presented or passed:
▪ by the National Assembly, in case of Money Bill; and
▪ by both the Houses, if it is other than Money Bill.
However, National Assembly may extend any Ordinance for another period of 120 days by
passing a resolution.
If National Assembly, before expiration of above 120 days, passes a resolution disapproving
an Ordinance, it shall expire on the day of passing of such resolution.
A.4 (I) Position of the parties to the contract

PE’s demand for additional payment of Rs. 1.5 million on account of custom duty
▪ PE’s demand for Rs. 1.5 million on account of custom duty over and above the
contract was not justified. It may be considered as conditional offer of performance
which renders the offer of performance invalid.
▪ PE’s demand was tantamount to an alteration of the contract by increasing the
contract price.
ST barring PE from accessing the commissioning site due to the price dispute
▪ Contract between ST and PE contain reciprocal promises. If PE is willing to deliver
the solar system at ST’s commissioning site despite the price dispute, then ST’s
action of barring PE from accessing the commissioning site shall be considered as
preventing PE from performing its promise. As a result, the contract is voidable at
the option of PE.
▪ Further, if PE has made a valid offer of performance to ST, and the offer was not
accepted, PE shall not be responsible for the non-performance of the contract and
shall have the right to claim compensation and rescind the contract.
Remedies available to PE due to ST’s fault
PE is entitled to claim reasonable compensation from ST for any loss which it may
sustain in consequence of the non-performance of the contract. However, it cannot
claim penalty from ST since the project milestones were not achieved.
Remedies available to ST due to PE’s fault
ST is entitled to claim reasonable compensation from PE for any loss which it may
sustain in consequence of the non-performance of the contract.
Business Law
Suggested Answer
(II) Position of the parties to the contract

PE’s demand for additional amount to proceed further does not fall under the definition
of coercion since PE did not commit, or threaten to commit, any act forbidden by the
Penal Code with the intention of causing ST to enter into an agreement. Therefore, ST’s
claim of coercion is not valid.
By reimbursing import duties, it is established that ST altered the original contract and
now has to abide by payment terms i.e. pay the remaining amount.
Remedies available to the parties to the contract
PE may obtain reasonable compensation for damages to the extent of accrued penalty
@ 1% per month for each day of delayed payment.
ST does not have any remedy against PE since it agreed to the alteration of the contract.
A.5 (a) Karim may file a suit against Zain on the grounds of undue influence since Zain was in
a position to dominate Karim’s will and he used that position to obtain an unfair
advantage over Karim.
Zain shall be deemed to be in a position to dominate Karim’s will because:
▪ he stands in a fiduciary relation to Karim; or
▪ Karim’s mental capacity may be affected due to old age.
(b) The validity of Karim’s promises is as follows:

Promise to transfer land
Since Karim made the promise without consideration on account of natural love and
affection, it shall not be enforceable unless the land is actually transferred to Wajid or
until the promise is expressed in writing, registered under the law for the time being in
force for the registration of documents.
Promise to reimburse expenses of suit
Even though Karim made the promise without consideration to reimburse Wajid the
expenses paid voluntarily in respect of the suit, such promise is still valid and
enforceable.
Page 3 of 7
A.6 (a) The rules regarding the performance of reciprocal promises are as follows:
(i) Simultaneous performance
When a contract consists of reciprocal promises to be simultaneously performed,
the promisor needs not perform his promise unless the promisee is ready and
willing to perform his reciprocal promise.
(ii) Order of performance
Where the order in which reciprocal promises are to be performed is expressly
fixed by the contract, they must be performed in that order as fixed by the
contract, and where the order is not expressly fixed by the contract, they must be
performed in that order which the nature of the transaction requires.
(iii) Preventing the performance
When a contract contains reciprocal promises, and one party to the contract
prevents the other from performing his promise, the contract becomes voidable
at the option of the party so prevented; and he is entitled to compensation from
the other party for any loss which he may sustain in consequence of the non-
performance of the contract.
(iv) Mutual and dependent reciprocal promises
When a contract consists of reciprocal promises, such that one of them cannot
be performed, or that its performance cannot be claimed till the other has been
performed, and the promisor of the promise last mentioned fails to perform it,
such promisor cannot claim the performance of the reciprocal promise, and must
make compensation to the other party to the contract for any loss which such
other party may sustain by the non-performance of the contract.
(v) Promise to do legal and illegal things
Where persons reciprocally promise, firstly, to do certain things which are legal,
and secondly, under specified circumstances, to do certain other things which are
illegal, the first set of promises is a contract, but the second is a void agreement.
(b) The enforceability of an agreement when consent is caused by any of the following types
of mistake is as follows:
▪ Bilateral mistake
Where both the parties to an agreement are under a mistake as to a matter of fact
essential to the agreement, or are under a mistake as to a law not in force in
Pakistan, the agreement is void.
However, an erroneous opinion as to the value of the thing which forms the subject-
matter of the agreement is not deemed to be a mistake as to a matter of fact.
▪ Unilateral mistake
A contract remains valid if it was caused by one of the parties to it being under a
mistake as to a matter of fact or under a mistake as to a law not in force in Pakistan.
▪ Mistake as to any law in force in Pakistan (Local Law)
A contract is not voidable because it was caused by a mistake as to any law in force
in Pakistan. In case of such mistake, the contract will be valid.
Business Law
Suggested Answer
A.7 (a) Contract between PCAD and Kamran is a contingent contract which can only be
enforced if Sohail does not participate in the exhibition.
Sohail’s non-participation can be confirmed either through an express response or by

his conduct i.e. non-submission of the details of his paintings fifteen days before the
exhibition which is a compulsory requirement for all the participating artists.
Payment for every painting sold

Requirement to pay Rs. 50,000 to PCAD for every painting sold is lawful and can be
enforced.
Restriction to sell paintings after exhibition

Kamran cannot be restricted from undertaking lawful business to sell paintings in any
locality including Karachi because he has not sold the goodwill of his business and is
merely a participant of the exhibition. Although Kamran has signed the agreement, it
shall be void to that extent.
Restriction to enforce legal rights

Kamran cannot be absolutely restricted from enforcing his rights under or in respect of
the contract by the usual legal proceedings in the ordinary tribunals. Therefore, Adil
cannot restrain Kamran in this regard. However, although Kamran has signed the
agreement, the same shall be void to that extent.
Submission of details prior to exhibition

The requirement of submitting the details of paintings by Kamran 15 days prior to
exhibition is lawful and in case of non-submission Kamran shall not be entitled to
participate in the exhibition.
(b) Kamran had made it clear that he aspired to achieve recognition for his paintings and
Adil had promised to display his painting with prominent credentials. Therefore, if
Kamran’s credentials are not displayed prominently, it means Kamran’s consent was
not freely obtained due to the following possibilities:
(1) If Adil innocently caused, Kamran to make a mistake as to the substance of the
subject matter of the contract, Kamran’s consent would be considered to have been
obtained by way of misrepresentation.
(2) If Adil made the promise without the intention of performing it or had the intention
to deceive, Kamran’s consent would be considered to have been obtained by way
of fraud.
Effect on the contract

As Kamran’s consent was not freely obtained, the contract would be voidable at the
option of Kamran.
Kamran, may, if he thinks fit, insist that the contract shall be performed, and that he
shall be put in the position in which he would have been if the representations made had
been true. Therefore, Kamran may either insist that his credentials are displayed
prominently or he may choose to withdraw from the contract by refusing to participate
in the exhibition and claim damages.
However, the contract shall not become voidable, if Kamran had the means of
discovering the truth with ordinary diligence.
Further, if it is established that Adil’s promise did not cause Kamran’s consent to the
contract, then the contract shall be considered valid and enforceable.
Page 5 of 7
A.8 (a) (I) Since Saiqa and Alia are joint promisors, Faizan may, in the absence of express
agreement to the contrary, compel any one of the joint promisors to perform the
whole of the promise and recover the remaining amount from Saiqa. This is
because if a joint promisor makes a default, then other joint promisors must bear
the loss arising from such default, unless a contrary intention appears from the
contract.
Saiqa is compelled to pay the remaining amount to Faizan. However, she can
subsequently recover the money from Alia, since a joint promisor can compel other
joint promisor to contribute equally, unless a contrary intention appears from the
contract.
(II) Since Saiqa and Alia made a joint promise, Faizan may, in the absence of express
agreement to the contrary, release Alia being one of such joint promisors.
However, such release would not discharge Saiqa, and Faizan would be able to
recover the entire loan amount from her.
Further, release of Alia by Faizan would not free her from her obligation towards
Saiqa. Therefore, Saiqa may subsequently recover Rs. 150,000 from Alia.
(b) Supervening impossibility

Following are the acceptable grounds of supervening impossibility:
▪ Destruction of subject matter.
▪ Death or personal incapacity in contracts of personal nature.
▪ Declaration of war making it impossible to perform the contract.
▪ The particular state of things cease to exist or occur which form the basis of
contract.
A.9 (a) The State Bank of Pakistan (SBP) may revoke the designation of a designated payment
system (DPS) if it is satisfied that:
▪ the DPS has ceased to operate effectively as a payment system;
▪ the operator of the designated system has knowingly furnished information or
documents to the SBP in connection with the designation of the payment system
which is or are false or misleading in any material particular;
▪ the operator or settlement institution of the DPS is in the course of being wound
up or otherwise dissolved, whether in Pakistan or elsewhere;
▪ any of the terms and conditions of the designation or requirements of the Payment
Systems and Electronic Fund Transfers Act, 2007 has been contravened; or
▪ the SBP considers that it is in the public interest to revoke the designation.
(b) (i) Product market comprises of all those products or services which are regarded as
interchangeable or substitutable by the consumers by reason of the products’
characteristics, prices and intended uses.
Geographic market comprises the area in which the undertakings concerned are
involved in the supply of products or services and in which the conditions of
competition are sufficiently homogeneous. This area can be distinguished from
neighboring geographic areas because, in particular, the conditions of competition
are appreciably different in those areas.
Business Law
Suggested Answer
(ii) Deceptive marketing practices shall be deemed to have been resorted if an

undertaking resorts to:
▪ the distribution of false or misleading information that is capable of harming
the business interests of another undertaking;
▪ the distribution of false or misleading information to consumers, including the
distribution of information lacking a reasonable basis, related to the price,
character, method or place of production, properties, suitability for use, or
quality of goods;
▪ false or misleading comparison of goods in the process of advertising;
▪ fraudulent use of another's trademark, firm name, or product labelling or
packaging.
A.10 (a) Principle of holding out

A person who by words spoken or written or by conduct represents himself, or
knowingly permits himself to be represented, to be a partner in a firm, is liable as a
partner in that firm to any person who has on the faith of any such representation given
credit to the firm, whether the person representing himself or represented to be a partner
does or does not know that the representation has reached the person giving credit.
Exception to the principle of holding out

The principle of holding out shall not apply 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.
(b) Subject to contract between the partners, property of the firm includes:
▪ all property and rights and interests in property originally brought into the stock of
the firm, or
▪ 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,
▪ the goodwill of the business.
Furthermore, unless the contrary intention appears, property and rights and interests in
property acquired with money belonging to the firm are deemed to have been acquired
for the firm.
(THE END)
Page 7 of 7

Business Law
(i) Which part of the Constitution of the Islamic Republic of Pakistan 1973 contains
special provisions relating to the National Economic Council?
(a) Part II - Fundamental Rights and Principles of Policy
(b) Part III - The Federation of Pakistan
(c) Part V - Relations between Federation and Provinces
(d) Part VII - The Judicature (01)
(ii) Which of the following statements is correct in relation to the objective of the
Competition Act, 2010?
(a) To provide for the establishment of the Competition Commission of Pakistan
to reduce competition
(b) To protect the consumers from anti-competitive behaviour
(c) To suggest practices which enhance competition in the relevant market
(d) To ensure free competition in all spheres of commercial activities only (01)
(iii) On 1 September 2022, Organza Florists (OF) agreed to deliver 100 kg of freshly picked
red roses to Blaize Banquet (BB) on 4 September 2022 at Rs. 250 per kg for a wedding
ceremony. As the roses were to be picked in the morning of the event day, OF planned
to procure the roses from Taffeta Gardens (TG) at an agreed rate of Rs. 100 per kg.
However, on 3 September 2022, before OF could place the order with TG, BB
contacted OF and asked for the delivery to be made on 7 September 2022 as the
ceremony was re-scheduled. OF refused to change the delivery date and rescinded the
contract.
Can OF claim damages from BB in respect of the contract?
(a) Yes, OF can claim Rs. 10,000 as damages
(b) Yes, OF can claim Rs. 25,000 as damages
(c) No, because OF has not suffered any damages
(d) No, because there was no penalty clause agreed between OF and BB (1.5)
(iv) Mona promised to sell her wedding dress to Sadaf for Rs. 80,000 if she would pay
Rs. 30,000 in advance and the balance on the delivery date which was a month before
Sadaf’s wedding. Mona knew that rain soaked her wedding dress and destroyed it
completely, however, she needed Rs. 30,000 urgently. Sadaf agreed to the payment
terms and paid the advance of Rs. 30,000 to Mona.
Subsequently, when Mona failed to honour delivery of the wedding dress, Sadaf had
to purchase another dress worth Rs. 100,000 for her wedding. Identify the amount
which Mona is liable to pay to Sadaf.
(a) Rs. 20,000 (b) Rs. 30,000 (c) Rs. 50,000 (d) Rs. 80,000 (1.5)
(v) Aziza is a home-based baker famous for making themed cakes for special occasions.
On 5 September 2022, a discount offer was made on Aziza’s social media account
with the caption ‘Order today to avail special price of Rs. 2,000 per pound for our special
chocolate fudge cake. Delivery within 24 hours’. Sadia messaged Aziza on the same day
for placing an order for a 2.5 pound cake. Aziza replied that she will charge
Rs. 3,000 per pound for the cake as she has received many orders and will now charge
premium price.
Can Sadia compel Aziza to sell the cake at Rs. 2,000 per pound?
(a) No, because Aziza’s offer was not specifically given to Sadia
(b) No, because Sadia’s offer has not been accepted by Aziza
(c) Yes, because Aziza’s discount offer regarding sale of cake is still valid
(d) Yes, because change in price was communicated after receiving of Sadia’s
message (1.5)
(vi) Salman and Farhan purchased two local coffee shops and renovated them to reflect
the modern café style under the name “Coffee Holics”. The interior designing of both
the shops was done by Salman whereas the renovation expenses were paid by Farhan.
The operational rights of both the shops were given to Zakir on the terms that Zakir
shall only pay a fixed amount of Rs. 25 on each coffee cup sold. Salman and Farhan
agreed to equally divide the amount paid by Zakir amongst themselves.
In the above scenario, Salman and Farhan are:

(a) partners because they share the profit in equal proportion
(b) partners because they jointly own the coffee shops
(c) not partners because the renovation expenses were not paid by both of them
(d) not partners because the arrangement does not constitute a partnership (01)
(vii) Furqan gifted a property to his spouse Nadira on completion of her post-graduation.
Subsequently, on Furqan’s request, Nadira agreed to transfer the property in Furqan’s
name if, at any time in future, he incurs heavy loss in business due to any reason.
After five years, Furqan incurred heavy loss in business due to COVID-19 pandemic
and asked Nadira to transfer the property in his name which she refused.
Can Furqan hold Nadira responsible for the breach of contract?

(a) Yes, because the agreement was contingent on incurring of heavy loss in
business
(b) Yes, because all agreements made verbally are enforceable by law
(c) No, because the agreement is void due to lack of consideration
(d) No, because the agreement was made by Nadira under undue influence (1.5)
(viii) Faiq agreed to sell two snow leopard cubs to Wajeeha for Rs. 500,000. He also
promised to deliver an imported Persian cat worth Rs. 80,000 along with the cubs as
complimentary. On the delivery date, Wajeeha refused to take delivery of the cubs on
the premise that snow leopards were endangered species and capturing them was
prohibited under local laws. However, she demanded that Faiq must deliver the cat
as promised and said that she is willing to pay the market price for the cat.
Is Faiq compelled to deliver the cat?

(a) Yes, because the contract is voidable at Wajeeha’s option due to unilateral
mistake of law
(b) Yes, because the legal set of reciprocal promises should be executed by Faiq
(c) No, because the promise to deliver the cat was dependent on the delivery of
snow leopard cubs
(d) No, because the agreement is void due to illegal consideration (1.5)
(ix) On 1 September 2022, Zahid wrote a promissory note undertaking to pay Rs. 300,000
in three equal monthly installments to the Chairman of Flannel Traders & Co. or
order. In the aforesaid promissory note:
(a) amount of money to be paid and payee both are certain
(b) amount of money to be paid is certain but payee is not certain
(c) amount of money to be paid is not certain but payee is certain
(d) amount of money to be paid and payee both are not certain (01)
(x) On 1 June 2022, Ali made an announcement promising to pay a reward of Rs. 90,000
to any person who would find his lost dog. Sarim came to know about the
announcement on 15 June 2022 and decided to find the dog. On 30 June 2022, Sarim
found the dog and handed it over to Ali on the same day. Ali paid the reward of
Rs. 90,000 to Sarim on 10 July 2022.
In the above scenario, the contract between Ali and Sarim was formed on:
(a) 1 June 2022 (b) 15 June 2022
(c) 30 June 2022 (d) 10 July 2022 (01)
(xi) Pervez had a guest house in Abbottabad which he rented to his business partner
Karim at a regular price for two days. On the day of leaving Abottabad, Karim noticed
overdues of last month appearing in the electricity bill of the guest house. He paid the
bill to appease Pervez. When Pervez came to know about Karim’s act, he thanked
Karim and verbally promised to pay back the bill amount of Rs. 55,000.
Can Pervez be held liable if he subsequently refuses to pay Rs. 55,000 to Karim?
(a) No, because Pervez did not make the agreement in writing
(b) No, because Karim was not legally bound to pay the dues
(c) Yes, because Pervez promised to pay Karim for his voluntary act
(d) Yes, because Karim was legally bound to pay the dues (1.5)
(xii) Precedents are defined as:

(a) interpretation of law by the Supreme Court of Pakistan
(b) interpretation of law by any high court which are binding on other high courts
(c) decisions of superior courts which are not an intrinsic part of the legal system
(d) judgements of a superior court which are binding on subordinate courts (01)
Q.2 Briefly discuss delegated legislation and state any two advantages and two disadvantages of
delegated legislation. Also describe how control is exercised over delegated legislation. (05)
Q.3 On 5 September 2022, Aftab bought goods from Kamran for Rs. 950,000 on credit of two
months and immediately sold them to Abdullah for Rs. 960,000. Aftab received Rs. 10,000
in cash from Abdullah and the remaining amount was agreed to be received after two
months. Aftab intends to settle both the transactions through a negotiable instrument.
Under the provisions of the Negotiable Instruments Act, 1881 prepare a draft of the
negotiable instrument that Aftab may issue in settlement of both the transactions. (Assume
necessary details for the preparation of the negotiable instrument) (05)
(a) identify any five differences between coercion and undue influence. (05)
(b) identify any two differences between fraud and misrepresentation. (03)
Q.5 Rahim Khan is a software engineer who runs his own IT firm. He engages many free lancers
as and when required to work on different projects. He also works part-time in a computer
training institute where he teaches various computer courses.
Consider the following matters under the Contract Act, 1872:
(a) While teaching at the institute, Rahim met a course participant Usama with
specialized graphic designing skills. He collaborated with Usama and submitted a
website designing proposal to a prospective client, Farah. She liked the proposal and
offered Rahim and Usama to design her boutique’s website for Rs. 500,000 to which
they both agreed.
Rahim and Usama lied to Farah that Usama is eighteen years old even though his
eighteenth birthday was still few months away.
Discuss whether Farah can enforce performance against Rahim and Usama. (04)
(b) On 10 September 2022, a virtual gaming tournament has been scheduled in which a
gaming expert team will participate from Pakistan. Rahim provided training to
Pakistani team. Considering the team’s skills, he proudly claimed to his friend Nadir
that his team will win the tournament.
Nadir offered that if Rahim submits Rs. 100,000 to him as a security and his team
wins the tournament then Nadir will pay Rs. 200,000 to Rahim. Rahim agreed and
paid Rs. 100,000 to Nadir.
Discuss whether Rahim can sue Nadir if the team wins the tournament but Nadir
refuses to pay. (03)
(c) Organdy Limited (OL) signed a contract with Rahim’s IT firm to manage OL’s social
media accounts for one year effective 1 July 2022 at Rs. 1,500,000 per quarter payable
in arrears. Rahim hired Zia to perform the task at a salary of Rs. 200,000 per month
for the contract term. Rahim sent several reminders for the passwords of OL’s social
media accounts but did not receive the passwords from OL.
Discuss the validity of the contract between OL and Rahim. Also identify the remedies
available to Rahim, if any. (03)
(d) Assume that in (c) above, Rahim was offered a similar project by Muslin Limited. On
31 August 2022, Rahim accepted the offer and assigned the project to Zia. On the
same date, Rahim sent an e-mail to OL regretting that performance is impossible
mainly due to non-availability of resources.
Discuss the validity of Rahim’s correspondence. Also discuss OL’s position in this
situation. (04)
Q.6 (a) Under the Payment Systems and Electronic Fund Transfers Act, 2007 identify the
operational arrangements required to be established by the operators of a designated
payment system. (04)
(b) Briefly explain when a person may be considered as an offender by virtue of which
such person may be punished under the provisions of the Prevention of Electronic
Crimes Act, 2016. (05)
(c) Under the provisions of the Arbitration Act, 1940 state any four powers of arbitrator. (04)
Q.7 On 30 June 2021, Noman, Salim, Ahmed and Sana entered into a partnership for carrying
on business of manufacturing and export of denim fabrics under the name and style ‘Damask
Traders’ (DT).
At the time of commencement of partnership, Noman disclosed to other partners his interest
in family business of export of velvet fabrics. Due to his connections with foreign buyers,
Noman brought in many export orders for DT. Salim handled operations and ensured timely
delivery of orders to customers.
Being the consultant of DT, consider the following matters under the Partnership Act, 1932:
(a) On 5 September 2022, a meeting was held to discuss the financial performance of DT
for the year ended 30 June 2022. Following matters were discussed in the meeting:
(i) Profit for the year was determined after accruing Salim’s salary of
Rs. 100,000 per month for running DT’s operations. Noman found this
unjustified and demanded an equivalent salary for his efforts to establish DT’s
business. Discuss the validity of Noman’s viewpoint. (03)
(ii) 20% of the export orders were combined orders for denim and velvet fabrics
which were jointly fulfilled by DT and Noman’s family business. Salim argued
that 50% of the velvet business’s profits should be paid to DT. Comment on the
validity of Salim’s argument. (03)
(iii) Ahmed informed that he had paid Rs. 900,000 from his personal bank account
to a supplier on 31 January 2022 due to non-availability of cash in DT’s bank
account. On 31 May 2022, the amount was paid back to Ahmed. He demanded
Rs. 27,000 as profit which he would have earned if the funds were maintained
in his bank account. Evaluate the validity of Ahmed’s demand. (03)
(iv) During the meeting, Noman stated that since he had brought most of the orders
for DT, remaining partners cannot use the brand ‘Damask Traders’, if he
decides to leave the partnership. Discuss the validity of Noman’s statement. (03)
(b) On 15 August 2021, Sana died in a car accident and her seventeen-year old daughter
Sarah was admitted to the benefits of DT. On 8 September 2022, Sarah is to celebrate
her eighteenth birthday. Advise Sarah regarding her rights and liabilities in respect of DT
on attaining the age of majority. (05)
Q.8 Sultan imports mulberry silk and receives repetitive orders from regular customers. The
invoices are generated on the dispatch date and payment becomes due on the last date of the
subsequent month.
Wajahat is a regular customer of Sultan. Following are the extracts from Wajahat’s
statement of receivables as on 30 June 2022:
Date of invoice Amount (Rs.) Due date Comments noted by Sultan

31 January 2017 60,000 28 February 2017 Time barred under local law
10 May 2021 100,000 30 June 2021 Overdue for one year
10 March 2022 90,000 30 April 2022 Overdue for two months
31 March 2022 200,000 30 April 2022 Overdue for two months
30 June 2022 50,000 31 July 2022 Not yet due
Total 500,000
Wajahat sent a cheque of Rs. 220,000 on 31 July 2022 but did not mention the invoices
against which the payment was to be adjusted. Sultan sent several reminders to Wajahat in
this regard but did not receive a response.
Under the provisions of the Contract Act, 1872 discuss how the proceeds of the cheque can
now be adjusted against Wajahat’s statement of receivables. (05)
Q.9 (a) Kazim agreed to supply 500,000 cotton fabric rolls of a specific design to Zainab’s
workshop on 4 September 2022 between 10 am to 9 pm. Zainab informed Kazim that
she requires the rolls urgently as she has to cater her orders.
On 4 September 2022, Kazim brought the rolls to Zainab’s workshop at 8:30 pm and
asked her to take delivery quickly as he was in a rush to make another delivery before
9 pm in nearby locality. Zainab wanted to check one roll from each of the
1,000 boxes to ensure that they are of the same design which she had ordered. Kazim
threatened Zainab that if she does not sign the goods receiving note within next
10 minutes, he will not deliver the rolls to her and will take the delivery truck away to
unload next order.
Under the provisions of the Contract Act, 1872 discuss whether Kazim is justified in
his contention. Also discuss Zainab’s position if Kazim does not deliver the rolls to
her. (04)
(b) Assume that in (a) above, Kazim brought the cotton fabric rolls for delivery to
Zainab’s workshop on 5 September 2022 at 10:30 am but Zainab refused to take the
delivery. However, Zainab offered to take the delivery if she is given a special discount
of 20% on the invoice amount.
Under the provisions of the Contract Act, 1872 discuss Kazim’s position if he:
(i) refuses to give the discount and sues Zainab for breach of the contract. (03)
(ii) agrees to give the discount and makes the delivery but later sues Zainab to pay
the full amount. (02)
(a) identify how and on what grounds a proposal stands revoked. Also describe the time
frame after which a proposal cannot be revoked. (05)
(b) briefly describe the rules in respect of time and place for the performance of a promise
where both of them have not been specified in the contract. (04)
(THE END)
Business Law
Suggested Answers
Certificate in Accounting and Finance – Autumn 2022
A.1 (i) (c) (ii) (b) (iii) (c)

(iv) (c) (v) (b) (vi) (d)
(vii) (c) (viii) (d) (ix) (a)
(x) (c) (xi) (c) (xii) (d)
A.2 Delegated legislation

In delegated legislation, power is given to an executive (a minister or public body to make
subordinate or delegated legislation) for specified purposes only. For example, local
authorities are given statutory powers to make bye-laws which apply within a specific
locality.
Advantages of delegated legislation

▪ As Parliament does not have time to examine matters in detail, delegated legislation
helps to make the process faster.
▪ Much of the content of delegated legislation is technical and is better worked out in
consultation with professional, commercial or industrial groups outside Parliament.
Disadvantages of delegated legislation

▪ Delegated legislation takes law making away from the democratically elected
members. Power to make law is given to unelected civil servants and experts
working under the supervision of a government minister.
▪ Because delegated legislation can be produced in large amounts, the volume of such
law making becomes unmanageable and it is impossible to keep up-to-date.
Control over delegated legislation

▪ Parliament has some control over delegated legislation by restricting or defining the
power to make rules.
▪ Rules made under delegated power to move legislation may be challenged in the
Courts on the grounds that it is ultra vires i.e. it exceeds the prescribed limits or has
been made without due compliance. If the objection is valid, the Court declares it
void.
A.3 Aftab may issue following negotiable instrument i.e. bill of exchange in settlement of both
the transactions:
Draft of the bill of exchange
Dated: 5 September 2022

Rs. 950,000/- only
Two months after date pay to Kamran or to his order the sum of Rupees NineHundred
and Fifty Thousand only, for value received.
Accepted
Signed by Abdullah
To
Abdullah Sign:
ABC Road Aftab
Name of city XYZ Road
Name of city
Page 1 of 6
A.4 (a) S. No. Coercion Undue influence
(1) Consent is obtained by giving a Consent is obtained by dominating
threat of an offence or committing an the will.
offence.
(2) Coercion involves physical pressure. Undue influence involves moral
pressure.
(3) Parties to a contract may or may not Parties to a contract are related to
be related to each other. each other under some sort of
relationship.
(4) The objective is to compel a person The objective is to obtain an unfair
to enter into a contract. advantage.
(5) Criminal liability is incurred, Criminal liability is not incurred.
therefore, it is illegal.
(b) S. No. Fraud Misrepresentation

(1) Fraud implies an intention or any Representation is innocent without
other act fitted to deceive. intent to deceive.
(2) Fraud is civil wrong and aggrieved Aggrieved party can only avoid the
party can claim damages in addition contract but damages are only
to cancellation of contract. payable at discretion of the Court.
A.5 (a) Usama was not competent to contract as he was below the age of majority i.e.
eighteen years and an agreement with minor is void ab-initio.
As Usama was not competent to contract, he will not be liable towards Farah
irrespective of the fact that he fraudulently induced Farah to enter into an agreement
with him. Therefore, Farah cannot demand performance from Usama. However,
since he entered into agreement jointly with Rahim, Farah can demand
performance from Rahim.
Furthermore, if it was intention of parties that contract should be performed by

promisors who submitted proposal, such promise must be performed by Rahim.
Otherwise, Rahim may employ another competent graphic designer to perform the
contract.
(b) Rahim has entered into an agreement with Nadir by way of wager as he has made
a bet such that Rs. 200,000 shall be paid to him on the happening of an uncertain
event i.e. a particular team winning the tournament. This agreement is void and no
suit can be filed to recover any sum paid or payable in this regard.
Hence, Rahim cannot file suit for recovering money already paid i.e. Rs. 100,000
or for recovering win money of another Rs. 100,000 even if the team wins the
tournament as predicted by him.
(c) The contract between Rahim and OL comprised of reciprocal promises and OL is
preventing Rahim from performing his promise, therefore, contract is voidable at
Rahim’s option i.e. Rahim can declare the contract void or not take any step
implying that he intends to continue the contract.
Furthermore, Rahim is entitled to get such damages which naturally arose in the
usual course of business from such breach or which the parties knew when they
Business Law
Suggested Answers
made the contract to be likely to result from such breach. Accordingly, Rahim can
claim Zia’s salary to such extent which incurred till the date he communicates his
decision to repudiate the contract.
(d) As identified in (c) above, the contract is voidable at Rahim’s option. By refusing to
perform, Rahim has rescinded the contract. However, his comment regarding
impossibility of contract performance is incorrect as non-availability of resources
does not make a contract void due to supervening impossibility.
OL does not have any option available and cannot insist that Rahim should perform
the contract. As discussed in (c) above, OL will have to compensate Zia’s salary of
Rs. 200,000 for two months i.e. July and August 2022 as Rahim incurred these
damages due to breach of contract.
A.6 (a) Under the Payment Systems and Electronic Fund Transfers Act, 2007 the
operational arrangements required to be made by the operators of a Designated
Payment System (DPS) are as follows:
(i) rules and procedures setting out the rights and liabilities of the operator and
the participant and the financial risks the participants may incur;
(ii) procedures, controls and measures for the management of credit, liquidity
and settlement risk, including rules determining the time when a payment
instruction and a settlement is final;
(iii) criteria for participation in the DPS; and
(iv) measures to ensure the safety, security and operational reliability of the DPS
including contingency arrangements.
(b) A person may be considered as an offender by virtue of which such person may be
punished under the Prevention of Electronic Crimes Act, 2016 if he with dishonest
intention:
(i) gains unauthorized access to any information system/data or any critical
infrastructure information system/data;
(ii) without authorization copies or otherwise transmits or causes to be
transmitted any data or any critical infrastructure data;
(iii) interferes with or damages or causes to be interfered with or damages any part
or whole of an information system/data or a critical information
system/data.
Furthermore, whoever prepares or disseminates information, through any
information system or device, with the intent to glorify an offence relating to
terrorism, or any person convicted of a crime relating to terrorism, or activities of
proscribed organizations or individuals or groups may also be considered as an
offender.
(c) The arbitrators shall, unless a different intention is expressed in the agreement, have
power to:
(i) administer oath to the parties and witnesses appearing;
(ii) state a special case for the opinion of the Court on any question of law
involved, or state the award, wholly or in part, in the form of a special case of
such question for the opinion of the Court;
(iii) make the award conditional or in the alternative;
(iv) correct in an award any clerical mistake or error arising from any accidental
slip or omission;
Page 3 of 6
A.7 (a) (i) Noman finding remuneration accrual unjustified indicates that it was not in
accordance with the contract terms agreed between partners.
Under the Partnership Act, 1932 a partner is entitled to receive remuneration

for taking part in conduct of business, only if it is agreed by all the partners.
Therefore, Salim can get salary for handling DT’s operations subject to
consent of all the partners.
Further, Noman can also get salary for establishing DT’s business, subject to
consent of all the partners.
(ii) DT is a newly established business and it is clear that instead of using DT’s
name or business connections, Noman is using his own family business
goodwill to establish DT’s reputation.
Under the Partnership Act, 1932, Noman would have been liable to pay the
profits derived by himself to DT, if:
▪ the businesses were of same nature or competing with each other.
Trading in denim fabrics is entirely separate from dealing in velvet
fabrics, it is neither of same nature nor competes with each other.
▪ there exists a contract between the partners to share personal profits.
Noman had disclosed his interest in family business dealing with velvet
fabrics at commencement of partnership but there was no contract to
share profits earned by him.
Due to the abovementioned reasons, Salim’s argument is invalid and Noman

and his family are not liable to share velvet business’s profits with DT.
(iii) Subject to contract between the partners 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 6% per annum.
Ahmed is entitled to receive interest amount of Rs. 18,000

(900,000×6%×4÷12) only, as he made the payment beyond the firm’s
capital irrespective of the fact that the actual profit offered by the bank would
have been Rs. 27,000.
(iv) Subject to contract between the partners, the property of the firm includes the
goodwill of the business.
Since there was no earlier contract between the partners as to treatment of

goodwill, Noman’s claim on goodwill of the firm is not valid.
(b) Sarah has to decide whether or not she wants to become a partner and such decision
has to be taken by her within six months from the date of attaining majority i.e. by
7 March 2023.
If Sarah decides not to become DT’s partner:

Sarah will have to give public notice of her intention not to become DT’s partner by
7 March 2023 and in this scenario:
▪ her rights and liabilities shall continue to be those of a minor up to the date
on which she gives public notice;
▪ her share shall not be liable for any acts of DT done after the date of public
notice; and
▪ she shall be entitled to sue DT’s partners for her share of property and profits.
Business Law
Suggested Answers
If Sarah decides to become DT’s partner:

Sarah will have to give public notice of her intention to become DT’s partner by
7 March 2023 and in this scenario:
▪ her rights and liabilities as a minor continue up to the date on which she
becomes a partner;
▪ she becomes personally liable to third parties for all acts of DT done since she
was admitted to the benefits of partnership; and
▪ her share in the property and profits of DT shall be the share to which she
was entitled as a minor.
Provided that, if she fails to give public notice as above, she shall become DT’s
partner on expiry of six months from the date of attaining majority.
A.8 In the absence of any intimation from Wajahat regarding application of payment to debts,
following are the two possibilities to determine the settlement:
(I) Sultan may apply the payment at his discretion to any lawful debt actually due and
payable to him from Wajahat, whether its recovery is or is not barred by the law in
force for the time being as to the limitation of suits.
(II) If Sultan does not make an appropriation, then the payment shall be applied in
discharge of the debts in order of time, whether they are or are not barred by the law
in force for the time being as to the limitation of suits.
Further, where the debts are of equal standing, the payment shall be applied in
discharge of each outstanding debt in equal proportion.
Accordingly, invoices dated 31 January 2017 amounting Rs. 60,000 and 10 May
2021 amounting to Rs. 100,000 will be settled first against the payment received.
Further, the invoices dated 10 March 2022 and 31 March 2022 are of equal standing
i.e. both matured on 30 April 2022, therefore, remaining payment shall be applied
in discharge of these invoices in equal proportion i.e. Rs. 18,621 against invoice
dated 10 March 2022 and Rs. 41,379 against invoice dated 31 March 2022.
A.9 (a) Kazim’s offer of performance to Zainab is not valid because it does not fulfill the
following conditions:
▪ An offer of performance must be unconditional. Kazim’s condition that
goods receiving note should be signed within next 10 minutes invalidates his
offer of performance;
▪ Since contract is to deliver cotton fabric rolls in specific designs, Zainab must
have a reasonable opportunity of checking that rolls pertains to the specific
designs she ordered. She cannot possibly inspect 1,000 boxes in 10 minutes.
Due to the above reasons Kazim is not justified in his contention since his offer of
performance is not fulfilling all the requirements.
Zainab’s position:
Zainab’s urgency to receive the order on time was in Kazim’s knowledge which he
tried to use to his advantage threatening to leave without delivery. If Kazim does
not deliver the rolls to her, Zainab can claim compensation for breach of contract
because non-delivery on the agreed date shall render the contract voidable at
Zainab’s option.
Page 5 of 6
(b) (i) Kazim already knew about Zainab’s urgent orders due to which time was the
essence of contract and non-delivery on the agreed date has made the contract
voidable at Zainab’s option. Accordingly, Kazim cannot hold Zainab
responsible for breach of contract as she has the right to declare the contract
void due to any reason and hence she can refuse to take delivery.
(ii) If Kazim agrees to Zainab’s demand of 20% discount, it will be considered as

accepting alteration of contract. Consequently, he will not be able to demand
full payment from Zainab afterwards.
A.10 (a) A proposal is revoked by:

(i) the communication of notice of revocation by the proposer to the other party;
(ii) the lapse of the time prescribed in such proposal for its acceptance, or if no
time is so prescribed, by the lapse of a reasonable time, without
communication of the acceptance;
(iii) the failure of the acceptor to fulfil a condition precedent to acceptance; or
(iv) the death or insanity of the proposer, if the fact of the death or insanity comes
to the knowledge of the acceptor before acceptance;
(v) non-acceptance or rejection by offeree;
(vi) a counter offer made by the offeree in response to the original offer.
Time frame after which a proposal cannot be revoked:

A proposal cannot be revoked after the communication of its acceptance is complete
as against the proposer i.e. when the acceptance is put in a course of transmission
to the proposer so as to be out of the power of the acceptor.
(b) Where time and place for the performance of a promise have not been specified in
the contract and the promisor is to perform promise without application by the
promisee in that situation following rules shall apply:
▪ where no time for performance is specified, the engagement must be performed
within a reasonable time.
▪ where no place is fixed for the performance of it, 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 END)

Business Law
Multiple Choice Questions (MCQs). Each MCQ carries ONE mark.
(i) Fluorine & Sons (FS) is a partnership firm in which Ali, Abid and Arif are partners.
During a business trip in January 2022, they convinced a well-known businessman
Haris to join FS. Haris agreed and joined FS as a partner.
Recently, it has been revealed that last year Abid intentionally consigned poor quality
goods to a customer while sending consignment on behalf of FS due to which the
customer suffered a huge loss. Will Haris be liable to the customer for wrongful act of
Abid?
(a) No, because Haris was unaware of Abid’s act at the time of becoming a partner
(b) No, because the act was carried out by Abid before Haris became a partner
(c) Yes, because all the partners are jointly and severally liable to the customer
(d) Yes, because Haris is considered as partner by holding out towards the customer
(ii) If the President of Pakistan resigns and his office becomes vacant, which of the
following will be next in line to act as the President until a new President is formally
elected?
(a) Prime Minister of Pakistan (b) Chairman of the Senate
(c) Speaker of the National Assembly (d) Chief Justice of Pakistan
(iii) If a government officer is involved in money laundering, this act will be considered as:
(a) a primary offence (b) a predicate offence
(c) an intentional tort (d) a minor offence
(iv) Waqar draws a bill of exchange on Dawood which states “Dawood, please pay
Rs. 900,000 to Afshan only”. The bill of exchange drawn by Waqar is:
(a) a valid negotiable instrument because payee’s name is clearly mentioned
(b) an invalid negotiable instrument because it contains an order to pay
(c) not a negotiable instrument since it restricts payment to Afshan only
(d) a valid negotiable instrument because it contains a request to pay
(v) Maria borrowed Rs. 500,000 from Amir and promised to repay on 5 January 2022. She
used the funds for giving loan to her brother Junaid. On the due date, Maria requested
Amir to take payment directly from Junaid instead of her. Junaid promised to pay
Rs. 500,000 to Amir on 15 March 2022 and Amir agreed. If Junaid makes default,
then:
(a) Amir can claim Rs. 500,000 from Maria
(b) Amir can claim Rs. 500,000 from both Maria and Junaid
(c) Amir cannot claim Rs. 500,000 from Maria as there is no contract between them
(d) Amir cannot claim Rs. 500,000 from Junaid as Maria is the principal debtor
(vi) In order to store valuables, Mariam agreed to purchase a safety cabinet from her friend
Noureen for Rs. 800,000. Mariam was of the impression that it was manufactured in
Japan and is fireproof. However, she did not confirm her understanding from Noureen.
On delivery day, Mariam expressed her excitement about owning a Japanese-origin

fireproof safety cabinet. Noureen corrected her and mentioned that the only safety
cabinet she owned and agreed to sell was purchased from Japan but it was neither
fireproof nor manufactured in Japan. Mariam got upset and refused to make the
payment.
The contract between Mariam and Noureen:
(a) is valid on account of unilateral mistake regarding quality of subject matter
(b) is voidable on account of unilateral mistake regarding quality of subject matter
(c) is void on account of unilateral mistake regarding quality of subject matter
(d) is void on account of bilateral mistake regarding quality of subject matter
(vii) Which of the following statements is correct?

(a) An arbitration agreement may either be express or implied
(b) Arbitration agreement cannot be made to submit future differences to arbitration
(c) An arbitrator can correct any mistake made in the award
(d) An arbitrator is empowered to make the award conditional
(viii) Zakir sent a letter to Rehman offering him to sell his sports bike for Rs. 50,000. It was
mentioned in the letter that if Rehman would not send a reply within one week, the
offer shall be presumed to be accepted. Rehman was thrilled to purchase the bike at
this price and therefore did not reply within the stipulated time.
Which of the following statements is correct?
(a) Rehman’s conduct constitutes implied acceptance of the offer
(b) Contract is valid because Rehman satisfied all the conditions of the offer
(c) Contract is not valid because the offer must be unconditional
(d) Rehman’s silence cannot be considered as acceptance
(ix) Fareeha was operating a home-based salon in her flat. The salon was well-known and
famous for modern hairstyling trends. Aliya, a certified hairdresser, opened her own
salon in the same building and offered to give Rs. 700,000 to Fareeha if she stops
providing salon services in the same building. Fareeha accepted the offer and Aliya
paid the amount. Subsequently, Aliya discovered that Fareeha never stopped providing
salon services as agreed.
(a) Aliya can sue Fareeha for fraud and force her to stop providing salon services
(b) Aliya can claim damages from Fareeha due to non-performance
(c) Aliya cannot demand performance from Fareeha as the agreement was void
(d) Aliya cannot claim damages as there was no penalty clause in the agreement
(x) Which of the following statements is correct in the context of a minor admitted to the
benefits of a partnership firm?
(a) His share in the partnership firm will not be liable for the acts of the firm
(b) He can have such right on partnership’s property as may be agreed upon
(c) He cannot inspect accounts of the partnership firm
(d) He shall be personally liable for the acts of the partnership firm
(xi) Promises which form the consideration for each other are:
(a) joint promises (b) unenforceable promises
(c) reciprocal promises (d) quasi promises
(xii) On 28 February 2022, Fahad offered to sell his vintage car to Rafay for Rs. 2 million.
Subsequently, Fahad died on 2 March 2022. Rafay was not aware of Fahad’s death
and sent acceptance to Fahad on 7 March 2022.

(a) The offer was revoked on 2 March 2022
(b) Fahad’s legal representatives are bound to sell the car to Rafay
(c) Contract is voidable at the option of Fahad’s legal representatives
(d) Fahad’s legal representatives are not bound to sell the car to Rafay
(xiii) On 10 January 2022, Asif agreed to deliver 5,000 kg of coal to Zain on 31 January 2022
at Rs. 70 per kg. On 15 January 2022, Zain promised to deliver 5,000 kg of coal to
Faizan on 10 February 2022 at Rs. 105 per kg. Asif had no information about Zain’s
agreement with Faizan.
Asif failed to deliver on due date and Zain filed a suit against him on 28 February 2022
claiming damages. Determine the damages that Zain can recover from Asif if market
price of coal at different dates was as follows:
10 January 2022 Rs. 75 per kg
10 February 2022 Rs. 98 per kg
(a) Rs. 100,000 (b) Rs. 140,000

(c) Rs. 175,000 (d) Nil
(xiv) On 20 February 2022, Saad agreed to provide 500 custom-made shirts to Jalil for a
match. Saad was unable to deliver the order on the agreed date due to fire incident in
one of his factories. He sent the delivery to Jalil after the agreed date and requested him
to accept the order as the shirts were customized and could not be sold in the market.

(a) Jalil can accept the delivery as contract is voidable at his option
(b) Jalil must accept the delivery as delay was due to supervening impossibility
(c) Jalil cannot accept the delivery because time was essence of the contract
(d) Jalil cannot accept the delivery as the contract became void
(xv) Jamal told Rehan that he wants to spend his retired life in a peaceful area with green
surroundings. Rehan offered to sell his ancestral home to Jamal located in an area
known for abundant parks and peaceful atmosphere. On Jamal’s query, Rehan told
him that he is not aware of any planned commercial developments in the area despite
the fact that he knew from a reliable source that construction of a large inter-city bus
terminal was about to commence on the land opposite his ancestral home.
Can Rehan be held liable if Jamal purchases his ancestral home?

(a) No, Rehan is not required to disclose such information to Jamal
(b) Yes, Rehan has committed a fraud against Jamal
(c) Yes, there is fiduciary relationship between the contracting parties
(d) No, Rehan has not forced Jamal to buy his house
Q.2 Explain any four differences between civil and criminal laws. Also identify any two criminal
laws which are presently enforced in Pakistan. (05)
Q.3 (a) Krypton Traders & Co. (KTC), a partnership firm having five partners, is engaged in
the business of manufacture and export of leather jackets. Operations of KTC are
managed by two of its partners namely Salman and Nadir, while the remaining three
partners are not actively involved in the business of the firm.
In March 2022, Salman presented two proposals to Nadir which, in his view, will
improve KTC’s profitability manifold. He requested Nadir to give his consent to any
one of the following two proposals so that it may be executed:
(i) Reduce material cost by using low-quality leather in production.
(ii) Discontinue production activities and invest KTC’s capital in real estate.
Nadir found none of the proposals in KTC’s interest and disapproved both of them.
Salman then presented the proposals to KTC’s most senior partner, Akmal and sought
his consent to proceed with the execution.
Under the provisions of the Partnership Act, 1932 discuss the possibility of execution
of the above proposals:
▪ if Akmal agrees with proposal no. (i) only
▪ if Akmal agrees with proposal no. (ii) only (06)
(b) Zaheer has recently graduated from the Institute of Textile Designing. He has been
approached by Zara with an offer to start a designer boutique in partnership under the
name and style of ‘Zareer Bridals’. Zara proposed to purchase a shop in Karachi and
to manage its operations whereas Zaheer will be responsible for designing the dresses
for the boutique.
Zara wants to sign a formal partnership contract with Zaheer. She intends to run the
boutique for five years and afterwards if the venture remains successful, she plans to
open international branches on her own without any profit sharing with Zaheer.
Under the provisions of the Partnership Act, 1932:

▪ discuss which type of partnership is suitable for Zara.
▪ discuss the statutory rights and duties of both Zara and Zaheer which can be
restricted or extended in Zara’s favour by way of a partnership contract. (08)
Q.4 (a) Amir drew a cheque in favour of Ghalib Mehmood on Xenon Bank Limited (XBL).
He crossed the cheque specially to be paid into Rhenium Bank Limited (RNBL).
The cheque was stolen from Ghalib’s wallet and before theft was revealed, cheque was
deposited in favour of another person having the same account title ‘Ghalib Mehmood’
into his account maintained with Rhodium Bank Limited (RDBL).
Under the Negotiable Instruments Act, 1881 discuss whether XBL would be liable to
the true owner if the cheque was cleared and funds were transferred to RDBL. (03)
(b) Assume that in (a) above, the stolen cheque was deposited in favour of another person
having the same account title ‘Ghalib Mehmood’ into his account maintained with
Rhenium Bank Limited (RNBL).
Under the Negotiable Instruments Act, 1881 discuss the implications on RNBL, if the
cheque is cleared and funds are received in RNBL. (02)
(c) Explain the circumstances in which a banker must refuse payment of a cheque. (03)
Q.5 Bromine Traders (BT) is engaged in the business of import, purchase and supply of electronic
items. During the year, BT entered into the following contracts for supply of various products:
(i) BT agreed to supply 500 electric ovens to Indium Limited (IL). The ovens were to be
manufactured by Argon Brothers (AB). AB failed to supply the ovens to BT on time
due to which BT was unable to deliver the ovens to IL. Evaluate BT’s position in the
given situation. (03)
(ii) BT agreed to supply 250 rice cookers to Francium & Co. (FC) against an advance
payment of Rs. 500,000. BT specified that the rice cookers would either be imported or
smuggled from Korea. Discuss status of contract between BT and FC. (03)
(iii) BT agreed to supply 900 automatic washing machines to Osmium Limited (OL).
Machines were to be imported from Singapore. However, the machines could not be
imported due to political unrest in Singapore. BT informed OL that import from
Singapore is impossible, therefore, machines may instead be imported from Taiwan.
Discuss whether BT’s excuse is valid and whether OL is bound to accept the machines
imported from Taiwan. (03)
(iv) In one of BT’s showrooms, a famous actor came to return an air conditioner purchased
one month ago. He demanded for the replacement of his air conditioner with the latest
model. The actor got upset when the showroom manager refused to replace the air
conditioner with the latest model and threatened to damage the products displayed in
the showroom. Considering the situation, the manager agreed to deliver the latest
model of air conditioner to actor’s house. Discuss the status of the contract between BT
and the customer. (03)
(v) Hafnium Limited (HL), a new customer, approached BT for the purchase of
5 television sets. BT agreed to supply the television sets on 6 March 2022 at a discount
of either 10% or 15% on retail price to be finalised at the time of delivery. Upon
delivery, HL demanded a discount of 15% on retail price which BT refused to provide.
Discuss whether HL can hold BT liable for breach of contract. (03)
Q.6 (a) Under the provisions of the Contract Act, 1872 describe contingent contracts and
identify the circumstances in which a contingent contract cannot be enforced. (05)
(b) Under the provisions of the Contract Act, 1872 explain the circumstances in which a
person may be restricted from carrying on a business. (02)
Q.7 (a) Under the provisions of the Anti-Money Laundering Act, 2010 explain when a person
may be held accountable for a money laundering offence. Also discuss the possible
consequences, if he is proven guilty. (05)
(b) Explain the term “Critical infrastructure” as defined under the provisions of the
Prevention of Electronic Crimes Act, 2016. (03)
(c) Under the provisions of the Competition Act, 2010 list any five practices that prevent,
restrict, reduce or distort competition in a particular market through abuse of dominant
position. (05)
Q.8 In November 2021, Farhan, Noman and Salman established a hotel in Swat. For the day-
to-day operations of the hotel they jointly borrowed Rs. 600,000 from Danish for a period of
six months.
Under the provisions of the Contract Act, 1872 discuss the following:
(a) Can Danish recover the loan only from Noman on the due date? (02)
(b) Can Danish recover the loan if Farhan, Noman and Salman die before the due date? (02)
(c) Can Farhan be held liable for the loan, if Danish releases him before the due date? (02)
Q.9 (a) On 19 January 2022, Potassium Farms (PF) agreed to supply 500 kg of strawberries to
Niobium Industries Limited (NIL) on 15 February 2022 at a discounted price to be
paid in advance. NIL agreed to the conditions and paid the amount to PF in advance
on 20 January 2022. NIL had a plan to introduce strawberry flavoured milk in
March 2022. On 15 February 2022, PF failed to deliver the strawberries to NIL.
Under the provisions of the Contract Act, 1872 discuss the remedies available to NIL. (03)
(b) What would be your answer in (a) above, if PF offers to deliver only 300 kg of
strawberries to NIL on the due date. (04)
Q.10 (a) Under the provisions of the Contract Act, 1872 describe constructive contracts and
identify the circumstances in which a constructive contract may be formed. (05)
(b) Under the provisions of the Contract Act, 1872 explain the circumstances in which an
agreement without consideration is considered to be a valid contract. (05)
(THE END)
Business Law
Suggested Answers
A.1 (i) (b) (vi) (a) (xi) (c)

(ii) (b) (vii) (d) (xii) (b)
(iii) (b) (viii) (d) (xiii) (a)
(iv) (c) (ix) (c) (xiv) (a)
(v) (c) (x) (b) (xv) (b)
A.2 Differences between civil and criminal laws are as follows:

S.no. Civil Law Criminal Law
(i) Civil law sets out the rights and duties Criminal law is concerned with the
of persons as between themselves, any conduct that is considered so
violation of which is a tort/wrongdoing. undesirable that the State punishes
persons who transgress as violation of
the criminal law is a crime.
(ii) Purpose of civil law is to provide a Purpose of criminal law is to regulate
means whereby an injured party can the society by the threat of punishment.
obtain compensation.
(iii) The person whose rights (private Legal action may be brought by the
individuals) have been affected can State against individuals who are
claim a remedy from the wrongdoer. accused of being in breach of the
criminal law. It is the responsibility of
the State to bring these legal actions, in
criminal trials.
(iv) The claimant sues the defendant for The State (Government) prosecutes the
harm caused. accused (the defendant) whether or not
the harm was caused.
The criminal laws in force in Pakistan include Pakistan Penal Code, Anti-Money
Laundering Act etc.
A.3 (a) Following are the possibilities of execution of the proposals presented by Salman:
▪ If Akmal agrees with proposal no. (i) only

The dispute relating to ordinary matters of the business i.e. reducing material
cost by using low-quality leather in production may be decided by a majority of
the partners (i.e. at least 3 partners) unless there is an express or implied
contract to the contrary among the partners.
If Akmal agrees to reduce material cost by using low-quality leather in

production, all the partners of KTC should be informed about the dispute and
provided with opportunity to express opinion before matter is decided.
Hence, proposal no. (i) can be executed if one more partner agrees to it besides
Akmal and Salman.
▪ If Akmal agrees with proposal no. (ii) only

The proposal to discontinue production activities and invest KTC’s capital in
real estate will be considered as change in nature of the firm’s business which
cannot be made without the consent of all the partners unless there is an
express or implied contract to the contrary among the partners.
Since Nadir has already disagreed with the proposal no. (ii), it cannot be
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executed even if Akmal agrees to the same.
Akmal’s agreement to proposal no. (ii) only, means that he is not in agreement
with proposal no. (i). Despite of Akmal’s and Nadir’s disagreement, proposal
no. (i) can still be executed if the other two partners of KTC agree to execute it.
(b) ▪ Zara may form a particular partnership for 5 years with Zaheer in respect of
Zareer Bridals (ZB). In this way, she will be able to take decision of extending
or ending the partnership after 5 years because partnership contract can only be
varied by consent of all the partners.
▪ The statutory rights and duties of Zara and Zaheer which can be restricted or
extended in Zara’s favour by way of a partnership contract are as follows:
Restrict/extinguish following of Zaheer’s rights:

(i) To take part in the conduct of the business of ZB;
(ii) To access/inspect/copy books of ZB;
(iii) To be involved in decision making in respect of ZB’s operations;
(iv) To object to change in the nature of ZB’s business;
(v) To receive remuneration for taking part in conduct of ZB’s business;
(vi) To receive equal share of ZB’s profit;
(vii) To receive 6% interest p.a. if he makes payment beyond agreed capital;
(viii) To exercise his implied authorities in respect of ZB;
(ix) To carry out any other business besides ZB.
Extend/establish following of Zara’s own rights:

(i) To receive more than 6% interest p.a. on payments made beyond agreed
capital;
(ii) To exercise her implied authorities in respect of ZB;
(iii) To use property of ZB for purposes other than ZB’s business.
Restrict/extinguish following of Zara’s own duties:

(i) To indemnify ZB or Zaheer for willful neglect on her part;
(ii) To account for personal profits derived by herself from ZB’s
connections;
(iii) To contribute equally to ZB’s losses;
(iv) To account for personal profits derived by herself from competing
business;
(v) To attend diligently to her duties in respect of ZB.
Zara may exclude the shop, if purchased for ZB, from being considered as ZB’s
property.
A.4 (a) If XBL cleared the cheque and funds were transferred to RDBL i.e. otherwise than
to the banker to whom it was specially crossed (RNBL), in that case, XBL shall be
liable to Ghalib Mehmood i.e. true owner of the cheque, for any loss he may sustain
owing to the wrong clearance of cheque because it will be considered to have been
paid out of due course.
However, XBL will not be liable to Ghalib Mehmood, if the cheque presented for
payment:
(i) did not at the time of presentment appear to be crossed; or
(ii) had a crossing which was altered otherwise than as authorized by the
Negotiable Instruments Act, 1881;
Business Law
Suggested Answers
and XBL cleared the cheque and transferred the funds in good faith and without
negligence.
(b) If RNBL received funds from XBL against the crossed cheque in good faith and
without negligence, then RNBL shall not incur any liability by reason only of
having received such payment even if the customer had no title or defective title
thereto.
(c) Following are the circumstances in which a banker must refuse payment of a
cheque:
(i) where bank has received countermand of payment;
(ii) where bank has received notice of customer’s death;
(iii) where bank has received notice of adjudication of the customer as insolvent;
(iv) where cheque presented for payment has been crossed specially more than
once.
A.5 (i) BT will be held liable towards IL and will have to pay the damages because default
by AB being third party to the contract, on whose work the promisor was relying
does not render the contract void on account of supervening impossibility.
However, BT can recover ordinary damages from AB which occurred due to breach
of contract. BT can also recover special damages if it was known to AB at the time
of making the contract that ovens were to be delivered onwards to IL.
Amount of damages in both cases i.e. those claimable from AB and those payable
to IL would depend as to whether or not the ovens manufactured by AB could be
readily purchased from the market.
(ii) The contract between BT and FC is partly valid because in case of alternative
promises if one branch of contract is legal i.e. imported goods and the other branch
is illegal i.e. smuggled goods, then, only legal branch can be enforced as illegal
branch is void.
(iii) BT’s excuse is not valid as political unrest/civil disturbances do not render a
contract void on account of supervening impossibility. BT will be held liable to pay
damages suffered by OL due to breach of contract.
OL is not bound to accept the machines imported from Taiwan as it will result in
alteration of original contract.
(iv) Contract between BT and the customer was established under coercion as the
customer threatened to damage BT’s property. Here, manager’s consent to deliver
the latest model of air conditioner in replacement of earlier model was not obtained
freely due to which the contract is voidable at the option of BT.
(v) HL cannot hold BT liable for breach of contract because the agreement entered into
between them was void for uncertainty as the price of the television sets is not
capable of being made certain.
A.6 (a) Contingent contract may be described as a contract to do or not to do something, if

some event, collateral to such contract, does or does not happen.
In following circumstances, a contingent contract cannot be enforced:

Page 3 of 6
(i) Contingent contracts to do or not to do anything if an uncertain future event
happens cannot be enforced by law if the event does not happen or contract
becomes void due to the event becoming impossible.
(ii) Contingent contracts to do or not to do anything if a specified uncertain event
happens within a fixed time cannot be enforced if such event does not happen
within fixed time or becomes impossible before time expires.
(iii) Contingent contracts to do or not to do anything if an uncertain future event
does not happen cannot be enforced if the event happens.
(iv) Contingent contracts to do or not to do anything if a specified uncertain event
does not happen within a fixed time cannot be enforced by law when the
event happens within the fixed time.
(v) If the future event on which a contract is contingent is the way in which a
person will act at an unspecified time, then such contract cannot be enforced
when such person does anything which renders it impossible that he should so
act within definite time or otherwise than under further contingencies.
(b) A person may be restricted from carrying on a business if the:

▪ person being restricted is seller of a goodwill;
▪ restriction relates to similar business;
▪ restriction is within specified local limits;
▪ restriction is for the time so long as the buyer or any person deriving title to
goodwill from him, carries on a like business in specified local limits.
Provided that such limits are reasonable having regard to the nature of the
business.
A.7 (a) In following situations, a person may be held accountable for a money laundering
offence if he:
(i) acquires, converts, possesses, uses or transfers property, knowing or having
reason to believe that such property is proceeds of crime;
(ii) conceals or disguises true nature, origin, location, disposition, movement or
ownership of property, knowing or having reason to believe that such
property is proceeds of crime;
(iii) holds or possesses on behalf of any other person any property knowing or
having reason to believe that such property is proceeds of crime;
(iv) participates in, associates, conspires to commit, attempts to commit, aids,
abets, facilitates, or counsels the commission of the acts specified above.
Possible consequences of a money laundering offence

If a person is proven guilty for money laundering offence, he shall be punished with
rigorous imprisonment for a term of one to ten years, liable to fine up to Rs. 25
million and also liable to forfeiture of property involved in money laundering or
property of corresponding value.
(b) "Critical infrastructure" means critical elements of infrastructure namely assets,

facilities, systems, networks or processes the loss or compromise of which could
result in:
(i) major detrimental impact on the availability, integrity or delivery of essential
services including those services, whose integrity, if compromised, could
result in significant loss of life or casualties, taking into account significant
economic or social impacts; or
Business Law
Suggested Answers
(ii) significant impact on national security, national defense, or the functioning of

the state.
The Government may also designate any private or Government infrastructure in

accordance with the above objectives, as critical infrastructure.
(c) Following are the practices that prevent, restrict, reduce, or distort competition in
the relevant market through abuse of dominant position:
(i) Unfair trading conditions: i.e. limiting production, sales and unreasonable
increases in price etc.;
(ii) Price discrimination: by charging different prices for same goods or services
from different customers in the absence of objective justifications that may
justify different prices;
(iii) Tie-ins: where the sale of goods or service is made conditional on the
purchase of other goods or services;
(iv) Making conclusion of contracts subject to acceptance by the other parties
of supplementary obligations which by their nature or according to
commercial usage, have no connection with the subject of the contracts;
(v) Applying dissimilar conditions to equivalent transactions on other parties,
placing them at a competitive disadvantage;
(vi) Predatory pricing: driving competitors out of a market, prevent new entry,
and monopolize the market;
(vii) Boycotting or excluding any other undertaking from the production,
distribution or sale of any goods or the provision of any service; or
(viii) Refusing to deal.
A.8 (a) Since Noman is one of the joint promisors, Danish can recover the loan of Rs.
600,000 from Noman only unless there exists between them an express agreement
restricting his right to do so.
(b) Since all joint promisors have died, Danish can recover the loan from the legal
representatives of Farhan, Noman and Salman jointly, who must fulfil the promise
and repay the loan unless a contrary intention appears by the contract.
(c) Release of Farhan will discharge him from his liability towards Danish and
subsequently Danish will not be able to hold Farhan liable against the loan.
However, he will still remain liable towards the other joint promisors i.e. Noman
and Salman.
A.9 (a) Under the given situation, since time was essence of the contract between PF and
NIL, where PF failed to deliver the strawberries to NIL, following remedies are
available to NIL:
▪ Contract becomes voidable at the option of NIL.
▪ NIL may insist that PF should deliver the strawberries and claim
compensation on account of the delayed supply if, at the time of acceptance,
NIL gives notice to PF of its intention to claim damages.
▪ NIL may decide not to accept performance beyond the stipulated time and
claim compensation for any damages which it may have sustained due to
non-fulfillment of the contract by PF.
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(b) If PF offers to deliver only 300 kg of strawberries on 15 February 2022, it will not
constitute a valid offer of performance. NIL will have all the remedies available in
(a) above.
However, NIL has the right to accept part performance of the promise made to him
by PF. In that case, if NIL accepts delivery of 300 kg on 15 February 2022 then it
cannot sue PF later as it will be considered as remission of the contract.
A.10 (a) Constructive contract may be described as a contract that should have been formed
even though in actuality it was not.
In the following circumstances, a constructive contract may be formed:

(i) Supply of necessaries: If a person, incapable of entering into a contract, or
any one 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.
(ii) Reimbursement of payment by interested person: 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.
(iii) Person enjoying benefit of non-gratuitous act: 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 thereof, the latter is
bound to make compensation to the former in respect of, or to restore, the
thing so done or delivered.
(iv) Finder of goods: A person who finds goods belonging to another and takes
them into his custody, is subject to the same responsibilities as a bailee.
(v) Payment or delivery 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.
(b) An agreement without consideration is considered to be a valid contract:

(i) if 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;
or
(ii) if 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; or
(iii) if 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 of which the creditor might have enforced
payment but for the law for the limitation of suits; or
(iv) if it is a gift already made by the donor to the donee.
(THE END)

Business Law
Section A – Multiple Choice Questions
(i) Kabeer, during his employment with Catfish Jewellers, stole a diamond set worth
Rs. 1,000,000. Basheer, the watchman at the shop, came to know about this fact.
However, Basheer agreed not to disclose it to anyone when Kabeer offered to pay
Rs. 100,000 to him. This agreement is:
(a) void (b) valid
(c) voidable at the option of Kabeer (d) voidable at the option of Basheer
(ii) Ali, Zaid and Haris issued a guarantee to Usman for repayment of a loan taken by
Faraz. In the event of Faraz’s default, they agreed to make payment to the extent of
Rs. 22,500, Rs. 36,000 and Rs. 54,000 respectively. If Faraz commits default of
Rs. 94,000 then Ali, Zaid and Haris will be liable to pay:
(a) Rs. 18,800, Rs. 30,080 and Rs. 45,120 respectively
(b) Rs. 20,000, Rs. 20,000 and Rs. 54,000 respectively
(c) Rs. 22,500, Rs. 35,750 and Rs. 35,750 respectively
(d) Rs. 22,500, Rs. 36,000 and Rs. 35,500 respectively
(iii) On 5 September 2021, Shakeel entered into a contract with Basim, representing
Basim Tanners (BT), for the supply of 1,000 kg of salt for BT’s leather tanning
operations by 20 September 2021. The contract does not specify the place of
delivery. Shakeel has addresses of BT’s head office and all 10 active tanning stations.
Shakeel should:
(a) deliver 100 kg of salt to each of BT’s tanning stations
(b) wait for Basim to specify the place where he wants delivery
(c) deliver 1,000 kg of salt to BT’s head office
(d) ask Basim to confirm the place of delivery
(iv) Farah pledged her gold locket worth Rs. 350,000 with a goldsmith and borrowed a
sum of Rs. 300,000 from him with a promise to repay it on 1 September 2021. Farah
did not pay the amount on due date. Goldsmith who was in urgent need of money,
sold the locket on 3 September 2021 at prevailing market price of Rs. 250,000.
Which of the following statements is true?

(a) Goldsmith had the right to sell the locket and now Farah has to pay the
difference of Rs. 50,000 in order to settle the debt
(b) Goldsmith had no right to sell the locket without Farah’s prior consent
(c) Goldsmith had no right to sell the locket without sending reasonable notice
to Farah, showing his intention to sell the locket
(d) Goldsmith had the right to sell the locket; however, he cannot claim the
difference of Rs. 50,000 from Farah
(v) On 1 September 2021, Rudderfish Electronics (RE) sent an e-mail to Clingfish
Printers (CP) offering to sell a printing machine for Rs. 100,000 with a condition
that the offer must be accepted by 10 September 2021. On 3 September 2021, CP
replied to RE “Do you need full payment upon delivery or would you accept payment over
three months?” RE read the e-mail but did not reply.
On 8 September 2021, RE sold the machine to Pearlfish Designers (PD).

Subsequently, on 9 September 2021, CP sent an e-mail to RE communicating its
acceptance to the offer with full payment upon delivery.
(a) Contract was executed on 3 September 2021 when CP first replied to RE
(b) There is no contract between RE and CP as the machine was sold on
8 September 2021
(c) Contract executed on 8 September 2021 with PD was voidable at the option
of CP
(d) Contract with CP was executed on 9 September 2021
(vi) A mistake of law:

(a) has same effect as mistake of fact if it relates to mistake of Pakistani law
(b) has same effect as mistake of fact if it relates to mistake of foreign law
(c) has same effect as mistake of fact whether it relates to mistake of Pakistani
law or foreign law
(d) is never treated as a mistake of fact
(vii) Mona asked Athar to act as her agent for the purpose of collecting rent from her
shops on monthly basis and mentioned that due to some financial difficulties, she
did not offer any remuneration. Athar collects monthly rent and deposits it into bank
account on the same day as per Mona’s instructions. However, with regard to
August 2021 rent, he did not deposit it into bank on the same day as he had to rush
to attend his cousin’s funeral. While returning home from funeral at night, he was
robbed.
Can Mona recover the amount from Athar?
(a) No, since there is no consideration, there is no agency agreement
(b) No, because Athar is not receiving any remuneration as Mona’s agent
(c) Yes, because Athar did not follow Mona’s instructions
(d) Yes, because Mona always has the right to recover the amount from her agent
(viii) Which of the following statements regarding wagering agreements is NOT true?
(a) Wagering agreements are void
(b) Parties cannot file suit to recover money won under the wagering agreements
(c) Parties to a wagering agreement have no control on the happening of event
(d) Prize competitions involving games of skill are considered as wagering
agreements
(ix) While having dinner at a restaurant, Nadir found a gold coin under his chair which
he took into his custody. Salim, the restaurant owner, demanded Nadir to hand over
the gold coin to him.
(a) Nadir should hand over the gold coin to Salim as he would be regarded as a
bailee being the restaurant owner
(b) Nadir should not hand over the gold coin to Salim as Nadir is the pledgee to
the owner of the gold coin
(c) Nadir can keep the gold coin with him as he has become the bailee to the
owner of the gold coin
(d) Nadir can keep the gold coin with him as he has become the agent to the
owner of the gold coin
(x) Which of the following statements is correct regarding continuing guarantee?

(a) A continuing guarantee may be revoked by the surety by sending notice to the
principal debtor
(b) Death of the surety always result in the revocation of continuing guarantee
(c) A continuing guarantee is revoked if the creditor promises to give time to the
principal debtor without surety’s knowledge
(d) In case of revocation of continuing guarantee, the surety is discharged from
all past and future liabilities
(xi) ‘Tort’ can be described as:

(a) restoration of benefit (b) violation of civil law
(c) violation of criminal law (d) judgment of a superior court
(xii) Kamran and Maria entered into a partnership to run a mobile shop. Kamran
obtained a loan of Rs. 500,000 in the name of partnership for purchasing 20 mobiles
for the shop’s inventory. However, he used the loan proceeds to pay for his family’s
vacation in Bhurban. Subsequently, the partnership business went bankrupt. In this
scenario:
(a) Kamran is severally liable for repayment of loan
(b) Kamran and Maria are jointly liable for repayment of loan
(c) Kamran and Maria are severally liable for repayment of loan
(d) Kamran and Maria are jointly and severally liable for repayment of loan
(xiii) A contract between partners of a firm determining the mutual rights and duties of
the partners may be varied by taking consent of:
(a) all partners of the firm whether express or implied
(b) all partners of the firm only through express agreement
(c) majority partners of the firm whether express or implied
(d) majority partners of the firm only through express agreement
(xiv) A bill of exchange payable in United Kingdom drawn in Bahawalpur on a person

resident in Peshawar shall be considered as:
(a) an inland instrument (b) a foreign instrument
(c) an invalid instrument (d) an illegal instrument
(xv) Nadeem draws a bill of exchange on Bilal which states “Bilal, pay Rs. 100,000 to
Sarah’s successors or order”. The bill of exchange drawn by Nadeem shall be
considered to be:
(a) invalid because it does not mention the date by which payment must be made
(b) invalid because the parties indicated in the bill of exchange are not certain
(c) valid because it contains an order to pay
(d) valid since all the essential elements of a negotiable instrument are satisfied
(xvi) The promoters of Blue Whale Limited (BWL) got the certificate of incorporation
dated 3 September 2021. They have decided that BWL shall never approach general
public for raising fund and have further decided to commence business from next
month. BWL would be required to file with the registrar:
(a) revised memorandum of association (b) revised articles of association
(c) prospectus (d) statement in lieu of prospectus
(xvii) The annual general meeting (AGM) of Trout Limited (TL) was held on
7 September 2021. Ali Kamal, one of TL’s shareholders, wants a certified copy of
AGM minutes for his record. On submission of his request to TL, he shall be entitled
to receive a certified copy of the minutes:
(a) within 7 days if he makes the request on 12 September 2021
(b) within 7 days if he makes the request on 21 September 2021
(c) within 15 days if he makes the request on 11 September 2021
(d) within 15 days if he makes the request on 15 September 2021
(xviii) Cod Limited (CL) is a public unlisted company having its registered office and
branch office in Karachi and Lahore respectively. CL is in the process of finalising
the location of its upcoming annual general meeting (AGM).
In this regard, which of the following statements is true?

(a) CL’s AGM has to be held in Karachi
(b) CL’s AGM can be held anywhere in the province of Sindh only
(c) CL’s AGM can be held anywhere in the province of Sindh or Punjab only
(d) CL’s AGM can be held anywhere in Pakistan
(xix) Ahmed holds 50,000 shares in Jellyfish Limited (JL). JL operates six days in a week
from Monday to Saturday. Annual general meeting of JL is scheduled to be held on
Monday i.e. 20 September 2021 at 11:00 a.m. in which Ahmed wants to appoint
Naeem as proxy. In this regard, he must have the proxy form delivered to JL by:
(a) Friday, 17 September 2021 at 11:00 a.m.
(b) Saturday, 18 September 2021 at 11:00 a.m.
(c) Sunday, 19 September 2021 at 11:00 a.m.
(d) Monday, 20 September 2021 at 11:00 a.m.
(xx) Zahid is planning to incorporate a company under the Companies Act, 2017 with
the name and style ‘Herring’, with his own capital. He shall be the sole member and
director in the company.
In this regard, which of the following names is in compliance with the

Companies Act, 2017?
(a) Herring (SMC) Limited (b) Herring (SMC-Private) Limited
(c) Herring (Private) Limited (d) Herring Limited
(xxi) Akram is the chief financial officer of Snapper House Limited (SHL). As part of its
expansion plan, SHL is in the process of acquiring an office building, owned by
Najma who is Akram’s wife, on rent in a commercial area. SHL asked Najma to
provide terms and conditions of the rent agreement for consideration and necessary
approval.

(a) Akram will have to disclose his interest and obtain prior approval of SHL’s
board before signing the rent agreement
(b) SHL can sign the rent agreement and Akram will give an update to SHL’s
board in the immediately next board meeting
(c) SHL can sign rent agreement with prior approval of the chief executive
(d) No approval is needed; however, Akram cannot be involved in the transaction
(xxii) Nominal share capital means the:

(a) amount of share capital fixed by the memorandum or articles of association
which must be paid by the subscribers in order to commence business
(b) face value of the shares issued by the company
(c) maximum amount of share capital as authorised by the memorandum of
association
(d) amount of share capital against which shares have been allotted by the
company
(xxiii) Sole Fish Limited (SFL) was incorporated on 12 August 2021 as public unlisted
company. SFL’s year-end is 30 September. The management shall have to present
SFL’s financial statements before the company in annual general meeting, without
taking extension, latest by:
(a) 12 August 2022 (b) 12 December 2022
(c) 30 December 2022 (d) 28 January 2023
(xxiv) A special resolution which is passed by members in the annual general meeting and
is required to be filed with the registrar, has to be authenticated by:
(a) a director and chief financial officer
(b) a director or company secretary
(c) chief executive officer and a director
(d) chairman or chief financial officer
(xxv) A prospectus issued by a company can only include a statement claimed to have
been made by an expert if such person:
(a) has not been engaged or interested in the management of the company
(b) has not received any remuneration from the company in preceding three years
(c) is not a close relative of any of the company’s employees
(d) is a promoter of the company
(xxvi) Which of the following companies are required to maintain particulars relating to
utilisation of labour?
(a) Any company engaged in manufacturing or supplying
(b) Any company engaged in production or distribution
(c) Any company engaged in processing or mining
(d) Any company engaged in service or hospitality
(xxvii) Kingfish Limited (KL) holds 5 million shares in Moonfish Limited (ML) and wants
to acquire further 3 million shares in ML. The issued, subscribed and paid-up share
capital of ML as at 9 September 2021 is 50 million shares. There is no common
director on the boards of both companies.
In this regard, which of the following statements is correct?

(a) KL needs to obtain approval of its members in general meeting before making
further investment in ML
(b) KL needs to obtain approval of its members in general meeting through
special resolution before making further investment in ML
(c) KL can make further investment in ML if board’s approval is in place
(d) KL does not require any approval before making further investment in ML
(xxviii) A company limited by guarantee means a company in which liability of members is

limited, in the event of its being wound up, by the:
(a) articles of association, to such amount as the members may respectively
thereby undertake to contribute to the liabilities of the company
(b) articles of association, to such amount as the members may respectively
thereby undertake to contribute to the assets of the company
(c) memorandum of association, to such amount as the members may
respectively thereby undertake to contribute to the liabilities of the company
(d) memorandum of association, to such amount as the members may
respectively thereby undertake to contribute to the assets of the company
(xxix) All the payment vouchers are required to be maintained by a company:

(a) for at least 10 years (b) for at least 15 years
(c) for at least 20 years (d) permanently
(xxx) When the chief executive officer of a public unlisted company is not present in
Pakistan, then the annual financial statements of such company shall be signed
at least by:
(a) any two directors along with chief financial officer
(b) a director and chief financial officer
(c) any two directors
(d) chairman of the board or a director
Section B – Mercantile Law
Q.2 Briefly describe the process of legislation in case of a bill which has been passed by the
National Assembly but rejected by the Senate. (04)
Q.3 (a) Briefly explain five rules regarding performance of reciprocal promises under the
provisions of the Contract Act, 1872. (05)
(b) Effective 1 July 2019, Arowana Power Limited (APL) started purchasing fuel from
Sauger Limited (SL). Up to 31 May 2021, APL did not make any payment to SL due
to which late payment surcharge was invoiced to APL. APL refused to acknowledge
the surcharge and asked for its cancellation but SL never responded. APL stopped
purchasing fuel from SL with effect from 15 June 2021.
In July 2021, APL made two bulk payments equivalent to the cost of fuel purchased
from 1 July 2019 to 15 June 2021 but did not mention the invoices against which the
payments were to be adjusted.
In August 2021, APL came to know that SL had first adjusted the late payment
surcharge and balance amount had been adjusted against cost of fuel. APL demands
that SL should adjust the payments against cost of fuel only and not against the
surcharge.
Under the provisions of the Contract Act, 1872 discuss the validity of APL’s demand
and adjustment made by SL. (04)
Q.4 (a) Akmal appointed a farmer Noman as his agent and authorised him to purchase
200 goats and 300 cows from his village and bring them to Hyderabad for sale in the
cattle market. Noman contacted Fahad, a local herdsman, for purchasing the animals.
Fahad informed Noman that he had 200 goats and 250 cows only. However, Fahad
offered to sell 150 sheep at a very low price in place of 50 cows. Noman agreed to the
deal and bought 200 goats, 250 cows and 150 sheep on the premise that due to the
lower prices, Akmal would earn huge profits on sale of sheep. Subsequently, he
brought all the animals to Hyderabad as required by Akmal.
Under the provisions of the Contract Act, 1872:
(i) discuss whether transaction entered into by Noman is binding on Akmal. (03)
(ii) what would be your conclusion in (i) above if Akmal sells the sheep immediately? (02)
(b) In June 2021, Haroon Publishers (HP) entered into a contract with Salima, an
upcoming and promising author, to publish her first novel. An advance of Rs. 100,000
was paid to Salima who agreed to share the manuscript in October. HP promised to
incur promotional expenses of Rs. 300,000 in respect of the novel.
In August 2021, Salima suddenly gained popularity as her social media publications
went viral. Seeing an opportunity, HP immediately launched the advertising campaign
for the promotion of Salima’s upcoming novel and secured pre-orders of 50,000 copies
of the novel. HP has estimated to earn profit of Rs. 1,700,000 from the orders.
In September 2021, Salima contacted HP regretting that she will not be able to send
the manuscript and sent back the cheque of Rs. 100,000 received in advance.
Under the Contract Act, 1872 discuss the status of the contract and any possible
remedies available to HP. (05)
Q.5 (a) Under the provisions of the Partnership Act, 1932 list the circumstances in which
sharing of profits of a partnership business does not make a person partner in the firm. (04)
(b) Ibad, engaged in the fishing business, has a good relationship with Aslam, who is a
seasoned and well known banker. Ibad, representing Aslam as his partner, asked
Mehmood for the supply of a fishing trawler for expansion of his fleet of vessels.
Mehmood, on the representation of Ibad, sold the trawler to Ibad on credit.
Subsequently, Ibad defaulted in making payment and Mehmood filed a suit against
Aslam for the recovery of the amount.
Under the provisions of the Partnership Act, 1932 discuss whether Aslam would be
liable to pay the outstanding amount to Mehmood. (04)
Q.6 Bilal owes Rs. 900,000 towards Saad and undertakes to endorse a promissory note in his
favour in order to settle the debt.
Under the Negotiable Instruments Act, 1881 explain to Saad the essentials of a valid
endorsement as he wants to ensure that promissory note is properly endorsed. (04)
Section C – Company Law
Q.7 The extraordinary general meetings of Dolphin Limited, a public company listed on Pakistan
Stock Exchange Limited and its subsidiary Sardines (Guarantee) Limited, a public unlisted
company, have been scheduled to be held on the same day i.e. 13 September 2021 at
9:00 a.m. and 2:00 p.m. respectively in Islamabad.
Under the provisions of the Companies Act, 2017 identify the quorum requirements for both
the companies in the above situation. (06)
Q.8 (a) Mackerel Limited (ML) is a listed company engaged in the business of fish farming.
As part of its expansion plan, ML’s board has decided to invest in poultry and dairy
businesses for which the principal line of business is required to be changed.
Under the provisions of the Companies Act, 2017 describe the prescribed procedure
for changing ML’s principal line of business. (03)
(b) The details of ML’s share capital as at 30 June 2021 are as follows:
Class of ordinary No. of shares Paid-up share capital

Voting rights
shares in million Rs. in million
Class A 50 500 1 vote per share
Class B 30 600 2 votes per share
Class C 20 600 3 votes per share
Saleem Hussain, one of ML’s shareholders, holding 50% shares in class A, has filed
an application with the company requesting for an increase in voting rights of class A
shares, without changing their face value, so that each share of class A would carry
2 votes.
Under the provisions of the Companies Act, 2017:

(i) advise ML’s management regarding Saleem Hussain’s eligibility to demand
increase in voting rights of class A shares and discuss the requisite approvals
required to be sought for getting such change approved. (04)
(ii) discuss the course of action required to be taken by ML on Saleem Hussain’s
application, assuming that his eligibility to demand increase in voting rights is
favourably established in (i) above. (05)
Q.9 Goldfish Limited (GL) is a public unlisted company with paid-up share capital of
Rs. 200 million divided into 20 million ordinary shares of Rs. 10 each.
Following directors were elected in GL’s annual general meeting held on 25 October 2020:
Name Votes casted in favour

Tariq Ali 42 million
Munim Ahmed 28 million
Areeb Khan 21 million
Siddique Ghani 14 million
Gia Ghouri 14 million
Rahim Zaheer 14 million
Fawad Zia 7 million
Zakir Hussain, an existing shareholder of GL, purchased additional 1.5 million shares in GL
on 3 September 2021 due to which his shareholding percentage increased to 15%. Zakir
Hussain now demands to have a suitable position on GL’s board.

(a) discuss the validity of Zakir Hussain’s demand. Also list the grounds under which he
may not be elected on GL’s board. (04)
(b) Assuming that Zakir Hussain is eligible to be appointed on GL’s board, state the
procedure to be followed by GL for his appointment. (04)
Q.10 (a) Under the provisions of the Companies Act, 2017 state the restrictions imposed on a
company with regard to declaration of dividend. (05)
(b) Under the Securities Act, 2015 an issuer or offeror of the securities intending to
approach general public for raising funds shall have to submit a prospectus with the
Commission for its approval.
List any four exceptions to the above provision of the Securities Act, 2015. (04)
(THE END)
Business Law
Suggested Answers
A.1 (i) (a) (xi) (b) (xxi) (a)

(ii) (c) (xii) (d) (xxii) (c)
(iii) (d) (xiii) (a) (xxiii) (b)
(iv) (c) (xiv) (a) (xxiv) (b)
(v) (d) (xv) (b) (xxv) (a)
(vi) (b) (xvi) (d) (xxvi) (c)
(vii) (c) (xvii) (b) (xxvii) (c)
(viii) (d) (xviii) (d) (xxviii) (d)
(ix) (c) (xix) (a) (xxix) (a)
(x) (c) (xx) (b) (xxx) (c)
A.2 Where a bill is rejected by the Senate, then such bill will not be effective unless it is, at
the request of National Assembly, (i.e. the house in which it originated) is considered in
joint sitting of both the houses (i.e. National Assembly and Senate both).
If in the joint sitting, such bill is passed by the votes of the majority of the members
present and voting in the joint sitting, it shall be presented to the President for assent.
The President shall within 10 days assent to the bill or return it to the Parliament for
reconsideration of any provision or any amendment therein.
A.3 (a) Rules regarding performance of reciprocal promises under the Contract Act, 1872:

When contract consists of reciprocal promises to be simultaneously
performed, the promisor needs not perform his promise unless the
promisee is ready and willing to perform his reciprocal promise.

Where the order in which reciprocal promises are to be performed is
expressly fixed by contract, they must be performed in that order as fixed
by the contract, and where the order is not expressly fixed by the contract,
they must be performed in that order which the nature of the transaction
requires.

When a contract contains reciprocal promises, and one party to the
contract prevents the other from performing his promise, the contract
becomes voidable at the option of the party so prevented; and he is entitled
to compensation from the other party for any loss which he may sustain in
consequence of non-performance of the contract.

Where the performance of one party depends on the prior performance of
the other party and party who is liable to perform first, fails to perform it,
then such party cannot claim the performance from the other party and
must make compensation to the other party for any loss which the other
party may sustain by non-performance of the contract.
Page 1 of 6
(v) Promise to do legal and illegal things
Where persons reciprocally promise, firstly, to do certain things which are
legal, and secondly, under specified circumstances, to do certain other
things which are illegal, the first set of promises is a contract, but the
second is a void agreement.
(b) Although APL did not send instructions for appropriation that the payments
should be adjusted against cost of fuel only, APL’s payment of two bulk amounts
equivalent to the cost of fuel purchased from 1 July 2019 to 15 June 2021 are
indicative of the fact that APL intends to have the payments applied against the
cost of fuel only as intimation given by a debtor may be given impliedly. Further,
APL refused to acknowledge the surcharge and asked for its cancellation, hence it
cannot be considered as lawful debt.
Considering the above, APL’s demand is valid as SL was not justified in first
adjusting the late payment surcharge and then adjusting the cost of fuel.
A.4 (a) (i) Noman, as Akmal’s agent has exceeded his authority by purchasing
150 sheep. Consideration shall have to be given to the following:
▪ Akmal shall not be bound for the purchase if the extent of excess
authority exercised by Noman is not separable. Therefore, if price of
150 sheep cannot be determined separately, Akmal will not be bound
for entire transaction.
▪ However, if the price of 150 sheep can be separately determined, then
only the part which is within Noman’s authority (i.e. 200 goats and
250 cows) is binding on Akmal.
(ii) The conclusion in (i) above would be changed if Akmal sells the sheep, as it
shall be treated as ratification and in such case it shall be treated as if
Noman made the transaction having full authority.
(b) Status of the contract:

Salima’s regret to send the manuscript and sending back the cheque of Rs.
100,000 received as advance was anticipatory breach of contract because she has
forwarded her intention of not performing the contract before the actual date of
performance.
Remedies for breach of contract available to HP are as follows:

Since anticipatory breach has taken place, HP may treat the contract as rescinded
and can take action immediately on receipt of Salima’s notification to repudiate
the contract, without waiting for the actual contractual date of performance.
Alternatively, HP may treat the contract as operative and wait until the actual
date of performance, before taking action and take action against Salima if she
still fails to perform on due date.
In either of the case:

▪ HP can sue Salima for damages in order to be compensated for financial loss
sustained as a consequence of Salima’s breach. However, the amount of
damages awarded shall not be more than the actual loss suffered by HP.
▪ Damages will only be awarded in respect of losses which arise naturally, or
which both parties may reasonably be supposed to have contemplated when
the contract was made, as a probable result of its breach.
Therefore, HP would only be able to recover the campaign cost from Salima
Business Law
Suggested Answers
and will not able to claim the anticipated profits of the pre-orders, as it was
not contemplated by the parties when the contract was signed in June 2021.
A.5 (a) Following are the circumstances in which sharing of profit of a partnership
business does not make a person partner in the firm:
(i) Lender of money to persons engaged or about to engage in any business;
(ii) Servant as remuneration;
(iii) Agent as remuneration;
(iv) Widow of a deceased partner as annuity;
(v) Child of a deceased partner as annuity;
(vi) Transferee of a partner’s interest;
(vii A minor who is admitted to the benefits of partnership;
)
(viii) Previous owner as consideration for the sale of goodwill or share thereof;
(ix) Part owner as consideration for the sale of goodwill or share thereof.
(b) Aslam would be regarded as partner by estoppel or holding out if he knowingly

permitted himself to be represented as a partner in the business by Ibad; and
Mehmood on the faith of such representation delivered the trawler on credit.
In above case, Aslam would be liable for paying the outstanding amount to
Mehmood. It does not matter whether Aslam does or does not know that the
representation reached Mehmood.
However, Aslam would not be considered as holding out partner and therefore
would not be liable to pay the outstanding amount to Mehmood if he had denied
Ibad’s representation holding him as a partner in the business or if he had no
knowledge of Ibad’s representation.
A.6 Saad should ensure the following as essentials of a valid endorsement after which a
promissory note will be considered as properly endorsed, that:
(i) it must be made on the face of the negotiable instrument, however, if no space is
left on its face then must be made on either the back of the said instrument or on
a slip of paper attached to it called ‘allonge’.
(ii) it must be signed by the endorser for the purpose of negotiation or by any person
who becomes the holder of instrument. Signature of the endorser without any
additional words is sufficient.
(iii) it must be endorsed for the entire instrument since endorsement for part of the
amount or to two or more endorsees severally is invalid.
A.7 Quorum of DL’s EGM when meeting is requisitioned by directors/members

▪ 10 members present personally or through video-link representing 25% of total
voting power, either of their own account or as proxies, unless GL’s articles
require a larger number.
Quorum of SGL’s EGM when meeting is requisitioned by directors/members

▪ Where SGL has share capital, 2 members present personally or through video-link
representing 25% of total voting power, either of their own account or as proxies,
unless the SGL’s articles require a larger number.
▪ Where SGL does not have share capital, then as provided in SGL’s articles of
association.
Page 3 of 6
Quorum of DL’s & SGL’s EGM(s) if meeting is requisitioned by the Commission
If the meetings are called on the direction of the Commission, then Commission may
give such ancillary / consequential directions as it thinks expedient in relation to the
calling, holding and conducting of the meeting. Accordingly, Commission may direct that
one member present in person or by proxy shall be deemed to constitute a meeting.
A.8 (a) The prescribed procedure for changing ML’s principal line of business are as
follows:
▪ ML shall alter the provisions of its memorandum of association through
special resolution.
▪ ML shall file duly authenticated special resolution with the registrar within
15 days from passing of special resolution.
▪ ML shall report to the registrar within 30 days from the date of change, on
the specified form and file the amended memorandum of association.
▪ Registrar may give direction of change of name if the name of ML does not
commensurate with the principal line of business.
(b) (i) Eligibility of Saleem Hussain to demand increase in voting rights of Class A
Since Saleem Hussain holds 14.71% [i.e. 25 (50 million shares × 50%) ÷
{170 (50×1) + (30×2) + (20×3)}] of total voting power in ML which is
more than one-tenth of the total voting power, he is eligible to demand
discussion of any agenda item proposed by him in accordance with the
Companies Act, 2017 at any general meeting of ML.
Requisite approvals required to be sought for getting such change approved

Currently all class of shares in ML carry equal voting rights of 10% of the
face value of each class (i.e. face value of Rs. 10/-, Rs. 20/- and Rs. 30/- each
of class A, B and C respectively). The request to increase the voting rights of
class A shares without changing their face value will be considered as
variation in shareholders’ rights that will affect the substantive rights of
members of class B and C, as it will give 20% voting rights to members of
class A.
Accordingly, the requisite approvals required to be sought for getting such

change approved will be from at least three-fourths of the affected class of
members i.e. class B and C.
(ii) Following actions are required to be taken by ML upon receipt of Saleem

Hussain’s application requesting variation in shareholders’ rights by
increasing voting rights of class A shares:
▪ The management shall call the board meeting forthwith to consider the
requisition made by Saleem Hussain.
▪ Shares of different classes are issued in accordance with the
memorandum of association (MOA) and articles of association (AOA) of
the company. Accordingly, ML needs to alter its MOA and AOA if
requisite approval is in place. Hence, the board of ML shall proceed to
call an extraordinary general meeting (EGM) by sending notice of EGM
to all the members within 21 days from the date of Saleem Hussain’s
requisition for discussing the agenda item of change in voting rights.
EGM shall be held within 90 days from the date of the deposit of the
said requisition.
▪ The alterations are considered as special business, hence, a statement
shall be annexed to the notice setting out all material facts concerning
Business Law
Suggested Answers
variation in shareholders’ right including, in particular, the nature and

extent of interest, if any, therein of every director.
▪ The alterations shall be subject to the provisions of the Companies Act,
2017 and to the conditions contained in ML’s MOA that requires passing
a special resolution.
▪ However, if any general meeting of ML is already scheduled to be held,

and the said request was sent by Saleem Hussain at least 10 days before
the said meeting, then ML shall forthwith circulate the notice of
resolution together with draft resolution and supporting statement, if
any, as submitted by Saleem Hussain to all the members of ML.
▪ ML shall file duly authenticated special resolution with the registrar
within 15 days from passing of special resolution.
▪ ML shall file a copy of MOA and AOA as altered, with the registrar,
within 30 days from the date of passing of special resolution.
A.9 (a) Conditions to be met for appointment of Zakir Hussain on GL’s board
Validity of Zakir Hussain’s demand
Under the Companies Act, 2017 the requisite shareholding to demand fresh
elections of GL is 14.28% (i.e. 100% ÷ 7 directors).
Considering this, Zakir Hussain’s demand seeking a position on GL’s board is valid
as he now holds 3 million shares in GL equal to 15% which is more than the
requisite shareholding.
Grounds under which Zakir Hussain may not be elected

Following are the grounds under which Zakir Hussain might not be eligible to
become a director on GL’s board i.e. if he:
(i) is a minor;
(ii) is of unsound mind;
(iii) has been convicted by a court of law for an offence involving moral
turpitude;
(iv) has been debarred from holding office of director under the Companies Act,
2017;
(v) is lacking fiduciary behavior and a declaration to this effect have been made
by the Court under Companies Act, 2017 at any time during preceding five
years;
(vi) does not hold National Tax Number as per the provisions of Income Tax
Ordinance, 2001 unless the Commission has granted an exemption;
(vii) holds office as a director, including as an alternate director at the same time
in more than such number of companies as may be specified.
(b) Procedure to be followed for appointment of Zakir Hussain on GL’s board

(i) GL shall call the board meeting forthwith to consider the requisition made
by Zakir Hussain.
(ii) Board, upon receipt of requisition shall as soon as practicable but not later
than 30 days from the receipt of such requisition, proceed to hold fresh
election of directors by calling general meeting. [It could be AGM if to be
held within 30 days of request otherwise by calling extraordinary general
meeting].
GL shall send notice of general meeting not less than 21 days before the said
general meeting for holding election of directors to all the members of GL
Page 5 of 6
specifying the number of directors to be elected (this shall be same as was
fixed in immediately preceding election, unless members in general meeting
increase the same).
(iii) All notices received by GL from persons seeking to contest election of
directors shall be transmitted to the members not later than 7 days before
the date of the meeting, in the same manner in which notice of said general
meeting has been sent.
(iv) If the number of persons who offer themselves to be elected are more than
the number of directors required to be elected in the said general meeting
then each member of GL shall be given such number of votes as is equal to
the product of the number of voting shares held by him and the number of
directors to be elected.
(v) If the number of persons who offer themselves to be elected are equal to the
number of directors to be elected then directors shall stand elected
unopposed in the general meeting.
Zakir Hussain may also be appointed if there occurs a casual vacancy on board
through resignation of a director. In this case, with mutual consent of GL’s
directors, he is appointed on board since casual vacancy on board of a company
may also be filled up by directors themselves.
A.10 (a) The restrictions imposed under the provisions of the Companies Act, 2017 on a
company with regard to declaration of dividend are as follows:
▪ Dividend shall not be declared by a company otherwise than out of its profits.
▪ Dividend declared in general meeting shall not exceed the amount
recommended by the board.
▪ Dividend shall not be declared by a company for any financial year, 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 or any of
the undertaking of the company, 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.
▪ Dividend shall not be declared out of unrealized gain on investment property
credited to the profit or loss account.
(b) The requirement of submission of prospectus to the Commission for its approval
is not required by an issuer or offeror of the securities intending to approach
general public for raising funds in the following circumstances:
(i) securities offered by the State Bank of Pakistan;
(ii) securities offered in connection with a private offering or private
placement;
(iii) issue of shares of a subsidiary to the members of a listed holding company
by way of specie dividend or any other distribution in the prescribed
manner;
(iv) securities offered by the issuer to:
▪ members or employees of the issuer; or
▪ members of the families of any such members or employees.
(THE END)

Business Law
(i) Answer all ELEVEN questions.
(i) The Constitution of the Islamic Republic of Pakistan 1973 has five schedules.
Which of the following is NOT part of the schedules?
(a) Oaths of Office (b) Legislative Lists
(c) Amendment of Constitution (d) Election of President
(ii) On 27 February 2021, Bilal as owner of Bloodstone Sugar Mills (BSM) entered
into a contract with Amber Bakers to supply 1,000 kgs of sugar on 5 March 2021 at
Rs. 70 per kg. On 3 March 2021, Government issued a notification directing sugar
mills to sell all their output to the Government at fixed rate of Rs. 75 per kg. On
the promised date of delivery, Bilal refused to honour the agreement. Can Amber
Bakers recover damages from BSM?
(a) Yes, because the contract was enforceable since it was made before the date
of notification
(b) No, because the contract became void on the date of notification
(c) Yes, because BSM earned a profit of Rs. 5 per kg at the expense of Amber
Bakers
(d) No, because the contract became voidable on the date of notification
(iii) Jalil is indebted to Kamran but due to financial crisis, he is not able to pay him. At
Jalil’s request, Kamran agreed to sell further goods to Jalil on very stringent terms.
Subsequently, Jalil approaches the Court demanding relief from contractual
obligations on grounds of undue influence.

(a) Kamran will have to prove that he did not exercise any undue influence
(b) Jalil will have to prove that the contract was induced by undue influence
(c) Both Jalil and Kamran will have to prove the presence or absence of undue
influence respectively
(d) The contract entered into between Kamran and Jalil is void ab-initio
(iv) Saad agreed to pay Rs. 500,000 to Hafsa if she delivered a judgement in his favour
in a suit. Hafsa gives the judgement in Saad’s favour but he later refuses to pay any
money. In this situation, can Hafsa claim the amount?
(a) No, because the agreement was voidable at the option of Saad only
(b) Yes, because the agreement was valid and enforceable
(c) Yes, because the agreement was voidable at the option of Hafsa only
(d) No, because the agreement was void due to unlawful activity
(v) Asma requested her friend Bina to keep some valuable items in safe custody while
she was going on a one-week vacation abroad. This contract between Asma and
Bina is a:
(a) social contract (b) contract of pledge
(c) contract of bailment (d) quasi contract
(vi) Umair purchased vegetables for his family while visiting Fahad. However, he
forgot to take them from Fahad’s house and those vegetables were consumed by
Fahad’s family. Fahad is now bound to pay the price of those vegetables because
of obligation created under:
(a) deemed contract (b) contract of indemnity
(c) quasi contract (d) contract of bailment
(vii) Which of the following would be classified as contingent contract?

(a) Insurance (b) Indemnity
(c) Wagering (d) Both (a) and (b)
(viii) Haris has two horses, one of the horse is purebred. He agrees to sell one horse to
Abdullah who gives his consent believing that he will receive a purebred horse
whereas Haris thinks that he would sell the other horse. What is the status of the
contract between Haris and Abdullah?
(a) Void on account of unilateral mistake regarding material fact
(b) Voidable on account of unilateral mistake regarding material fact
(c) Void on account of bilateral mistake regarding material fact
(d) Voidable on account of bilateral mistake regarding material fact
(ix) Amir had offered both Behram and Ahmed to sell his piano at a discounted price
of Rs. 25,000. Behram responded immediately and refused to accept the offer.
Amir who was in urgent need of money, lowered the offered price to Rs. 15,000
which was finally accepted by Behram. Before delivering the piano to Behram,
Amir received acceptance from Ahmed on his initially offered price. Therefore,
Amir has refused to deliver the piano to Behram.
Can Behram claim damages upon Amir’s refusal?

(a) No, because Amir refused the delivery to Behram due to inadequate
consideration
(b) No, because Amir had agreed to deliver piano to Behram under undue
influence
(c) Yes, because the contract was completed on acceptance of revised offer
price
(d) Yes, because Behram responded first to the Amir’s offer
(x) During the clearance sale at a famous clothing store, Sana selected a dress from the
rack with a price tag of Rs. 20,000 and brought it to the cash counter. Sana asked
the cashier to pack the dress and handed over her credit card for payment. Her act
was to be considered as:
(a) invitation of an offer (b) acceptance of an offer
(c) making an offer (d) making an agreement
(xi) A partnership firm is constituted for one year. After the expiry of one year, if the
partners decide to continue the partnership, then:
(a) the period is extended automatically for further one year
(b) the partnership becomes partnership at will
(c) the partnership becomes particular partnership
(d) the partnership becomes a joint venture
(xii) In order to hold a person liable as a partner on the basis of holding out principle, it
must be established:
(a) that by word or conduct he represented himself to be a partner
(b) that the other person acting on faith of the given representation extended
credit to the firm
(c) either (a) or (b) i.e. any one condition must be fulfilled
(d) both (a) and (b) i.e. both conditions must be fulfilled
(xiii) Jamal is the financial controller of Emerald Stones & Co. where he is entitled to a
monthly remuneration of Rs. 500,000 as well as 20% of the profits, if the net
annual profits of the firm exceed Rs. 50 million. What is the status of Jamal in the
partnership firm?
(a) A partner in the firm
(b) An employee of the firm
(c) Partner as well as employee of the firm
(d) An agent of the firm
(xiv) The authority of a banker to pay a cheque drawn on him by his customer is
revoked by:
(a) notice of adjudication of the customer as an insolvent
(b) countermand of payment
(c) notice of the customer’s death
(d) all of the above
(xv) Promissory note is an instrument in writing containing an unconditional

, to pay a certain sum of money.
(a) instruction (b) order (c) undertaking (d) demand
(xvi) Any change in principal line of business shall be reported by the company from the
date of change to:
(a) the Commission within thirty days
(b) both the Commission and the registrar within thirty days
(c) the registrar within thirty days
(d) both the Commission and the registrar within fifteen days
(xvii) Which of the following instruments is considered to be the prima facie evidence of the
title of a listed company’s shares?
(a) Share purchase agreement
(b) Share subscription application
(c) Share certificates issued in book-entry form
(d) All of the above
(xviii) Minutes of all general meetings of a company should be kept at the registered
office of the company in physical and electronic form for a period of:
(a) 10 years
(b) 10 years and permanently respectively
(c) 20 years
(d) 20 years and permanently respectively
(xix) With reference to the resolution passed by members through circulation, which of
the following statements is true?
(a) The resolution may be revoked if members holding 10% voting power
withdraw their agreement signified in writing
(b) The resolution may be revoked when the board of directors vote against the
resolution
(c) The resolution may be revoked where decision taken by members is not
effected within 120 days of passing the same
(d) The resolution cannot be revoked once signified by members in writing
(xx) Sunstone Limited is a public company with nine directors and a paid-up capital of
Rs. 40 million (face value of Rs. 100 each). Khurram and Asim were elected as
directors in the recent elections by securing 400,000 and 300,000 votes
respectively. However, subsequently both of them resigned.
Nasir was appointed to fill the casual vacancy created by Khurram while Asim’s
position is still vacant. Board is not satisfied with Nasir’s performance and wish to
replace him with Saim. A resolution has been moved in general meeting to remove
Nasir from his position. Nasir will be able to secure his position if number of votes
casted against the resolution equals to or exceeds:
(a) 450,000 (b) 400,000 (c) 350,000 (d) 300,000
(xxi) Which of the following business decisions requires approval of members in a general
meeting?
(a) Approval of interim dividend
(b) Approval to invest excess funds in fixed term deposits
(c) Selling all the shares of subsidiary company to the highest bidder
(d) Acquiring shares of another company at seven times higher the book value per
share of that company
(xxii) Election of directors of Rhinestone Limited (RL) having share capital of

Rs. 4 million (face value of Rs. 10 each) was held on 5 March 2021 in which seven
directors were elected. Yasir, Samia and Noureen, the shareholders of RL are of
the opinion that the elections were not held fairly and material irregularities were
noted. They intend to apply to the Court for re-election. The shareholders will be
eligible to file their application if they hold atleast:
(a) 40,000 voting shares and submit application by 4 April
(b) 40,001 voting shares and submit application by 20 March
(c) 80,000 voting shares and submit application by 4 April
(d) 80,001 voting shares and submit application by 20 March
(xxiii) Approval of the shareholders at the general meeting is NOT required when shifting
the registered office of a company from:
(a) one city in a Province to another
(b) one place to another place within the same city
(c) one city to another in any part of Pakistan not forming part of a Province
(d) Islamabad to any city of Pakistan
(xxiv) Which of the following businesses proposed to be presented in the upcoming annual
general meeting of Neelam Limited shall be deemed as special business?
(a) Obtaining financial facility of Rs. 100 million
(b) Declaration of 300% dividend out of the current years’ profit
(c) Election of directors
(d) Approval of consolidated financial statements
(xxv) Which of the following is entitled to inspect the books of accounts?

(a) Directors at any time
(b) Shareholders having more than 10% shares at any time
(c) Directors during business hours
(d) Shareholders having more than 10% shares during business hours
(xxvi) The annual general meeting of Blue Amber Limited, a listed company having
share capital of Rs. 500,000,000 of Rs. 10 each was scheduled to be held on
6 March 2021 at 8:30 AM for which the notice of the meeting was sent on
12 February 2021. On the day of meeting at 9:00 AM, attendance of shareholders
was as follows:
Present in person 10 persons holding 10 million shares

Present through proxies 5 persons holding 2 million shares
Which of the following actions should be taken by the chairman?

(a) Commence the meeting as per the agenda circulated
(b) Adjourn the meeting to be held on 13 March 2021
(c) Dissolve the meeting and circulate fresh notice of meeting
(d) Either (a) or (b)
(xxvii) Notice of extraordinary general meeting of the company, called by the directors on the
requisition of members, is required to be sent to:
(a) members, directors and the Commission
(b) directors, auditors and the Commission
(c) members, directors and auditors
(d) members, auditors and the Commission
(xxviii) A director of a public company shall ipso facto cease to hold office if he is absent
from:
(a) three consecutive board meetings without leave of absence
(b) three consecutive general meetings without leave of absence
(c) all meetings held during the last three months
(d) three consecutive audit committee meetings
(xxix) In the case of listed company, statement of compliance is required to be signed by:
(a) the chairman and a director
(b) at least two directors
(c) the chairman and the chief executive
(d) the chief executive and a director
(xxx) Aquamarine (Pvt) Limited (APL) was incorporated on 1 January 2020 with an
authorized share capital of Rs. 500,000.
APL is required to accompany an affidavit with its annual financial statements

confirming that the financial statements:
(a) give a true and fair view of the company’s affairs
(b) have been approved by the Board
(c) are prepared in accordance with the requirements of the Companies
Act, 2017
(d) are free from material misstatements
Q.2 List down the main topics/areas covered under the following parts of the Constitution of
the Islamic Republic of Pakistan 1973:
(a) Part III - The Federation of Pakistan (02)
(b) Part VI - Finance, Property, Contracts and Suits (02)
Q.3 (a) Under the provisions of the Contract Act, 1872 briefly describe any six
circumstances when an agent shall be personally liable under a contract entered into
by him on behalf of his principal. (06)
(b) Maria purchased a diamond necklace of Rs. 700,000 from Emerald Jewellers (EJ)
and issued a cheque in favour of EJ fully knowing that she does not have enough
funds to make the payment. Consequently, the cheque was dishonoured because of
insufficient funds in Maria’s bank account. EJ demanded to return the necklace.
However, before the said demand, Maria had pledged the necklace with Ruby
Traders (RT) against an obligation of Rs. 800,000.
Under the provisions of the Contract Act, 1872 discuss the status of the agreement
between Maria and EJ. Also explain the validity of the pledge and discuss whether
EJ would be able to recover the necklace. (04)
Q.4 (a) On 4 March 2021, Aliya agreed to sell her ancestral jewels to Salma at a discounted
price. However, on the next day when Salma came to take the delivery, Aliya’s
brother being custodian of the jewels refused to honour the delivery on the premise
that Aliya was admitted to the mental hospital and, therefore, her earlier agreement
to sell the jewels was not valid.
Under the provisions of the Contract Act, 1872 discuss whether Aliya’s brother is
justified in refusing to deliver the jewels to Salma. (03)
(b) Salman agreed to supply cotton yarn to Rehan for the entire year, whenever
requisitioned, at prevailing wholesale prices. The contract also stipulated that in case
of dispute, Salman and Rehan would not seek settlement through the Court.
Under the provisions of the Contract Act, 1872 discuss the validity of the contract
and determine any remedy available to Rehan, in case of dispute with Salman. (03)
Q.5 (a) Malik, Asif and Sohail are partners in a firm carrying on dairy business and sharing
the profit or loss equally. Malik has recently started a poultry business in the same
vicinity for which he has applied for a loan from a bank. As a security of the loan, he
offered the bank to create charge over the book debts of the poultry business together
with his interest in the dairy business.
Under the provisions of the Partnership Act, 1932 describe the bank’s rights and
limitations in the dairy business. (04)
(b) Tahira, Farhana and Sadia are partners in a bridal boutique situated in the local
market. Sadia also owns a jewellery shop in the same market. The shop is managed
by her brother, Wasi. Tahira and Farhana were not aware of Sadia’s interest in the
jewellery shop. Most of the clients from the bridal boutique buy jewellery sets from
Sadia’s shop. During the year, Sadia earned a hefty profit of Rs. 10 million from the
jewellery business.
Upon knowing the fact of Sadia’s interest in the jewellery shop, both Tahira and
Farhana demanded Sadia to share her profits equally with them.
Under the provisions of the Partnership Act, 1932 explain whether Tahira and
Farhana are justified in their demand. (04)
Q.6 (a) Under the provisions of the Negotiable Instruments Act, 1881 explain different types
of crossing of cheque along with their respective effects. (04)
(b) Under the provisions of the Negotiable Instruments Act, 1881 identify the type of
each of the following instruments and give reason(s) as to validity of each
instrument.
(i) I promise to pay Zahid Rs. 350,000 and all the applicable interest amounts.
(ii) Pay Rs. 350,000 to Jafer along with interest of Rs. 3,500.
(iii) I hereby acknowledge that I have taken Rs. 350,000 from Abid and shall pay
the interest to him on the amount at agreed interest rate. (03)
Q.7 White Diamond Limited (WDL) was incorporated on 6 February 2021. All the subscribers
to the memorandum of WDL has paid the share money except Aijaz who has subscribed
4,000 shares and is willing to make the payment before 10 March 2021.
WDL’s management intends to start the operations of the company immediately since
minimum subscription amount is not fixed in WDL’s memorandum and articles of
association. Accordingly, for the purpose of commencement of business, they intend to
submit requisite documents with the registrar. The management is confident that the
registrar will accept and register all the documents.
Under the Companies Act, 2017:

(a) determine Aijaz’s status in WDL and discuss implications, if any, towards himself as
well as WDL, if he makes the payment before 10 March 2021.
(b) explain WDL’s duties if all the subscription money is received on or before
1 March 2021. (08)
Q.8 (a) List any ten contents of the directors’ report of a public unlisted company as
prescribed under the Companies Act, 2017. (05)
(b) Annual general meeting of Opal Limited (OL), a listed company, for the year ended
31 December 2020 was held on 1 March 2021. All the presented agenda items were
approved at the meeting except for the adoption of annual financial statements.
In the light of the Companies Act, 2017 discuss the requirements OL must comply
with for filing its financial statements. (03)
Q.9 (a) In the 14th annual general meeting of Sapphire Limited, a special resolution has been
passed to increase the voting rights of shareholders of class A by 50%.
Faiza Ibrahim, a shareholder from class B, wants to get the said special resolution
cancelled.
Under the Companies Act, 2017 discuss how Faiza Ibrahim can challenge the special
resolution and ask for its cancellation. Also determine the grounds on which the
decision may be made in her favour. (04)
(b) In the general meeting of Red Coral Limited (RCL), while discussing one of the
agenda items, two of the members, Yasmeen and Yameen wants to demand poll.
Under the provisions of the Companies Act, 2017 advise the chairman whether they
are eligible to demand the poll. Also discuss the procedure to be followed for taking
the poll in the general meeting. (03)
Q.10 (a) On 31 December 2020, Ali was appointed as a chief executive of Pearl Limited (PL),
a listed company. In March 2021, he informed the board that on 15 February 2021,
his spouse was appointed as a director in a brokerage house.
Under the provisions of the Companies Act, 2017 evaluate the impact of the
appointment of Ali’s spouse on his position and on PL. (04)
(b) In February 2021, Silver Topaz Limited (STL) acquired 18% voting shares in Jade
Limited (JL). After acquisition, STL nominated one of its directors on JL’s board.
STL’s board is planning to acquire further 10% voting shares in JL in May 2021.
Under the Companies Act, 2017 discuss the condition(s) which STL must fulfil
before making any further acquisition of shares in JL. (04)
Q.11 Identify any four criteria on the basis of which a company formed under section 42 of the
Companies Act, 2017 differs from any other limited liability company. (04)
(THE END)
Business Law
Suggested Answers
Ans.1 (i) (c) (xi) (b) (xxi) (c)

(ii) (b) (xii) (d) (xxii) (a)
(iii) (a) (xiii) (b) (xxiii) (b)
(iv) (d) (xiv) (d) (xxiv) (a)
(v) (c) (xv) (c) (xxv) (c)
(vi) (c) (xvi) (c) (xxvi) (b)
(vii) (d) (xvii) (c) (xxvii) (c)
(viii) (c) (xviii) (d) (xxviii (a)
(ix) (c) (xix) (d) (xxix) (d)
(x) (c) (xx) (a) (xxx) (b)
Ans.2 (a) Part III - The Federation of Pakistan include provisions related to:
▪ eligibility, term of office, powers, removal of President of Pakistan;
▪ the President of Pakistan’s job responsibilities and limitations such as exercising
functions in accordance with the advice of the Cabinet or Prime Minister;
▪ composition, duration and meetings of the Parliament and Senate;
▪ qualifications and disqualifications for membership of the Parliament;
▪ introduction and passing of bills.
(b) Part VI - Finance, Property, Contracts and Suits include provisions of:
▪ distribution of revenues between the federation and the provinces;
▪ financial provisions such as exemption and imposition of certain taxes;
▪ borrowing by Federal and Provincial government;
▪ appointment, powers and functions of Auditor General of Pakistan;
▪ property, contracts, liabilities and suits.
Ans.3 (a) Following are the circumstances:

(i) Foreign Principal: where the contract is made by an agent for the sale or purchase of
goods for a merchant residing abroad.
(ii) Unnamed Principal: If an agent declines to disclose the identity of his principal then
he is personally liable to the third party.
(iii) Principal cannot be sued: An agent is also presumed to incur personal liability where
he contracts on behalf of a principal who though disclosed cannot be sued.
(iv) Undisclosed Principal: Where an agent acts for an undisclosed principal and
contracts in his own name then he is personally liable to the third parties.
(v) Agent exceeding his authority: Where an agent while acting in the course of business
of agency exceeds his authority, he is personally liable for the excess part if it is a
separable transaction otherwise for the entire transaction.
(vi) Improperly appointed sub-agent: An agent is personally liable to third parties for the
acts of a sub-agent appointed by him without having authority to do so.
(b) Since Maria knew that she did not have enough funds to make the payment, EJ’s consent
was caused by fraud. Therefore, the contract is voidable at EJ’s option.
Maria obtained possession of necklace under a voidable contract, however, she pledged the
necklace before the contract was rescinded (i.e. before EJ demanded the return of
necklace); hence, RT has acquired a good title (i.e. the pledge is valid) provided RT acted in
good faith and without any notice of the defective title.
Page 1 of 6
Since the pledge is valid, EJ will not be able to claim the necklace from RT’s possession.
Ans.4 (a) Aliya’s brother is justified in refusing the delivery to Salma, if at the time of making the
agreement, Aliya was:
▪ not capable of understanding it; and
▪ not capable of forming a rational judgment as to its effect upon her interests.
If Aliya is usually of unsound mind but occasionally of sound mind then she may enter into
a contract when she is of sound mind. However, if she was of unsound mind, then the
agreement would be void.
(b) The contract between Salman and Rehan is partly valid to the extent of supply of cotton
yarn and partly void where it restricts them absolutely from enforcing their rights by legal
proceeding.
Under the Contract Act, 1872 the remedy available to Rehan is that he may approach the
Court if there is any dispute with Salman.
Ans.5 (a) Rights of the bank in the dairy business:

▪ The bank is entitled to receive the share of profits of Malik in the dairy business.
▪ In case of dissolution or if Malik ceases to be a partner, the bank will be entitled as
against the remaining partners to receive the share of the assets of the dairy business
to which Malik was entitled, and, for the purpose of ascertaining that share, to receive
partnership’s accounts as from the date of the dissolution.
Limitation of the bank in the dairy business:

The bank, during the continuance of the dairy business, is not entitled to:
▪ interfere in the conduct of the dairy business, or
▪ to require its accounts, or
▪ to inspect the books of the dairy business.
(b) Tahira and Farhana would be justified in their demand, if they have restrained Sadia from
carrying on another business other than that of the firm as is permitted under the
Partnership Act, 1932.
In the absence of any such agreement, they are not justified in claiming profits of the
jewellery shop as the said business is not of same nature nor competes with the bridal
boutique business.
Moreover, jewellery shop having same customers does not amount to misusing resources
of boutique business unless it is established that Sadia had used property or business
connection of boutique or the firm’s name to earn personal profits i.e. if she referred the
boutique customers to jewellery shop, only then she would be liable to pay such profits to
Tahira and Farhana.
Ans.6 (a) Following are the types of crossing of a cheque:

(i) General crossing:
A cheque is said to be crossed generally where it bears across its face an addition of
the words “and company” or any abbreviation of it between two parallel transverse
lines.
Business Law
Suggested Answers
Effect of crossing:
The banker on whom cheque is drawn shall not pay it otherwise than to a banker.
(ii) Special crossing:

A cheque is said to be crossed especially where it bears across its face an addition of
the name of the banker, either with or without the words “not negotiable”, that
addition shall be deemed a crossing, and the cheque shall be deemed to be crossed
specially. Parallel lines are not necessary.
Effect of crossing:
The banker on whom cheque is drawn shall not pay it otherwise than to a banker to
whom it is crossed or his agent for collection.
(iii) Restrictive crossing:

Restrictive crossing may be added with general crossing by adding the words “A/c
Payee” or “A/c Payee only”.
Effect of crossing:
The cheque shall cease to be negotiable. The amount collected by the banker on the
cheque must be credited only to the account of payee named in the cheque.
(iv) Not Negotiable crossing:

The addition of the words ‘not negotiable’ does not restrict the further
transferability of the cheque. It only takes away the main feature of negotiability,
which is transferability free from defects.
Effect of crossing:
The effect of the words ‘not negotiable’ on a crossed cheque is that the title of the
transferee of such a cheque cannot be better than that of its transferor.
(b) (i) This instrument is a promissory note. It should not be accepted as it is invalid since
the amount payable under it is not certain.
(ii) This instrument is a bill of exchange. It will be considered valid if signed by drawer
and drawee as it meets rest of the conditions of bill of exchange hence should be
accepted.
(iii) This instrument is a promissory note. It should not be accepted as it is invalid since
payment of principal amount has not been promised.
Page 3 of 6
Ans.7 (a) Status of Aijaz:

Aijaz being the subscriber to the memorandum of association is deemed to have agreed to
become member of WDL and become WDL’s member on its registration.
Moreover, as Aijaz has not yet paid share money for 4,000 shares, the amount due from
him shall be considered as debt due from him and payable in cash. Hence, he will also
become debtor of WDL
Implications for Aijaz:

If share money is not deposited by Aijaz within 30 days from WDL’s incorporation i.e. on or
before 7 March 2021, the said shares shall be deemed to be cancelled and Aijaz shall not
remain WDL’s member.
Implications for WDL:

If Aijaz pays share subscription money, on or before 7 March 2021, then WDL being a
public company would be able to file duly verified declaration with reference to
commencement of business.
However, if he makes the payment after 7 March 2021, then WDL would not be able to
submit documents for commencement of business. Consequently, WDL will not be able to
start its operation or exercise any borrowing powers. Since the amount of minimum
subscription is not fixed, therefore, the entire authorized share capital other than that
issued or agreed to be issued as paid up otherwise than in cash, shall be deemed to be
minimum subscription.
If the subscribers of the memorandum have appointed Aijaz as first director and his
particulars were submitted with WDL’s documents of incorporation then the casual
vacancy will arise that may be filled up by the directors.
(b) Duties of WDL where subscription money received:

If all the subscription money is received from the subscribers on or before 1 March 2021
then WDL shall report the same to the registrar on a specified form within 45 days from
WDL’s date of incorporation i.e. by 22 March 2021, accompanied by a certificate from a
practicing Chartered Accountant or Cost and Management Accountant verifying receipt of
the money so subscribed.
WDL shall file with the registrar a declaration duly verified by the chief executive or one of
the directors and the secretary that:
▪ shares have been allotted to equivalent to minimum subscription and the money has
been received by WDL;
▪ every director of WDL has paid full amount on each of the shares taken or contracted
to be taken by him and for which he is liable to pay in cash.
Business Law
Suggested Answers
Ans.8 (a) Following are the contents of the directors’ report of a public unlisted company:
(i) the state of the company’s affairs;
(ii) a fair review of company’s business;
(iii) the amount, if any, that the directors recommend should be paid by way of
dividend;
(iv) the amount, if any, that directors propose to carry to Reserve Fund, General Reserve
or Reserve Account;
(v) the names of the persons who, at any time during the financial year, were directors
of the company;
(vi) the principal activities and the development and performance of the company’s
business during the financial year;
(vii) a description of the principal risks and uncertainties facing the company;
(viii) any changes that have occurred during the financial year concerning the nature of
the business of the company or of its subsidiaries, or any other company in which
the company has interest;
(ix) the information and explanation in regard to any contents of modification in the
auditor’s report;
(x) information about the pattern of holding of the shares;
(b) Since OL’s financial statements have not been adopted in the annual general meeting, a
statement of that fact and its reasons shall be annexed to the said financial statements
required to be filed with the registrar within thirty days from the date of the meeting
i.e. 30 March 2021.
Ans.9 (a) Faiza Ibrahim can challenge the special resolution by applying to the Court for an order
cancelling the resolution; if she holds 10% or more shares of class B either in her own
name or collectively with others who should authorize her in writing. The said application
shall be filed within 30 days of the date of the said resolution.
Following are the grounds on which the decision may be made by the Court in her favor:
(i) If the applicant(s) had casted vote in favor of the resolution and some facts which
would have had a bearing on the decision of Faiza Ibrahim, were withheld by
Sapphire Limited in getting the aforesaid resolution passed.
(ii) If the applicant(s) had not casted vote in favor of the resolution, then it will have to
be proved by Faiza Ibrahim, that the variation would unfairly prejudice their rights.
(b) If Yasmeen and Yameen together hold not less than 10% of the voting share of RCL, then
they will be eligible to demand poll.
Following procedures are to be followed for taking the poll in the general meeting subject
to fulfillment of the above conditions:
(i) Upon demand of Yasmeen and Yameen, the chairman shall entertain their demand
and order to take poll within 14 days from the day of the demand.
(ii) The chairman shall have power to regulate the manner in which a poll shall be
taken.
(iii) The chairman or his nominee and a representative of the Yasmeen and Yameen
shall scrutinize the votes given on the poll.
(iv) The result shall be announced by the chairman.
(v) The result of the poll shall be deemed to be the decision of the meeting on the
resolution for which the poll was taken.
Page 5 of 6
Ans.10 (a) Impact on Ali:
Ali shall ipso facto cease to hold office of chief executive in PL from 15 February 2021
when his spouse was appointed as a director of a brokerage house.
Ali being PL’s chief executive shall be deemed to be a director, hence he shall not be able
to continue as the chief executive or a director of any other listed company including PL.
Impact on PL:
(i) Ali’s acts till discovery of ineligibility are valid notwithstanding that afterwards it
was discovered that he had ceased to hold his office in PL.
(ii) PL’s board shall have to appoint chief executive within 14 days of occurrence of
casual vacancy in the office of chief executive.
(b) As STL has nominated one of its directors on JL’s board, both the companies became
associated companies due to common directorship. Therefore, STL’s plan of further
investment would be considered as investment in associated company.
Accordingly, STL can make further investment in JL only under the authority of a special
resolution which shall indicate the nature, period, amount of investment and terms and
conditions attached thereto.
Ans.11 A Company formed under section 42 of the Companies Act, 2017 i.e. association not for profit
differs from any other limited liability company in following manner:
▪ It can only be formed as a public company.
▪ The promoters shall have to apply to the Commission for licence to permit the association
to be registered with registrar.
▪ The licence granted as aforesaid shall be for a specified period only.
▪ The licence may be granted on such conditions and subject to such regulations as the
Commission thinks fit, which shall be inserted in and deemed part of the memorandum
and articles.
(THE END)

Business Law
(i) Answer all ELEVEN questions.
(ii) Answer using black pen only.
(i) Tipu provided a loan to Wasi against the guarantees of Iqbal, Meher and Baqir. It
was agreed that in the event of Wasi’s default, Iqbal, Meher and Baqir would
contribute to the extent of Rs. 5,000, Rs. 8,000 and Rs. 12,000 respectively. Wasi has
defaulted to the extent of Rs. 15,000.
(a) All the three sureties are liable to pay Rs. 5,000 each
(b) Iqbal is liable for Rs. 3,000, Meher for Rs. 4,800 and Baqir for Rs. 7,200
(c) Iqbal is liable for Rs. 5,000, Meher for Rs. 8,000 and Baqir for Rs. 2,000
(d) Iqbal and Meher are liable for Rs. 1,500 each and Baqir is liable for Rs. 12,000
(ii) The term ‘Quid pro quo’ means:

(a) something in return (b) something important
(c) something of value (d) something relevant
(iii) To constitute a wager, which of the following elements should NOT be present in the
agreement?
(a) Uncertain event
(b) Each party must be in a win or lose situation
(c) Neither party should have any control over the event
(d) There should be a promise to pay money only
(iv) Ibrahim directs his attorney to acquire a piece of land in Hyderabad by employing an
estate agent for the purpose. Attorney appoints Bukhari, an estate agent, for the
acquisition of the land. Bukhari in this case is a:
(a) general agent (b) co-agent
(c) sub-agent (d) pretended agent
(v) Saleem owns 20 acres of land in district Badin, part of which is woodland. He sells
the land to Malik Bashir with a covenant in the contract that he will not cut down the
trees. Six months later, Malik Bashir prepares to cut down the trees. What remedy
can Saleem seek?
(a) Damages (b) Specific performance
(c) Injunction (d) Rescission
(vi) The banker wrongfully dishonoured the cheque issued by Mir Atif, a renowned
trader, to one of his major suppliers. Mir Atif in this case is entitled to claim:
(a) special damages (b) liquidated damages
(c) nominal damages (d) exemplary damages
(vii) Which of the following is NOT considered to be a source of law in Pakistan?
(a) Legislation
(b) Sharia
(c) Precedent
(d) International treaties and conventions
(viii) Which of the following statements is correct under the Contract Act, 1872?
(a) Fraud means the suggestion, as a fact of that which is not true, by one who
believes it to be true
(b) A proposal is revoked by the death of the acceptor
(c) An agreement by Ali, who deals in oils, to sell hundred tons of oil to Vakeel is a
void agreement
(d) A pawnee may retain the goods pledged only for the payment of the debt
(ix) Paramount Furniture wrote a letter to Baber Naeem stating, “We have received
exquisite bedside tables which we will sell to you at a very favourable price.”
Which of the following statements with respect to the above is correct?

(a) The letter is an offer to sell
(b) The letter lacks the essential element of an offer
(c) The letter contains a valid offer which will terminate within a reasonable time
(d) An offer made by a letter must be accepted by a letter
(x) Akram, Minhas and Bali are partners, Bali is a sleeping partner. Bali retires without
giving public notice of his retirement.
Is Bali liable for subsequent debts incurred by Akram and Minhas?
(a) Bali is liable only to the extent of his estate
(b) Bali is fully liable, as he did not give public notice of his retirement
(c) Bali is liable for the amount left after contribution from Akram and Minhas
(d) Bali is not liable as he was a sleeping partner
(xi) Sohail and Fida purchased a yacht, renovated it and sold it to Qasim for
Rs. 10 million. They shared the proceeds equally. Both Sohail and Fida are:
(a) co-owners (b) co-venturers
(c) partners (d) mutual agents
(xii) Under the provisions of the Partnership Act, 1932, which of the following statements
is NOT correct?
(a) The relation of partnership arises from contract and not from status
(b) Goodwill of the business is regarded as the property of the firm
(c) Nature of business can be changed with the consent of majority of the partners
(d) A dormant partner has a right to inspect and copy any of the books of the firm
(xiii) Which of the following may be regarded as a valid promissory note (duly signed)
under the provisions of the Negotiable Instruments Act, 1881?
(a) I promise to pay Zubair on demand Rs. 6,000 at my convenience
(b) I promise to pay Ali or order Rs. 6,000 with interest charged at quarterly rests
(c) I promise to pay you or your successors on demand Rs. 11,000
(d) I promise to pay Khalid or order Rs. 12,000 six days after Saad’s death
(xiv) While drawing a bill of exchange, a person whose name is given in addition to the
drawee to be resorted to when the requirement arises, is called:
(a) drawer
(b) acceptor
(c) drawee in case of need
(d) acceptor for honour
(xv) Under the provisions of the Negotiable Instruments Act, 1881, which of the following
statements is NOT correct?
(a) Where a cheque is crossed specially the banker on whom it is drawn shall not
pay it to his agent for collection
(b) It is a presumption of law that every holder of a cheque is a holder in due
course
(c) Where a cheque contains the name of a banker without two parallel transverse
lines, it is a valid special crossing
(d) Where a generally crossed cheque bears across its face the addition of the words
‘account payee’, it shall cease to be negotiable
(xvi) Mega Stars Limited (MSL) shall be deemed to be the holding company of Little Stars
(Private) Limited (LSPL) if:
(a) MSL owns 50% shares of LSPL and by virtue of such investment, MSL has
nominated three directors out of six directors on board of LSPL
(b) MSL and one of its associated companies own 45% and 10% voting shares of
LSPL respectively
(c) MSL and one of its associated companies own 30% and 35% voting securities
of LSPL and by virtue of such investments, both companies have nominated
two directors each out of six directors on the board of LSPL
(d) MSL owns 5% voting shares in LSPL; however, LSPL’s other shareholders
having 60% voting shares have empowered MSL to appoint four directors out
of six directors of LSPL
(xvii) Which of the following information does NOT form part of ‘Certificate of
incorporation’?
(a) The name and registration number of the company
(b) The date of commencement of business
(c) Whether it is a private or a public company
(d) Whether it is a limited or unlimited company
(xviii) A prospectus is required to be duly signed by:

(a) the chief executive and a director
(b) every person who is named therein as a director or proposed director
(c) the chief executive, a director and the chief financial officer
(d) every director including the chief executive
(xix) Candid Oils Limited has class A and class B ordinary shares of Rs. 10 each, carrying
voting right of one and two votes per share respectively. A special resolution was
passed to bring the voting rights of class B shareholders equal to class A shareholders.
However, two shareholders of class B are not satisfied with this resolution and
intends to apply for its cancellation. They can do so if:
(a) they hold more than 10% shares of class B and apply to the Court
(b) they hold 10% or more shares of class B and apply to the Court
(c) they hold at least 10% shares of class B and apply to the Commission
(d) they hold at least 20% shares of class B and apply to the Commission
(xx) Minimum subscription is:
(a) the total authorised share capital of a company as stated in the prospectus
(b) the whole amount of the share capital other than that issued or agreed to be
issued as paid up otherwise than in cash, if no amount of minimum
subscription is so fixed
(c) the whole amount of the subscription received from applicants, if no amount of
minimum subscription is so fixed
(d) the amount to be generated from public for which prospectus is issued
(xxi) Toys & Toys Limited (TTL) resolved to shift its registered office from Gujranwala to
Lahore i.e. within the province of Punjab. For this purpose, TTL must:
(a) obtain consent of creditors who are entitled to object and obtain prior approval
of the Commission
(b) give notice of change to the Commission within a period of fifteen days after
the change
(c) obtain approval of the registrar prior to shifting of its registered office
(d) give notice of change in situation of the registered office to the registrar within a
period of fifteen days after the date of change
(xxii) Anas, Asadullah, Ameen and Arqam are founder partners of Fast Movers
Forwarders (FMF). In January 2020, all partners had purchased shares of Quality
Tiles Limited (QTL), a listed company. In June 2020, they contested the election of
directors of QTL and got elected as directors out of seven positions. Being majority
directors of QTL, they cancelled the contract of existing logistics service provider and
awarded the contract to FMF.
Whether the aforesaid contract is valid?

(a) Yes, because it is approved by the majority of the directors and the board is
fully empowered to manage the affairs of the company
(b) No, the contract need to be approved by majority of such directors who are not
interested in the said contract
(c) No, the contract must be laid before the general meeting for approval
(d) No, the contract must be approved by the general meeting as well as by the
Commission
(xxiii) Abid is the chairman of the board of directors of Innovative Technologies Limited
(ITL) and is present in ITL’s 25th Annual General Meeting (AGM). However, due to
difference of opinion with ITL’s chief executive on few agenda items, Abid is
unwilling to chair the AGM. In such a situation:
(a) the chief executive shall have to preside the AGM as chairman
(b) the members present in the AGM shall choose one of the members to be the
chairman
(c) the member holding highest number of shares and present shall preside the
AGM as chairman
(d) one of the directors present may be elected to be the chairman of the said AGM
(xxiv) Casual vacancy on the board of directors of a listed company must be filled:
(a) by calling an extra ordinary general meeting within ninety days from the date of
such vacancy
(b) by the directors not later than ninety days from the date of such vacancy
(c) by the directors or the members in general meeting, as the case may be, in
accordance with the provisions contained in the articles of association
(d) by the members in the upcoming annual general meeting
(xxv) Afridi, Bader, Dawood and Iffat owns 45%, 25%, 10% and 5% shares respectively
of Splendid Mills Limited (SML), a public unlisted company. They were elected as
SML’s director in the last election of directors as unopposed. The board appointed
Anas as the chief executive of SML; however, due to Anas’s unsatisfactory
performance, the board has decided to remove him in the next board of directors
meeting.
Anas will stand removed as chief executive if:

(a) directors having more than 50% shareholdings in SML’s share capital will vote
against him
(b) directors having more than 75% shareholdings in SML’s share capital will vote
against him
(c) any four directors will vote against him
(d) all the directors will vote against him
(xxvi) Under the provisions of the Companies Act, 2017, the composition of a company’s
board shall be deemed to be controlled by another company if that other company
by exercise of power exercisable by it at its discretion can:
(a) appoint all or a majority of the directors
(b) appoint or remove majority of the directors
(c) appoint or remove all or a majority of the directors
(d) appoint majority of the directors
(xxvii) Which of the following statements is correct regarding chairman of a listed

company?
(a) Chairman must be from amongst the non-executive directors
(b) Chairman can only be removed by passing a special resolution
(c) Chairman must be from amongst the independent director
(d) Chairman is appointed by the shareholders within fourteen days from the date
of election of directors
(xxviii) Which of the following officers are mandatorily required to be appointed to manage
the affairs of a listed company under the provisions of the Companies Act, 2017?
(a) Chairman, chief executive, company secretary, sole purchase agent
(b) Chairman, chief executive, company secretary, share registrar
(c) Chairman, chief executive, company secretary, chief financial officer
(d) Chairman, chief executive, company secretary, chief financial officer, head of
audit
(xxix) Which of the following clauses is NOT covered in Table A of the First Schedule?
(a) Proceedings of directors
(b) Votes of members
(c) Instrument of proxy
(d) Annual return
(xxx) Any dividend payable in cash by a listed company may be paid:

(a) only through electronic mode directly into the bank account designated by the
entitled shareholders
(b) by cross cheques issued in the name of the entitled shareholders
(c) by dividend warrant at the registered address of entitled shareholders
(d) in any of the above manner at the discretion of the distributing company
Q.2 Briefly describe how an Ordinance is promulgated in Pakistan and what is the effect of such
Ordinance. (04)
Q.3 (a) Under the provisions of the Contract Act, 1872 list any three circumstances in which a
party whose consent was obtained by misrepresentation cannot rescind the contract. (03)
(b) Sarya Traders (ST) agreed to supply building materials to Khwaja Contractors (KC)
on 10 September 2020 for the construction of a charitable hospital in District Malir.
However, on due date, ST failed to fulfil their obligation.
Under the provisions of the Contract Act, 1872 explain the rights available to KC
under the above situation. Assume time was the essence of the contract. (03)
(c) What would be your answer in (b) above if KC had to procure building material from
another supplier at a price higher than the price agreed with ST and also had to pay a
penalty of Rs. 50,000 to the owner of the hospital for construction delay? (03)
Q.4 (a) Under the provisions of the Contract Act, 1872 list the essentials of a valid acceptance. (04)
(b) Sulman’s son was missing. Mehmood, one of the bodyguards of Sulman, volunteered
to find Sulman’s son. Meanwhile, Sulman gave an advertisement in the newspaper
announcing an award of Rs. 25,000 to anyone who finds the missing boy. Mehmood
found the boy and brought him home. Sulman refused to pay the reward and
Mehmood filed a suit against him.
Under the provisions of the Contract Act, 1872 briefly describe whether Mehmood is
entitled to the reward. (02)
(c) Mohsin and Jaleel jointly borrowed a sum of Rs. 300,000 from Muslim and Munaf
jointly. On due date, Mohsin and Jaleel defaulted in making the payment. Munaf,
without Muslim’s knowledge, filed a suit against Mohsin and Jaleel for the recovery of
the amount due.
Under the provisions of the Contract Act, 1872 briefly describe whether Munaf would
succeed in his case. (02)
Q.5 (a) Under the provisions of the Partnership Act, 1932 what are the general duties of a
partner which cannot be altered by an agreement amongst themselves? (03)
(b) Saeed, Mona and Burhan are engaged in a partnership business. On 26 March 2019,
they admitted Laila, on her seventeenth birthday, to the benefits of partnership. Laila
is Mona’s niece. On 20 April 2020, Laila became aware of her admittance to the
benefits of partnership. On acquiring the knowledge, she immediately gave notice to
Saeed, Mona and Burhan that she intends to be their partner.
Under the provisions of the Partnership Act, 1932 discuss whether Laila would be
regarded as a partner in the firm with effect from the date of her notice. i.e.
20 April 2020. Also describe Laila’s liability with regard to firm’s debts once she
becomes a partner. (04)
Q.6 (a) Under the provisions of the Negotiable Instruments Act, 1881 what would be the
effect(s) of the words ‘Not negotiable’ on a cheque crossed generally? (03)
(b) Mujahid bought readymade garments worth Rs. 600,000 from Shoaib on credit. The
amount is payable on 25 December 2020. Mujahid wants to issue a negotiable
instrument in satisfaction of his debt to Shoaib without involving a third party for the
payment.
Under the provisions of the Negotiable Instruments Act, 1881 identify the type of
negotiable instrument which Mujahid may issue to Shoaib in satisfaction of his debt.
Also prepare a draft of the said instrument. (04)
(You may assume necessary details for the preparation of the negotiable instrument)
Q.7 A group of persons intends to form a limited liability company, with the objective to provide
research related services to pharmaceutical companies. In this respect, one of the promoters
proposed ‘Pharma Research Authority’ as a name of the proposed company which was liked
by all the promoters.
Under the provisions of the Companies Act, 2017 comment on the validity of the name
proposed by the promoters and suggest how they can overcome the deficiencies, if any, in it. (06)
Q.8 (a) The directors of Jhelum Limited (JL) intends to make a public offer of its securities
and are in the process of preparing the prospectus. They wish to include a statement
made by an expert in JL’s prospectus.
Under the provisions of the Securities Act, 2015 advise the directors about:
(i) the matters that must be considered before including the statement made by an
expert in JL’s prospectus. (02)
(ii) the conditions that must be complied with before issuing, circulating or
publishing JL’s prospectus containing the expert’s statement. (02)
(b) Explain the term ‘shelf registration’ in the context of a prospectus as defined in the
Securities Act, 2015. (02)
Q.9 On 26 September 2020, the board of directors of Duck Fertilizers Limited (DFL), a public
unlisted company, in its recent board meeting has approved a short term loan to Kitten
Limited, one of the associated companies, to meet its working capital requirement, for
which shareholders’ approval is required. DFL’s annual general meeting is scheduled to be
held in March 2021.

(a) briefly discuss the options available to DFL for obtaining shareholders’ approval. (03)
(b) state the procedure(s) to be followed for obtaining the approval in each option
identified in (a) above. (Ignore procedures relating to voting) (06)
Q.10 Election of directors of Excellent Technologies Limited (ETL), a listed company, is
scheduled to be held on 15 October 2020. The board of directors has requested Mohsin, one
of the leading engineers, to contest the upcoming election as non-executive director for
adding value to the board.
Before responding to the offer of ETL’s board, Mohsin has sought your advice on the
following concerns:
(i) Since he has no relationship with ETL either pecuniary or otherwise, can he contest
the election as non-executive director?
(ii) Would he be subjected to unforeseen liability that may arise due to adverse action of
other directors?
Under the provisions of the Companies Act, 2017, advise Mohsin with regard to the above
concerns. (06)
Q.11 (a) Naseer, a non-executive director of Oliver Travels Limited (OTL), while reviewing
details of investments made by OTL, has shown his concerns on the following shares
that are not held in the name of OTL:
(i) 500 shares in Pak Travels (Private) Limited (PTPL) are held in the name of
Rahim who is an employee of OTL. PTPL is a wholly owned subsidiary of
OTL. (02)
(ii) 5,000 shares of Tours & Tours (Private) Limited (TTPL) are held in the name of
Sami, who is a non-executive director in TTPL by virtue of OTL’s nomination.
OTL owns 30% voting shares in TTPL. (02)
Under the provisions of the Companies Act, 2017 briefly explain the possible reasons
for holding investment of OTL in the name of Rahim and Sami.
(b) Under the provisions of the Companies Act, 2017 briefly discuss:
(i) the time frame within which quarterly financial statements should be prepared
and the requirement, if any, for its review (02)
(ii) the filing requirement of the quarterly financial statements. (02)
(THE END)
Business Law
Suggested Answers
Ans.1 (i) (a) (xi) (a) (xxi) (d)

(ii) (a) (xii) (c) (xxii) (c)
(iii) (d) (xiii) (d) (xxiii) (d)
(iv) (b) (xiv) (c) (xxiv) (b)
(v) (c) (xv) (a) (xxv) (c)
(vi) (d) (xvi) (d) (xxvi) (c)
(vii) (d) (xvii) (b) (xxvii) (a)
(viii) (c) (xviii) (b) (xxviii (c)
(ix) (b) (xix) (b) (xxix) (d)
(x) (d) (xx) (b) (xxx) (a)
Ans.2 Promulgation of an Ordinance in Pakistan:

In terms of the constitution, the President has power to promulgate Ordinances only if the Senate
or National Assembly is not in session and the President is satisfied that circumstances exist
which render it necessary to take immediate action.
The Ordinance as promulgated by the President has the same force and effect as an Act of the
Parliament.
However, within 120 days of its issuance, such Ordinance is required to be presented or passed by
the National Assembly in case of money bill and by both the houses in case of all other bills,
otherwise the Ordinance stands repealed.
Ans.3 (a) Exceptions to rescind the contract under misrepresentation:

A party cannot rescind the contract where:
(i) the party whose consent was caused by misrepresentation had the means of
discovering the truth with ordinary diligence
(ii) the party gave the consent in ignorance of misrepresentation
(iii) the party after becoming aware of the misrepresentation takes a benefit under the
contract
(b) Time being essence of the contract, following would be the rights of Khwaja Contractors
(KC) under the circumstances:
▪ Contract would be voidable at the option of KC (promisee).
▪ KC may insist that Sarya Traders (ST) should deliver building material. However, in
order to claim compensation on account of the delayed supply, KC shall have to give
notice to ST of their intention to do so at the time of acceptance of performance at
any time other than earlier agreed.
▪ KC may decide not to accept performance beyond the stipulated time and rescind the
contract and claim compensation for any damages which it may have sustained due
to non-fulfillment of the contract by ST.
(c) In this case, ST is liable to pay by way of compensation to KC, the difference between the
contract price and the price which KC had to pay for procuring building material.
However, if ST was aware about the penalty, which KC had to pay to the third party due to
delay in construction of hospital, at the time of contract with KC, ST would be liable to
compensate the amount of Rs. 50,000 to KC.
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On the contrary, if ST was not aware of any such penalty at the time of contract with KC,
then KC cannot recover the amount of Rs. 50,000 from ST.
Ans.4 (a) Essentials of a valid acceptance:

Following are the essentials of a valid acceptance:
(i) acceptance must be absolute and unqualified;
(ii) it must be communicated either in writing or by word of mouth or by performance of
some act;
(iii) acceptance must be in the prescribed mode/reasonable mode;
(iv) the acceptance must be given within the time specified or within a reasonable time
when no time is specified;
(v) mere silence is not acceptance. It cannot be in the form of a negative confirmation. The
acceptor should expressly accept the offer;
(vi) acceptance must be given only by that person to whom the offer has been made;
(vii) the acceptor must be aware of the proposal at the time of acceptance of the proposal;
(viii) the acceptance must be given before the offer lapses or is withdrawn.
(b) In order for Mehmood to claim the reward from Sulman, it is necessary for him to prove
that he was aware of Sulman’s proposal before finding the missing boy.
As the communication of the proposal is complete when it comes to the knowledge of the
person to whom it is made.
Under the given circumstances, since Mehmood acted in ignorance of the offer, he is not
entitled to claim the reward from Sulman.
(c) Munaf will not succeed in his case. He must be joined by Muslim as the right to claim
performance rests with all the promisees (i.e. Munaf and Muslim) jointly and a single
promisee (i.e. Munaf) cannot claim performance.
Ans.5 (a) General duties of partners:

Following are the mandatory duties of a partner that cannot be changed by an agreement
amongst the partners:
(i) Duty to be just and faithful.
(ii) Duty to carry on business to the greatest common advantage.
(iii) Duty to render true accounts.
(iv) Duty to provide full information.
(v) Duty to indemnify for loss caused by fraud.
(vi) Duty to be liable jointly and severally – unlimited liability.
(vii) Duty to act within authority.
(viii) Duty in case of emergency.
(b) Admittance of minor as a partner:

By giving notice of her willingness to be a partner in the firm to the existing partners, Laila
would not become a partner in the firm.
In order to be a partner, Laila may give a public notice that she has elected to become a
partner in the firm and such notice may be given at any time within six months of her
attaining majority i.e. up to 26 September 2020, or her obtaining knowledge that she has
been admitted to the benefits of partnership i.e. 20 October 2020, whichever date is later.
And such public notice shall determine her position as regards the firm.
If Laila fails to give public notice till 20 October 2020, she will become a partner in the firm
Business Law
Suggested Answers
on the expiry of the said six months.
Laila’s liability with regard to firm’s debts:

Laila would be personally liable to third parties for all debts of the firm from the date she
was admitted to the benefits of partnership i.e. 26 March 2019.
Ans.6 (a) Effect(s) of the words ‘Not negotiable’ on a cheque crossed generally
The effect of the words “not negotiable” on a crossed cheque is that the title of the
transferee of such a cheque cannot be better than that of its transferor. The addition of the
words not negotiable does not restrict the further transferability of the cheque. It only
takes away the main feature of negotiability, which is transferability, free from defects.
(b) Mujahid would issue a promissory note as time instrument to Shoaib in satisfaction of his
debt.
Draft of the promissory note
Date: September 26, 2020
Rs. 600,000/- only
Three months after date I promise to pay Shoaib or to his order the sum of Rupees Six
Hundred Thousand, for value received.
To Sd/-
Shoaib Mujahid
XYZ Street Down Town
Karachi Karachi
Ans.7 The name proposed by the promoters is not valid under the provisions of the Companies Act,
2017 due to following two reasons:
(i) The word “Authority” cannot be used as it implies connection with a Government.
According to the Companies Act, 2017 “no company shall be registered by a name which
contains any word suggesting or calculated to suggest any connection with a Government.”
However, in order to overcome this the promoters with the prior approval in writing of the
Commission may be able to get the company registered with such word.
(ii) The word “Limited” is missing from the name of the company. According to the Companies
Act, 2017 the word limited is required to be written at the end of the name of a company.
However, if the group of persons intend to form a limited liability company with charitable
and not for profit objects then they have to apply to the Commission for a licence and the
Commission, if satisfied, may allow them to be registered as a limited liability company
without addition of the word “Limited” to its name.
Moreover, it should also be ensured that the proposed name is not identical with or resemble or
similar to the name of already registered company or inappropriate or deceptive.
Ans.8 (a) (i) Jhelum Limited must ensure that the expert is a person who has the power or
authority to issue a certificate in pursuance of any law for the time being in force
and who is not and has not been engaged or interested in the formation or
Page 3 of 5
promotion or in the management of the company.
(ii) Before issuing, circulating or publishing prospectus containing expert’s statement, it

must be ensured that the following conditions have been complied with:
▪ the expert has given written consent to the issue of the prospectus with the
statement in the form and context in which it is included; and
▪ there appears in the prospectus a statement that the expert has given and has
not withdrawn his consent.
(b) ‘Shelf registration’ means an arrangement that allows a single offering document allowing
companies to make multiple offerings as disclosed in the offering document within a
prescribed time and subject to prescribed conditions.
Ans.9 (a) Following options are available to DFL for obtaining shareholders’ approval:
(i) The board of directors of DFL may obtain approval of its shareholders by calling an
extraordinary general meeting (EGM). As the board is entitled to call EGM at any
time to consider any matter which requires shareholders’ approval.
(ii) Nonetheless, as the approval required for matter that is special business, and being a
public unlisted company, if DFL’s number of members are not more than fifty then
DFL’s board of directors has another option to get the shareholders’ approval by
passing resolution by circulation.
(b) The procedures to be followed for obtaining shareholders’ approval:
(i) Holding Extra Ordinary General Meeting

▪ Twenty-one days’ notice of the meeting shall be given to every member in the
manner required by the Act.
▪ However, DFL being a public unlisted company, if all the members entitled to
attend and vote at the said EGM so agree, a meeting may be held at a shorter
notice.
▪ Notice of the meeting shall specify the place, the day and hour of the meeting
along with a statement of the business to be transacted at the meeting and a draft
resolution.
▪ A statement shall be annexed to the notice of the meeting setting out all the
material facts concerning the short term loan, including the nature and extent of
interest, if any, of the directors.
▪ Members may participate in the meeting personally, through video-link or by
proxy.
▪ Every member shall have votes proportionate to the paid-up value of the shares
held by him and no such member shall be debarred from casting his vote.
(ii) Passing of resolution by the members through circulation

▪ The resolution shall be circulated together with the necessary papers, if any, to
all the members.
▪ The resolution passed by circulation must be signed by all the members for the
time being entitled to receive notice of a meeting.
▪ The said resolution shall be noted at the subsequent meeting of members and
made part of the minutes of such meeting.
Business Law
Suggested Answers
Ans.10 (i) It is pertinent to note that pecuniary or other relationship with company are not the only
criteria to establish eligibility of a person to be a non-executive director. Rather, in order
to be a non-executive director of ETL, Mohsin shall have to ensure that he:
▪ is not from among the executive management team and may or may not be
independent;
▪ is expected to lend an outside viewpoint to ETL’s board;
▪ does not undertake to devote his whole working time to ETL and will not involve in
managing the affairs of the ETL;
▪ is not a beneficial owner of ETL or any of its associated companies or undertakings;
▪ does not draw any remuneration from ETL except the meeting fee.
(ii) As far as the unforeseen liability due to adverse action of ETL’s other directors are
concerned Mohsin if elected as non-executive director, shall be held liable, only in respect
of such acts of omission or commission by ETL which had occurred with his knowledge,
attributable through board processes, and with his consent or connivance or where he had
not acted diligently.
Ans.11 (a) (i) PTPL is wholly owned subsidiary company of OTL means it has one shareholder.
Whereas, PTPL being a private company must have at least two members, hence OTL
may hold any shares in the name of any of its nominee to ensure that the number of
members of PTPL is not reduced below the statutory limit.
(ii) OTL has nominated Sami as non-executive director by virtue of its investment in
TTPL. It means OTL have right to appoint or get elected any person as director of
TTPL, therefore, in the light of the provisions of Companies Act, 2017 OTL have the
right to transfer TTPL’s shares in the name of Sami up to an amount not exceeding
the nominal value of the qualification shares which are required to be held by TTPL’s
director. Such shares may be registered or held by OTL jointly with Sami or in the
name of Sami alone.
(b) (i) Time frame for preparation of quarterly financial statements

Every listed company shall prepare the quarterly financial statements within the
period of:
▪ thirty days of the close of first and third quarters of its year of accounts; and
▪ sixty days of the close of its second quarter of its year of accounts.
Requirement of review of second quarter financial statements

The cumulative figures for the half year presented in the second quarter accounts
shall be subjected to a limited scope review by the statutory auditors of the
company in such manner and according to such terms and conditions as may be
determined by the Institute of Chartered Accountants of Pakistan and approved by
the Commission.
(ii) Filing of quarterly financial statements

The quarterly financial statements must be transmitted electronically to the
Commission, Securities Exchange and with the Registrar within the period as
specified above.
However, upon an application by the company, the Commission may, extend the
period of filing in case of accounts of the first quarter for a period not exceeding
thirty days, if the company was allowed extension in respect of its previous financial
statements.
(THE END)
Page 5 of 5

Business Law
Mercantile Law Section
Q.1 (a) Discuss why and to whom prerogative orders may be issued by the High Court. Briefly
describe any two types of prerogative orders. (03)
(b) What is a delegated legislation? State one disadvantage of a delegated legislation. (02)
Q.2 (a) Mohsin acquired a piece of agricultural land in Moro, Sindh from a local landlord,
Qasim Soomro, on a lease term of twenty years. The revenue payable by Qasim
Soomro on his land to the Provincial Government was in arrears. As a result, the land
was advertised for sale by the Provincial Government. Mohsin, in order to prevent the
sale of land, paid the sum due by Qasim Soomro to the Provincial Government.
Under the provisions of Contract Act, 1872 explain whether Mohsin can recover such
amount from Qasim Soomro. (02)
(b) Naeem was a treasury manager in Raheel Associates (RA). Naeem robbed
Rs. 100,000 cash from the business. Raheel, the owner of the business, instituted legal
proceedings against Naeem. Naeem agreed to return the cash and Raheel agreed to
withdraw the proceedings against him. Naeem fulfilled his part of the promise.
Under the provisions of the Contract Act, 1872 explain whether Raheel is bound to
withdraw the proceedings against Naeem. (02)
(c) What is meant by ‘Assignment of contracts’ under the Contract Act, 1872? State any
four rules subject to which a contract may be assigned by act of parties. (05)
Q.3 Respond to the following independent scenarios, under the provisions of the
Contract Act, 1872:
(a) Four Wheels Limited (FWL), misrepresenting themselves to be the agents of

Big Motors (BM), persuaded Motor Manufacturers (MM) to sell them 10 luxury Jeeps
customised for BM. Discuss FWL’s liability under the above situation. (05)
(b) Muneer wanted to complete his bachelor’s degree from Europe. His paternal uncle
Furqan Butt had promised him to pay Rs. 2 million by way of a gift, at the time of his
admission to a college in Europe. After getting admission to one of the renowned
colleges in Europe, Muneer asked Furqan Butt to pay him Rs. 2 million as promised.
However, Furqan Butt refused to pay the amount and Muneer filed a suit against
Furqan Butt for the enforcement of his promise. Discuss the circumstances in which
Muneer may be able to recover the amount from Furqan Butt. (04)
(c) Batool offered to sell her flat to Saqib for Rs. 4,200,000. Saqib accepted the offer and
sent a cheque of Rs. 1,500,000 with a stipulation to pay the balance in 24 equal
monthly instalments of Rs. 112,500 each. Explain whether it is a valid contract. (03)
(d) Imran Traders entered into a one-year contract with Minhas Oils Limited for the
supply of gravels for their extraction project in Badin at a fixed price of Rs. 30,000 per
dumper. Six months after the contract, the diesel prices increased sharply, making it
non-profitable for Imran Traders to continue the supply at the agreed price. Therefore,
they terminated the contract on the ground of impossibility of performance. Describe
whether the contract is discharged in the above situation. (04)
Q.4 (a) Respond to the following independent scenarios, under the provisions of the
Partnership Act, 1932:
(i) Moiz, Adeeb and Mumtaz were partners in a firm. Adeeb died. Moiz and
Mumtaz continued the business and agreed to give 10% share of profits of
business to the widow of Adeeb as annuity. Discuss whether Adeeb’s widow would
be deemed to be a partner in the firm. (02)
(ii) Saima, Ahsan and Bari are partners in a law firm. Bari received an advance of
Rs. 150,000 from one of firm’s clients for defending a law suit. Bari, without
proceeding on client’s request and informing other partners about the receipt of
the amount, utilised the money for personal use. Discuss the rights and liabilities of
partners and that of the firm with regard to Bari’s act. (06)
(b) Under the provisions of the Partnership Act, 1932 list down any four restrictions
imposed on the implied authority of a partner. (02)
Q.5 (a) List any five situations in which an alteration made to the negotiable instrument does
not render the instrument void. (05)
(b) Rahat received a cheque of Rs. 75,000 from one of his customers, Jahanara. Rahat
however, failed to present the cheque for payment within a reasonable time of its issue
and the bank failed in the meanwhile. Jahanara suffered a damage of Rs. 40,000
through the delay in presenting the cheque.
In view of the provisions of the Negotiable Instruments Act, 1881 discuss whether
Rahat can recover the money in the above situation. (03)
(c) Sultan drew a bill of exchange on Amjad and made it payable to Bukhari or order. On
maturity another person of the same name wrongfully acquired possession of the bill
and presented it to Amjad for payment. Amjad after making due inquires and being
satisfied that the presenter is Bukhari, made payment on the bill.
Under the provisions of the Negotiable Instruments Act, 1881 discuss whether Amjad
is discharged from his liability. (02)
Company Law Section
Q.6 A team of young engineers is planning to incorporate a private limited company which
would provide machine maintenance services to large companies. The company would
initially be incorporated with a share capital of Rs. 20 million.
However, the engineers are not certain about the following matters:
(a) Registration and signing of articles of association. (03)
(b) Appointment of the first and subsequent directors and chief executive and terms of their
office. (07)
Advise the team of engineers in respect of the above matters in the light of the
Companies Act, 2017.
Q.7 (a) The licence of Cancer Research Association (CRA), issued under section 42 of the
Companies Act, 2017, was revoked by the Commission as the affairs of CRA were
conducted in a manner prejudicial to public interest.
Under the Companies Act, 2017 briefly discuss the effect of revocation of licence on
CRA, its members and officers. (05)
(b) Under the provisions of the Securities Act, 2015 no person shall make a public offer of
securities unless the Commission has approved the prospectus submitted by the issuer
or offeror of the securities.
Discuss the exceptions to the above provision of the Securities Act, 2015. (04)
(c) On 4 February 2020, the Commission approved the prospectus of Victory Limited (VL)
for public offer of its securities. The directors intend to publish the prospectus on
10 April 2020.
Under the provisions of the Securities Act, 2015 advise the directors with regard to the
following:
(i) The time frame within which the prospectus may be published. (02)
(ii) The requirements for publication of prospectus. (03)
Q.8 The Board of Directors of Giant Industries Limited (GIL), a listed company, in their
meeting held on 25 February 2020 had approved 30% interim cash dividend for the
shareholders. While approving the dividend payment, the board had authorised to adjust
dividend payable to one of the shareholders, Kamran Ahmed, against the amount due from
him.

(a) state when an interim dividend is deemed to have been declared and the
responsibilities of GIL regarding its payment. (04)
(b) identify the circumstances under which the directors may withhold/adjust the payment
of dividend. (02)
(c) list the steps which GIL would be required to take, for adjustment of dividend payable
to Kamran Ahmed against the amount due from him. (02)
Q.9 The annual general meeting of Alpha Limited (AL), a listed company, is scheduled to be
held in March 2020 to transact several ordinary and special businesses such as election of
directors including independent directors.
Under the provisions of the Companies Act, 2017 list the information which must be
included in AL’s notice of annual general meeting to be published in the newspapers. Your
answer should cover all aspects which must either be included in or be annexed to notice of
annual general meeting. (10)
Q.10 (a) Liaquat Munira & Co., Chartered Accountants (LMC) is the auditor of Noor Holdings
Limited (NHL) and its two subsidiaries. On 6 March 2020, the spouse of one of the
partners of LMC got elected as director of NHL.
Briefly discuss the effect(s) of appointment of partner’s spouse as director of NHL. (03)
(b) Briefly discuss the rights of the auditor with regard to access to company’s records.
Also identify the persons from whom an auditor may require to provide him any
information or explanations as he may think necessary for the performance of his
duties. (05)
(THE END)
Business Law
Suggested Answers
Ans.1 (a) Prerogative orders:

In order to discharge its supervisory role, the High Court issues 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 discretion fairly.
The three types of prerogative orders are:

Mandamus: requires the court or other body to carry out a public duty (mandatory duty)
e.g., if the subordinate court wrongfully rejects an application. High Court may through a
writ of mandamus order subordinate courts to accept that application.
Prohibition: prevents a court or tribunal from exceeding its jurisdiction e.g., a High Court
may through writ of prohibition direct the judge and parties to cease the litigation because
the subordinate court does not have proper jurisdiction to hear or determine the matters
before it.
(b) Delegated Legislation:

In Delegated Legislation power is given to an Executive (a minister or public body to make
subordinate or delegated legislation for specified purposes only).
Disadvantages of delegated legislation:

▪ The main criticism of delegated legislation is that it takes law making away from the
democratically elected members. Power to make law is given to unelected civil
servants and experts working under the supervision of a government minister.
Ans.2 (a) Payment by interested person:

To constitute a quasi-contract and be entitled for reimbursement, following conditions
must be satisfied:
(i) the person who made the payment must have his own interest in the payment; and
(ii) the other person must be bound by law to pay.
In the given scenario, Qasim Soomro was legally bound to pay the land revenue to the
Provincial Government and Mohsin, being interested in such payment, as his lease would
have been annulled upon sale of land by the provincial government, is entitled to recover
the amount from Qasim Soomro.
(b) The agreement between Naeem and Raheel is void as its object is unlawful. Raheel,
therefore, is not bound to fulfil his part of the promise.
(c) Assignment of contracts:

Assignment of contracts means transfer of contractual rights and liabilities to a third party.
Assignment by act of parties

Assignment by act of parties takes place when the parties to a contract themselves make
the assignment. Such an assignment is subject to the following rules:
(i) If it is a contractual obligation/right involving personal skill or ability than it cannot
be assigned.
(ii) If the contract expressly or impliedly provides that the contract shall be performed
by the promisor only then such obligation cannot be assigned.
(iii) If the contract does not expressly or impliedly provides that the contract shall be
performed by the promisor only then the promisor or his representative may
employ a competent person to perform such obligation but even than the promisor
remains liable to the promisee for proper performance.
Page 1 of 8
(iv) By Novation the promisor may transfer his liability to a third party with the consent
of the promisee and the transferee.
Ans.3 (a) Since Four Wheels Limited (FWL) acquired 10 luxury Jeeps, customised for BM, on behalf of
Big Motors (BM), without their knowledge or authority, FWL’s liability would be analysed
under the following two circumstances:
(i) When BM elects to ratify FWL’s acts:

If BM ratifies FWL’s act, the same effects will follow as if the act had been performed
by BM’s authority.
Being agent, FWL is bound to conduct the business according to the custom which
prevails in doing business of the same kind at the place where the agent conducts
such business. If FWL acts otherwise, in case of any loss, FWL would be responsible to
make good the loss to BM and if any profit accrues, account for such profit to BM.
Similarly, FWL would be liable to compensate BM in respect of the direct

consequences of their negligence, want of skill or misconduct.
However, if FWL without the knowledge of BM deals in the business of agency on

FWL’s own account, BM is entitled to claim any benefit which may have resulted to
FWL from the transaction.
(ii) When BM disown FWL’s act:

If BM does not ratify the agency, the contract would be between FWL and Motor
Manufacturers (MM). If MM suffers a loss due to breach of contract, FWL would be
responsible to make good the loss.
(b) Completed gift/love and affection:

An agreement made without consideration is void. However, Muneer may claim the amount
of Rs. 2 million from his uncle Furqan Butt, by proving either of the following two
conditions.
(i) gift
(ii) love and affection
Completed gift:
In case of a gift it needs to be completed. The rule ‘No consideration no contract’ does not
apply to completed gifts.
Love and affection:

An agreement made on account of natural love and affection without consideration will be
valid if it is:
▪ expressed in writing,
▪ registered under the law,
▪ made on account of natural love and affection, and
▪ between parties standing in a near relation to each other.
However, in the given scenario, Furqan Butt only made a promise to pay
Rs. 2 million by way of a gift and did not actually pay the amount. Similarly, the promise
was not made in writing and was not registered, therefore, the promise cannot be enforced
in both of the above circumstances and Muneer cannot recover anything from his uncle
Furqan Butt.
Business Law
Suggested Answers
(c) 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 Batool and Saqib has not been formed.
However, if Batool accepts the counter offer made by Saqib then it would be a binding
contract.
(d) Contract to do act afterwards becoming impossible or unlawful:

A contract to do an act which, after the contract is made, becomes impossible, or, by reason
of some event which the promisor could not prevent, becomes void when the act becomes
impossible, or unlawful.
However, events that make the contract extremely difficult, costly or less beneficial or
commercially unviable or non-profitable then that agreed at the time of its formation, but
not impossible, are not accepted as an excuse for non-performance.
Therefore, in the given scenario, Imran Traders excuses shall not be acceptable and in the
event of non-performance they will be held liable for the breach of contract and the
consequential damages.
Ans.4 (a) (i) Existence of partnership:

No, Adeeb’s widow is not a partner in the firm. The receipt by a person of a share of
the profits of a business, is a prima facie evidence of the existence of partnership.
However, the receipt by the widow of a deceased partner, as annuity, does not of itself
make the receiver a partner with the persons carrying on the business. In
determining whether Adeeb’s widow is a partner in the firm regard shall be had to
the presence of mutual agency relationship among Moiz, Mumtaz and Adeeb’s widow,
which is a conclusive evidence, of the presence of partnership, and which in this case
does not exist.
(ii) Mutual rights and liabilities of partners and the firm:

Bari has clearly exceeded his authority. However, Saima and Ahsan cannot repudiate
Bari’s transaction with the client. Bari’s act of receiving Rs. 150,000 from the client,
for defending them against a law suit, was done to carry on, in the usual way, business
of the kind carried on by the firm and such act binds the firm.
Further, where a partner acting within his apparent authority receives money from a
third party and misapplies it, the firm is liable to make good the loss. As a result, each
of the partners is jointly and severally liable to the client for all the acts of the firm
done while they are the partners.
Similarly, where by the wrongful act or omission of Bari (not defending the client
against the law suit), a loss or injury is caused to the client or any penalty is incurred,
the firm is liable to the same extent as the partners are liable.
However, Bari would be personally liable to the other partners for Rs. 150,000 and
shall indemnify the firm for any loss caused to it by his wilful neglect in the conduct of
the business of the firm.
Further consequence of his breach of duty not to act in any way prejudicial to the
partnership business; the partnership could be wound up.
Page 3 of 8
(b) Restrictions imposed on the implied authority of a partner:
In the absence of any usage or custom of trade to the contrary, the implied authority of a
partner does not empower him to:
(i) submit a dispute relating to the business of the firm to arbitration,
(ii) open a banking account on behalf of the firm in his own name,
(iii) compromise or relinquish any claim or portion of a claim by the firm,
(iv) withdraw a suit or proceeding filed on behalf of the firm,
Ans.5 (a) In the following situations, the alteration does not render the negotiable instrument void:
(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.
(b) When cheque not duly presented and drawer damaged there by:
It was the duty of Rahat 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. 40,000 to Jahanara due to this delay.
In this case, Jahanara is discharged from her liability to the extent of her damage
i.e. Rs. 40,000.
However, Rahat can still recover Rs. 35,000 from Jahanara.
Rahat, after the discharge of Jahanara, is now the creditor of the bank in lieu of Jahanara to
the extent of Rs. 40,000 and can recover Rs. 40,000 from the bank.
(c) Payment in due course:

Yes, Amjad is discharged from his liability on the bill.
Amjad made payment to the presenter, who was in possession of the bill, according to the
apparent tenor of the instrument, in good faith and without negligence, after making due
inquiry as to his identity.
It is therefore, a payment in due course and the acceptor is discharged.
Company Law Section
Ans.6 (a) Registration of articles

▪ The company limited by shares has the option to set out its own regulations for the
company and get it registered with the memorandum of association, or adopt Table A
as its Article of association.
▪ If articles are not registered, or, if articles are registered, in so far as the articles do
not exclude or modify the regulations in Table A in the First Schedule to the
Companies Act, those regulations shall, so far as applicable, be the regulations of the
company in the same manner and to the same extent as if they were contained in duly
registered articles.
▪ The article shall be signed by each subscriber, in the presence of a witness who shall
attest the signature of the subscriber.
Business Law
Suggested Answers
(b) First directors

The number of directors and the names of the first directors shall be determined by the
subscribers of the memorandum. The number of first directors may be increased by appointing
additional directors by the members in a general meeting.
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 name of the first chief executive shall be determined by the subscribers of the
memorandum of association of the company. The first chief executive shall, unless he
earlier resigns or otherwise ceases to hold office, hold office up to the first annual general
meeting of the company or, if a shorter period is fixed by the subscriber at the time of his
appointment, for such period.
Subsequent Chief Executive

Within fourteen days from the date of election of directors or the office of the chief
executive falling vacant, as the case may be, the board 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.
Ans.7 (a) Effect of revocation of licence

On revocation of licence of CRA issued under section 42, by the Commission:
(i) the company shall stop all its activities except the recovery of money owed to it, if
any;
(ii) the company shall not solicit or receive donations from any source; and
(iii) all the assets of the company after satisfaction of all debts and liabilities shall be
transferred to another company licensed under section 42, preferably having similar
or identical objects to those of the company, within ninety days from the revocation
of the licence or such extended period as may be allowed by the Commission:
Provided that a reasonable amount to meet the expenses of voluntary winding up or

making an application to the registrar for striking the name of the company off the
register may be retained by the company.
(iv) The members and officers of the first mentioned company (whose assets have been
transferred) or any of their family members shall not be eligible to hold any office in
the later company (the company to whom such assets have been transferred) for a
period of five years from the date of transfer of such assets.
(b) The requirement of submission of prospectus for public offering of securities to the
Commission and its approval is not required in the following circumstances:
▪ securities offered by the State Bank of Pakistan.
▪ securities offered in connection with a private offering or private placement and
▪ issue of shares of a subsidiary to the members of a listed holding company by way of
specie dividend or any other distribution in the prescribed manner.
▪ securities are offered by the issuer to:
− members or employees of the issuer; or
− members of the families of any such members or employees; and
▪ securities are shares and are offered as bonus shares to any or all of the members of
Page 5 of 8
the issuer.
(c) (i) Since a prospectus approved by the Commission shall be valid for a period of sixty
days from the date of such approval. Victory Limited must publish the prospectus by
3 April 2020.
However, as the directors intends to publish it on 10 April 2020 they must apply to
the Commission for extension in time limit. The application for extension must
contain the reasons for extension in time.
(ii) Publication of the prospectus

In Newspapers
The prospectus shall be published in full text or in such abridged form as may be
prescribed, at least in one Urdu and one English daily newspaper.
The prospectus shall not be published in the newspapers less than seven days or
more than thirty days before the commencement of the public subscription.
On Website
The prospectus in full text shall be uploaded on the website of the issuer and shall
remain there from the date of its publication in the newspapers till the closing of the
subscription.
Ans.8 (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 board.
Responsibilities of GIL for the payment of dividend:

The dividend shall only be paid out of the profits. The chief executive of GIL is responsible
to make the payment of dividend to registered shareholders or to their order within such
period and in such manner as may be specified.
Moreover, since dividend is payable in cash, it shall only be paid through electronic mode
directly into the bank account designated by the entitled shareholders.
(b) Circumstances under which GIL may withhold the payment of dividend to certain
shareholders:
▪ where the dividend could not be paid by reason of the operation of any law;
▪ where a shareholder has given directions to GIL regarding the payment of the
dividend and those directions cannot be complied with;
▪ where there is a dispute regarding the right to receive the dividend;
▪ where the dividend has been lawfully adjusted by GIL against any sum due to it from
the shareholder; or
▪ 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 GIL.
▪ where the member has not provided the complete information or documents, as
specified by the commission.
(c) Declaration of dividend

GIL is not required to make an application to the Commission for the adjustment of the
dividend. The dividend can be adjusted after obtaining permission of the concerned
Business Law
Suggested Answers
shareholder for the adjustment of the dividend against any sum due to GIL from the
shareholder.
Ans.9 Information to be included in the notice of general meeting

Notice of AL’s annual general meeting should:
For normal business

▪ specify the place, day and hour of the meeting;
▪ include a statement of the business to be transacted at the meeting;
▪ specify availability of a option of video-link facility to those members on demand who hold
10% of the total paid up capital or such other percentage as may be specified, and who
reside in a city;
▪ prominently set out member’s right to appoint a proxy and the right of such proxy to
attend, speak and vote in the place of the member at the meeting;
▪ be accompanied by a proxy form;
For special business
▪ the special resolution, shall be accompanied by the draft resolution;
▪ a statement shall be annexed to the notice of the meeting setting out all material facts
concerning such special business, including, in particular, the nature and extent of the
interest, if any, therein of every director, whether directly or indirectly, and where any item
of business consists of the according of an approval to any document by the meeting, the
time when and the place where the document may be inspected, shall be specified in the
statement;
In case of election of directors

▪ expressly state the number of directors fixed for election and names of the retiring
directors.
In case of election of independent directors

▪ indicate the justification for choosing the appointee for appointment as independent
director in the statement of material facts.
Ans.10 (a) ▪ The LMC becomes disqualified as auditor of the NHL because of appointment of a
partner’s spouse as director of NHL.
▪ Consequently, the LMC is deemed to have vacated its office as auditors with effect
from the date on which partner’s spouse becomes the director of NHL.
i.e. 6 March 2020.
▪ A casual vacancy is created for auditor in NHL which should be filled by its board of
directors within thirty days from 6 March 2020.
▪ LMC would also be deemed to have vacated its office as auditor from companies
which are NHL’s subsidiaries.
(b) An auditor of a company has a right:

(i) of access at all times to the company’s books, accounts and vouchers (in whatever
form they are held); and
(ii) of access to such copies of, an extracts from, the books and accounts of the branch
as have been transmitted to the principal office of the company;
(iii) to require any of the following persons to provide him with such information or
explanations as he thinks necessary for the performance of his duties:
▪ any director, officer or employee of the company;
▪ any person holding or accountable for any of the company’s books, accounts
or vouchers;
Page 7 of 8
▪ any subsidiary undertaking of the company; and
▪ any officer, employee or auditor of any such subsidiary undertaking of the
company or any person holding or accountable for any books, accounts or
vouchers of any such subsidiary undertaking of the company.
(THE END)
Business Law
Q.1 (a) Briefly describe the composition of Federal Shariat Court. (03)
(b) What do you understand by ‘Persuasive precedent’ and ‘Declaratory precedent’? (02)
Q.2 (a) Fauzia is working as a sales girl for a pottery store, owned by Mirza Baig, in a famous
mall. Fauzia, in the absence of Mirza Baig, often displays her own pottery items on the
shelves and uses her employer’s time, resources and facilities to sell her own items.
Recently, on a surprise visit to the store, Mirza Baig caught Fauzia selling her own
items in the store. Upon investigation, it was also revealed that on certain instances
Fauzia had sold Mirza Baig’s pottery wares at a higher rate than recommended and
pocketed the difference.
Under the provisions of the Contract Act, 1872 identify the nature of contractual
relationship between Fauzia and Mirza Baig. Discuss the duties breached by Fauzia
and the rights available to Mirza Baig under the above circumstances. (05)
(b) Under the provisions of the Contract Act, 1872 define pledge. Also describe the
conditions in which a pledge made by a non-owner is considered to be a valid pledge. (05)
Q.3 Respond to the following scenarios, under the provisions of the Contract Act, 1872:
(a) Shoaib, aged 15, is the son of a billionaire businessman, Ijaz Munsif. Last month
Shoaib drove his father’s 2018 Model BMW to a vintage car exhibition arranged by
Volkswagon Club of Pakistan. At the exhibition he saw a vintage Mercedes-Benz and
entered into a contract with the seller for the purchase of the car.
The seller, knowing Ijaz Munsif’s status, delivered the car to Shoaib at his house. The
seller requested for payment for the car but Shoaib refused to pay. The seller is now
requesting for full payment by Ijaz Munsif. Discuss whether the seller would succeed in
recovering the payment from Shoaib or Ijaz Munsif. (05)
(b) Haroon was engaged to be married to Ghazala. Haroon wanted to establish his own
business and therefore he entered into a contract with Ghazala for providing him all
her jewellery and apartment by way of a gift and in return Haroon agreed to give her a
small share in business profit. After some time, Ghazala filed a suit against Haroon,
requesting for setting aside the gift deed as it was not made with her free will. Discuss
whether Ghazala would succeed in her contention. (04)
(c) Sultan bought electronic appliances worth Rs. 700,000 from Zameer on thirty days’
credit. At the time of purchase, Sultan knew that he was in insolvent circumstances.
Discuss the validity of the contract. (03)
(d) Majid and Soomro went to a money lender. Majid said to the money lender, ‘Let
Soomro have a loan of Rs. 50,000, I ensure that you will be paid’. Identify and describe
the type of contract and state Majid’s responsibility in the contract. (03)
Q.4 (a) Under the provisions of the Partnership Act, 1932 state the mandatory duties of
partners which cannot be modified by an agreement amongst them. (03)
(b) Masoom, Rahul and Naila are partners in a trading firm. In 2016, they borrowed
Rs. 500,000 from Ishtiaq for purchasing a shop in Multan. The loan was agreed to be
repaid in two years’ time. However, due to financial crises the loan could not be re-
paid in time. For the purpose of settling the loan, Ishtiaq has offered Naila to admit his
seventeen-year-old son Muneer to the partnership business.
Under the provisions of the Partnership Act, 1932 discuss whether Muneer can be
admitted to the partnership business. State Muneer’s rights and liabilities if he is so
admitted. (04)
(c) Aftab, Rehan and Bali were partners in a law firm. The partnership deed, among other
things, provided that the profits or losses of the firm would be shared equally among
the partners. The firm continued its business for many years with Aftab receiving fifty
percent share in the net profit and Rehan and Bali each sharing twenty-five percent of
the net profit. Rehan and Bali never objected to this arrangement. Later on, partners
developed some differences and Rehan and Bali filed a suit against Aftab for the
recovery of their share in profits on the basis of partnership deed.
Under the provisions of the Partnership Act, 1932 discuss whether Aftab would
succeed in defending the suit filed against him by Rehan and Bali. (03)
Q.5 (a) Respond to the following independent situations, under the provisions of the
Negotiable Instruments Act, 1881:
(i) Talat Mir, acting within the scope of his authority as an agent, draws a bill upon
his principal, Mirza Nadir. Discuss what kind of a negotiable instrument it may be
regarded. (03)
(ii) Samad drew a cheque which was payable to ‘Munaf or order’. Saleem after
forging Munaf’s endorsement on the cheque received payment from the banker.
Discuss whether the banker would be liable on the cheque to Samad. (02)
(b) Under the provisions of the Negotiable Instruments Act, 1881 briefly describe:
(i) When an acceptance is said to be qualified (03)
(ii) Payment in due course (02)
Company Law Section
Q.6 (a) Under the provisions of the Companies Act, 2017 discuss how a person may become a
member of the company. (03)
(b) The Registrar, after registering the memorandum and articles of association, has issued
the certificate of incorporation to Shahbaz Limited, a company with an authorized
share capital of Rs. 300 million.
Under the Companies Act, 2017 briefly describe the effects of such registration. (05)
Q.7 Respond to the following scenarios, under the provisions of the Companies Act, 2017:
(a) On 31 August 2019, Easy Life Limited (ELL) paid the last installment of its long-term
finance which was obtained from a commercial bank against the mortgage of factory
building.
Briefly describe the duties of both ELL and the Registrar for the release of mortgage
after the payment. (04)
(b) Fancy Works Limited (FWL) is in process of finalizing the prerequisites of holding its
first Annual General Meeting (AGM) to be held on 31 October 2019.
(i) Advise FWL about the matters relating to proxies which must be included in the
notice of AGM. (02)
(ii) Arbaz Limited (AL) is a member of FWL. How would AL represent itself in the
AGM? (02)
(c) The Board of Directors of Hassam Textiles Limited (HTL) is not satisfied with the
performance of its chief executive officer (CEO) and wants to remove him from his
office before the expiry of his term on 31 August 2020.
Briefly explain the options available to HTL for removal of CEO under the above
situation. (02)
Q.8 (a) Kalaam Limited (KL) is considering the following options to invest its excess funds:
(i) Acquire 8% shareholdings in Lighter Oil Limited (LOL) for Rs. 120 million.
LOL is a growing company and is expected to fetch higher returns in futures.
(ii) Grant a loan of Rs. 100 million to Monsoon (Private) Limited (MPL) for
launching a new product. The loan would carry interest at the rate prevailing in
the market. KL currently holds 25% of MPL’s paid-up capital.
Under the provisions of the Companies Act, 2017 specify the condition(s) which KL
must fulfill before opting for any of the above investment options. (07)
(b) Faraz Limited (FL) is considering to enter into a contract with Bari Limited (BL) for
the construction of its new manufacturing facility. The Board of Directors of FL has
authorized Hasan Ali, an executive director, to negotiate the final price with BL.
Sara Ali, who is a chief executive in BL, is the spouse of Hasan Ali.
In view of the provisions of the Companies Act, 2017 briefly explain the
responsibilities of Hasan Ali towards FL under the above circumstances. (05)
Q.9 Under the provisions of the Companies Act, 2017 briefly explain the exception(s) to the
following general rules:
(a) No public company shall give financial assistance to anyone whether directly or
indirectly for the purchase of its own shares. (03)
(b) No subsidiary company shall, either by itself or through its nominees, hold any shares
in its holding company. (02)
(c) Companies can commence the business only after obtaining certificate of
commencement of business from the registrar. (02)
Q.10 (a) Zeeshan Limited (ZL) has recently acquired the majority shareholdings in Ghaffar
Limited (GL). ZL has decided to replace the existing auditor of GL in the next annual
general meeting and has recommended to appoint Javed and Company, Chartered
Accountants, as GL’s auditor for the next year.
Under the provisions of the Companies Act, 2017 explain the procedure(s) to be
followed and formalities to be complied with for the appointment of Javed and
Company as the auditor of GL. Also explain the rights of the retiring auditor in this
regard. (09)
(b) Under the provisions of the Companies Act, 2017 explain the term ‘Independent
director’. Discuss the provisions relating to the payment of remuneration to any of the
directors for attending the board meeting and performing extra services. (04)
(THE END)
Business Law
Suggested Answers
Ans.1 (a) Composition of Federal Shariat Court:

The Federal Shariat Court consists of 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’ experience in
Islamic law, research or instruction and not more than four judges each one of them
is or has been or is qualified to be a judge of High Court.
(b) Persuasive precedent:

It is the type of the precedent which is not required to be followed e.g. a decision by
lower court, decision by courts of other countries.
Declaratory precedent:
It is the application of an already existing rule of law.
Ans.2 (a) Agency:

The question deals with the law of agency and the relationship between Fauzia and
Mirza Baig is that of agent and principal.
Duties breached by Fauzia (agent’s duties towards principal)

In the given scenario, Fauzia breached following duties:
(i) Duty to follow principal’s directions or customs:

Fauzia’s first duty was to act within the scope of her authority and perform the
agency work according to the directions given by the principal. Fauzia’s selling
her principal’s items at a higher rate than recommended rate without his
consent amounts to acting beyond her authority.
(ii) Duty to carry out work with reasonable diligence and in good faith:
Fauzia’s act of using her principal’s time, resources and facilities to sell her
own items in place of her principal’s items tantamount to breach of application
of reasonable diligence and good faith.
(iii) Duty not to deal on her own account (conflict of interest):

The action of Fauzia in placing her own items on the shelves indicates that her
own personal interest was allowed to conflict with the interest of her principal.
(iv) Duty not to make any secret profit out of agency:

Fauzia’s act of selling her principal’s items at a higher rate and keeping the
price difference into her own pocket amounts to making secret profit.
Rights of Mirza Baig:

Following are the rights available to Mirza Baig under the given circumstances:
(i) Right to proper account:

Mirza Baig is entitled to get proper accounts of his money from Fauzia.
(ii) Right to receive benefits gained by agent (secret profit):

Since Fauzia was dealing on her own account in the business of agency, Mirza Baig
has the right to ask Fauzia for surrendering all the benefits which may have
resulted from the transactions (secret profit) to him. He is also entitled for the
compensation of any loss caused to him due to Fauzia’s misconduct.
(iii) Right not to pay remuneration:
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Since Fauzia is guilty of misconduct, Mirza Baig is not required to pay any
remuneration to Fauzia for that part of the business which she has misconducted.
(iv) Terminate the agency:

Mirza Baig has a right to terminate the agency relationship with Fauzia.
(b) Pledge:
The bailment of goods as security for payment of a debt or performance of a promise is
called “Pledge”. The bailor in this case is called “Pawnor”. The bailee is called the
“Pawnee”.
Following are the conditions in which a valid pledge can be made by non-owners:
(i) Pledge by a mercantile agent:

If the agent is in possession of the goods or documents of title to the goods with
the consent of the owner, any pledge made by him while acting in the ordinary
course of business of a mercantile agent shall be valid provided:
▪ the pawnee acts in good faith and
▪ the pawnee has not at the time of the pledge, notice that the agent has no
authority to pledge.
(ii) Pledge by person in possession under voidable contract

When the pawnor has obtained possession of the goods pledged by him under a
voidable contract but the contract has not been rescinded at the time of pledge, he
can make a valid pledge provided the pledgee acts in good faith and without notice
of the pawnor’s defect of title.
(iii) Pledge where pawnor has only a limited interest

Where a person pledges goods in which he has only a limited interest, the pledge is
valid to the extent of that interest.
Ans.3 (a) Contract with minor:

Shoaib, being a minor, lacks the capacity to enter into a legally binding contract
with the seller. Therefore, Shoaib is not bound by the contract and the contract is
void ab-initio.
A minor can only be bound by a contract, if he has been supplied with necessaries
suited to his condition in life. His liability in such a case would be limited to the
extent of his property, if any.
In this case, the vintage car cannot be regarded as a necessary good. Therefore, the
seller cannot enforce payment for the vintage car against Shoaib.
The seller can only claim for the return of his car through an order of restitution.
Similarly, Ijaz Munsif cannot be held liable for the price of the car which his son
Shoaib bought. He would have been held liable if his son had either entered into a
contract jointly with him or the contract was for the supply of necessaries to
Shoaib.
Business Law
Suggested Answers
(b) Undue influence:

Ghazala may succeed to recover her jewellery and apartment from Haroon on the
presumption of undue influence.
A contract is said to be induced by undue influence where the relation subsisting

between the parties is such that one of the parties is in a position to dominate the
will of the other and uses that position to obtain unfair advantage over the other.
Haroon in this case is a fiancé of Ghazala and is in a position to dominate her will.
When the consent to an agreement is caused by undue influence, the agreement is

voidable at the option of the party whose consent is so caused. Therefore, the
contract is voidable at the option of Ghazala.
The Court may set aside the contract either absolutely or, in case if Ghazala has
received any benefit under the contract, upon such terms and conditions as the
Court may seem just.
The burden of prove that the above contract, which on the face of it appears to be
unconscionable, was not induced by undue influence lies on Haroon, as he is the
one who is in a position to dominate Ghazala’s will.
(c) Fraud:
A promise made without any intention of performing it tantamount to fraud.
Therefore, in this case since Sultan had no intention of performing the contract, he
committed a fraud and the contract is voidable at the option of Zameer.
(d) Contract of indemnity:

This is the case of indemnity. A contract of indemnity is a contract by which one
party promises to save the other from loss caused to him by the conduct of the
promisor himself or by conduct of any other person.
In this case, Majid is the indemnifier and money lender is the indemnity holder.
Majid is responsible to make good any loss which may have been caused to the
money lender due to either his own default or the default of Soomro.
Ans.4 (a) Mandatory duties of partners:

Following are the mandatory duties of a partner that cannot be changed by an
agreement amongst the partners:
▪ Duty to be just and faithful.
▪ Duty to carry on business to the greatest common advantage.
▪ Duty to render true accounts.
▪ Duty to provide full information.
▪ Duty to indemnify for loss caused by fraud.
▪ Duty to be liable jointly and severally – unlimited liability.
▪ Duty to act within authority.
▪ Duty in case of emergency.
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(b) Minor’s admission to the partnership:
Partnership is created by a valid contract. Since a minor is not capable of entering
into a contract, a contract by or with a minor is void ab-initio. Accordingly, Muneer
cannot be a partner in the firm.
However, Muneer can be admitted to the benefits of partnership with the consent
of all the partners and not only by Naila alone.
Rights and liabilities of Muneer (minor):
The rights and liabilities of Muneer, who has been admitted to the benefits of
partnership are governed by the following rules:
Rights:
(i) Right to share property and profits of the firm as agreed by the partners.
(ii) Right of inspecting and taking copies of accounts of the firms ONLY.
(iii) Right not to be adjudged insolvent.
Liabilities:
(i) Personally not liable to third parties for the debts of the firm i.e. limited
liability.
(ii) His share is liable for the acts of the firm.
(c) Determination of rights and duties of partners by contract between them:

The contract between the partners may be varied by consent of all the partners,
and such consent may be expressed or may be implied by a course of dealing.
In view of above, the suit filed by Rehan and Bali against Aftab is not maintainable
because by accepting profits for the past many years in a ratio different from the
agreed ratio they have impliedly consented to the variation in the contract. i.e.
partnership deed.
Ans.5 (a) (i) Ambiguous instrument:

It is an ambiguous instrument as both the drawer and the drawee are the same
person. In this case, Mirza Nadir may either treat it as a bill of exchange or a
promissory note, but once he has made his choice the instrument shall
henceforth be treated accordingly.
(ii) Payment in due course of crossed cheque:

The banker in this case would not be liable to Samad and can debit Samad’s
account with the amount of the cheque provided the payment was made in due
course without negligence and in accordance with the apparent tenor of the
cheque. The banker is not expected to verify the signatures of the payees and
the endorsees in an order cheque. The banker would only be liable to Samad if
he can prove that payment was not made in due course.
(b) (i) Qualified Acceptance:
An acceptance is qualified in the following manner:
▪ Conditional: where acceptance is conditional i.e., payment dependent on
the happening of an event therein stated;
▪ Part Payment: where it undertakes part payment of the sum ordered to be
paid;
▪ Place of Payment: where no place of payment being specified in the order
it undertakes the payment at a specified place and not otherwise or
elsewhere; or where a place of payment being specified in the order it
Business Law
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undertakes the payment at some other place and not otherwise or

elsewhere;
▪ Time of Payment: where it undertakes the payment at a time other than
that at which under the order it would be legally due.
(ii) Payment in due course:
Payment in due course means payment in accordance with the apparent tenor
of the instrument in good faith and without negligence to any person in
possession thereof under circumstances which do not afford a reasonable
ground for believing that he is not entitled to receive payment of the amount
therein mentioned.
Company Law Section
Ans.6 (a) A person may become the member of the company in any of the following ways:
▪ The subscribers to the memorandum of association are deemed to have agreed
to become members of the company and become members on its registration.
and in other cases:
▪ A person to whom shares of any kind are allotted, or who becomes the holder
of any class or kind of shares; become the member of the company or
▪ in relation to a company not having a share capital, any person who has agreed
to become a member of the company;
and whose names are entered; in the register of members, are members of the
company.
(b) Effects of registration:
The registration of Shahbaz Limited has the following effects as from the date of
incorporation:
(i) The subscribers to the memorandum, together with such other persons as
may from time to time become members of the company, are a body
corporate by the name stated in certificate of incorporation;
(ii) The body corporate is capable of exercising all the functions of an
incorporated company having perpetual succession and a common seal;
(iii) The status and registered office of the company are as stated in, or in
connection with, the application for registration;
(iv) The subscribers to the memorandum become holders of the initial shares;
(v) The persons named in the articles of association as proposed directors, are
deemed to have been appointed to that office.
Ans.7 (a) Duty of ELL

ELL shall give intimation to the registrar in the manner specified, of the payment, in
full, of mortgage by it within thirty days from the date of such payment.
Duty of registrar
The registrar shall, on receipt of such intimation, issue a notice to the bank to show
cause within a time limit not exceeding fourteen days, as may be specified in such
notice, as to why payment in full, shall not be recorded. If no cause is shown by the
bank, the registrar shall make an entry in the register of mortgages and charges.
If any cause is shown, the registrar shall record a note to that effect in the register
of charges and shall inform the company.
Page 5 of 8
The above mentioned notice by the registrar shall not be required if a no objection
certificate on behalf of the bank is furnished along with the intimation of payment
in full of loan.
(b) (i) The Notice of AGM of FWL shall prominently set out the member’s right to
appoint a proxy and the right of such proxy to attend, speak and vote in the
place of the member at the meeting and such notice shall be accompanied
by a proxy form.
(ii) AL may by resolution of its board authorize an individual to act as its
representative at any meeting of FWL. The instrument of proxy for such
individual be under AL’s seal or be signed by an officer or an attorney duly
authorized by AL in this behalf.
(c) The Chief Executive may be removed before the expiration of his term of office
notwithstanding anything contained in the article of the company or any
agreement between the company and such chief executive by:
▪ board resolution passed by not less than three fourths of the total number
of directors for the time being or
▪ the company by a special resolution.
Ans.8 (a) (i) The directors can make investment in its shares by passing a resolution in
their meeting.
(ii) MPL is an associated undertaking of KL as it holds 25% shareholdings in
MPL. Therefore, KL can make investment in MPL only under the authority
of a special resolution passed by the members in the general meeting.
The special resolution shall be supported by an agreement in writing
which shall include the terms and conditions specifying the nature,
purpose, period of loan, rate of return, fees or commission, repayment
schedule for principal and return, penalty clause in case of default or late
repayments and security, if any, for the loan in accordance with the
approval of the members in the general meeting.
The rate of return on such investment shall not be less than the borrowing
cost of KL (investing company) or the rate as may be specified by the
Commission whichever is higher and shall be recovered on regular basis in
accordance with the terms of agreement, failing which the directors shall
be personally liable to make the payment.
Further, the directors of KL (investing company) shall certify that
investment is made after due diligence and that the borrower has the
ability to repay the loan as per the agreement.
(b) Disclosure of directors’ interest
Being a director, Hassan Ali is an agent of the shareholders of the company and
stands in a fiduciary relationship with them so he is required to make all
contracts and all transactions in good faith and in best interest of the company.
In this case, Hassan Ali is deemed to be indirectly interested in the transaction as
his wife is the chief executive in BL.
Therefore, Hassan Ali should give a general notice to the effect to all other
directors that he should be regarded as concerned or interested in the
transaction to be entered into with BL and such notice shall be given at the
meeting of the directors at which the question of entering into the contract or
Business Law
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arrangement is first to be taken into consideration.

After disclosing his interest in the transaction, Hassan Ali should not be part of
the directors’ meeting in which such contract or transaction is to be discussed.
Ans.9 (a) Exceptions to the given rule are as under:
(i) The lending of money by a banking company in the ordinary course of its
business;
(ii) The provision of money in accordance with any scheme approved through
special resolution and in accordance with such requirements as may be
specified, for the purchase of, or subscription for shares in the company, if
the purchase of, or the subscription for, the shares held by a trust for the
benefit of the employees or such shares held by the employee of the
company.
(iii) The provision or securing an advance to any of its employees, including a
chief executive who, before his appointment as such, was not a director of
the company, but excluding all directors of the company, for purchase of
shares of the company.
(b) No subsidiary can hold any shares in its holding company. However, a subsidiary
is not barred:
(i) from acting as a trustee, and
(ii) from dealing in shares of its holding company in the ordinary course of its
business, on behalf of its clients only subject to non-provision of any
financial assistance where such subsidiary carries on a bona fide business
of brokerage:
(iii) from holding shares by operation of law
(c) Following companies can commence business without obtaining certificate of

commencement of business:
(i) A private company
(ii) A company converted from private to public
(iii) A company limited by guarantee and not having a share capital
Ans.10 (a) Procedures to be followed and formalities to be complied with for appointment of
new auditors:
▪ ZL shall obtain the consent of Javed and Company, Chartered Accountants
(JCC) for acting as GL’s auditor.
▪ ZL shall give a notice not less than 7 days before the date of the annual
general meeting to the company, for a resolution for appointment of JCC as
auditors at a company’s annual general meeting.
▪ GL shall forthwith send a copy of such notice to the retiring auditor and shall
also be posted on its website.
▪ GL shall, within fourteen days from the date of appointment of JCC, send to
the registrar intimation thereof, together with the new auditor’s consent in
writing.
▪ GL shall, within fourteen days from the date of removal of the existing
auditor, send intimation thereof to the registrar.
Rights of the existing auditor:

▪ The retiring auditor shall have a right to make a representation in writing to
the company at least two days before the date of general meeting. Such
representation shall be read out at the meeting before taking up the agenda
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for appointment of the auditor.
▪ Provided that where such representation is made, it shall be mandatory for
the auditor or a person authorised by him in writing to attend the general
meeting in person.
(b) Independent director is a director who is not connected or does not have any
other relationship, whether pecuniary or other, with the company, its associated
companies, subsidiaries, holding company or directors; and he can be reasonably
perceived as being able to exercise independent business judgment without
being subservient to any conflict of interest.
The remuneration to be paid to any director for attending the meetings of the
directors or a committee of directors shall not exceed the scale approved by the
company or the directors, as the case may be, in accordance with the provisions
of the articles.
The remuneration of a director for performing extra services, including the office
of the chairman, is determined by the directors or the company in general
meeting in accordance with the provisions in the company's articles.
(THE END)
Business Law
Q.1 (a) Briefly explain five rules regarding performance of reciprocal promises under the
provisions of Contract Act, 1872. (05)
(b) Respond to the following scenarios, under the provisions of Contract Act, 1872:
(i) On 11 February 2019, Isfandyar agreed to sell his house to Javed for
Rs. 15 million. On 19 February 2019, Javed came to know that Isfandyar has
finalized a deal for the same house with Jenny. Discuss the option(s), if any,
available to Javed. (02)
(ii) Ahmed being interested in purchasing Adil’s DHA property sent him this letter
on 01 March 2019, “I have heard that you are selling your DHA property. I am very
much interested in purchasing it. Will you please consider selling the same to me? What is
the highest price you have been offered so far?” Adil replied, “The highest quote for the
property till now is Rs. 35 million.” Ahmed replied, “I agree to buy your DHA property
for Rs. 36 million.” Subsequently, Adil received an offer from Hamid quoting
Rs. 38 million for the said property. What will be Adil’s liability towards Ahmed if
he wishes to make the sale to Hamid? (02)
(iii) Noman rented his house to Ahsan under a contract terminable on three months’
notice. Noman’s wife without discussing with Noman, sent a termination notice
to Ahsan. When Noman came to know of the situation, he ratified the act of
sending of notice to Ahsan. Discuss whether the notice given by Noman’s wife is
valid. (02)
(iv) While attending a seminar, Khizar told a group of people on his table that he is
the agent of Lucky. Lucky smiled considering it a joke. Later, Moiz who was
sitting on the table sold security cameras and surveillance system to Khizar on
credit believing him to be agent of Lucky. Comment on whether a contract of
agency is established between Khizar and Lucky. (02)
Q.2 (a) Under the provisions of Negotiable Instruments Act, 1881 define ‘Holder in due
course’ and ‘Acceptor for honour’. (05)
(b) Umair drew a duly stamped promissory note favouring Vazir, intending to pay
Rs. 500,000 against the purchase of office equipment. No amount was mentioned on
the instrument and Umair told Vazir to fill it himself. The stamp affixed could cover
amount up to Rs. 700,000.
Under the Negotiable Instruments Act, 1881:

(i) identify the nature of the instrument and describe when Umair’s liability will
arise on the instrument. (02)
(ii) specify Umair’s liability where Vazir filled in Rs. 600,000 on the promissory
note. (1.5)
(iii) specify Umair’s liability where Vazir filled in Rs. 600,000 on the promissory note
and transferred it to Waris for value. (1.5)
Q.3 (a) Yasmin stayed at Hotel Fragrance, during the exhibition of her famous jewellery
brand. After she left, the house-keeping staff found a precious branded ring from a
drawer which was handed over to the hotel manager. Meanwhile, Ahmed who was
staying at the hotel, stole the ring and escaped. Hotel manager tried to contact Yasmin
but she had already proceeded on a year long tour at an unknown destination.
Under the provisions of Contract Act, 1872 discuss what action(s) can be taken by the
hotel management in this scenario and what would be their rights when the ring is
recovered. (06)
(b) Salim gave a loan of Rs. 100,000 to Ahmed carrying a mark-up of 10% per annum.
Amir and Rehan agreed to act as Ahmed’s sureties. In the light of Contract Act, 1872
determine, along with reasons, how much each surety would be liable (in Rupees) in the
following independent scenarios:
(i) Ahmed defaulted and Salim being aware of weak financial position of Rehan,
asked Amir and Rehan to pay 75% and 25% of the default respectively. (02)
(ii) Salim without discussing with Rehan released Amir from the suretyship. Ahmed
defaulted and Salim asked Rehan to pay the entire amount. (02)
(c) Under the Contract Act, 1872 state an agent’s responsibility in case he appoints a
sub-agent without having the principal’s authority. (02)
Q.4 (a) Respond to the following scenarios, under the provisions of Partnership Act, 1932:
(i) Tehram, Rahil and Zain are partners in TRZ Associates. Zain, after obtaining
mutual consent of all the partners, transferred his share of interest to Hatim.
Hatim now wants to discuss the future business strategy of the firm with Tehram
and Rahil. In this regard, he has asked the partners to provide him the firm’s
cash flow forecast so that he can determine firm’s growth potential for the next
five years. Comment on Hatim’s entitlement to do the same. (03)
(ii) Sahir and Sarim are lawyers who have entered into a partnership namely
SS Associates. Noreen approached SS Associates for a property dispute case.
However, after seeing Sarim’s capabilities, Noreen gave Rs. 250,000 to Sarim for
investment in stocks and bonds at his discretion on her behalf. Sarim hid the said
fact from Sahir and used the money to meet his personal needs. Subsequently,
Noreen filed a suit on the firm for the recovery of Rs. 250,000. Reason out the
validity of suit filed by Noreen. (02)
(iii) Faizan and Mehran are partners in a trading firm and have decided that no
partner shall have the right to buy or sell goods beyond the value of Rs. 100,000
without consent of the other partner. Due to a sudden crisis in the market, prices
of a product started falling sharply. Faizan without consulting Mehran sold all
the perishable stock worth Rs. 950,000 in order to restrict the firm’s loss. Can
Mehran hold Faizan responsible for misconduct? (02)
(b) Define principle of ‘holding out’ under the Partnership Act, 1932 and state its
exception, if any. (03)
Q.5 List respective jurisdiction of the following:

(a) Three classes of Judicial Magistrates under the Magistrates Court; and (03)
(b) Three classes of Civil Judges under the Family Court. (02)
Company Law Section
Q.6 (a) In the light of Companies Act, 2017 identify six circumstances under which a director
shall not be considered as an independent director. (06)
(b) Following is the composition of board of directors of Faisal Limited, a listed company:
Independent directors Khalid, Dawood, Rehmat

Non-executive directors Salman, Arif, Ashraf
Executive directors Fasih (CEO), Kashif (Director
Finance)
Under the Companies Act, 2017 advise which of the above directors are eligible to be
appointed as Chairman of the board. Also state the time frame for his appointment,
duration of office and his responsibilities. (06)
Q.7 (a) List six types of charges which a company is mandatorily required to get registered
with the registrar under the Companies Act, 2017. Also state the effect of
non-registration of a charge created in favour of a company. (04)
(b) Sepham Limited is in process of raising money through issuance of shares and intends
to issue a prospectus.
Advise the management as to who would be liable under the Securities Act, 2015 to
compensate the investors in case there is any deficiency in the prospectus and under
what circumstances this liability would arise. (04)
Q.8 Xiam Limited (XL) is due to conduct its first annual general meeting in March 2019. XL
wants to propose Rehan Hameed & Co., Chartered Accountants, as the auditors of the
company for the next term, in place of the existing auditors, Jamil Behram & Co., Chartered
Accountants.
Under the Companies Act, 2017:

(a) identify who has the right to propose auditors and state the conditions which are
required to be fulfilled before presenting any such proposal in the annual general
meeting. (05)
(b) what will be the term of the auditors appointed in the first annual general meeting?
Briefly state the situations under which the auditors may cease to hold office before
expiry of the above term. (03)
(c) what are the rights of Jamil Behram & Co., Chartered Accountants, where Rehan
Hameed & Co., Chartered Accountants, are proposed to be appointed as the auditors
in the annual general meeting? (03)
Q.9 (a) Masters Limited (ML) has made equity investment in Abbas Limited (AL). In the light
of Companies Act, 2017 state under what circumstances ML may classify AL as its
subsidiary. (04)
(b) Describe the provisions contained in the Companies Act, 2017 relating to ‘principal
line of business’ of a company. (05)
Q.10 (a) Zaigham Limited (ZL) having share capital of Rs. 100 million was incorporated on
01 January 2014 when its shares were issued at a face value of Rs. 10 each. ZL
announced cash dividend of Rs. 10 million in its first year. Thereafter, the cash
dividend kept on increasing by Rs. 2 million each year till 31 December 2018.
In a recent board meeting, it was noted that 8% of the company’s shares and the
related dividend has remained unclaimed till 28 February 2019. Hence, the board
advised the management to take immediate steps to comply with the
Companies Act, 2017.
Narrate the procedures that the management should follow in order to comply with the
board’s advice. Also determine the amount of company’s liability in respect of the
above. Assume that market value of the shares is Rs. 22 per share and dividends for each
year become due on 28 February of the next year. (06)
(b) Under the provisions of Companies Act, 2017 it is the responsibility of the board to
prepare directors’ report for each financial year. The Act has further prescribed the
minimum contents of such report.
In the above context, list the matters which are required to be included in the business
review section of the directors’ report of a listed company. (04)
(THE END)
Ans.1 (a) Rules regarding performance of reciprocal promises under the Contract Act, 1872

When a contract consists of reciprocal promises to be simultaneously performed, the
promisor need not perform his promise unless the promisee is ready and willing to
perform his reciprocal promise.

Where the order in which reciprocal promises are to be performed is expressly fixed
by the contract, they must be performed in that order, and where the order is not
expressly fixed by the contract, they must be performed in that order which the
nature of the transaction requires.

When a contract contains reciprocal promises, and one party to the contract prevents
the other from performing his promise, the contract becomes voidable at the option
of the party so prevented; and he is entitled to compensation from the other party for
any loss which he may sustain in consequence of the non-performance of the
contract.

Where the performance of one party depends on the prior performance of the other
party and party who is liable to perform first, fails to perform it, then such party
cannot claim the performance from the other party and must make compensation to
the other party for any loss which the other party may sustain by non-performance of
the contract.
(v) Promise to do legal & illegal things

Where persons reciprocally promise, firstly, to do certain things which are legal, and
secondly, under specified circumstances, to do certain other things which are illegal,
the first set of promises is a contract, but the second is a void agreement.
(b) (i) Isfandyar has committed anticipatory breach of contract so Javed has following
options:
▪ He may either treat the contract as rescinded and claim damages from Isfandyar
for breach of contract immediately without waiting until the due date of
performance, or
▪ He may elect not to rescind but to treat the contract as still operative and wait for
the time of performance and then hold Isfandyar responsible for the
consequences of non-performance.
(ii) The first letter from Ahmed and Adil’s response on it were merely ‘asking for
information’ and ‘providing information’ respectively and not offer and acceptance.
The second letter from Ahmed sent as a reply to Adil was itself an offer and not the
acceptance of an offer. Since this offer had not been accepted by Adil, there is no
binding contract between the parties. Accordingly, there is no liability if Adil sells his
bungalow to Hamid.
(iii) An act done by one person on behalf of another, without such other person's
authority, which, if done with authority, would have the effect of terminating any
right or interest of a third person, cannot be ratified.
Considering the above, notice served by Noman’s wife is not valid. If Noman wants, he
will have to give fresh notice.
(iv) Khizar in this situation has become agent of Lucky by estoppel. Lucky is bound by this
transaction and he is stopped from denying the existence of the agency since he gave
out clear representation to others by smiling and keeping quiet.
Moiz relied on representation of existence of agency. Thus, if he suffers a loss from

the transaction, he may hold Lucky liable as principal.
Ans.2 (a) Holder in due course - means any person who for consideration becomes the possessor
(holder) 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 became overdue, without notice that the title
of the person from whom he derived his own title was defective.
Acceptor for honour - when a bill of exchange has been noted or protested for non-acceptance
or for better security, and any person accepts it supra protest for honour of the drawer or of
any one of the endorsers, such person is called an "acceptor for honour."
(b) (i) An incomplete or blank negotiable instrument which is properly stamped and signed
but where the name or amount is missing is an ‘Inchoate Instrument’.
Umair is liable to pay when blank (i.e. amount) is filled in which makes the
instrument complete.
(ii) Vazir being holder can only recover the amount intended to be paid by Umair i.e. Rs.
500,000.
(iii) Waris being holder in due course can recover the amount of Rs. 600,000 from Umair.
Ans.3 (a) Responsibility of Hotel Management as finder of goods

The contract which exists between Yasmin and the Hotel Management is a bailment contract.
Yasmin in this case is the bailor while the Hotel Management is the bailee, being finder of lost
goods.
Ahmed has wrongfully deprived the Hotel Staff of the possession of the goods bailed. Now, the
Hotel Management may use such remedies as the owner, might have used as if no bailment
had been made and may bring a suit against Ahmed.
Rights of Hotel Management in case ring is recovered
(i) Repayment by Yasmin of necessary expenses

Under the conditions of bailment, where the goods are to be kept or carried, and the
Hotel Management is to receive no remuneration, Yasmin shall repay to the Hotel
Management the necessary expenses incurred by them for the purpose of the
bailment.
(ii) Right to lien

The Hotel Management has no right to sue Yasmin for compensation for the trouble
and expense voluntarily incurred by them to preserve the ring, but they may retain
the ring against Yasmin until they receive such compensation.
(iii) Right of sale
If Yasmin after returning from the tour refuses to pay the lawful charges to the Hotel
Management in respect of the ring; Hotel Management may sell the ring, being
commonly a subject of sale, if the lawful charges in this respect amount to two third
of the ring’s value.
(b) (i) When two or more persons are co-sureties for the same debt, either jointly or
severally, in the absence of any contract to the contrary, they are liable, as between
themselves, to pay an equal share of the whole debt, or of that part of it which
remains unpaid by the principal debtor.
Accordingly, the liability will be divided in ratio of 50:50 and not 75:25 and Amir and
Rehan would be liable for Rs. 55,000 each.
(ii) Where there are co-sureties, a release by the creditor of one of them does not
discharge the other; neither does it free the surety so released from his responsibility
to the other sureties. Accordingly, Amir and Rehan will still be liable for Rs. 55,000
each.
(c) Where an agent, without having authority to do so, has appointed a person to act as a sub-
agent, the agent stands towards such person in the relation of a principal to an agent, and is
responsible for the acts of the sub-agent, both to the principal and to third persons.
Ans.4 (a) (i) A transfer by a partner of his interest in the firm does not entitle Hatim to interfere in
the conduct of the business, or to require accounts, or to inspect the books of the firm,
but entitles Hatim only to receive the share of profits of Zain, and Hatim shall accept
the account of profits agreed to by the partners.
(ii) The firm cannot be made liable since the receiving of money by Sarim for investment
purposes is not in ordinary course of a lawyer’s business and accordingly, is beyond
the scope of his implied authority as a partner.
(iii) A partner has authority, in an emergency, to do all such acts for the purpose of
protecting the firm from loss as would be done by a person of ordinary prudence, in
his own case, acting under similar circumstances, and such acts bind the firm. Hence,
Faizan cannot be held responsible for misconduct.
(b) Holding out

Anyone, who by words spoken or written or by conduct represents himself, or knowingly
permits himself to be represented, to be a partner in a firm, is liable as a partner in that firm
to anyone who has on the faith of any such representation given credit to the firm, whether
the person representing himself or represented to be a partner does or does not know that
the representation has reached the person so giving credit.
Exceptions of holding out partner

After a partner’s death if the business of the firm is continued in the old firm’s name, the
continued use of that name or of the deceased partner will not itself make legal
representatives of the deceased partner liable for any act of the firm done after his death.
Ans.5 (a) Magistrates Court
Staff Jurisdiction
Judicial Magistrate Offences with punishment of imprisonment for a term not exceeding
1st Class three years, fine not exceeding Rs. 15,000 and whipping.
2nd Class one year, fine not exceeding Rs. 5,000.
3rd Class one month, fine not exceeding Rs. 100.
(b) Family Court

Civil Judge 1st Class Suit of unlimited value of subject matter.
Civil Judge 2nd Class Suit having value of subject matter not exceeding Rs. 50,000.
Civil Judge 3rd Class Suit having value of subject matter not exceeding Rs. 5,000.
Company Law Section
Ans.6 (a) No director shall be considered independent if following circumstances exist:
(a) he has been an employee of the company, any of its subsidiaries or holding company
within the last three years or two years in case of public sector companies;
(b) he is or has been the chief executive officer of subsidiaries, associated company,
associated undertaking or holding company in the last three years or two years in case
of public sector companies;
(c) he has, or has had within the last three years or within the last two years in case of
public sector companies; a material business relationship with the company either
directly, or indirectly as partner, major shareholder or director of a body that has such
a relationship with company.
(d) he has received remuneration in the three years preceding his/her appointment as a
director or receives additional remuneration, excluding retirement benefits from the
company apart from director’s fee or has participated in the company’s stock option or
a performance-related pay scheme;
(e) he is a close relative of the company’s promoters, directors or major shareholders;
(f) he holds cross-directorships or has significant links with other directors through
involvement in other companies or bodies not being the associations licenced under
section 42.
(b) Any of the non-executive directors (i.e. Khalid, Dawood, Rehmat, Salman, Arif, Ashraf) may be
appointed as Chairman. The board of Faisal Limited shall within fourteen days from the date
of election of directors appoint a chairman who shall hold office for a period of three years
unless he earlier resigns, becomes ineligible or disqualified under the Companies Act, 2017 or
is removed by the directors.
The responsibilities of the Chairman are defined by the board. Chairman shall be responsible
for leadership of the board and ensure that the board plays an effective role in fulfilling its
responsibilities.
The Chairman is required to issue a review report in every annual financial statement of the
company which shall contain a review on overall performance of the board and effectiveness
of the role played by the board in achieving the company’s objectives.
Ans.7 (a) (i) a charge on any immovable property wherever situated, or any interest therein;
(ii) a charge on any movable property of the company;
(iii) a charge for the purposes of securing any issue of debentures;
(iv) a charge on book debts of the company;
(v) a floating charge on undertaking or property of the company, including stock-in trade;
(vi) a charge on a ship or aircraft, or any share in a ship or aircraft;
Effect of non-registration
Charge created by a company shall not be taken into account by the liquidator or any other
creditor unless it is duly registered under the Companies Act, 2017.
(b) Every issuer, director of an issuer or any person who has signed the prospectus shall be liable
to pay compensation to any person who acquires any of the securities, in reliance upon the
prospectus, to which the prospectus relates and suffers loss in respect of them as a result of
any incorrect, untrue or misleading statement in the prospectus or the omission from it of any
matter required to be included under the Securities Act, 2015.
Ans.8 (a) Following have the right to propose auditors:
(i) The board of directors

Auditors shall be appointed by the company in the annual general meeting on the
recommendation of the board after obtaining consent of the proposed auditors. A
notice shall be given to the members about proposed change in auditors with notice of
general meeting.
(ii) Member(s) having at least ten percent shareholdings

A member / member(s) having not less than ten percent shareholdings of the company
shall also be entitled to propose any auditor or auditors for appointment whose
consent has been obtained by him/them and a notice in this regard has been given to
the company not less than seven days before the date of the annual general meeting.
The company shall forthwith send a copy of such notice to the retiring auditors and
shall also post it on its website.
(b) The auditors appointed in the first annual general meeting shall retire on the conclusion of
the next annual general meeting. Unless, the auditors appointed in an annual general meeting
becomes disqualified, vacates office due to resignation or death, or is removed through a
members’ special resolution.
(c) Jamil Bahram & Co., Chartered Accountants being the retiring auditors shall have a right to
make a representation in writing to the company at least two days before the date of general
meeting. Such representation shall be read out at the meeting before taking up the agenda for
appointment of the auditors.
Ans.9 (a) AL may be considered as a subsidiary company of ML if:
▪ ML controls composition of the board of AL. The composition shall be deemed to be

controlled by ML if it can appoint or remove all or a majority of AL’s directors; or
▪ ML exercises or controls more than one-half of its voting securities either by itself or
together with one or more of its subsidiary companies.
(b) Principal line of business means the business in which substantial assets are held or likely to
be held or substantial revenue is earned or likely to be earned by a company, whichever is
higher.
Principal line of business of the company shall be mentioned in the memorandum of

association of the company which shall always commensurate with name of the company.
Any change in the principal line of business shall be reported to the registrar within thirty
days from the date of change, on the form as may be specified and registrar may give direction
of change of name if the name does not commensurate with the principle line of business of
the company.
Ans.10 (a) In respect of all shares and dividend which remain unclaimed for a period of three years, the
company shall give a 90 days’ notice to shareholders to file a claim by a registered post
acknowledgement due on his last known address. After expiry of 90 days, final notice in
specified form shall be published in 2 daily newspapers, one in Urdu and one in English
having wide circulation.
If no claim is made by the shareholders, the company shall after 90 days from date of
publication of 2nd notice, deposit the unclaimed amount with the Federal Government. In the
given case, Rs. 1,760,000 [(Rs. 10,000,000×8%)+(12,000,000×8%)] worth of unclaimed
dividend will be deposited i.e. the dividend becoming due on 28 February 2015 and 28
February 2016.
Further, the management shall report and deliver 800,000 shares to the Commission and the
Commission shall, after selling these shares in specified manner and period, deposit the
proceeds to the credit of Federal Government.
(b) In the case of a listed company, the business review section must, to the extent necessary for
understanding the development, performance or position of the company’s business, include:
(i) the main trends and factors likely to affect the future development, performance and
position of the company’s business;
(ii) the impact of the company’s business on the environment;
(iii) the activities undertaken by the company with regard to corporate social
responsibility during the year; and
(iv) directors’ responsibility in respect of adequacy of internal financial controls as may
be specified.
(THE END)
Business Law
Q.1 Specify Pakistan’s system of government and identify Senate’s role in the legislation
process. (05)
Q.2 (a) Mughal and Dawood are trading in rice. Dawood entered into a contract with
Mughal for the purchase of 50 tons of rice. Dawood had private information of
change in prices which would have affected Mughal’s willingness to enter into the
contract. When Mughal, through his own resources, came to know about the prices,
he accused Dawood of fraud and repudiated the contract.
Under the provisions of the Contract Act, 1872 explain whether Mughal is justified in
repudiating the contract. (04)
(b) Under the provisions of the Contract Act, 1872:

(i) List any five circumstances in which the parties to the contract are not absolved
from the performance of their contractual obligations on the ground of
supervening impossibility. (05)
(ii) Briefly describe the conditions in which a pledge made by a mercantile agent is
considered to be a valid pledge. (03)
(c) Zubair agrees to construct a bungalow for Ubaid for Rs. 20 million on the condition
that payment will only be made after Muneer, an architect, certifies that the bungalow
has been constructed in accordance with the layout plan.
Under the provisions of the Contract Act, 1872 describe the nature and validity of the
above contract. (02)
Q.3 (a) In view of the provisions of the Negotiable Instruments Act, 1881 comment on the
type and validity of each of the following instruments signed by Rahul:
(i) Nauman please pay to Mahreen Rs. 100,000.
(ii) Nauman, I shall be highly obliged if you make it convenient to pay Rs. 100,000
to Mahreen.
(iii) I acknowledge myself to be indebted to Nauman in Rs. 100,000 to be paid on
demand, for value received.
(iv) I promise to pay Mahreen or order Rs. 100,000 six days after Nauman’s death. (04)
(b) Under the provisions of the Negotiable Instruments Act, 1881 discuss the effect(s) of
the words ‘Not negotiable’ on a cheque crossed specially. (03)
(c) Under the provisions of the Negotiable Instruments Act, 1881 calculate the maturity
of the instrument in each of the following cases:
(i) A bill of exchange dated 30 January 2018 is made payable at one month after
date.
(ii) A promissory note dated 6 August 2018 is made payable 15 days after date.
(iii) A bill of exchange dated 30 August 2018 is made payable three months after
date. Assume the date on which the instrument is at maturity is Sunday. (03)
Q.4 (a) Mujeeb obtained a generator on lease for a period of six years from Munaf at an
annual rent of Rs. 120,000. Fareed executed a contract of guarantee in favour of
Munaf guaranteeing due payment of rent by Mujeeb. In the third year, Mujeeb
defaulted in payment. Munaf sued Fareed and got a decree. Fareed, thereafter, gave a
notice to Munaf revoking his guarantee for the remaining period of lease.
Under the provisions of the Contract Act, 1872 identify the nature of Fareed’s
guarantee and explain whether Fareed would be discharged under the above
circumstances. (04)
(b) On 3 September 2018 Saleem offered, by a letter, to sell his laptop to Ghazi for
Rs. 50,000. Ghazi received the letter on 5 September 2018.
On 6 September 2018 Ghazi posted the letter of acceptance to Saleem. The letter
reached Saleem on 8 September 2018.
Saleem wrote a letter of revocation of his offer and posted it to Ghazi on

5 September 2018. The letter reached Ghazi on 7 September 2018.
Required:
Under the provisions of the Contract Act, 1872 briefly describe:
(i) When the communication of the offer and acceptance and the revocation of the
offer was completed as against Saleem and Ghazi under the above
circumstances. (2.5)
(ii) Whether a binding contract was created between Saleem and Ghazi. (2.5)
(c) On 1 July 2018 Basit agreed to buy 500 grams of silver from Taimure after two
months at a price of Rs. 65 per gram. On the due date the price of silver was
Rs. 62 per gram.
Under the provisions of the Contract Act, 1872 discuss the validity of the above
contract if both Basit and Taimure had an intention to settle the transaction by paying
the difference between the contract price and the market price without making any
delivery. (02)
Q.5 (a) Taqi, Saqib and Abrar are partners in a trading firm. By an agreement among
themselves they decided that no partner shall have the authority to buy or sell goods
beyond the limit of Rs. 20,000 without the consent of other partners. Ignorant of this
restriction, Wajid sold goods worth Rs. 45,000 to Saqib who did not consult with the
other partners.
In view of the provisions of the Partnership Act, 1932 explain whether the firm and
its partners are liable to Wajid under the above circumstances. (04)
(b) Bader and Yaseen established a distribution agency for supplying low cost medicines
to hospitals. Yaseen, by way of a verbal agreement, allowed the agency to use his
ancestral land for the business of the agency. Bader purchased a delivery van in his
own name with partnership money. Bader wants to repay the amount to the
partnership and therefore a receivable has been recorded in the partnership books.
Under the provisions of the Partnership Act, 1932 describe whether the above assets
would be considered to be the partnership property. (04)
(c) The sharing of profit is a prima facie evidence of partnership. Under the provisions of
the Partnership Act, 1932 list any four circumstances in which a non-partner could
benefit from the profits of a partnership. (02)
Company Law Section
Q.6 (a) Under the provisions of the Companies Act, 2017 briefly describe the term ‘Special
resolution’. (04)
(b) Saga Limited (SL), a listed company, has two classes of ordinary shares i.e. Class A
and Class B. In order to attract foreign investors, the directors intend to issue a new
class of ordinary shares i.e. Class C, with no voting rights. Currently SL’s
memorandum and articles of association do not contain such class of shares.
Under the provisions of the Companies Act, 2017 briefly describe the steps which the
directors should take prior to issuance of Class C shares. (Procedure for issuance of
shares is not required) (06)
Q.7 (a) Under the provisions of the Companies Act, 2017 briefly describe the provisions
relating to granting of loan by a company for the purchase of its own shares. (05)
(b) The Directors of Solar Limited (SL), want to arrange finances for their factory
expansion project and have decided to issue 1,000,000 ordinary shares to general
public. The directors want the public subscription to commence not later than
7 October 2018. Mobeen, who is the company secretary, has proposed the following
schedule for the purpose:
(i) On 12 September 2018, a copy of the prospectus shall be submitted to the

Registrar Joint Stock Companies for approval.
(ii) For ease of access, the copies of the prospectus shall be available for members’
inspection at SL’s main showroom. The prospectus shall remain open for
inspection from 28 September 2018 till 4 October 2018 at a fee of Rs. 50.
(iii) The prospectus would be published in a popular fortnightly Urdu magazine on
30 September 2018.
(iv) Public subscription would commence on 5 October 2018.
Suggest appropriate revision in the above proposal to bring it in line with the
provisions of the Securities Act, 2015. (05)
Q.8 (a) The director of a company shall not 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 such contract or arrangement.
Under the provisions of the Companies Act, 2017 briefly describe the exceptions to
the above rule, if any. (03)
(b) On 8 September 2018, the directors of Ashanti Limited (AL), a listed company,
declared an interim dividend of Rs. 5 per share and announced book closure from
28 September 2018 to 3 October 2018, both days inclusive.
Under the provisions of the Companies Act, 2017 briefly describe when AL should
pay the above dividend. Also state any four circumstances in which AL may not be
considered to have committed an offence for non-payment of dividend. (07)
Q.9 (a) Joint Limited (JL) was incorporated as a public company on 1 February 2018 and
was authorized by the registrar to commence business from 1 April 2018. The board
of directors is divided on the issue of holding first general meeting of its members.
Two directors are of the view that the meeting should be held on 30 September 2018
whereas majority of the directors want to hold it on 30 October 2018.
In the light of the provisions of the Companies Act, 2017:

(i) Explain whether you agree with the proposal of the majority of the directors or
the other two directors. (03)
(ii) What would be your opinion in (i) above if the directors want to hold first
annual general meeting on 25 September 2018? (01)
(b) Baalbek Limited is an unlisted public company and has eight directors. Its paid-up
capital is Rs. 50,000,000 divided into ordinary shares of Rs. 500 each. The directors
have decided to remove Aga Kirmani from the board due to his dismal performance.
Aga Kirmani was elected unopposed on the board.
In the light of the provisions of the Companies Act, 2017 briefly describe how
Aga Kirmani can be removed from the board. (02)
(c) Faraya Limited (FL), an unlisted public company, is engaged in the business of
manufacturing and sale of plastic bottles in Lahore. FL is planning to appoint Gul
Maher as the chief executive officer (CEO) of the company. During an interview with
Gul Maher, he disclosed to the board that his wife Mona is running a corporate
brokerage house in Lahore and that his son Sultan, who is a business graduate, is
engaged in the business of selling plastic bottles in Multan. Gul Maher also disclosed
to the board that he sometimes provides technical assistance to Sultan without any
charge.
Under the provisions of the Companies Act, 2017 explain whether FL can appoint
Gul Maher as the CEO of the company. (04)
Q.10 Under the provisions of the Companies Act, 2017 analyse and comment on each of the
following independent situations:
(a) On 1 January 2017 Rahat and Company, Chartered Accountants (RC) appointed
Rao Bashir as a Director in assurance department, with a commitment to promote
him as a partner in due course. RC is the auditor of Clove Limited (CL). Prior to
joining RC, Rao Bashir was a director in CL. He left his job in 2016 but still holds
500,000 shares in CL. (03)
(b) Tarkwa (Pvt) Limited (TPL) has a paid-up capital of Rs. 2,800,000. It was a 90%
owned subsidiary of Niger Limited (NL). However, NL recently disposed of 70% of
its holding in TPL to a partnership firm, Abad Associates (AA). All the partners in
AA are also the directors in NL. TPL is now planning to appoint Mugabe, who is a
member of the Institute of Cost and Management Accountants of Pakistan, as its
auditor. Mugabe’s brother is also a partner in AA. (04)
(c) Dushanbe Limited (DL) intends to appoint Sonu and Company, Chartered
Accountants, as its auditor. DL has a paid up capital of Rs. 850 million which
includes ordinary share capital of Rs. 180 million.
Anjum, the wife of a partner in Sonu and Company, is a director in Jabal Limited
(JL). JL holds 30 million non-voting preference shares and 3 million ordinary shares
in DL. The par value of both the preference and ordinary shares is Rs. 10 each. (03)
(THE END)
Business Law
Suggested Answers
Note:
The suggested answers are provided for the guidance of the students. However, there are alternative solution(s)
to the questions which are also considered by the Examination Department while marking the answer scripts.
Ans.1 System of government:

Pakistan has a Federal Parliamentary System of government, with the President as the Head of
State and Prime Minister as Head of Government. The Federal Legislature is a bicameral Majlis- e-
Shoora(Parliament), composed of the President, National Assembly(Lower House) and Senate
(Upper House).
Role of Senate:
The role of the Senate is to approve all statutes passed by the National Assembly with the
exception of money bills.
Ans.2 (a) Fraud:

No, Mughal is not justified in repudiating the contract. Dawood is not bound to disclose the
information to Mughal as the relationship existing between them is not that of ‘utmost good
faith’ (i.e. fiduciary relationship). Mere silence as to facts likely to affect the willingness of a
person to enter into a contract is not fraud, unless there is a duty to disclose such fact or
where silence is equivalent to speech.
(b) (i) Supervening impossibility:

Following are the circumstances under which the parties to the contract are not
absolved from the performance of their contractual obligations on the ground of
supervening impossibility:
▪ Difficulty of performance due to some uncontemplated events or delays.

▪ Commercial impossibility like non-realisation of higher profits, increase in prices
of raw material or other inputs due to any reason, or a sudden depreciation of
currency.
▪ Default by a third person on whose work the promisor relied.
▪ Strikes, lock-outs and civil disturbances unless the parties have specifically agreed
in this regard at the time of the contract.
▪ Failure of one of the objects in a contract with several objects.
▪ Self-induced impossibility.
(ii) Pledge by a mercantile agent (non-owners):

Under the following conditions a valid pledge may be created by the mercantile agent:
▪ the agent is in possession of the goods or documents of title to the goods with the
consent of the owner
▪ the agent pledges the goods while acting in the ordinary course of business of a
mercantile agent provided:
– the pawnee acts in good faith and
– the pawnee has not at the time of the pledge, notice that the agent has no
authority to pledge.
(c) Contingent contract:

It is a contingent contract as the condition i.e. certification of the construction in accordance
with the layout plan by a third party is collateral to the contract. Although it is a valid
contract, the performance can only be enforced by Zubair after happening of the collateral
event. i.e. certification by Muneer.
Ans.3 (a) (i) It is a valid bill of exchange as it contains an unconditional order to pay.
(ii) It is in the nature of bill of exchange but it is not a valid bill of exchange as it contains
only request to pay and not an order to pay.
(iii) It is a valid promissory note containing all the essential elements.
(iv) It is a valid promissory note. It is not considered to be conditional, for it is certain that
Nauman will die, though the exact time of his death is uncertain.
(b) Effect(s) of the words ‘Not negotiable’ on a cheque crossed specially.

The effect of the words “not negotiable” on a crossed cheque is that the title of the transferee
of such a cheque cannot be better than that of its transferor. The addition of the words not
negotiable does not restrict the further transferability of the cheque. It only takes away the
main feature of negotiability, which is transferability free from defects.
(c) Calculating maturity:

(i) The bill of exchange is at maturity on the third day after 28 February 2018. i.e. 3
March 2018.
(ii) The note will be at maturity on 24 August 2018.
(iii) The bill of exchange is at maturity on 2 December 2018.
Ans.4 (a) Revocation of a Continuing guarantee:

The guarantee provided by Fareed is in the nature of ‘Specific guarantee’ and not a
‘Continuing guarantee’ because “lease for six years” is an entire or indivisible consideration
and not a fragmented one.
Fareed therefore is not competent to revoke his guarantee. His liability would come to an
end with the duly discharge of guaranteed debt/performance of the promise.
(b) Communication of offer, acceptance and revocation:

(i) Communication of offer was completed on 5 September 2018 i.e. when it came to the
knowledge of Ghazi.
Communication of acceptance was completed as against Saleem when the letter was
posted i.e. on 6 September 2018 and as against Ghazi it was completed when the letter
of acceptance reached Saleem i.e. on 8 September 2018.
The communication of revocation of offer was completed as against Saleem on 5

September 2018 i.e. when the letter of revocation was posted, and as against Ghazi on 7
September 2018, when the letter of revocation was received by him.
(ii) Since Ghazi had posted his letter of acceptance on 6 September 2018 and revocation of
offer was communicated to him on 7 September 2018, his acceptance was valid Saleem
cannot revoke his offer after 6 September 2018, when the communication of acceptance
was completed as against him. Therefore, a binding contract had been created between
Saleem and Ghazi.
(c) The contract being wagering in nature, is not a valid contract. As both Basit and Taimure
had no intention of giving or taking delivery of goods and were only interested in earning
profit by way of fluctuations in silver prices.
Business Law
Suggested Answers
Ans.5 (a) Restriction of partner’s implied authority:

Any act done by a partner on behalf of the firm which falls within his implied authority
binds the firm unless, the person with whom he is dealing knows about the restriction.
Under the given scenario, the firm and all the partners are jointly and severally liable to pay
the entire amount to Wajid as he was unaware of any such restriction on partners authority.
(b) Partnership property:

Land provided by Yaseen:
Subject to contract between the partners, the land would not be treated as the partnership
property. It will become the partnership property only if the partners show an intention to
make it so.
But since Yaseen, by way of an agreement, brought the property only for the use of the
partnership, the mere use of such land by the partnership would not make the land part of
the partnership property.
Delivery van:
In this case, van does not constitute partnership property because recording of receivable in
partnership books shows that the van was not acquired for the partnership.
(c) Circumstances in which a non-partner could benefit from the profits of a partnership.
Following are the circumstances in which a non-partner could benefit from the profits of a
partnership:
(i) Lender of money to persons engaged or about to engage in any business
(ii) Servant or agent as remuneration
(iii) Widow or child of a deceased partner as annuity
(iv) Transferee of a partner’s interest
(v) A minor who is admitted to the benefits of partnership
(vi) Previous owner or part owner as consideration for the sale of goodwill or share
thereof.
Ans.6 (a) Special resolution:

Special resolution is a resolution which is passed by a majority of not less than three-fourths
of such members of the company entitled to vote as are present in person or by proxy or vote
through postal ballot at a general meeting of which not less than twenty-one days‘ notice has
been given specifying the intention to propose the resolution as a special resolution:
Provided that 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;
(b) Issue of Class C shares:

SL can issue new class C shares only if it is permitted by the memorandum and articles of
association.
Since SL’s articles and memorandum lack any such classification, the directors are first
required to alter the provisions of SL’s articles of association and memorandum of
association by passing a special resolution.
It should however be noted that where such alteration affects the substantive rights or
liabilities of members or of a class of members, it shall be carried out only if a majority of at
least three-fourths (3/4) of the members or of the class of members affected by such
alteration, as the case may be, exercise the option through vote either personally or through
proxy.
An altered copy of the articles of association shall be filed with the registrar, within thirty
days from the date of passing of the resolution. The registrar shall register the same and
thenceforth the alteration shall be effective.
Ans.7 (a) Prohibition of giving loan by a company for the purchase of its own shares:
A public company or a private company which is the subsidiary of a public company cannot
provide financial assistance, whether directly or indirectly, for the purpose of or in
connection with purchase of its own shares.
However, under the following circumstances such financial assistance may be granted:
▪ If the purchase of shares in the company are in accordance with any scheme approved
by the company through special resolution and in accordance with the specified
requirements, provided such shares are held by a trust for the benefit of the employees or
are held by the employee(s) of the company.
▪ To the employees including a chief executive who, before his appointment as such, was
not a director of the company but excluding all directors of the company.
(b) Approval and publication of prospectus:

The prospectus is required to be approved by the Commission and not by the Registrar Joint
Stock Companies.
A copy of the prospectus shall be submitted to the Commission for approval, not less than
21 days before the proposed date of its publication. Therefore, a copy shall be submitted to
the Commission on or before 9 September 2018 OR (8 September 2018) OR (7 September
2018) but not afterwards.
The prospectus shall be published in at least one Urdu and one English daily newspaper and
not in an Urdu fortnightly magazine.
The date of newspaper publication of the prospectus shall not be less than 7 days before the
commencement of the public subscription. Therefore, public subscription shall not
commence any time before 7 October 2018 OR (6 October 2018) OR (5 October 2018).
Lastly, Sufficient number of copies of the prospectus shall be made available for inspection
of general public, free of charge, from the date of its publication i.e. 30 September 2018 OR
(29 September 2018) OR (28 September 2018) till the closing of the subscription. i.e. 7
October 2018 OR (6 October 2018) OR (5 October 2018) at SL’s registered office and not at
its showroom. Further, the copies shall also be made available with all the securities
exchanges of the country, with all the bankers to the issue, the concerned share registrar, the
concerned balloter and the concerned credit rating agency, if any, and should also be
uploaded on SL’s website.
Business Law
Suggested Answers
Ans.8 (a) Interested director not to participate or vote in proceedings of board:

The above rule shall not be applicable under the following circumstances:
(i) If the person is a director of a private company which is neither a subsidiary nor a
holding company of a public company;
(ii) when the director has acted as surety of the company and the resolution under
consideration relates to the indemnification or insurance coverage of the surety
director against any loss incurred by the director for becoming surety of the company.
(b) Payment of interim dividend:

An interim dividend must be paid within 30 days of its declaration and in the given scenario,
the dividend shall be deemed to have been declared on 28 September 2018 i.e. the date of
commencement of closing of share transfer for determination of entitlement of dividend.
Hence, AL should pay dividend latest by 28 October 2018.
The circumstances in which non-payment of dividend by AL shall not constitute an

offence are as under:
(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
(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; or
(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;
AL may also withhold the payment of dividend of a member where the member has not
provided the complete information or documents as specified by the Commission.
Ans.9 (a) (i) Statutory meeting:

JL is required to hold its first general meeting (Statutory meeting) within a period of
180 days from the date at which it was entitled to commence business or within nine
months from the date of its incorporation whichever is earlier.
Therefore, in view of the above, JL is required to hold its statutory meeting not later
than 27 September 2018.
(ii) If the directors decides to hold its first AGM on 25 September 2018 than no statutory
meeting shall be required.
(b) Removal of a director:

Aga Kirmani may be removed from the board by passing a resolution in a general meeting.
However, since he was appointed unopposed, he shall not be removed from his office if the
number of votes casted against the resolution equals or exceeds the number of votes
calculated as per the following formula:
(Number of directors for the term × Number of shares)÷ Number of directors for the time being
i.e. 8 × (50,000,000÷500) ÷ 8 = 100,000 votes
Therefore, Aga Kirmani would be removed from the board if less than 100,000 votes are
casted against the resolution.
(c) Appointment of chief executive:
A person who is ineligible to become a director of a company or has been disqualified to be
a director of the company shall not be appointed as a CEO of any company.
A person shall not be eligible to be appointed as a director of the company if the person
himself or the spouse of such person is engaged in the brokerage business. However, this
condition shall be applicable only in case of a listed company.
Similarly, a chief executive of a public company shall not directly or indirectly engage in any
competing business with the business carried on by the company of which he is a CEO.
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.
In the given scenario, FL is not a listed company and Sultan is not a minor son of Gul
Maher. Therefore, both the above conditions are not applicable and Gul Maher is eligible to
be appointed as the CEO of FL.
Ans.10 (a) Since Rao Bashir presently is not a partner in RC, the firm can be the auditor of CL.
However, RC at the time of admitting Rao Bashir as a partner, would need to ensure that:
▪ the period of three years has lapsed from the date when Rao Bashir resigned from the
directorship of CL.
▪ The shareholding of Rao Bashir in CL is disposed of.
(b) TPL is a private company, and is not a subsidiary of any public company and its paid-up
capital is less than Rs.3 million. Therefore, Mugabe can be appointed as TPL’s auditor
provided he holds a certificate of practice from ICMAP.
Further, holding of interest by Mugabe’s brother or his brother being a director of NL, does
not make Mugabe ineligible for becoming the auditor of TPL.
(c) DL is not an associated company of Jabal Limited (JL) as JL only holds 16.7% voting
shares in DL.
Holding of non-voting shares is not relevant in determining the status of the company.
Hence, Sonu and Company, Chartered Accountants are eligible to be appointed as the
auditors of Dushanbe Limited (DL).
(THE END)
Business Law
Q.1 (a) Briefly describe how delegated legislation takes place and also describe how control is
exercised over delegated legislation. (04)
(b) What is the process of legislation in case of a money bill when National Assembly is
in session? (02)
(c) Under the provisions of the Contract Act, 1872 analyse the following situations and
comment on the type and validity of the contracts:
(i) Arif is the sole proprietor and deals in sale of product X. On 1 January 2018,
Arif entered into two months’ contract with Abbas for the promotion and sale
of product X on commission basis. On 4 February 2018, Arif died in a car
accident. Abbas came to know about it on 15 February 2018. However, Abbas
continued selling the product as per the contract. (03)
(ii) Pawan owed Rs. 5 million to Ghafoor but was unable to pay due to liquidity
constraints. However, Pawan owned a property and on 1 November 2017 he
authorised Ghafoor to collect rent of the property until he recovers his dues.
On 1 March 2018 Pawan terminated the authority of Ghafoor to collect rent
although his dues were not fully satisfied. (04)
Q.2 (a) Saleem entered into a contract for the purchase of 5 vehicles from Phony (Pvt.)
Limited (PL) which were to be delivered in the month of February. Saleem also
entered into another contract for onward sale of these vehicles to Jabbar Limited
(JL). However, PL refused to deliver the vehicles as contracted. Saleem had to buy
the vehicles from another supplier at an extra cost of Rs. 2 million for supplying these
to JL. Saleem also had to pay compensation of Rs. 0.6 million to JL due to delay in
supply.
Under the provisions of the Contract Act, 1872 analyse the above situation and
comment whether Saleem is entitled to receive any compensation from PL. (04)
(i) describe co-agent (02)
(ii) briefly describe various types of quasi-contracts. (05)
Q.3 Under the provisions of the Contract Act, 1872 analyse and comment on the following
situations:
(a) Abid has obtained a loan of Rs. 800,000 from Saqib. Loan was given on the surety of
Munib, Hamid and Suleman with maximum limits of Rs. 150,000, Rs. 250,000 and
Rs. 400,000 respectively. Abid repaid Rs. 200,000 and defaulted. Comment and
compute the amount payable by each surety. (03)
(b) Shafiq obtained a loan from Qasim on the surety of Anwar. Qasim also obtained a
charge over Shafiq’s car at the time of disbursement of loan. However, Anwar was
unaware of this security. Qasim gave up the charge over the car and Shafiq defaulted.
Comment on the position of Anwar. (03)
Q.4 (a) Gul, Raza and Sami are partners in GRS Garments. Raza discovered that a supplier
MP offers reasonable rates for consumables stores and put forth a resolution that MP
should be included in the firm’s list of suppliers. MP is owned by Gul and managed
by his brother but Gul did not disclose this fact. When Raza and Sami became aware
of the fact, they asked Gul to share with them the profits earned by MP on
transactions with GRS.
Under the provisions of the Partnership Act, 1932 discuss whether Gul is bound to
share the profits as demanded by Raza and Sami. (2.5)
(b) In 2014, Majid and Ebad started a business of sale and repair of vehicles under the
name of ME Motors (MEM). Majid sold one of the vehicles which came for repair to
Zahid for Rs.10 million. Zahid on finding out that Majid did not have the legal title
of the car sued MEM.
Under the provisions of the Partnership Act, 1932 discuss who would be liable for
damages in the above situation. (2.5)
(c) X has been carrying on textile business for the past few years. He has recently met Y
who is an expert in textile designing. X and Y have agreed that Y would advise X on
various technical issues and use his contacts for the benefit of the business. Y would
be entitled to 35% of the profits of the business. However, Y will not be required to
bring any capital and will not take part in the day to day affairs of the business.
Under the provisions of the Partnership Act, 1932 analyse the above situation and
advise whether partnership exists between X and Y. (05)
Q.5 Under the provisions of the Negotiable Instruments Act, 1881 briefly explain:
(a) the term endorsement. (03)

(b) any seven ways in which the maker of a negotiable instrument is discharged from
liability. (07)
Company Law Section
Q.6 (a) Printing (Pvt.) Limited (PL) wants to change its name to Printing and Marketing
(Pvt.) Limited.
Under the provisions of the Companies Act, 2017 describe the steps to be followed by
PL for changing its name and matters to be complied with after the change of name. (05)
(b) Under the provisions of the Companies Act, 2017 explain the term ‘body corporate
or corporation’. (04)
Q.7 (a) On 25 February 2018 Badar Limited (BL), in a move to list its shares on Pakistan
Stock Exchange, received approval from the Commission for the publication of
prospectus.
Under the provisions of the Securities Act, 2015 advise BL with regard to the
publication of the prospectus in the newspaper and its placement on the company’s
website. (06)
(b) Under the provisions of the Companies Act, 2017 describe the circumstances in
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. (03)
Q.8 (a) Under the provisions of the Companies Act, 2017 comment on each of the following
independent situations:
(i) Opticians Limited (OL), a listed company, plans to appoint Yameen as an
independent director of OL. Yameen was Head of Operations of Glasses
Limited till December 2016. Glasses Limited is a subsidiary of Opticians
Limited. (02)
(ii) Zafar was recently appointed as a Director of HP Limited, a listed company.

In March 2018 the board of directors came to know that Zafar had been
declared a defaulter by the High Court. (02)
(iii) Kalim is a director of Behaal Limited. On 1 October 2017 Kalim went abroad
on a personal trip and returned back on 15 February 2018. He was unable to
attend five board meetings which were held during this period. (02)
(b) Unique Limited is due to hold its first annual general meeting on 20 April 2018.
Under the provisions of the Companies Act, 2017 advise the directors with regard to
the types of businesses which would be deemed to be special business and also
discuss additional formalities which are required to be complied with in respect of
notice containing special business. (06)
Q.9 Under the provision of the Companies Act, 2017 briefly describe the following:
(a) the requirements of a private limited company for presenting its first financial
statements in the annual general meeting and whether the financial statements are
required to be audited. (05)
(b) the restrictions, if any, with regard to the declaration of final dividend by a company
listed on stock exchange. (05)
Q.10 (a) Under the provisions of the Companies Act, 2017 state the qualification of the
person(s) who may be appointed as external auditor of a company limited by shares. (05)
(b) Dildar & Co. (DC) has recently been appointed as the external auditor of Zee
Limited (ZL). At the time of appointment, Kashif who is the son of a partner of DC,
was employed as Head of HR in Sabir Limited (SL), which is ZL’s subsidiary. Kashif
also owned 5% shares in SL. Within 30 days of DC’s appointment, Kashif left the job
and gifted SL’s shares to his mother.
Under the provisions of the Companies Act, 2017 analyse and comment on the
above situation. (05)
(THE END)
Business Law
Suggested Answers
Ans.1 (a) In delegated legislation power is given to an executive (a minister or public body to
make subordinate or delegated legislation) for specified purpose only. For example,
local authorities are given statutory powers to make bye-laws which apply within a
specific locality.
Control over delegated legislation is exercised in following ways:
(i) Parliament exercises control over delegated legislation by restricting or

defining power to make rules
(ii) Rules made under delegated power to move legislation may be challenged in
the courts on the grounds of being ultra vires.
(b) Legislation in case of a money bill when National assembly is in session:

A money bill shall originate in the National Assembly and after it has been passed
by the Assembly it shall, without being transmitted to the Senate, be presented to
the President for assent.
(c) (i) Termination of agent’s authority:

It’s a contract of agency. The termination of the authority of Abbas as an
agent takes effect when the death of Arif becomes known to Abbas i.e. 15
February 2018. Therefore, Arif’s estate will be liable for any sale made and
commission earned until 15 February 2018. For the sale made after 15
February 2018 Abbas will be personally liable.
(ii) Termination of agency where agent has an interest in subject matter:

It’s a contract of agency. Pawan cannot terminate the authority of Ghafoor to
collect rent as the agency is coupled with interest and is therefore irrevocable.
However, agency coupled with interest can be revoked if the contract of

agency contains an express provision for the revocation of agency.
Ans.2 (a) Compensation for loss or damage caused by breach of contract:

Saleem is entitled to receive from Phony (Pvt.) Limited (PL), compensation for any
loss or damage caused to him which naturally arose in the usual course of things
from such breach i.e. Rs. 2 million. However, such compensation can not be
claimed for any remote and indirect loss or damage sustained by reason of the
breach unless the parties knew about such consequences when they made the
contract. Hence, PL would only be liable to pay the amount of Rs. 0.6 million
claimed by JL if PL knew about this arrangement at the time of entering into the
contract.
(b) (i) Co-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 not a sub-agent but an agent of the
principal for such part of the business of the agency as is entrusted to him.
(ii) Different types of quasi contract

▪ Supply of necessaries:
If a person incapable to enter into contract or his dependent is supplied
by another person necessities suited to his conditions in life, the person
supplying such necessities is entitled to be reimbursed the price from the
property of such incompetent person.
▪ Payment by interested person:
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.
▪ Person enjoying benefit of 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 thereof, the latter is bound to make
compensation to the former in respect of, or to restore, the thing so
done or delivered.
▪ 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.
▪ Payment 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.
Ans.3 (a) Liabilities of co-sureties bound in different sums:

Co-sureties who are bound in different sums are liable to pay equally as far as the
limits of their respective obligations permit. Hence the remaining amount would be
payable as follows:
Munib Rs. 150,000

Hamid Rs. 225,000
Suleman Rs. 225,000
Total Rs. 600,000
(b) Surety’s right to benefit of creditor’s securities

Anwar is entitled to the benefit of every security which Qasim has against Shafiq at
the time when the contract of suretyship is entered into, whether Anwar knows of
the existence of such security or not. However, if Qasim obtained charge over
Shafiq’s car after the contract of suretyship was entered into then giving up the
charge will not discharge/reduce Anwar’s liability.
Ans.4 (a) Personal profits earned by partners

Gul has a duty to give full information to other partners, in relation to everything
affecting the partnership. Subject to contract between the partners, if Gul had
derived any profit for himself from any transactions with the firm then Gul shall
account for that profit and pay it to the firm.
(b) The act of a partner which is done to carry on, in the usual way, business of the
kind carried on by the firm, binds the firm. Further, in case a loss is sustained by a
third party ME Motors (MEM) would be liable even for the wrongful acts of Majid.
Therefore, Zahid can recover the amount from MEM or any of the partners.
However, Majid shall indemnify MEM or Ebad for any loss caused to them by his
fraud in the conduct of the firm’s business.
Business Law
Suggested Answers
(c) Mode of determining existence of partnership:

In determining whether X and Y are partners, regard shall be had to the real
relationship between the partners, as shown by all the relevant facts taken together.
A partnership exists where following conditions are complied with:

(i) There is an agreement between two or more persons;
(ii) They run a business with the intention of sharing profits; and
(iii) The business is 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 in the partnership.
Therefore, since both X and Y have a common interest in the same business in
which they are sharing profit and have a mutual agency relationship between them,
partnership does exist in the above situation unless it can be proved that the real
relationship of being partners does not exist.
Ans.5 (a) Endorsement

When the maker or holder of a negotiable instrument signs the same, otherwise
than as such maker, for the purpose of negotiation, on the back or face thereof 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 such act is called endorsement.
(b) Discharge of a negotiable instrument

The maker of a negotiable instrument can be discharged from liability in the
following ways:
(i) Payment:
If payment has been made in due course.
(ii) Negotiation in favour of the maker:

If the maker is liable as a principal debtor and then becomes the holder
thereof at or after its maturity.
(iii) Cancellation:
When the holder of a negotiable instrument or his agent cancels the name of
maker on the instrument with the intent to discharge him.
(iv) Release:
Where the holder of a negotiable instrument releases maker to the instrument
by any method other than cancellation, the party so released is discharged
from the liability.
(v) Qualified Acceptance:

If the holder of a bill agrees to a qualified acceptance all prior parties
including the maker whose consent is not obtained to such an acceptance is
discharged from liability.
(vi) Non-presentment of cheques:

Where a cheque is not presented by the holder for payment within a
reasonable time of its issue and the drawer/maker suffers damage because of
the failure (collapse or out of fund) of the bank, maker is discharged from the
liability to the extent of such damage.
(vii) Allowing drawee more than 48 hours:
If the holder of a bill of exchange allows the drawee more than 48 hours
exclusive of public holidays, for the purpose of acceptance then maker not
consenting to such allowance is discharged from liability to such holder.
(viii) Operation of law

This includes discharge;
▪ By an order of insolvency court,
▪ By merger,
▪ By lapse of time
(ix) Material alteration:

A material alteration of a negotiable instrument renders the same void for the
maker if his consent was not obtained unless it was made in order to carry out
the common intention of original parties.
(x) Non-presentment for acceptance of a bill:

When a bill of exchange is payable certain period after sight, and if the holder
defaults in making presentment for its acceptance to the drawee within a
reasonable time after it is drawn, the maker who was liable towards such a
holder is discharged from his liability towards such holder.
Ans.6 (a) Change of name by a company

The steps required for change of names are as follows:
(i) Pass special resolution and obtain written permission of the registrar for new
name
(ii) Obtain certificate of incorporation bearing the new name
After the change of its name PL shall for a period of ninety days from the date of
issue of a certificate by the registrar continue to mention its former name along with
its new name on the outside of every office or place in which its business is carried
on and in every document or notice.
(b) Body corporate or corporation includes:

(i) a company incorporated under Companies Act, 2017 or company law; or
(ii) a company incorporated outside Pakistan; or
(iii) a statutory body declared as body corporate in the relevant statue, but does
not include;
▪ a cooperative society registered under any law relating to cooperative
societies.
▪ any other entity, not being a company as defined in this Act or any other
law for the time being in force, which the concerned Minister-in-Charge of
the Federal Government may, by notification, specify in this behalf.
Business Law
Suggested Answers
Ans.7 (a) Publication of prospectus:

BL’s prospectus, approved by the Commission, shall be published within
60 days from the date of Commission’s approval (25 February 2018) i.e., 26 April
2018 unless the period of 60 days has been extended by the Commission by reasons
to be recorded in writing.
BL Limited shall publish the prospectus in full text or in such abridged form as may
be prescribed, at least in one Urdu and one English daily newspaper.
The prospectus shall be published in the newspaper not less than seven days or not
The prospectus shall be uploaded on the website of the issuer and shall remain there
from the date of its publication in the newspapers till the closing of the subscription.
(b) Power of registrar to make entries of satisfaction and release in absence of

intimation from company:
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:
(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;
Ans.8 (a) (i) Yameen will not be considered as independent director as he was an
employee in subsidiary Glasses Limited up till December 2016 which is
within the last three years.
(ii) Zafar will become ineligible from being a director only if he had defaulted in
repayment of a loan to financial institution. If he has been declared a
defaulter for any other reason, he would still be eligible for appointment as
director.
(iii) Kalim shall ipso facto cease to hold office if he was absent for at least three
consecutive board meetings unless he has obtained leave of absence.
(b) Special Business:

In case of an annual general meeting, all businesses to be transacted shall be
deemed special other than:
(i) the consideration of financial statements and the reports of the board and
auditors;
(ii) the declaration of any dividend;
(iii) the election and appointment of directors in place of those retiring; and
(iv) the appointment of the auditors and fixation of their remuneration.
Where any special business is to be transacted at a general meeting, there shall be

annexed to the notice of the meeting a statement setting out all material facts
concerning such business, including, in particular, the nature and extent of the
interest, if any, therein of every director, whether directly or indirectly. Where any
item of business consists of according of an approval to any document by the
meeting, the statement shall specify the time and the place for the inspection of such
document.
Ans.9 (a) Financial statements:
The first financial statements of a private limited company must be laid before the
general meeting not later than sixteen months after the date of incorporation of the
company.
In addition to above, the financial statements must be laid within a period of one
hundred and twenty days following the close of the financial year. However, for any
special reason, the registrar may extend the period for a term not exceeding thirty
days.
The first financial statements of a private limited company shall be audited by its
auditor and auditor’s report shall be attached thereto. However if the paid up
capital of the private company does not exceed one million the audit is not
mandatory.
(b) Restrictions imposed with regard to the declaration of dividend:

Dividend shall be declared by a company only out of profits of the company.
Dividend declared shall not exceed the amount recommended by the board of
directors.
No dividend shall be declared by a company for any financial year out of the profits
of the company made from the sale or disposal of any immovable property or assets
of a capital nature or any of the undertaking of the company unless the business of
the company consists, whether wholly or partly, of selling and purchasing any such
property or assets, and except after such profits are set off or adjusted against losses
arising from the sale of any immovable property or assets of a capital nature.
No dividend shall be declared out of unrealized gain on investment property

credited to profit and loss account.
Ans.10 (a) Qualification of auditors:

In the case of public company or a A person who is a chartered accountant
private company which is subsidiary of a having valid certificate of practice from
public company or a private company the Institute of Chartered Accountants
having paid up capital of three million of Pakistan or a firm of chartered
rupees or more accountants;
In the case of a company other than A person who is a chartered accountant
those mentioned above or cost and management accountant
having valid certificate of practice from
the respective institute or a firm of
chartered accountants or cost and
management accountants, meeting such
criteria as may be specified;
(b) Under the provisions of Companies Act, 2017, none of the following persons shall
be appointed as the auditor of a company:
(i) A person who is, or at any time during the preceding three years was, a
director, other officer or employee of the company.
(ii) A person or his spouse or minor children who holds any shares of an audit
client or any of its associated companies.
Business Law
Suggested Answers
In view of the above provisions, appointment of DC is valid as:

▪ Kashif is not a minor child; and
▪ There is no bar on his association with SL as head of HR.
However, Kashif’s subsequent disposal of shares to his mother would disqualify DC

as the auditor and DC would be deemed to have vacated the office as auditor with
effect from the date on which it becomes so disqualified.
(THE END)
Business Law
Q.1 (a) Golden Foods (GF) agreed to supply 2,500 cans to Riaz Grocery Stores (RGS).
According to the agreement, the date of delivery was 31 August 2017. However, on
the due date GF refused to supply the cans.
Under the provisions of the Contract Act, 1872 discuss the rights of RGS in the
above situation assuming that time was the essence of the contract. (03)
(b) What would be your answer to (a) above, if GF supplied the cans on
12 September 2017 and RGS accepted the performance; but suffered a loss on
account of delayed supply? (02)
Q.2 (a) ‘Any material alteration to a negotiable instrument renders the instrument void’. List
the exceptions to this rule. (06)
(b) ‘The holder of a cheque has no right of action against the banker for refusing to pay
the cheque because there is no privity of contract between the holder and the
banker.’
Under the provisions of Negotiable Instruments Act, 1881 discuss the exceptions
under which holder becomes entitled to enforce payment from the banker. (04)
Q.3 (a) Ghaffar purchased a piece of land from Sharif who is an engineer by profession.
During the discussion prior to the purchase, Sharif had told Ghaffar that in his
opinion, the land would be able to support 2,500 mango trees. However, only 2300
trees could eventually be planted on the land.
Under the provisions of the Contract Act, 1872 discuss whether Ghaffar can claim
damages on the grounds of fraud. (03)

(i) list the essentials of a valid acceptance. (04)
(ii) explain the term ‘right of subrogation’. (03)
(c) Following is the statement of sums payable by Nisar to Mairaj on 4 March 2017:
Date of Rupee Remark

invoice s
200,000 s Imran.
Guaranteed by
01/01/2016 150,000
08/06/2016 350,000
Nisar sent a cheque for Rs. 100,000 on 5 March 2017. As there were no instructions
from Nisar, Mairaj adjusted the payment against the amount of Rs. 150,000. The
guarantor (Imran) objected to such appropriation and claimed that adjustment
should be made in the order of the date of invoices.
Under the provisions of the Contract Act, 1872 discuss whether the objection of
Imran is justified. (03)
Q.4 (a) ‘The sharing of profit is a prima facie evidence but not a conclusive test of
partnership’.
Under the provisions of the Partnership Act, 1932 list the circumstances in which
receipt by a person of a share of profits of a business does not of itself make him a
partner with the persons carrying on the business. (03)
(b) On 1 July 2016 Abid, Rizwan and Salman started a partnership business and
contributed Rs. 200,000 each towards the firm’s capital. They also agreed to share
profits in equal proportion. Abid, in addition to his capital contribution, paid
Rs. 100,000 to one of the suppliers as a security deposit. All the partners are entitled
to interest at the rate of 8% on their capital. However, during the year, the firm
incurred a loss of Rs. 80,000.
Under the provisions of the Partnership Act, 1932 state the amount of interest, if
any, payable to each partner. (04)
(c) Wasim, Ahmed and Salman are partners in a firm. Salman died in a plane crash.
Wasim and Ahmed agreed to admit Salman’s minor son, Noman, to the benefits of
the Partnership. Noman attained majority on 6 June 2016. He became aware of the
fact that he had been admitted to the benefits of the Partnership on 16 July 2016.
Being undecided about joining the firm as a partner, he preferred to wait for some
time.
On 10 January 2017, the firm suffered heavy losses due to a fire in one of its
factories. Wasim and Ahmed informed Noman that on account of losses, his entire
capital has been wiped off and he is required to contribute Rs. 100,000 to enable the
firm to settle its liabilities.
advise whether Noman would be regarded as a partner in the firm. Also state his
liabilities towards the losses, if any. (05)
Q.5 (a) Discuss how High Court exercises supervisory role over the subordinate courts. Also
describe the three types of prerogative orders which High Court may issue in this
regard. (05)
(b) Kalim Real Estate (KRL) by misrepresenting themselves as an agent of Goofy

Builders (GB), negotiated and entered into a contract with Tameer Associates for
acquisition of a piece of land for GB.
Under the provisions of the Contract Act, 1872 explain the liability of KRL in the
above situation. (05)
Company Law Section
Q.6 (a) Malik and Azad, being the promoters of Masoom Limited, are in the process of
preparation of memorandum of association for filing with the registrar.
Under the provisions of the Companies Ordinance, 1984 advise them about the
conditions required to be fulfilled for registering the memorandum. Also state the
remedies available to them, if for any reason, the registration is refused. (05)
(b) Zeta Associates (ZA) intends to register as a limited liability company without
adding the word ‘Limited’ to its name.
Under the provisions of the Companies Ordinance, 1984 list the conditions which
ZA must satisfy for dispensing with the requirement of using ‘Limited’ to its name. (04)
Q.7 (a) Under the provisions of the Companies Ordinance, 1984 briefly describe:
(i) the provisions relating to the inspection of register of mortgages and charges
and where such register should be kept. (03)
(ii) the circumstances in which a company would be considered as a holding
company of another company. (02)
(b) Tafriq Textiles Limited has issued two classes of shares with Class A being entitled
to two votes per share and Class B having one vote per share. In a general meeting, a
resolution was placed to give the same rights to the shareholders of both the classes,
which was passed by the required majority. However, Gul & Sons holding Class 'A'
shares are not satisfied with the decision taken by the company.
Under the provisions of the Companies Ordinance 1984 discuss how Gul & Sons
can challenge the above resolution and have it revoked. (05)
Q.8 (a) Disneyland Limited is considering purchase of a new production house which is
currently owned by Marvels (Private) Limited. The Board of Directors of
Disneyland Limited is considering to give responsibility of negotiation and
finalization of the deal to two of its Directors, Moiz and Kareem. However,
Naghma the wife of Moiz and their 15 year old son Riaz jointly hold 15% shares of
Marvels (Private) Limited.
In the light of Companies Ordinance, 1984 discuss the duties and responsibilities of
Moiz under the above circumstances. (04)
(b) Pluto (Private) Limited (PPL), having paid-up capital of Rs. 7.5 million, has laid its
annual financial statements for approval at PPL’s annual general meeting.
Under the provisions of the Companies Ordinance, 1984 advise the company
secretary about the requirements for filing the financial statements with reports and
other documents, if any. (03)
(c) Karam Limited (KL), an unlisted public company, owns 30% shares in Jumma
(Private) Limited (JPL). In order to finance its working capital requirements, JPL
has asked for a loan of Rs. 1,000,000 from KL. Under the provisions of the
Companies Ordinance, 1984 briefly describe the conditions which are required to be
met, if KL agrees to grant the loan. (03)
Q.9 In the light of Companies Ordinance, 1984 comment on each of the following independent
scenarios:
(a) Partners of Ubaid & Co., Chartered Accountants have authorised Zehra, who is a
chartered accountant, to sign the audit report of Tufail Limited. Zehra is a manager
in the firm and has been managing the audit of Tufail Limited for a number of years. (02)
(b) Tariq Limited a listed company, is due to hold its annual general meeting on
15 September 2017. Discuss the rights and duties of the auditors of Tariq Limited in
relation to the meeting. (04)
(c) Fareed, a director of Tameer Limited, got married to Hira, a chartered accountant.
Hira is a senior employee of Salman & Co., Chartered Accountants who are also the
auditors of Tameer Limited. (02)
(d) Brass Limited wants to appoint Jafer & Co., Chartered Accountants as their
statutory auditor. One of the partners in Jafer & Co. had served on the Board of
Brass Limited for many years as a government nominee. (02)
Q.10 (a) The annual general meeting (AGM) of Kamyab Limited is due to be held on
12 September 2017 at 10:00 am at company’s registered office.
Being the company secretary, comment on the following situations under the
provisions of the Companies Ordinance, 1984:
(i) Shafiq lodged a proxy form on 10 September 2017 at 5:00 pm. (01)
(ii) Anwar appointed Amjad as his proxy by depositing the proxy form on
8 September 2017. On the next day, Anwar came to know that Amjad has
gone abroad, so he deposited a proxy form in favour of Waqas. (01)
(iii) Sajid appointed Javed as his proxy. Javed’s name is not in the members’
register. (1.5)
(iv) One of the members, Asaan Limited has inquired about who may attend the
AGM on its behalf and what would be the right(s) of such attendee. (2.5)
(b) Sunshine Limited, an unlisted company, had three directors A, B and C. After two
and half years of their appointment, A died in a car crash. B and C are of the
opinion that since the election of directors are due in six months time, there is no
need to fill the casual vacancy.
Discuss the above situation in the light of the Companies Ordinance, 1984. (02)
(c) Farhan Limited, a listed company, has received a request from a shareholder who
holds 9% shares of the company, to inspect the register containing the minutes of
proceedings of general meetings.
Discuss the rights of the shareholder to inspect the above register. (03)
(THE END)
Business Law
Suggested Answers
Ans.1 (a) Time being essence of the contract, following would be the rights of Riaz Grocery
Stores (RGS) under the circumstances:
▪ Contract would be voidable at the option of RGS (promisee);
▪ RGS may insist that Golden Foods (GF) should deliver the product and to claim
compensation on account of the delayed supply;
▪ RGS may decide not to accept performance beyond the stipulated time and
claim compensation for any damages which it may have sustained due to
non-fulfillment of the contract by GF.
(b) Effect of acceptance of performance at a time other than that agreed upon:
Riaz Grocery Stores (RGS) is not entitled to claim compensation for any damages
which it may have sustained through the non-fulfillment of the contract where
performance beyond the stipulated time is accepted, unless at the time of acceptance
RGS gives notice to GF of its intention to claim damages.
Ans.2 (a) In the following situations, the alteration does not render the negotiable instrument
void:
(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.
(b) The holder is entitled to enforce payment from the banker in the following two
cases:
▪ the holder does not present the cheque within reasonable time of its issue and
in the meantime the bank fails. The drawer is discharged to the extent of the
loss suffered by the drawer due to the non-presentation of the cheque in time.
For the remaining amount, the bank becomes liable to the holder.
▪ where a banker pays a cheque crossed generally over the counter or a cheque
crossed specially otherwise than to the banker to whom the same is crossed, he
is liable to the true owner of the cheque for any loss he may sustain owing to the
cheque having been so paid.
Ans.3 (a) Fraud:

Sharif’s statement that in his opinion the land could support 2,500 mango trees
clearly indicated that he was not sure about it and was just giving an opinion.
Therefore, unless Ghaffar can show that the statement was made with the intention
to deceive him, he cannot claim damages on the grounds of fraud.
(b) (i) Under the Contract Act, 1872 essentials of a valid acceptance are as follows:
▪ acceptance must be absolute and unqualified;
▪ its must be communicated either in writing or by word of mouth or by
performance of some act;
▪ acceptance must be in the prescribed mode/reasonable mode;
▪ the acceptance must be given within the time specified or within a
reasonable time when no time is specified;
▪ mere silence is not acceptance. It cannot be in the form of a negative
confirmation. The acceptor should expressly accept the offer;
▪ acceptance must be given only by that person to whom the offer has been
made;
▪ the acceptor must be aware of the proposal at the time of acceptance of the
proposal;
▪ the acceptance must be given before the offer lapses or is withdrawn.
(ii) Right of subrogation

When the surety pays off the debt on default of the principal debtor or
performs a guaranteed duty, he is invested with all the rights and remedies
which the creditor had against the principal debtor. This is called the right of
subrogation.
(c) Application of payment:

Imran’s objection is not valid. In the absence of any intimation from the 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.
Ans.4 (a) Under the following circumstances the receipt by a person of a share of profits of a
business does not of itself make him a partner with the persons carrying on the
business:
where profit or payment is received
(i) by a lender of money from persons engaged or about to engage in any business
(ii) by a servant or agent as a remuneration
(iii) by the widow or child of a deceased partner, as annuity
(iv) by the previous owner or part owner of the business, as consideration for the
sale of goodwill or share thereof
(v) by a transferee of a partner’s interest
(vi) by the persons holding a joint or a common interest in any property
(vii) by the minor who is admitted to the benefits of existing partnership
(viii) by a sub partner from a partner in the firm.
(b) Interest to be received by each partner:

Where a partner is entitled to interest on capital such interest is required to be paid
only out of profits of the firm. During the year, since the firm has incurred a loss, all
the partners are not entitled to receive any interest on their capital.
However, any partner making any payment, for the purpose of the business, beyond
the amount of his capital contribution, is entitled to interest thereon at the rate of 6%
per annum. Therefore, Abid is entitled to receive Rs. 6,000 on the amount paid as a
security deposit.
Business Law
Suggested Answers
(c) Noman would only be considered a partner in the firm when either he gives public
notice of becoming a partner, at any time within six months of the later of following
dates:
▪ the date of his attaining majority; or
▪ the date of his obtaining knowledge that he had been admitted to the benefits of
partnership; or
If Noman fails to give such notice he shall become a partner on the expiry of the
above six months. i.e. 15 January 2017 in the given case.
Since up to 10 January 2017, when the firm suffered heavy losses, Noman’s status in
the firm had not been determined, i.e. whether he is or is not a partner in the firm,
Noman would not be liable to pay additional Rs. 100,000 and would only be liable
up to the extent of his share in the firm.
Ans.5 (a) The High Court exercises its supervisory role in the following manner:
(i) It may issue a writ of habeas corpus.
(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 (mandatory
duty) e.g., if the subordinate court wrongfully rejects an application. High Court
may through a writ of mandamus order subordinate courts to accept that
application.
Prohibition: prevents a court or tribunal from exceeding its jurisdiction e.g., a High
Court may through writ of prohibition direct the judge and parties to cease the
litigation because the subordinate court does not have proper jurisdiction to hear or
determine the matters before it.
Certiorari: orders a court or tribunal which has taken any action, to submit the
record of its proceedings to the High Court for review. The High Court may then
quash the decision but cannot substitute its own decision.
(b) Since Kalim Real Estate (KRL) acquired a piece of land on behalf of Goofy Builders
(GB), without their knowledge or authority, KRL’s liability would be analysed
under the following two circumstances:
(i) When GB elects to ratify KRL’s acts:

If GB ratifies KRL’s acts, the same effects will follow as if the acts had been
performed by GB’s authority.
Being agent, KRL is bound to conduct the business according to the custom
which prevails in doing business of the same kind at the place where the agent
conducts such business. If KRL acts otherwise, in case of any loss, KRL would
be responsible to make good the loss to GB and if any profit accrues, account
for such profit to GB.
Similarly, KRL would be liable to compensate GB in respect of the direct
consequences of their negligence, want of skill or misconduct.
However, if KRL without the knowledge of GB deals in the business of

agency on KRL’s own account, GB is entitled to claim any benefit which may
have resulted to KRL from the transaction.
When GB disown KRL’s acts:

If GB does not ratify the agency, the contract would be between KRL and
Tameer Associates (TA). If TA suffers a loss due to breach of contract, KRL
would be responsible to make good the loss.
Ans.6 (a) Malik and Azad need to file with the registrar a declaration of compliance with
the requirements of the Ordinance and show to the satisfaction of the registrar
that:
(i) the company is being formed for lawful purposes;

(ii) all or any of the objects stated in the memorandum are appropriate or not
deceptive or sufficiently 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 been complied with.
Options available to the promoters:

In case of refusal of registrar to register the memorandum, the subscribers of the
Memorandum or any one of them authorized 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.
(b) Association of Persons:

The Commission may allow Zeta Associates (ZA) to be registered as a
company with limited liability, without addition of the words “Limited”, to its
name, if ZA 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; and
(v) such other conditions and regulations as the Commission thinks fit and, if
the Commission so directs, these should be inserted in the memorandum
and/or articles.
Business Law
Suggested Answers
Ans.7 (a) (i) Company is required to keep the register of mortgages and charges at its
registered office.
Any creditor or member of the company can inspect the copies of the
instruments so placed and the register of mortgages or charges of the company
free of cost at all reasonable times. The register of mortgage or charges is also
open to inspection of any person other than members or creditors against
payment of fee.
(ii) Meaning of Holding Company:

A company would be a holding company of another company if:
▪ the company directly or indirectly controls, beneficially owns or holds more

than fifty per cent of the voting securities in such other company; or
▪ has power to elect and appoint more than fifty per cent of the directors in
such other company.
(b) Variation of shareholders’ rights:

Gul & Sons, member of the affected class (Class A shares), either by themselves or
in combination with other shareholders, must hold at least 10% shares of that class,
for making an application to the Court for an Order against the resolution varying
their rights. The Court has powers to cancel the resolution, if it is satisfied that:
(i) the company withheld certain facts while getting the resolution passed and
had the members been aware of those facts, they would not have passed the
resolution varying the rights of a particular class; or
(ii) the variation or change is prejudicial to the interest of the members.
The application by Gul & Sons to get an Order against the resolution must be filed
within 30 days of the date of passing of resolution.
Ans.8 (a) Duties and responsibilities of interested directors:

Being a director, Moiz is an agent of the shareholders of the company and stands in
a fiduciary relationship with them. So he is required to make all contracts and all
transactions in good faith and in best interest of the company.
In this case, Moiz is deemed to be indirectly interested in the transaction as his wife
and son (relatives) jointly own 15% shares of Marvels (Private) Limited (MPL).
If a director makes any transaction or enters into any contract on behalf of the
company in which he is interested by any means, he should give a complete
disclosure of the nature of his interest.
Therefore, Moiz should give a general notice to the effect to all other directors that
he should be regarded as concerned or interested in the transaction to be entered
into with MPL and such notice shall be given:
▪ at the meeting of the directors at which the question of entering into the contract
or arrangement is to be taken into consideration.
▪ after disclosing his interest in the transaction, Moiz should not be part of the
directors meetings when such contract or transaction is to be discussed.
(b) Filing of accounts:
Pluto (Pvt) Limited (PPL) is required to send at least two copies of its accounts as
well as auditors and directors report to the registrar within 30 days of the date of
annual general meeting in which these accounts were approved. These accounts
shall be duly signed.
(c) Investment in associated companies and undertakings:

KL may grant loan to JPL if the following conditions are satisfied:
(i) a special resolution has been passed indicating the nature, period and amount
of loan and terms and conditions attached thereto; and
(ii) the return on loan should not be less than KL’s borrowing cost
Ans.9 (a) Signing of Auditors’ Report:

Zehra cannot sign the audit report of Tufail Limited only a partner of Ubaid & Co.
practicing in Pakistan can sign the auditors’ report.
(b) Rights and duties of auditors’:
Duty of the auditors

Since Tariq Limited is a listed Company, auditors’ or a person authorized by them
in writing must be present in the general meeting in which the balance sheet and
profit and loss account and the auditors’ report are to be considered.
Rights of the auditors

The auditor has a right to receive all notices of and any communications relating to
AGM which any member of Tariq Limited is entitled to receive and to be heard at
the AGM which he attends on any part of the business which concerns him as
auditor.
(c) The spouse of the director of a company cannot be appointed as auditors if the
spouse (Hira) is a partner in the firm. Since Hira is an employee of the auditors’ of
the company so it will not affect the appointment of Salman & Co.
(d) Jafer & Co. is not qualified for appointment as auditor of BL if any of its partners
has been a director of BL during the past three years.
Jafer & Co. should not accept the appointment except if the partner resigns from the
firm.
Ans.10 (a) (i) Proxy form lodged by Shafiq is invalid as it was not submitted at least 48
hours before the meeting.
(ii) Both the proxy forms submitted by Anwar would be considered invalid as a
member is entitled to appoint only one proxy to attend the meeting and not
more.
(iii) Proxy of Sajid is invalid as Javed is not a member. However, if articles of

association of Kamyab Limited permit appointment of non-members as proxy
then proxy of Sajid is valid.
Business Law
Suggested Answers
(iv) Asaan Limited may, by resolution of its directors, authorize any of its officials
or any other person to act as its representative at the annual general meeting.
The person so authorized shall be entitled to exercise the same powers on

behalf of Asaan Limited as if he was shareholder of Kamyab Limited.
(b) Casual vacancy:

Sunshine Limited, an unlisted company, shall have a minimum of three directors at
all times on the board. As due to the death of director A, a casual vacancy has
occurred on the board, the existing directors are required to appoint a person to fill
the casual vacancy and such person shall hold office for the remainder of the term of
director A in whose place he is appointed.
(c) Minutes of proceedings of general meeting:

The shareholder, irrespective of the amount of shareholding, has the right to inspect
the minutes of proceedings of the general meetings without charge during business
hours, subject to such reasonable restrictions as Farhan Limited may by its articles
or in general meeting impose so that not less than two hours in each day be allowed
for inspection.
(THE END)
Page 7 of 7
Certificate in Accounting and Finance Stage Examinations
Business Law
Q.1 (a) What do you understand by the term ‘Alternative Dispute Resolution’? Briefly
explain different types of alternative dispute resolution mechanisms. (05)
(b) Danish while buying a smart phone from one of the retailers, found a satellite phone
on the market floor. Danish in spite of considerable search could not find the owner
of the phone. He gave the phone to the retailer for safe custody till the real owner is
found. Under the provisions of the Contract Act, 1872 explain the following:
(i) the type(s) of contractual relationships, if any, between Danish, the retailer and
the real owner of the phone. (03)
(ii) the duties of retailer towards Danish. (04)
Q.2 (a) Under the provisions of the Contract Act, 1872 ‘Every person is competent to
contract who is of the age of majority according to the law to which he is subject,
and who is of sound mind, and is not disqualified from contracting by any law to
which he is subject.’
Describe the circumstances in which a person may not be able to enter into a
contract, despite meeting the above conditions. (04)
(b) Jamal threatened Rafia to murder her son Atif if she did not sell her house to
Mujahid. Rafia did as she was told.
Under the provisions of the Contract Act, 1872 comment on the validity of the
above contract. (02)
(c) Vazir said to Saulat, “I will buy speed boats worth Rs. 10,000,000 from you, if you
obtain the licence for me to operate the boats at Clifton beach”. Saulat agreed and
applied for the licence and deposited Rs. 100,000 as processing fee. However, before
the issuance of licence, the city government imposed ban on the issuance of new
licences. Saulat wants Vazir to buy the speed boats as he had made necessary efforts
to arrange for the licence. However, Vazir refuses to buy the speed boats from
Saulat.
Under the Contract Act, 1872 identify the type of contract between Vazir and Saulat.
Also state whether Vazir is now bound to purchase the speed boats from Saulat. (04)
Q.3 Faheem, Saleem and Jameel jointly borrowed Rs. 50 million for a business project from a
common friend Kamal. They jointly promised to repay the borrowed amount. Under the
provisions of the Contract Act, 1872 comment on the following:
(a) in the absence of express agreement, what would be the rights and liabilities of joint
promisors. Also explain their rights and liabilities if Kamal releases Jameel from the
joint liability. (06)
(b) how the liability would devolve in case of death of one or more of the joint
promisors. (02)
Q.4 (a) Amjad enjoys a very good credit standing in the market. Kashif, owner of Kashif
Electronics, represents Amjad as his partner. Kalim on the faith of such
representation supplied laptops to Kashif Electronics on credit. Kashif defaulted and
Kalim filed a suit for the recovery of the amount against both Amjad and Kashif.
explain whether Amjad would be liable to pay the outstanding amount to Kalim. (04)
(b) Asghar, Babar and Careem are carrying on agricultural business in partnership.
They have agreed to share the profits in the ratio of 4:3:2 respectively. Careem is not
liable for the losses of the firm. Under the provisions of the Partnership Act, 1932
analyse and comment on each of the following independent situations:
(i) Asghar, who is responsible for procurement, has suggested to buy seeds and
pesticides from Zubair Enterprises, a supplier of crop products, as the seeds
and pesticides offered by him are of good quality and at a very reasonable
price. However, Babar is not in agreement with Asghar. (03)
(ii) In February 2017, the partnership incurred substantial losses due to heavy
floods in the area and the partnership assets are not sufficient to meet the
firm’s liabilities. A number of creditors have filed a suit for recovery of the
amount from Careem. (03)
Q.5 (a) What do you understand by the term ‘Drawee in case of need’ under the provisions
of the Negotiable Instruments Act, 1881? (02)
(b) Aamna has received a bearer cheque from her uncle Shoaib as a gift. Shoaib’s title to
the cheque was defective and Aamna after receiving the cheque indorsed it to her
landlord on account of rent. Under the Negotiable Instruments Act, 1881 explain
whether the landlord would be able to recover the amount of the cheque. (03)
(c) Under the Negotiable Instruments Act, 1881 briefly describe the circumstances in
which acceptance of a bill of exchange would be regarded as a ‘qualified
acceptance’. Also state the liability, if any, of the prior parties to the instrument in
case of qualified acceptance. (05)
Company Law Section
Q.6 (a) Innovation Limited is a newly incorporated public limited company. Prior to the
issuance of certificate of commencement of business, the directors have entered into
a long-term contract with a foreign company for the supply of materials for use in
production.
Under the provisions of the Companies Ordinance, 1984 explain the following:
(i) status of the long-term contract under the above circumstances. (02)
(ii) requirements for obtaining the certificate of commencement of business. (05)
(b) Saleem and Company, a partnership concern, is engaged in IT consulting business.

The partners intend to convert the partnership into a private limited company in the
name of Marhaba (Pvt.) Limited.
Under the provisions of the Companies Ordinance, 1984 advise the partners with
respect to the appointment of first directors of the company and the term for which
they may be appointed. (03)
Q.7 (a) Khush-haal Limited (KL) is engaged in the business of manufacturing garments in
Karachi. The directors, in order to expand KL’s business, are planning to acquire a
garment factory in Multan. In order to finance the acquisition cost, they intend to
issue 5 million ordinary shares to the general public. They have appointed Mr.
Sehgal as an expert to evaluate the above project and include his statement in KL’s
prospectus.
Under the provisions of the Securities Act, 2015 advise the directors about the
conditions to be fulfilled for including Mr. Sehgal’s statement in KL’s prospectus for
its issuance to the general public. (03)
(b) Expansion Limited (EL), a company incorporated in Quetta, has acquired a hotel in
Iran. On 1 March 2017, EL obtained a long term loan from ABC Bank Limited,
situated in Chaman, by creating a charge on its property in Iran.
Under the provisions of the Companies Ordinance, 1984 explain the procedure for
the registration of the above charge. (04)
(c) Holding Limited (HL), after obtaining necessary approvals, is in the process of
issuing shares to the general public. HL intends to use the proceeds of the issue to
acquire more than 50% shares in SF (Pvt.) Limited (SFL).
Under the provisions of the Companies Ordinance, 1984 briefly describe the
additional reports which the auditors are required to set out in the prospectus in view
of the above acquisition. Assume SFL has no subsidiary. (03)
Q.8 (a) Two companies may be regarded as associates of each other, ‘If a person who is a
director of the company or holder of shares carrying voting power of 20% or more in
that company is also the director or holder of shares carrying voting power of 20% or
more in the other company’.
Under the provisions of the Companies Ordinance, 1984 briefly describe the
circumstances under which the above relationship may not qualify the Companies to
be regarded as ‘Associated Companies’. (04)
(b) The Directors of Generous Limited (GL), a listed company, have recommended
dividend equal to 40% of GL’s undistributed profits. However, in the annual general
meeting, the shareholders demanded that 60% of the undistributed profits should be
distributed as dividend.
(i) whether the shareholders are justified in their demand. (02)

(ii) whether the directors’ recommendation is appropriate if 70% of the
undistributed profits comprise of unrealized gain on investment property. (02)
(iii) consequences if the directors fail to pay the dividend within the stipulated
time. (02)
Q.9 (a) Woodworks (Pvt.) Limited (WPL) was incorporated on 5 October 2016 with a paid
up capital of Rs. 10 million. On 15 January 2017, the directors appointed Murad &
Co., Chartered Accountants as first auditors of WPL.
Under the provisions of the Companies Ordinance, 1984 briefly discuss:
(i) the appointment of Murad & Co. as the first auditors of the Company. (03)
(ii) how the remuneration of the first auditors may be fixed. (02)
(b) Under the provisions of the Companies Ordinance, 1984 explain the circumstances
in which the Commission may appoint the auditors of the Company. (05)
Q.10 (a) Shafiq and Rahat intend to establish a limited liability company in Lahore for the
manufacture of edible oil. Under the provisions of the Companies Ordinance, 1984
advise them with regard to the following:
(i) factors to be considered while selecting the name of the Company. (02)
(ii) names which may require prior approval of the Commission. (04)
(b) The registrar, after registration of the memorandum of association, has issued the
certificate of incorporation to Anjaan Limited.
Under the provisions of the Companies Ordinance, 1984 briefly describe the effects
of incorporation. (04)
(THE END)
Business Law
Suggested Answer
Ans.1 (a) Alternate Dispute Resolution:

Alternate dispute resolution is a type of procedure or combination of procedures
which disputing parties use voluntarily to resolve issues in controversy, or
outside court.
Types of Alternative dispute resolution mechanisms:
(i) Negotiation:
In negotiation, the participation is voluntary and there is no third party to
facilitate the resolution process or impose a resolution.
(ii) Mediation:
In mediation, there is a third party known as mediator; who facilitates the
resolution process but does not impose a resolution on the parties.
(iii) Arbitration:
Arbitration is the process of settlement of a dispute by an independent
person usually chosen by the parties themselves.
(iv) Conciliation:
It is a process in which conciliator meets with the parties separately to
resolve the grievances.
(b) (i) Bailment, Bailor and Bailee:

The contract which exists between Danish and the retailer is a bailment
contract. Danish in this case is the bailor while the retailer is the bailee.
The contract which exists between Danish and the real owner is a
Quasi Contract, an obligation imposed by law in absence of any
agreement between the parties, and on taking the custody of the satellite
phone, as a finder of lost goods, Danish is subject to the same
responsibility as those of a bailee while the real owner is the bailor.
(ii) Duties of bailee:

The following are the duties of the retailer (Bailee) towards Danish:
▪ duty to take care of satellite phone bailed - retailer is bound to take
as much care of the phone as a man of ordinary prudence would,
under similar circumstances, take of his own goods;
▪ duty not to make any unauthorized use of the phone – if the bailee
(retailer) makes any use of the phone bailed which is not according
to the condition of the bailment; he is liable to make compensation to
the Danish (bailor) for any damage arising to the phone from or
during such use;
▪ duty not to mix the phone bailed with his phones – a bailee is bound
to keep the goods bailed separately.
▪ duty to return the phone – it is the duty of the retailer to return the
phone to Danish when so demanded by Danish.
Ans.2 (a) Disqualified persons:
Following persons are disqualified from entering into the contract though they
are major and of sound mind:
(i) Alien enemies

If a war is declared with the enemy country then alien enemy of Pakistan
can neither enter into a contract or be sued during the period of war.
(ii) Foreign sovereigns and ambassadors

As such persons have immunity. They have a right to enter into a contract
but can claim the privilege of not being sued.
(iii) Convicts
A convict while under imprisonment is incapable of contracting.
(iv) Insolvent
A person declared as insolvent cannot enter into contract as his property
is dealt with by official assignee or official receiver.
(v) Companies
A company is an artificial person and a contract entered into by a
company is invalid if it is not within the powers granted by the
Memorandum of Association.
(b) Coercion:
The contract in the above situation is voidable at the option of Rafia as her
consent is not free and has been obtained by coercion.
(c) Contingent Contract:

The contract between Vazir and Saulat is a contingent contract whose
performance is based on the happening of certain event collateral to the
contract, i.e. arranging of license for Vazir. If such event has not happened the
performance of the contract does not become due. It does not matter at all that
Saulat had applied for the license and also paid processing fee of Rs. 100,000
to the authorities. Thus Vazir is not bound to purchase the boats from Saulat.
Ans.3 (a) Any one of Joint promisors may be compelled to perform

In absence of express agreement to the contrary, Faheem, Saleem and
Jameel are jointly liable to fulfil the promise.
However, Kamal, may compel anyone (Faheem/Saleem/Jameel) or more of

them to perform whole of the promise.
Each joint promisor (Faheem/Saleem/Jameel) may compel every other joint

promisor to contribute equally with himself to the performance of the promise.
If anyone of joint promisor (Faheem/Saleem/Jameel) or more of them makes

default in such contribution, the remaining joint promisors must bear the loss
arising from such default in equal share.
Effect of release of one joint promisor

If Kamal releases Jameel, it will not discharge the other joint promisors
Faheem and Saleem; neither would it free Jameel from responsibility to
Faheem and Saleem.
Business Law
Suggested Answer
(b) Devolution of Joint Liabilities

In case of death of one or more of joint promisors, the liability would devolve as
follows:
▪ to representatives of the deceased promisor jointly with the surviving
promisor(s) in case of death of any of the joint promisors; and
▪ to representatives of all of them jointly in case of death of all joint
promisors.
Ans.4 (a) Partner by Estoppel or Holding out:

Amjad would be regarded as partner by estoppel or holding out if:
▪ he knowingly permitted himself to be represented as a partner in the firm
by Kashif.
▪ Kalim on the faith of such representation extended credit to the firm.
It does not matter whether Amjad does or does not know that the
representation has reached Kalim.
Therefore, in such case, Amjad would be liable for the outstanding amount to
Kalim.
However, Amjad would not be considered as holding out partner if he has

denied Kashif’s representation in public holding him as a partner in the firm or if
he has no knowledge of Kashif’s representation.
(b) (i) Decision making:

Subject to contract between the partners, a partner can bind the firm by
his actions. However, in case of differences, decision should be made by
majority of the partners. Asghar cannot take decision without consultation
with other partners. Every partner has a right to express his opinion
before the matter is decided.
(ii) Liabilities of Partners towards third parties:

Every partner is liable jointly with all the other partners and also severally
to third parties for all acts of the firm done while he is a partner.
A partner may not share in the business losses, yet his liability towards
outsiders shall be unlimited.
If the partnership assets are insufficient to meet the firm’s liabilities,

Careem would have to repay the amount personally. However, Careem
can recover the amount which he is called upon to pay to the creditors
from Asghar and Babar.
Ans.5 (a) Drawee in case of need:

The person whose name is given in addition to the drawee to be referred in
case of need.
By whom the name is given:
▪ By the drawer while drawing the bill
▪ By the endorser while indorsing the bill.
(b) If the landlord has no knowledge of the defects in title of the previous holders
of the cheque, he would be regarded as holder in due course as he has
received the cheque against consideration (rent).
Therefore, he is entitled to recover the amount of the cheque.
However, if the landlord was aware of the defective title of the holder from
whom he derived his own title, then he would not be considered as holder in
due course and he would not be able to recover the amount of the cheque.
(c) Qualified Acceptance:

An acceptance is qualified in the following manner:
▪ Conditional: where acceptance is conditional i.e., payment dependent on

the happening of an event therein stated;
▪ Part Payment: where it undertakes part payment of the sum ordered to
be paid;
▪ Place of Payment: where no place of payment being specified in the
order it undertakes the payment at a specified place and not otherwise or
elsewhere; or where a place of payment being specified in the order it
undertakes the payment at some other place and not otherwise or
elsewhere;
▪ Time of Payment: where it undertakes the payment at a time other than
that at which under the order it would be legally due.
All prior parties whose consent was not obtained to qualified acceptance would
be discharged from liability.
Company Law Section
Ans.6 (a) (i) Provisional Contract:

Any contract entered by Innovation Limited (IL) before the date at which it
is entitled to commence business shall be provisional only, and shall not
be binding on the company until that date, and on that date, it shall
become binding.
(ii) Certificate of Commencement of Business:

IL has to comply with the following requirements for obtaining the
certificate of commencement of business:
▪ IL should have allotted shares against cash for an amount, which is
not less than the amount of minimum subscription;
▪ Directors of IL should have paid to the company full amount on each
of the shares taken or contracted to be taken by them and for which
they are liable to pay in cash;
▪ If IL decides not to issue prospectus-inviting public to subscribe its
shares, it shall have to file with the registrar a statement in lieu of
prospectus.
▪ If IL had issued a prospectus and could not get its shares listed on
stock exchange, IL shall not be given a certificate of commencement
of business until the date all money repayable on such a prospectus is
paid by IL and unless statement in lieu of prospectus is filed by the
company;
▪ IL has to file with the registrar a duly verified declaration by the chief
executive or one of the directors and the secretary in the prescribed
form, that the aforesaid conditions have been complied with; and
Business Law
Suggested Answer
(b) First directors and their terms
▪ Marhaba (Pvt.) Limited (ML) shall have not less than two directors;
▪ The number of first directors and their names shall be determined in
writing by a majority of the subscribers of the memorandum;
▪ Until the names and number of directors is so determined, all the
subscribers of the memorandum who are natural persons shall be
considered as directors of the company; and
▪ The first directors shall retire at the date of the first annual general
meeting.
Ans.7 (a) Expert Report in Prospectus:

Prospectus of Khush-haal Limited (KL) cannot include a statement purporting
to be made by an expert (Mr. Sehgal), unless he is a person who is not, and
has not been, engaged or interested in the formation or promotion, or in the
management of KL.
A prospectus which contains a statement purporting to be made by Mr. Sehgal

cannot be issued unless:
(i) Mr. Sehgal has given his written consent to the issue of prospectus with
the statement in the form and context in which it is included; and
(ii) there appears in the prospectus a statement that the expert has given and
has not withdrawn his consent.
(b) Registration of Charge:

Expansion Limited (EL) shall be required to file with the registrar for registration
in the manner required by the Companies Ordinance, the prescribed
particulars of the charge together with a copy of the instrument, if any, verified
in the prescribed manner, by which the charge has been created or evidenced
within twenty-one days after the date of its creation, but without prejudice to
any contract or obligation for repayment of loan thereby secured.
In addition to above, as the charge has been created in Pakistan but comprises
property which is situated outside Pakistan (i.e. in Iran), further proceedings
may be necessary to make the charge valid or effectual according to the law of
the country (Iran) in which the property is situated.
(c) Additional Audit Reports:

Additional reports on the following, must be set out in the prospectus which
shall be made by the auditors named in the prospectus:
▪ the profits or losses of SFL for each of the five financial years immediately
preceding the issue of the prospectus;
▪ the assets and liabilities of SFL at the last date to which its accounts were
made up;
The above report shall also:

▪ indicate how the profits or losses of SFL dealt with by the report would, in
respect of the shares to be acquired, have concerned HL’s members and
what allowance would have fallen to be made, in relation to assets and
liabilities of SFL, for holders of HL’s shares, if HL had at all material times
held SFL’s shares (i.e. shares proposed to be acquired).
Ans.8 (a) Directorships or Shareholdings not to be taken into account:
The following directorships or shareholdings are not to be taken into account
for determining the status of a company as an associated company:
(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;
(ii) shares owned by the National Investment Trustor the Investment

Corporation of Pakistan or a financial institution directly or indirectly
owned or controlled by the Federal Government or a Provincial
Government; and
(iii) shares registered in the name of a central depository, where such shares
are beneficially owned by the central depository.
(b) (i) Shareholders’ Demand to increase Dividend:

According to Companies Ordinance, 1984, the shareholders may reduce,
accept or reject the dividend proposed by the directors, but shall not
approve an amount exceeding the amount recommended by the directors
of GL. In view of above, shareholders are not justified in their demand.
(ii) Declaration of dividend from sale of immovable property:

No dividend shall be declared or paid out of unrealized gain on
investment property credited to profit and loss account.
Therefore, 40% dividend recommended by the directors is inappropriate.
(iii) 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.
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.
Ans.9 (a) (i) Appointment of first auditor:

The appointment of Murad is not valid as the directors of WPL failed to
appoint Murad within 60 days of the date of incorporation of WPL (i.e., by
4 December 2016). In case of failure of directors to appoint the first
auditors within the stipulated time, the members were required to appoint
first auditors within 120 days of the date of incorporation (i.e. by 02
February, 2017),instead of directors of WPL.
(ii) How auditor’s remuneration may be fixed:

The remuneration of the first auditor of WPL shall be fixed:
▪ by the directors if the auditor were appointed by the directors;
▪ by the Commission if the auditor was appointed by the Commission;
and
▪ in all other cases, by WPL in general meeting or in such manner as
the general meeting may determine.
Business Law
Suggested Answer
(b) Appointment of auditor by the Commission:

In the following circumstances the Commission may 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.
Ans.10 (a) (i) Factors to be considered in selecting the name of the Company:
Shafiq and Rahat while selecting name for their company should consider
that the name:
▪ is not inappropriate or deceptive;

▪ is not designed to exploit or offend the religious sentiments of the
people; and
▪ is not identical and does not closely resemble with the name of a
company already registered, 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.
(ii) Company names requiring prior approval:

Prior approval of the Commission is required if the proposed name
contains any words suggesting or calculated to suggest:
▪ the patronage of any past or present Pakistani or Foreign Head of

State.
▪ any connection with the Federal Government or a Provincial
Government or any department or authority of any such Government.
▪ any connection with any corporation set up by or under any Federal or
Provincial law.
▪ the patronage of, or any connection with, any Foreign Government or
any international organization.
(b) Effects of incorporation:

The effects of incorporation are as follows:
▪ from the date of incorporation mentioned in the certificate of incorporation,
the subscribers of memorandum, together with such other person as may
from time to time become members of the company shall be a body
corporate by the name contained in the memorandum; and
▪ the Company becomes capable of exercising all the functions of an
incorporated company and having perpetual succession and a common
seal, but with such liability on the part of the members to contribute to the
assets of the company in the event of its being wound upas is provided in
the Companies Ordinance, 1984.
(THE END)
Business Law
Q.1 Briefly describe the process of legislation in case of a money bill when:
(a) National assembly is in session (b) National assembly is not in session (05)
Q.2 (a) What do you understand by the doctrine of ‘Privity of contract’? Describe the
circumstances in which a stranger to a contract may file suit under the Contract Act,
1872. (05)
(b) Until recently Mansoor and Arif were independently engaged in the business of selling
sweets at Multan railway station. Mansoor incurred a loss due to competition. Arif, in
view of his friendship with Mansoor, agreed to move his business to the old city area.
They reached an agreement that Arif would not engage in any competing business
with Mansoor. It was also agreed that in case of a breach, none of them would have
recourse to a court of law for the enforcement of their rights.
Subsequently, due to economic downturn, Arif in addition to the old city area has also
started to sell sweets at Multan railway station. Mansoor, in order to restrain Arif from
selling sweets has filed a suit against him.
Under the provisions of the Contract Act, 1872 analyse the above situation and
explain the following:
(i) whether Arif is justified in starting sweets business at Multan railway station. (02)
(ii) what would be your answer in (i) above, if Mansoor had bought the goodwill of
Arif’s business. (03)
(iii) whether Mansoor is justified in filing a suit in the court of law. (02)
(iv) what would be your answer in (iii) above, if both Arif and Mansoor had agreed
to refer their disputes to arbitration and not to the court of law. (02)
Q.3 (a) Zeshan is engaged in the business of buying and selling town houses in Lahore for the
past many years and Inam is his agent. Due to the recent growth in construction
business, Zeshan has decided to buy a small cement factory in the outskirts of Lahore
and has asked Inam to negotiate the deal with the seller. Inam who has no technical
knowledge of the cement industry has employed Saqib for his assistance.
(i) the status of Saqib and whether Inam is justified in employing Saqib to perform
his work. (03)
(ii) Saqib’s responsibility towards Inam and Zeshan. (02)
(iii) Inam’s responsibility for Saqib’s acts, if employed without Zeshan’s authority. (02)
(b) Mrs. Ikram was searching for a house for her family in city’s posh locality. Her
grandfather Nadeem had promised to pay her Rs. 1.0 million by way of a gift for the
purchase of the house. After finalizing the deal with one of the estate brokers, Mrs.
Ikram asked Nadeem to pay her Rs. 1.0 million as promised. Nadeem, however,
refused to pay the amount. Mrs. Ikram filed a suit against her grandfather Nadeem for
the enforcement of the promise made by him.
Under the provisions of the Contract Act, 1872 advise under what circumstances
Mrs. Ikram would be able to recover the amount from Nadeem. (04)
Q.4 (a) Raheel, Samina and Umair have agreed to constitute a partnership for carrying on a
business of printing study text for CA students in Peshawar. Raheel wants to specify
the rights and duties of partners in the partnership agreement so that these can be
changed with mutual consent of all the partners whereas Samina and Umair do not
consider it necessary and believe that the implied authority may be extended to bind
the firm whenever required.
Under the provisions of the Partnership Act, 1932 list:
(i) the general duties of partners which cannot be modified by an agreement
amongst them. (03)
(ii) the restrictions imposed on the implied authority of a partner in the absence of
any usage or custom of trade. (04)
(b) In the above partnership business, assume Umair is a minor who has been admitted to
the benefits of the partnership with the consent of Raheel and Samina.
Under the provisions of the Partnership Act, 1932 list the rights and disabilities of
Umair before attaining majority. (03)
Q.5 (a) Under the provisions of the Negotiable Instruments Act, 1881 describe the following:
(i) Acceptor for honour (ii) Material alteration (05)
(b) Under the Negotiable Instruments Act, 1881 briefly describe any five modes by which
a party or parties to a negotiable instrument is/are discharged from liability. (05)
Q.6 (a) Yawar Limited (YL) is engaged in the business of manufacture and supply of watches
in urban areas of Sindh. However, due to rapidly changing consumer demand, YL has
decided to diversify its business and start assembly of smart phones at their factory in
Karachi. In order to alter the object clause of its memorandum for the purpose, YL has
passed a special resolution and has applied to the Commission for approval.
Under the provisions of the Companies Ordinance, 1984 briefly describe:
(i) the circumstances in which YL may alter the object clause of its memorandum. (04)
(ii) the conditions which must be satisfied before the Commission may issue an
order confirming the alteration. (04)
(b) Under the provisions of the Companies Ordinance, 1984 briefly describe the term
‘Body corporate’. (02)
Q.7 (a) Super Star Limited has recently been incorporated as a public limited company in
Islamabad. The directors are planning to make a public offer of its securities and are in
the process of finalizing the prospectus.
Under the provisions of the Securities Act, 2015 advise the directors with regard to the
following:
(i) particulars of the amount of minimum subscription i.e. the minimum amount
which must be raised by the issue of shares. (03)
(ii) publication of prospectus. (03)
(b) Jamal, who has recently been appointed as a Chief Executive Officer of Alibaba (Pvt.)
Limited (APL) has applied for financial assistance of Rs. 1.0 million to the Board of
Directors of APL for buying shares in Mujahid Limited, a public company, holding
75% voting rights in APL.
Under the provisions of the Companies Ordinance, 1984 explain whether APL may
grant financial assistance to Jamal under the above circumstances. (04)
Q.8 (a) Under the provisions of the Companies Ordinance, 1984 what do you understand by
the term ‘Extraordinary general meeting’? Who may call such meeting and what
should be the quorum of such meeting? (07)
(b) Golden Limited (GL), registered with a paid-up capital of Rs. 20,000,000 consisting of
ordinary shares of Rs. 50 each, has decided to remove one of its elected directors
Saleem due to poor performance. Saleem was elected on the board by securing
1,800,000 votes in a general meeting held on 1 January 2015. The least number of
votes casted for electing a director in the meeting was 1,200,000. GL has seven
directors on the board.
Under the provisions of the Companies Ordinance, 1984 enumerate:

(i) the number of votes required by Saleem to retain his directorship in GL.
(ii) what would be your answer in (i) above, if Saleem was elected to fill a casual
vacancy on the board. (03)
Q.9 (a) Aabshar Limited, a listed company, was incorporated on 1 April 2015. The directors
are in the process of finalizing the annual accounts of the company and have sought
your advice with regard to the directors’ report to be sent to the members along with
the annual accounts.
Under the provisions of the Companies Ordinance, 1984 advise the directors about the
particulars to be set out in their report for submission to the members of the company. (07)
(b) Faraz, a director in Green Lines Limited (GLL), is also a nominee director in Blue
Lines Limited (BLL) by virtue of GLL’s equity investment in BLL. GLL transferred
6,000 shares in BLL, being the qualification shares, in the name of Faraz for
appointing him on the Board of BLL.
Recently the Directors of GLL have shown their interest in entering into a joint
venture with BLL and have called a meeting of the board of directors for the purpose.
Under the provisions of the Companies Ordinance, 1984 advise whether Faraz can
participate in the above meeting. (03)
Q.10 Under the provisions of the Companies Ordinance, 1984 briefly describe whether Murad is
eligible to be appointed as an auditor of the company in each of the following independent
situations:
(i) Murad, a partner in Delta and Company, Chartered Accountants, is also a director in
Gama Limited (GL). His firm has received an offer for appointment as auditors of Star
Limited (SL). Both GL and SL are subsidiaries of Pluto Limited (PL). (03)
(ii) Murad is a sole proprietor in Murad and Company, Chartered Accountants. He has
received an offer for appointment as auditor of Super Energy Limited (SEL), a power
generation company in Multan. Murad has not paid his electricity bills to SEL for the
last two months. (02)
(iii) Murad is a partner in Beta & Company, Chartered Accountants (BCC). His firm has
accepted an offer for appointment as auditors of Panama Limited (PL). Rita, who is
Murad’s sister, is working as an internal auditor in PL. She also owns 20% shares in
PL. Rita disposed the shares to Murad’s wife, within 30 days of appointment of BCC
but continues to remain employed in PL. (05)
(THE END)
Business Law
Suggested Answers
Ans.1 (i) Legislation in case of a money bill when National assembly is in session:
A money bill shall originate in the National Assembly and after it has been passed by the
Assembly it shall, without being transmitted to the Senate, be presented to the President for
assent.
(ii) Legislation in case of a money bill when National assembly is not in session:
▪ When National assembly is not in session and President deems necessary to take
immediate action, he has the power to issue an Ordinance.
▪ Such Ordinance promulgated thus, shall have the same force and effect as an Act of
the parliament.
▪ However, the Ordinance shall stand repealed after 120 days if it is not presented or
passed by the National assembly.
Ans.2 (a) Privity of contract:

Generally a stranger to a contract cannot sue, while a stranger to consideration can sue.
This rule is known as the doctrine of privity of contract.
Exceptions to the above rule

The following are the exceptions to the rule that a stranger to a contract cannot sue:
▪ when an arrangement is made in connection with marriage, partition or other family
arrangements and a provision is made for the benefit of a person, he may sue although
he is not a party to the contract.
▪ the person who becomes an agent of third party by acknowledgement or estoppel,
may be sued by such third party.
▪ where a benefit under a contract has been assigned (other than one involving personal
skill), the assignee can enforce the contract subject to all equities between the original
parties to the contract.
▪ where a charge in favour of a person has been created on specific immovable property,
such charge is enforceable at the instance of the person beneficially interested, though
he may not be a party to the document creating the charge.
(b) (i) Agreement in restraint of trade:

Yes, Arif is justified in starting a sweets business at Multan railway station. As any
agreement by which anyone is restricted from exercising a lawful profession, trade or
business of any kind, is void to that extent.
(ii) Exception:
Arif in this case would not be justified to start similar business at Multan railway
station.
An agreement which restrains the seller of a goodwill from carrying on a business is
valid if all the following conditions are fulfilled:
▪ Such restriction must relate to a similar business.
▪ Such restriction must be within specified local limits.
▪ Such restriction must be for the time so long as the buyer or any person deriving
title to the goodwill from him carries on a like business in the specified local
limits.
▪ Such specified local limits must be reasonable to the Court having regard to the
nature of the business.
(iii) Agreement in restraint of legal proceedings:

Yes, Mansoor is justified in filing a suit against Arif.
Every agreement, by which any party is restricted absolutely from enforcing his rights
under or in respect of any contract, by the usual legal proceedings in the ordinary
tribunals, is void to that extent.
(iv) Exception: [S.28 of the Contract Act, 1872]
An agreement between Arif and Mansoor to refer to arbitration any dispute which
may arise between them is not void.
However, if Mansoor or Arif are not satisfied with the arbitration award, they cannot
be restricted to go to the court of law. This right cannot be excluded by the agreement.
Ans.3 (a) (i) Sub-agent:

Saqib may be regarded as a sub-agent as he is appointed by, and acting under the
control of Inam (original agent) in the business of agency.
When agent cannot delegate:

Inam cannot lawfully employ Saqib to perform acts which he has expressly or
impliedly undertaken to perform personally unless it is required by the ordinary
custom of trade or the work undertaken by Inam is of such nature that it requires
delegation.
In the above circumstances the appointment of a professional was necessary;
therefore, Inam is justified in Saqib’s appointment.
(ii) Sub-agents responsibility:

Saqib is responsible for his acts to Inam, but not to Zeshan, except in case of fraud or
wilful wrong.
(iii) Agent’s responsibility for sub-agent appointed without authority:

If Inam, without having authority to do so appoints Saqib to act as sub-agent, Then
Inam stands towards Saqib in the relation of a principal to an agent, and is responsible
for Saqib’s acts both to Zeshan and to third persons.
(b) Completed gift/love and affection:

An agreement made without consideration is void. However, Mrs. Ikram may claim the
amount of Rs. 1.0 million from her grandfather Nadeem, by proving either of the following
two conditions.
(i) Gift
(ii) love and affection
Completed gift:
In case of a gift it needs to be completed. The rule ‘No consideration no contract’ does not
apply to completed gifts.
Love and affection:

An agreement made on account of natural love and affection without consideration will be
valid if it is:
▪ expressed in writing,
▪ registered under the law,
▪ made on account of natural love and affection, and
▪ between parties standing in a near relation to each other.
However, in the given scenario, Nadeem only made a promise to pay Rs. 1.0 million by
way of a gift and did not actually pay the amount. Similarly, the promise was not made in
writing and was not registered, therefore, the promise cannot be enforced in both of the
above circumstances and Mrs. Ikram cannot recover anything from her grandfather
Nadeem.
Business Law
Suggested Answers
Ans.4 (a) (i) General duties of partners:

Following are the mandatory duties of a partner that cannot be changed by an
agreement amongst the partners:
▪ Duty to be just and faithful.
▪ Duty to carry on business to the greatest common advantage.
▪ Duty to render true accounts.
▪ Duty to provide full information.
▪ Duty to indemnify for loss caused by fraud.
▪ Duty to be liable jointly and severally – unlimited liability.
▪ Duty to act within authority.
▪ Duty in case of emergency.
(ii) Restrictions on the 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:-
▪ submit a dispute relating to the business of the firm to arbitration,
▪ open a bank account on behalf of the firm in his own name,
▪ compromise or relinquish any claim or portion of a claim by the firm,
▪ withdraw a suit or proceeding filed on behalf of the firm,
▪ admit any liability in a suit or proceeding against the firm,
▪ acquire immovable property on behalf of the firm,
▪ transfer immovable property belonging to the firm, or
▪ enter into partnership on behalf of the firm.
(b) Position of a minor before attaining majority:
The rights and disabilities of Umair before attaining majority are as follows:
(i) Rights:
▪ right to share property and profits of the firm as agreed by the partners.
▪ right to have access to accounts of the firm and not to the secret books of the firm.
▪ right not to be adjudged insolvent
(ii) Disabilities:
▪ he will not be considered as a partner.
▪ cannot file suit against partners for profit and property except after disconnecting
his relation with the firm.
▪ not entitled to have access to books other than accounts.
Ans.5 (a) (i) Acceptor for honour:

When a bill of exchange has been noted or protested for non-acceptance or for better
security and any person accepts it supra protest for honour of the drawer or of any one
of the endorsers, such person is called an acceptor for honour.
(ii) Material alteration:
An alteration is material which:
▪ alters the character or identity of the instrument or which shakes the very
foundation of the instrument or
▪ changes the rights and liabilities of the parties or
▪ alters the operation of the instrument.
The following alterations are material:
▪ Date
▪ Sum payable,
▪ Time of payment,
▪ Place of payment,
▪ Addition of place of payment,
▪ Rate of interest.
(b) Discharge of party or parties:
A party or parties to a negotiable instrument is/are discharged in any one of the following
ways;
(i) Payment:
The party is discharged by payment made in due course by the party who is
secondary liable to pay.
(ii) Cancellation:
When the holder of a negotiable instrument or his agent cancels the name of a party
on the instrument with the intent to discharge him, such party and all subsequent
parties who have a right of action against the party whose name is so cancelled are
discharged from liability.
(iii) Release:
Where the holder of a negotiable instrument releases any party to the instrument by
any method other than cancellation, the party so released is discharged from the
liability.
(iv) Allowing drawee more than 48 hours:
If the holder of a bill of exchange allows the drawee more than 48 hours exclusive of
public holidays, for the purpose of acceptance then all previous parties not consenting
to such allowance are discharged from liability to such holder.
(v) Non-presentment of cheque:
Where a cheque is not presented by the holder for payment within a reasonable time
of its issue and the drawer suffers damage through the delay, because of the failure
(collapse or out of fund) of the bank, drawer is discharged from the liability to the
extent of such damage.
(vi) Qualified acceptance
If the holder of a bill agrees to a qualified acceptance all prior parties whose consent
is not obtained to such an acceptance are discharged from liability.
(vii) Operation of law
This includes discharge;
▪ By an order of insolvency court,
▪ By merger.
▪ By lapse of time
(viii) Material alteration
A material alteration of a negotiable instrument renders the same void as against
anyone who is a party to it at the time of alteration and does not consent to it, unless
it was made in order to carry out the common intention of the original parties.
(ix) Discharge by payment of altered instrument
When an instrument has been materially altered but does not appear to have been so
altered, payment on such an instrument discharges the party liable if payment is
according to the tenure of the instrument and in due course.
(x) Not giving notice of dishonour
Any party to a negotiable instrument to whom notice of dishonour is not sent by the
holder is discharged from liability as against the holder unless no notice of dishonour
is required to be sent.
(xi) Non-presentment for acceptance of a bill
When a bill of exchange is payable certain period after sight, and if the holder
defaults in making presentment for its acceptance to the drawee within a reasonable
time after it is drawn, the drawer and all endorsers who were liable towards such a
holder are discharged from their liability towards him.
Business Law
Suggested Answers
(xii) Negotiation back

When a bill of exchange comes back to the drawer or endorser by process of
negotiation and he becomes its holder then all the parties in between are discharged
from the instrument.
Ans.6 (a) (i) Circumstances in which YL may alter the object clause of its memorandum:
Under following circumstances YL may alter the object clause:
▪ 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.
(ii) Conditions which must be satisfied before the Commission may issue an order
confirming the alteration
Before confirming the alteration, the Commission must be satisfied that:
▪ the circumstances, as discussed in (i) above for the alteration of object clauses of
the memorandum, exist and
▪ sufficient notice has been given by the company to every person who is a holder
of debentures of company or any other person whose interest might be affected by
the alteration.
▪ consent of every objecting creditor has been obtained or his debt or claim has
been discharged or determined, or has been secured to the satisfaction of the
Commission.
▪ The Commission may also order to purchase the interests of dissident members.
(b) Body corporate:

"Body corporate" or "corporation" includes a company incorporated outside Pakistan, but
does not include
▪ A corporation sole; or
▪ A co-operative society registered under any law relating to the registration of co-
operative societies; or
▪ Any other body corporate, which the Federal Government may specify in this behalf.
Ans.7 (a) (i) Minimum subscription:

The particulars as to the minimum amount which must be raised by the issue of shares
in order to provide the sums, required to be provided in respect of each of the
following:
▪ 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.
(ii) Publication of prospectus:

Since Super Star Limited intends to make a public offer of its securities in Pakistan, it
is required to publish the prospectus in the following manner:
▪ obtain Commission’s approval for the publication of the prospectus.
▪ publish the prospectus in full text or in such abridged form as may be prescribed,
at least in one Urdu and one English daily newspaper.
▪ the prospectus shall not be published in the newspapers less than seven days or
▪ the prospectus in full text and the shares subscription form shall be uploaded on
company’s website and shall remain there from the date of its publication in the
newspapers till the closing of the subscription.
(b) Restriction on grant of financial assistance by the company for purchase of its own or its
holding company’s shares:
According to the provisions of the Companies Ordinance, 1984 no company limited by
shares, other than a private company, not being a subsidiary of a public company, is
allowed to grant financial assistance of any sort, i.e. loan advance or credit etc., to any
person for buying its shares or the shares of its holding company.
In view of the above provision, APL, being subsidiary of public company (Mujahid
Limited) cannot grant financial assistance to Jamal its CEO.
However, under the following circumstances APL may grant financial assistance to its
CEO, Jamal:
▪ if he is a salaried employee and payment of such financial assistance is part of contract
of service; and that
▪ he was not a director of the company prior to his appointment as a chief executive of
the company.
Ans.8 (a) Extraordinary General Meeting (EGM):

Every general meeting of a company other than annual general meeting and the statutory
meeting is called extra-ordinary general meeting.
Calling of EGM:
The extraordinary general meeting may be called by:
▪ the directors of the company at any time on their own motion; or
▪ the directors on the requisition of member(s) representing not less than ten per cent of
the total voting power on the date of deposit of the requisition; or
▪ by the requisitionists themselves, if the directors do not proceed to call an
extraordinary general meeting on the requisition of the member(s); or
▪ the Commission either on its own motion, or on the application of any director or
member of the company, if default is made in holding the extraordinary general
meeting on the requisition of the member(s).
Quorum of an EGM:
The quorum of an extra ordinary general meeting shall be:
▪ in the case of a public listed company, unless the articles provide for a larger number,
not less than 10 members present personally who represent not less than twenty five
percent of the total voting power, either of their own account or as proxies;
▪ in the case of any other company, unless the articles provide for a larger number, 2
members present personally who represent not less than twenty-five percent of the
total voting power, either of their own account or as proxies;
▪ in the case of a single member company, single member present in person or by proxy.
▪ In case of a meeting called by the Commission, one member present in person or by
proxy, as the Commission may deem fit, in such meeting.
(b) Removal of a director:

(i) GL may remove Saleem from his office by passing a resolution in a general meeting.
In order for Saleem not to be removed from his office, he will have to secure at least
1,200,000 votes against the resolution which are the least number of votes secured by a
director for election in the last election of directors.
Business Law
Suggested Answers
(ii) If Saleem was appointed to fill a casual vacancy on the board, he shall not be removed
from his office if the number of votes casted against the resolution equals or exceeds
the number of votes calculated as per the following formula:
Number of directors for the term × Number of shares

Number of directors for the time being
Or, 7 × (20,000,000÷50) ÷ 7 = 400,000
Therefore, Saleem would require at least 400,000 votes against the resolution to retain
his directorship in GL.
Ans.9 (a) Directors’ report:

The Directors of Aabshar Limited shall make out and attach to the accounts, a report
containing following particulars namely
(i) statements regarding the state of the affairs of the company.
(ii) any amount recommended as dividend.
(iii) any amount transferred or proposed to be transferred to any reserve account.
(iv) address any specific changes and commitments affecting the financial position of the
company, occurring between the financial year end date and the date of the report.
(v) The directors’ report of Aabshar Limited, being a public company, shall address all the
material changes occurred during the financial year which affect:
▪ the business of the company, or
▪ its holding company or
▪ any of its subsidiaries or
▪ any other company where it has made investments.
(vi) fullest information and explanation in regard to any reservation, observation,
qualification or any adverse remarks pointed out by the auditors.
(vii) circulate with it information about the pattern of shareholding.
(viii) state the name and country of incorporation of its holding company, if any, where
such holding company is incorporated outside Pakistan.
(ix) state the earnings per share.
(x) give reasons for incurring loss and a reasonable indication of future profit, if any; and
(xi) contain information regarding default in repayments of loans or interests on loans, if
any.
(b) Interested director not to vote:

According to the Companies Ordinance, 1984, when the director is a director on the board
of any public company on an appointment made by his present company and he has got
only that number of shares which are qualification shares. He shall not be considered as
interested director on the board of his original company for any transaction to be entered
into with that other public company.
Therefore, Faraz can attend directors’ meeting of GLL and can take part in discussions and
also vote if required on the joint venture with BLL.
Ans.10 Qualification and disqualification of auditors

(i) As per the Companies Ordinance, 1984 a person shall not be appointed as auditor of a
company, if he is disqualified for appointment of any other company, which is that
company’s subsidiary or a holding company or a subsidiary of that holding company.
Therefore, Delta & Co. cannot be appointed as an auditor of SL as Murad is a director in
GL which together with SL is a subsidiary of PL.
For appointment as the auditor of the company, Murad is required to resign from GL’s
directorship.
(ii) As per the Companies Ordinance, 1984 a person shall not be appointed as auditor of a
company, if he is indebted to the company. However, in case of a utility provider, an
auditor is not considered to be indebted if his bills for up to ninety days are pending.
In this case since Murad has not paid only two months electricity bills to SEL, therefore, he
can be appointed as auditor of SEL.
(iii) In accordance with the provisions of the Companies Ordinance, 1984 BCC’s appointment
as auditors of PL was valid as Rita’s holding of 20% shares in PL and her association with
PL as internal auditor was not in contravention of any of the provisions of law.
However, her subsequent disposal of shares in PL to Murad’s wife within 30 days of BCC’s
appointment as auditors rendered BCC’s appointment invalid. According to the provisions
of the Companies Ordinance, 1984 a person or his spouse or minor children, or in case of a
firm, all partners of such firm who holds any shares of an audit client or any of its
associated company is ineligible to be appointed as auditors of that company.
Moreover, if after his appointment, an auditor becomes subject to any of the

disqualifications, he should be deemed to have vacated his office as auditor with effect from
the date on which he becomes so disqualified.
Therefore, BCC shall be deemed to have vacated the office of the auditor with effect from
the date on which Murad’s wife acquired shares in PL.
(THE END)
Business Law
Q.1 Identify the basis of legal system and explain the main sources of law in Pakistan. (05)
Q.2 (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. (05)
(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. (08)
Q.3 (a) 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. (08)
(b) 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. (04)
Q.4 (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. (06)
(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. (04)
Q.5 (a) Under the provisions of the Negotiable Instruments Act, 1881 briefly describe the
terms ‘Negotiation’ and ‘Indorsement’. (04)
(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) (04)
(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. (02)
Q.6 (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
‘Limited’ to its name. Describe those conditions and also specify the authority who
may grant such exemption under the Companies Ordinance, 1984. (04)
(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. (06)
Q.7 (a) 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. (02)
(ii) the requirement(s) which must be satisfied before registration of the prospectus. (06)
(b) Briefly describe the term ‘Mortgage’ as stated in the Companies Ordinance, 1984. (02)
Q.8 (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. (04)
(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. (06)
Q.9 (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. (01)
(ii) Describe the conditions which SSL must fulfil before making any investment in
FPL. (05)
(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. (04)
Q.10 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. (04)
(b) how a casual vacancy in the office of the auditor may be filled. (3.5)
(c) provisions relating to the signing of an audit report. (2.5)
(THE END)
Business Law
Suggested Answers
Ans.1 Basis of legal system in Pakistan:

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.
Ans.2 (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.
Ans.3 (a) 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.
(b) 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.
Business Law
Suggested Answers
Ans.4 (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.
Ans.5 (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
Sd/-
To Zain Sarwat
ABC New Town
Road Karachi
Karachi
(c) Purpose of crossing a cheque:
The purpose of crossing a cheque is to direct the drawee (banker) to pay the amount of the
cheque only to a banker so that the party who receives the payment can easily be traced.
Can a Cheque be Crossed Specially more than Once:

Yes. It is allowed when a banker in whose favour a crossing is made, once again crosses it
specially in favour of his agent (another banker) for collection.
Ans.6 (a) Associations not for profit:

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.
Business Law
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(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.
Ans.7 (a) (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.
(b) Mortgage:
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.
Ans.8 (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).
Ans.9 (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.
Business Law
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Ans.10 (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.
(THE END)
Business Law
Q.1 (a) Briefly describe the terms ‘Company court’ and ‘Company bench’. (03)
(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. (02)
Q.2 (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. (08)
(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. (03)
(ii) Rohi, who paid the electricity bill of Saulat without being asked, is now
demanding payment from Saulat. (01)
(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. (02)
Q.3 (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. (08)
(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. (03)
Q.4 (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. (05)
(b) 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. (05)
Q.5 (a) Specimen of a Negotiable Instrument
Date: September 12, 2015

Rs. 100,000/- only
Please pay on demand to Tauseef or to his order the sum of Rupees One
Hundred Thousand only, for value received.
Accepted
To Laila 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. (07)
(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. (03)
Q.6 (a) 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. (04)
(b) 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. (06)
Q.7 (a) What is meant by the term ‘Member’ as described under the provisions of the
Companies Ordinance, 1984? (04)
(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. (06)
Q.8 (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.

(i) What do you understand by variation of shareholders’ right? (01)
(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. (05)
(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. (04)
Q.9 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. (02)
(b) The consequences of non-payment of dividend within the stipulated time. (03)
(c) The circumstances under which CEL may not be responsible to pay dividend to
certain shareholders. (05)
Q.10 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. (01)
(b) Who may appoint the first auditor and fix their remuneration. Also state the time
frame within which such auditor may be appointed. (05)
(c) About the powers and duties of the auditors. (04)
(THE END)
Business Law
Suggested Answers
Section A (Mercantile Law)
Ans.1 (a) Company court:

A company court is the High Court which has jurisdiction under the Companies
Ordinance, 1984. Its jurisdiction is in the place at which the registered office of the
company is situated.
Company bench:
Company bench(s) is/are one or more benches constituted in each High Court by the chief
justice of the High Court.
The Federal Government may empower any civil court to exercise all or any of the
jurisdictions by the Companies Ordinance, 1984.
(b) How can precedents be avoided?

A judge is not bound to follow the precedent under the following circumstances:
(i) Overruling a precedent:
A precedent established by a lower court can be overruled by a higher court. The
higher court sets aside the decision of the lower court, and the precedent ceases to
apply.
(ii) Making a distinction between cases:
A judge may avoid a precedent by identifying facts in the current case that make it
different from a previous case. If the facts are sufficiently different, the judge in the
current case does not have to follow the precedent of the previous case.
Ans.2 (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.
Page 1 of 7
(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.
Ans.3 (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.
▪ 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.
(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.
Business Law
Suggested Answers
Ans.4 (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.
Ans.5 (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.
Page 3 of 7
(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.
Section B (Company Law)
Ans.6 (a) 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.
(b) Circumstances in which proceedings of a General Meeting may be declared invalid:

In the given scenario, Mateen and Ragib would not succeed in their contention as they have
filed the complaint with the chairman of the board of directors.
In order to succeed, Mateen and Ragib are required to file a petition in the Court and must
have 10% or more of the voting power in the company.
The petition must be made within thirty days of the impugned meeting.
The Court may declare the proceedings of a general meeting or part thereof invalid and
direct holding of a fresh meeting on the following grounds:
▪ By reason of any material defect or omission in the notice; or
▪ Irregularity in the proceedings of the meeting which prevented Mateen and Ragib
from using their rights.
Business Law
Suggested Answers
Ans.7 (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.
Ans.8 (a) (i) Variation of shareholders’ rights:

Variation of shareholders’ rights means changing of the rights i.e. reducing, enhancing
or cancelling the rights of the shareholders.
(ii) Petition to cancel variation of rights:

The aggrieved members who are objecting to the variation in their rights must not be
less than 10% of the class of aggrieved members. i.e. members holding A class shares.
The aggrieved members may apply to the Court for an order cancelling the resolution
varying their rights.
The application shall be made within 30 days of the date of such resolution.
The aggrieved members shall have to show to the Court’s satisfaction, that:
▪ Some facts which would have had a bearing on the decision of the shareholders
were withheld by Sigma Limited in getting the special resolution passed, or
▪ The variation would unfairly prejudice the interest of the members.
The above application may also be made by any one or more of the aggrieved
members who are authorised in writing by the group of aggrieved members in this
behalf.
The decision of the Court on any such application shall be final.

Page 5 of 7
(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.
Ans.9 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.
▪ 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
(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.
Business Law
Suggested Answers
Ans.10 Appointment of first auditors:

(a) Yes Mr. Fakhir can be appointed as the first auditor of TPL, provided he is a Chartered
Accountant within the meaning of the Chartered Accountants Ordinance, 1961 (X of 1961).
(b) Who may appoint the first auditors and the time frame:
The first auditor of TPL shall be appointed by the 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.
(THE END)
Page 7 of 7
Business Law
Q.1 What do you understand by delegated legislation? Give two advantages and disadvantages
of such legislation. (05)
Q.2 (a) Lalchi Traders agreed to supply cotton yarn to Farzi Textile Limited at a fixed price
for one year. Three months after the formation of the contract the price of yarn
increased sharply, making it commercially unviable for Lalchi Traders to continue the
supply at the agreed price. Therefore, they terminated the contract on the ground of
difficulty/impossibility of performance.

(i) whether the contract would be discharged under the above circumstances. (05)
(ii) what would be your decision if Lalchi Traders were importing yarn and
Government has imposed a ban on its import. (02)
(b) In accordance with the contract entered into by Masoom and Mubarak, Masoom has
offered to deliver 300 Rolex watches to Mubarak on 1 March 2015. Under the
provisions of the Contract Act, 1872 advise Masoom about the conditions which must
be satisfied for constituting a valid offer of performance. (03)
Q.3 (a) Under the provisions of the Contract Act, 1872 describe the circumstances in which an
agent is presumed to be personally liable on the contract to third parties. (08)
(b) Basit and Rahim go into a shop. Basit says to the shopkeeper, ‘Let him (Rahim) have
the goods and if he does not pay you, I will’.
Under the provisions of the Contract Act, 1872 identify and describe:
(i) the type of the above contract and whether Basit would be liable in case of
Rahim’s default. (04)
(ii) what would be your answer, if Basit said to the shopkeeper, ‘Let him (Rahim)
have the goods, I will see you are paid’. (03)
Q.4 (a) Nomi, Sultan and Behram have decided to establish a partnership business to run a
departmental store. Under the provisions of the Partnership Act, 1932 advise them
about their mutual rights and liabilities towards each other. (05)
(b) The above partnership business was started in January 2015. In March 2015 Behram
received an overdraft of Rs. 100,000 from the partnership’s bank. He informed the
bank that the money would be used to construct a new cash counter in the
departmental store. However, he used the money to pay for his wife’s Dubai trip.
Advise Nomi, Sultan and Behram about their rights and liabilities and that of the firm
in relation to the above transaction. (05)
Q.5 (a) Under the provisions of the Negotiable Instruments Act, 1881 identify the person(s)
who may cross the cheque after its issue and the manner in which it may be crossed. (05)
(b) Sakhi drew a blank stamped promissory note in favour of Zarouratmand with an
intention to pay him Rs. 100,000 against the purchase of a laptop computer. The
stamp on the promissory note was sufficient to cover Rs. 200,000.
Briefly describe Sakhi’s liability on the promissory note in each of the following
independent cases:
(i) Zarouratmand filled Rs. 150,000 on the promissory note and transferred it to
Kallash for value. (1.5)
(ii) Zarouratmand filled Rs. 170,000 on the promissory note and gifted it to
Chaplousy. (1.5)
(iii) Zarouratmand filled Rs. 250,000 on the promissory note and transferred it to
Ayyash for value. (02)
Q.6 (a) Under the provisions of the Companies Ordinance, 1984 briefly describe the following:
(i) special resolution (04)

(ii) chief executive in relation to a company (03)
(b) Under the provisions of the Companies Ordinance, 1984 list the circumstances under
which Mehkoum Limited may be deemed to be the subsidiary of Hakim Limited. (03)
Q.7 (a) Under the provisions of the Companies Ordinance, 1984 answer each of the following:
(i) the subscription list of Mayanaz Limited (ML) is due to open on 20 March 2015.
ML is in the process of issuing a prospectus. Assuming ML has no subsidiaries,
specify the auditor’s reports which are required to be set out in the prospectus. (02)
(ii) ‘No one shall issue any form of application for shares in or debentures of a
company, unless the form is accompanied by a prospectus.’ What are the
exception(s) to this general rule? (04)
(b) Samjhota Limited (SL) has an authorised capital of Rs. 100,000,000 divided into
2,000,000 shares of Rs. 50 each. The directors have decided to alter the conditions of
the capital clause of SL’s memorandum of association. Advise the directors about the
provisions of the Companies Ordinance, 1984 applicable to such alteration. (04)
Q.8 (a) Karamad (Pvt) Limited was incorporated on 1 July 2014. Subsequently it was
converted into a public unlisted company on 1 March 2015.

(i) describe whether the company is required to hold its statutory meeting; if yes,
identify the time frame within which such a meeting must be convened. (03)
(ii) what would have been your decision, had the company been converted into a
listed company on 1 July 2015? (01)
(iii) identify those contents of the statutory report which are required to be certified
by the company’s auditor. Also specify the purpose of the auditor’s certificate. (02)
(iv) state the requirements of law regarding the certification and filing of statutory
report. (02)
(b) Under the provisions of the Companies Ordinance, 1984 state who may call an annual
general meeting of the company. (02)
Q.9 Mr. Khushkismat holds 10% shareholding in Basant Limited (BL), a company listed on
Karachi Stock Exchange. He wants to propose Mustaid and Company, Chartered
Accountants to be the new auditors of BL in place of the retiring auditors.
Under the provisions of the Companies Ordinance, 1984 explain the duty of
Mr. Khushkismat and the company in respect of the proposed appointment. Also explain
the rights of the retiring auditor under the above circumstances. (10)
Q.10 (a) The company’s annual financial statements are in the process of finalisation for
presentation at company’s AGM.
Being company secretary, you are required to advise the company regarding approval
and signing of financial statements under the provisions of the Companies Ordinance,
1984. (05)
(b) Munafa Limited (ML) is engaged in the business of leasing vehicles to corporate
customers. The Board of Directors of ML is considering to authorise one of its
directors, Mr. Farigh, to enter into a contract with Mrs. Laiqa, the Managing Director
of Taizraftar Limited, for the purchase of six delivery vans. Mrs. Laiqa is also the wife
of Mr. Farigh.
Under the provisions of the Companies Ordinance, 1984 analyse the above situation
and advise Mr. Farigh about his responsibilities towards the company with respect to
the above transaction. (05)
(THE END)
Business Law
Suggested Answers
Section A (Mercantile Law)
Ans.1 Delegated Legislation:

In Delegated Legislation power is given to an Executive (a minister or public body to make
subordinate or delegated legislation for specified purposes only).
Advantages of delegated legislation:

▪ Time
Parliament does not have time to examine matters in detail
▪ Expert opinion
Much of the content of delegated legislation is technical and is better worked out in
consultation with professional, commercial or industrial groups outside Parliament.
▪ Flexible
Delegated legislation is more flexible than an Act of Parliament. It is far simpler to amend
a piece of delegated legislation than to amend an Act of Parliament.
Disadvantages of delegated legislation:

▪ The main criticism of delegated legislation is that it takes law making away from the
democratically elected members. Power to make law is given to unelected civil servants
and experts working under the supervision of a government minister.
▪ Because delegated legislation can be produced in large amounts the volume of such law
making becomes unmanageable and it is impossible to keep up-to-date.
Ans.2 (a) (i) Contract to do act afterwards becoming impossible or unlawful:

A contract to do an act which, after the contract is made, becomes impossible, or, by
reason of some event which the promisor could not prevent, becomes void when the
act becomes impossible, or unlawful.
However, events that make the contract extremely more difficult, costly or less
beneficial or commercially unviable or non-profitable then that agreed at the time of
its formation, but not impossible, are not accepted as an excuse for non-performance.
Therefore, in the given scenario, Lalchi Traders pleas shall not be acceptable and in
the event of non-performance they will be held liable for the breach of contract and
the consequential damages.
(ii) A contract is discharged, if after its formation, a law or regulation is adopted that
makes performance impossible/ illegal.
Therefore, due to the imposition of ban on the import of yarn by the Government,
Lalchi Traders would be discharged from their liability to perform the contract.
(b) Condition of Valid Offer

In order to constitute a valid offer, Masoom must fulfil the following conditions:
▪ The offer must be unconditional;
▪ It must be made at a proper time and place, and under such circumstance that
Mubarak may have a reasonable opportunity of ascertaining that Masoom is able and
willing there and then to deliver 300 Rolex watches;
▪ Mubarak (the promisee) must have a reasonable opportunity of satisfying himself that
the watches offered are the Rolex watches and are 300 in numbers which Masoom
(the promisor) was bound by his promise to deliver.
Ans.3 (a) Circumstances where an agent becomes personally liable to third parties:
Following are the circumstances under which an agent is personally liable to third parties:
(i) Foreign principal:

When an agent contracts for a principal resident abroad he is presumed to be
personally liable.
(ii) Principal cannot be sued:

An agent is also presumed to incur personal liability where he contracts on behalf of
a principal who though disclosed cannot be sued. E.g. where promoters contract for a
projected company, they are held liable personally as the company being non-existent
at the time of the contract cannot be sued.
(iii) Undisclosed Principal:

Where an agent acts for an undisclosed principal and contracts in his own name then
he is personally liable to the third parties.
(iv) Agency coupled with interest:

In case of agency coupled with interest, since the agent has himself an interest in the
property which forms the subject matter of the agency therefore the agent is
personally liable to the extent of his interest.
(v) Agent exceeding his authority:

Where an agent while acting in the course of business of agency exceeds his
authority, he is personally liable for the excess part if it is a separable transaction
otherwise for the entire transaction.
(vi) Improperly appointed sub-agent:

An agent is personally liable to third parties for the acts of an improperly appointed
sub-agent.
(vii) Agent incurring personal liability:

Where an agent, while acting in the course of business of agency incurs personal
liability he is personally liable on the contract.
(viii) Pretended agent:

A pretended agent, if the principal does not ratify his act, is personally liable to third
parties for the loss or damage incurred by them because of dealing with him.
(ix) Criminal act:
Where an agent has been employed to do a criminal act, the agent is not entitled to
indemnify himself against the consequences of that act and is personally liable for it.
(x) Special contract:
If an agent, while acting in the course of business of agency enters into a special
contract with the third party that he will be personally liable on the contract then the
agent is personally liable.
(xi) Unnamed principal:

If an agent declines to disclose the identity of his principal then he is personally liable
to the third party.
(xii) Custom:
An agent is personally liable on a contract if there is any usage or custom of a market
or trade to that effect. e.g. stock brokerage business.
Business Law
Suggested Answers
(b) (i) Contract of guarantee:

The above contract is a contract of guarantee. Contract of guarantee is a contract to
perform the promise, or discharge the liability, of a third person in case of his default.
In this case, Basit is the surety whereas Rahim and shopkeeper are respectively the
‘principal debtor’ and ‘creditor’.
Since a guarantee may either be oral or written, in case of Rahim’s default, Basit
would be liable to pay to the shopkeeper.
(ii) Contract of Indemnity:

This is the case of indemnity. A contract of indemnity is a contract by which one
party promises to save the other from loss caused to him by the conduct of the
promisor himself or by conduct of any other person.
In this case, Basit is the indemnifier and shopkeeper is the indemnity holder.
Yes, Basit is liable to make good any loss which may have been caused to the
shopkeeper due to either his own default or the default of Rahim.
Ans.4 (a) Mutual rights and liabilities:
Subject to contract between the partners, following are their mutual rights and liabilities:
(i) Every partner has a right to take part in the conduct of the business;
(ii) Every partner is bound to attend diligently to his duties in the conduct of the
business;
(iii) Every partner shall have the right to express his opinion in case of difference arising
as to ordinary business matters;
(iv) Every partner has a right to have access to and to inspect and copy any of the books
of the firm;
(v) A partner is not entitled to receive remuneration for taking part in the conduct of the
business;
(vi) The partners are entitled to share equally in the profits earned, and shall contribute
equally to the losses sustained by the firm;
(vii) Where a partner is entitled to interest on the capital subscribed by him such interest
shall be payable only out of profits;
(viii) 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;
(ix) 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
(x) A partner shall indemnify the firm for any loss caused to it by his wilful neglect in the
conduct of the business of the firm.
(b) Behram has clearly exceeded his authority. However, Nomi and Sultan cannot repudiate
Behram’s transaction with the bank. As a trading partnership, all the partners have the
implied authority to borrow money on the credit of the firm and the bank is under no
obligation to find out the purpose for which the loan has actually been used.
Further, where a partner acting within his apparent authority receives money from a third
party and misapplies it, the firm is liable to make good the loss. As a result, each of the
partners is jointly and severally liable to the bank for repayment.
However, Behram would be personally liable to the other partners for Rs. 100,000and shall
indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the
business of the firm.
Further consequence of his breach of duty not to act in any way prejudicial to the
partnership business; the partnership could be wound up.
Ans.5 (a) Crossing after issue

▪ Where a cheque is uncrossed, the holder may cross it generally or specially.
▪ Where a cheque is crossed generally, the holder may cross it specially.
▪ Where a cheque is crossed generally or specially, the holder may add the words “not
negotiable”.
▪ 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.
▪ When an uncrossed cheque, or a cheque crossed generally, is sent to a banker for
collection, he may cross it specially to himself.
(b) Inchoate stamped instrument:

(i) In this case, since Kallash is a holder in due course, he can claim any amount
covered by the stamp on the promissory note irrespective of the amount
intended to be paid by Sakhi. Therefore, Sakhi is liable to pay Rs. 150,000 to
Kallash.
(ii) In this case, since Chaplousy is an ordinary holder of the promissory note, he
cannot claim anything more than what Sakhi intended to pay. Therefore, Sakhi
is only liable to pay Rs. 100,000 on the instrument.
(iii) In this case, although Ayyash is a holder in due course, he cannot recover Rs.
250,000 from Sakhi. Sakhi is liable to pay only Rs. 200,000 to Ayyash, being the
maximum amount covered by the stamp on the instrument.
Section B (Company Law)
Ans.6 (a) (i) Special resolution:

means a resolution which has been passed by a majority of not less than three-fourths
of such members entitled to vote as are present in person or by proxy 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:
Provided that, 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 then twenty-one days notice has been given;
(ii) Chief executive:

Chief executive, in relation to a company means an individual who, subject to the
control and directions of the directors, is entrusted with the whole, or substantially the
whole, of the powers of management of the affairs of the company, and includes a
director or any other person occupying the position of a chief executive, by whatever
name called, and whether under a contract of service or otherwise;
Business Law
Suggested Answers
(b) Subsidiary and holding company:

Under the following circumstances Mehkoum Limited shall be deemed to be the subsidiary
of Hakim Limited:
▪ If Hakim Limited directly or indirectly controls, beneficially owns or holds more than
fifty per cent of Mehkoum Limited’s voting securities or
▪ otherwise has power to elect and appoint more than fifty per cent of Mehkoum
Limited’s directors; or
▪ Mehkoum Limited is a subsidiary of a third company which is in turn the subsidiary
of Hakim Limited.
Ans.7 (a) (i) Reports to be set out in prospectus:

Following reports, by ML’s auditors shall be set out in the prospectus; namely
▪ A report on assets and liabilities of the company at the last date to which the
accounts were prepared and Profit and loss account of the company for each of
the five financial years immediately preceding the issue of the prospectus along
with any non-recurring item.
▪ Dividends paid by the company during last five financial years for all classes of
shares including when dividend was not paid and also on the matter when
accounts of the company were not prepared for any year during last five years.
(ii) Issuance of prospectus not required:

The form of application is not required to be accompanied by the prospectus, if it is
shown that the form of application was issued either:
▪ in connection with a bona fide invitation to a person to enter into an

underwriting agreement with respect to the shares or debentures; or
▪ in relation to shares or debentures which were not offered to the public.
Further the issuance of a form of application shall not be required if:
▪ the offer of shares or debentures is made to existing shareholders or debenture

holders or
▪ The offer is being made for such shares or debentures which are already in issue
and listed on an exchange.
(b) Power of company limited by shares to alter its share capital:

Samjhota Limited, if so authorised by its articles, may alter the conditions of the capital
clause of its memorandum so as to:
(i) increase its share capital by such amount as it thinks expedient;

(ii) consolidate and divide the whole or any part of its share capital into shares of larger
amount than its existing shares;
(iii) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by
the memorandum; or
(iv) cancel shares which, at the date of the passing of the resolution in that behalf, have
not been taken or agreed to be taken by any person, and diminish the amount of its
share capital by the amount of the share so cancelled:
(v) For exercising the above power, Samjhota Limited is required to obtain approval of
members in a general meeting.
(vi) In the event of consolidation or sub-division of shares, the rights attaching to the new
shares shall be strictly proportional to the rights attaching to the previous shares so
consolidated or sub-divided.
(vii) The resolution along with the altered copy of the memorandum shall be filed with the
registrar within 15 days of passing the same.
Ans.8 (a) (i) Statutory meeting and the time frame for convening the meeting:
Since Karamad (Pvt) Limited has been converted into a public company within a
period of one year from the date of its incorporation, therefore, it is required to hold a
statutory meeting.
Time frame:
The meeting is required to be held within a period of not less than three months, nor
more than six months, from the date at which the company was converted into a
public company.
(ii) In case, if the company is converted into a public company, whether listed or unlisted,
after one year of its incorporation it is not required to hold a statutory meeting.
Therefore, in this case, since the date of conversion into public company is after one
year of its incorporation no statutory meeting is required to be held.
(iii) Contents of the statutory report which must be accompanied by auditor’s

certificate and the matter it must testify:
Following are the contents of the statutory report which are required to be certified by
the company’s auditor:
▪ Allotment of shares
▪ Cash received against share allotted and
▪ Receipts and payments of the company.
▪
The auditor’s certificate is required to certify the correctness or otherwise of the above
matters.
(iv) Certification and filing of statutory report:

Report shall be certified by not less than three directors, one of whom shall be the
chief executive of the company.
The directors shall deliver five copies of the certified statutory report to the registrar
for registration forthwith after sending the report to the members.
(b) Calling of an annual general meeting:

Normally, the annual general meeting of the company is called by the board of directors of
the company.
However, if default is made in holding the annual general meeting, the Commission may,
either of its own motion or on the application of any director or member of the company,
call, or direct the calling of, the said meeting in such manner as the Commission may think
fit.
Ans.9 Duty of the member(s) and the company for the appointment of a new auditor in place of a
retiring auditor:
▪ Mr. Khushkismat is required to give a notice for a resolution to be passed at BL’s annual
general meeting appointing Mustaid and Company Chartered Accountants as auditor in
place of the retiring auditor.
▪ Such notice shall be given to BL not less than 14 days before the annual general meeting.
▪ BL shall forthwith send a copy of such notice to the retiring auditor.
▪ BL shall also give the notice thereof to its members not less than seven days before the date
fixed for the annual general meeting.
▪ The notice shall also be published by BL in one Urdu and one English newspaper in the
province in which the stock exchange on which BL is listed is situated.
Business Law
Suggested Answers
▪ After receiving the notice, the retiring auditor has a right to make a representation in
writing, not exceeding a reasonable length, regarding the matter to the members of the
company.
▪ BL shall, unless the representation is received too late by it to do so,
▪ state the fact of the representation having been made in any notice of the resolution given
to members of the company; and
▪ send a copy of the representation to every member of the company to whom notice of the
meeting is sent whether before or after receipt of the representation by the company; and
▪ if a copy of the representation is not sent as aforesaid because it was received too late or
because of the company's default, the retiring auditor may, without prejudice to his right to
be heard in person, require that the representation shall be read out at the meeting.
▪ BL shall, within fourteen days from the date of appointment of Mustaid and Company
Chartered Accountants, send intimation thereof to the registrar together with the consent in
writing of the auditor concerned.
Ans.10 (a) Authentication of balance-sheet
(i) The balance-sheet and profit and loss account or income and expenditure account
shall be approved by the directors and shall be signed by the chief executive and at
least one director.
(ii) 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 for non-compliance with the above provisions.
(b) Disclosure of directors’ interest

Being a director, Mr. Farigh is an agent of the shareholders of the company and stands in a
fiduciary relationship with them. So he is required to make all contracts and all
transactions in good faith and in best interest of the company.
If a director makes any transaction or enters into any contract on behalf of the company in
which he is interested by any means, he should give a complete disclosure of the nature of
his interest.
In this case, Mr. Farigh is deemed to be indirectly interested in the transaction as his wife is
the managing director in TL.
Therefore, Mr. Farigh should give a general notice to the effect to all other directors that he
should be regarded as concerned or interested in the transaction to be entered into with TL
and such notice shall be given:
▪ at the meeting of the directors at which the question of entering into the contract or
arrangement is first to be taken into consideration.
▪ after disclosing his interest in the transaction, Mr. Farigh should not be part of the
directors meetings in which such contract or transaction is to be discussed.
In case of failure to comply with the above requirements, Mr. Farigh would be liable to a
fine which may extend to Rs. 5,000.
(THE END)
Business Law
Q.1 List the criteria which may be followed for determining the eligibility of a person(s) for
appointment as a judge of the High Court and Supreme Court. (05)
Q.2 Under the provisions of the Contract Act, 1872 describe the following:
(a) Undue influence (06)

(b) Fraud (06)
Q.3 (a) Two wrestlers Goga and Sheeda agreed to play a wrestling match on the condition
that if any of them would fail to appear for the match, he would have to pay Rs.
5,000 to the other party. The winner was to receive Rs. 20,000 out of the sale
proceeds of the tickets. Goga failed to appear in the match and Sheeda sued him for
Rs. 5,000. Goga however, refused to pay claiming that being wagering in nature, the
contract is not enforceable by law.
Under the provisions of the Contract Act, 1872 describe whether Sheeda can recover
the amount from Goga. (03)
(b) Arif was running a meat shop in Islamabad. He wanted to attend the wedding of his
sister in Peshawar so he asked his friend, Moiz, to look after his shop during his
absence. While managing the shop, Moiz noticed that the deep-freezer in the shop
was not working properly. In order to save the meat from being spoilt, he sold it at a
discount of 5% and had the freezer repaired the next morning. Looking at customers’
positive response, Moiz continued to offer the meat at 5% discount. Upon his return
from Peshawar, Arif, being unhappy with the situation, immediately discontinued the
discount and now wants to recover the loss from Moiz.
In view of the provisions of the Contract Act, 1872, analyse the above situation and
explain the rights and liabilities of Arif against Moiz. (10)
Q.4 (a) Rustum, Mahmood and Wali are partners in a firm. Wali wants to admit his sixteen
year old son Raghib as a new partner.
Under the provisions of the Partnership Act, 1932 can Raghib be admitted to the
partnership business? State the rights, liabilities and limitations of Raghib, if he is
admitted to the partnership business. (05)
(b) Sharing net profits usually creates a very strong inference that the parties have formed
a partnership. But in certain situations, the fact that the profits are shared or the
parties have agreed to share the profits will not by itself create a presumption that a
partnership was intended. List such situations as given in the Partnership Act, 1932. (05)
Q.5 (a) What do you understand by the terms ‘Holder’, ‘Holder in due course’ and ‘Payment
in due course’ under the Negotiable Instruments Act, 1881? (08)
(b) Samina sold her car to Faiz for Rs. 800,000. Faiz draws a bill of exchange stating
“Pay to Samina or her order a sum of eight hundred thousand rupees”. In figures the
amount is stated as Rs. 80,000.
Under the Negotiable Instruments Act, 1881 explain whether it is a valid bill. (02)
Q.6 (a) Under the provisions of the Companies Ordinance, 1984 a company, without prior
approval of the Commission, cannot be registered by a name which contains certain
words or phrases suggesting certain attributes/affiliations. List those
attributes/affiliations. (04)
(b) Mrs. Raheel was a member of Nightmare (Guarantee) Limited. On 30 September

2013 she ceased to be the member of the company and on 31 July 2014 the company
went into the process of winding up.
Under the provisions of the Companies Ordinance, 1984 advise Mrs. Raheel of her
rights and liabilities as provided in the company’s memorandum of association. (06)
Q.7 (a) Baykarar Limited (BL), a listed company, wants to increase its production capacity
and is in the process of acquiring a new plant for its soda ash project. The company is
contemplating to finance the project by issuing ordinary shares to the general public.
In order to enhance the credibility of its expansion project, BL’s management has
decided to include a statement from Mr. Suleman, a mechanical engineer, in its
prospectus.
Under the provisions of the Companies Ordinance, 1984 describe the conditions
which must be satisfied for the inclusion of statement from Mr. Suleman in BL’s
prospectus. (05)
(b) On 1 July 2014, Big Ban Limited obtained a short term running finance facility from
Cool Bank by creating a floating charge on its book debts and stock-in-trade.
(i) The procedure required to be followed to get the charge registered with the
registrar. (03)
(ii) The consequences of non-registration. (02)
Q.8 (a) Mazboot Limited (ML) is a newly incorporated company. ML has issued a
prospectus inviting offers from the general public for subscription to its shares and is
also intending to sign a musharika finance facility agreement with Top Bank Limited.
However, Mr. Baqir, who is the legal advisor of the company, is against the signing
of musharika finance facility agreement.
In view of the provisions of the Companies Ordinance, 1984 explain why ML should
not sign the finance facility agreement. List the condition(s), if any, which ML must
comply before exercising its borrowing powers. Also state the consequences if ML
signs the musharika finance facility without fulfilling the above condition(s). (07)
(b) Briefly describe the provisions relating to the restrictions imposed on directors’
remuneration with regard to performing extra services, attendance of meeting, etc. as
provided in the Companies Ordinance, 1984. (03)
Q.9 (a) ‘Every company is required to keep, at its registered office, proper books of account.’
Under the provisions of the Companies Ordinance, 1984 briefly explain the
following:
(i) When such books are NOT deemed to be proper. (02)

(ii) When a company is deemed to have kept proper books of account in case of a
branch office. (03)
(b) The Directors of Sigma Limited wish to recommend a final dividend. Under the
provisions of the Companies Ordinance, 1984 advise the directors about the
restrictions, if any, with regard to the declaration of dividend. (05)
Q.10 The Directors of Sunshine Limited, a listed company, intend to appoint the first auditors of
the company. In view of the provisions of the Companies Ordinance 1984, advise the
directors in respect of the following:
(i) The time frame within which the first auditors should be appointed.
(ii) The person(s) who may or may not be eligible for appointment as auditor(s). (10)
(THE END)

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Certificate in Accounting and Finance Stage Examination

The Institute of 5 September 2023

However, on 5 September 2023, TF communicated to GS that the contract cannot be

FOR MORE CA RELATED STUFF VISIT: WWW.JOURNALJOTTER.INFO

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(i) In a contract, a specific provision dictates that in the event of a default,

(ii) A constructive contract lacks a pre-established determination of the damages to

(b) Under the Contract Act, 1872, identify the following:

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Suggested Answer of this attempt is not uploaded by icap

The Institute of 7 March 2023

On 6 March 2023, Zia contacted RM to purchase an automatic wheelchair worth

FOR MORE CA RELATED STUFF VISIT: WWW.JOURNALJOTTER.INFO

In the above scenario, CF’s liability towards SF would be:

Can Aqib recover his service charges from Jamal?

Which of the following statements is NOT true?

Following matters are under consideration of the firm:

Project milestone Due Date Payment terms

Q.6 Under the provisions of the Contract Act, 1872:

(b) Under the provisions of the Competition Act, 2010:

Q.10 Under the provisions of the Partnership Act, 1932:

A.1 (i) (d) (ii) (d) (iii) (b)

Restrictions on Sarah’s implied authority as DC’s partner

A.3 Promulgation of an Ordinance in Pakistan and its effect

A.4 (I) Position of the parties to the contract

(II) Position of the parties to the contract

(b) The validity of Karim’s promises is as follows:

Sohail’s non-participation can be confirmed either through an express response or by

Payment for every painting sold

Restriction to sell paintings after exhibition

Restriction to enforce legal rights

Submission of details prior to exhibition

Effect on the contract

(b) Supervening impossibility

(ii) Deceptive marketing practices shall be deemed to have been resorted if an

A.10 (a) Principle of holding out

Exception to the principle of holding out

The Institute of 6 September 2022

In the above scenario, Salman and Farhan are:

Can Furqan hold Nadira responsible for the breach of contract?

Is Faiq compelled to deliver the cat?

(xii) Precedents are defined as:

Q.4 Under the provisions of the Contract Act, 1872:

Consider the following matters under the Contract Act, 1872:

Date of invoice Amount (Rs.) Due date Comments noted by Sultan

Q.10 Under the provisions of the Contract Act, 1872:

A.1 (i) (c) (ii) (b) (iii) (c)

A.2 Delegated legislation

Advantages of delegated legislation

Disadvantages of delegated legislation

Control over delegated legislation

Dated: 5 September 2022

(b) S. No. Fraud Misrepresentation

Furthermore, if it was intention of parties that contract should be performed by

Under the Partnership Act, 1932 a partner is entitled to receive remuneration

Due to the abovementioned reasons, Salim’s argument is invalid and Noman

Ahmed is entitled to receive interest amount of Rs. 18,000

Since there was no earlier contract between the partners as to treatment of

If Sarah decides not to become DT’s partner:

If Sarah decides to become DT’s partner:

(ii) If Kazim agrees to Zainab’s demand of 20% discount, it will be considered as

A.10 (a) A proposal is revoked by: