Caf-4 All Test (Sp-24)

CAF:04
Business Law
By
Sir Muhammad Asif, FCA
Test Number Syllabus

Test # 1 Syllabus: Ch. # 02
Test # 3 Syllabus: Ch. # 04 [LO 1 to LO 3]
Test # 4 Syllabus: Ch. # 04 [LO 4 to LO 10]
Assessment # 1 Syllabus: Ch. # 3, 4 & 5
Term Test # 1 Syllabus: Ch. # 2 to 9
Test # 8 Syllabus: Ch. # 10, 11
Test # 9 Syllabus: Ch. # 12, 13
Term Test # 2 Syllabus: Ch. # 8, 9, 10, 11, 12, 13, 14, 15
Test # 13 Syllabus: Ch. # 14, 17, 18

Certificate in Accounting and Finance Stage Examination
12 October 2023
40 minutes – 25 marks
Additional reading time – None
CAF 4 – BUSINESS LAW

Test – 1
Instructions to examinees:
(i) Answer all FIVE questions.
(ii) Answer in black pen only.
(iii) Attempt each part of the question on fresh page. MCQs can be attempted on the same page.
Q.1 Select the most appropriate answer from the options available for each of the following Multiple
Choice Questions (MCQs). Each MCQ carries ONE mark.
(i) 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
(ii) 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
(iii) 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
(iv) 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
(v) Aziz Corporation approached Modern Builders in January 2022, stating their intent to purchase a piece of commercial
land. Modern Builders responded, saying they'd be open to offers. Aziz Corporation then formally offered PKR 150
million in a letter dated February 10th, 2022, asking for a response by February 20th. On February 19th, Modern Builders
sent a counter-offer for PKR 170 million via fax but Aziz Corporation only viewed it on February 23rd. According to the
principles of business law, which of the following is correct?
(a) Aziz Corporation's initial offer stands as Modern Builders responded within the specified time.
(b) Modern Builder's counter-offer, sent on February 19th, serves as a rejection of the initial offer.
(c) Modern Builders' counter-offer is void as it was viewed by Aziz Corporation after February 20th.
(d) Aziz Corporation is bound to the counter-offer since it was within the given period.
(05)
Business Law Page 2 of 2
Q.2 (a) What is the time limit after which a proposal cannot be revoked? (03)
(b) A offered to sell his house to B at price of Rs. 2.0 million and promised to keep the offer valid
till April 30, 2001. A revoked his offer on April 28, 2001. B accepted the offer on April 29, 2001.
B claims that since he accepted the offer before the expiry of its validity, therefore, there is valid
agreement between him and A whereas A claims that the offer was withdrawn before the
acceptance by B, therefore, there is no binding contract. Comment on the claim made by A and
B? (04)
Q.3 Ahmed of Lahore, offered, by letter, to sell some specific property to Babar of Karachi for Rs. one
million. The letter of offer was posted on 1st April, which reached Babar on 5th April. Babar posted
his letter of an acceptance on 7th April, which reached Ahmed on 11th April.
How would the contract be affected if:

(i) Ahmed posts a letter of revocation of offer on 6th April, which reaches Babar on 10th April.
(ii) Babar dispatches a telegram canceling his acceptance which reaches Ahmed on 10th April. (06)
Q.4 Bromine Traders (BT) is engaged in the business of import, purchase and supply of electronic
items. During the year, 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)
Q.5 (a) X polished Y 's shoes without being asked by Y to do so. Y does not make any attempt to stop (02)
X from polishing the shoes. Is Y bound to make payment to X?
(b) Mr. X and Mrs X hired a room in a hotel for a week. When they entered the room, they found
a notice on the wall disclaiming the owner's liability for damages, loss or theft of articles. Some (02)
of their items were stolen. Discuss the legal position.
(You are not required to write “relevant legal provision in this question. Just write your decision and
basis of decision}
(THE END)
CAF 04: Business Law
Suggested Solution – Test # 1
Answer # 1
MCQ # Correct Option

(i) c
(ii) b
(iii) d
(iv) b
(v) b
(01 mark for each correct MCQ)
Answer # 2
(a) A proposal cannot be revoked after acceptance by offeree.
Acceptance is communicated as against offeror when it is put in the course of transmission so as

to be out of power of acceptor.
(b) Relevant legal Provision:

Offeror can revoke his offer before acceptance, even if he promised to keep it open for a certain
period.
Decision and Basis of Decision:

Claim of A is correct i.e. offer has been withdrawn before acceptance and there is no binding
contract.
Offeror can revoke his offer anytime before acceptance, even if before expiry of period mentioned
in offer.
Answer # 3
Relevant legal Provision:

Offeror can revoke his offer by notifying other party before his acceptance.
Acceptor can revoke his acceptance by notifying other party before it reaches him.

In this case:
 Offer is communicated to Babar on 5th April.
 Acceptance is communicated as against Ahmed on 7th April (when Babar posted letter).
 Acceptance is communicated as Babar Ahmed on 11th April (when letter reached
Ahmed).
(i) Revocation of offer reached Babar on 10th April, however, contract was completed as against
Ahmed on 7th April. Therefore, this letter of revocation has no effect on validity of contract.
(ii) Revocation of acceptance reached Ahmed on 10th April, as acceptance was not yet
communicated as against Babar, therefore this revocation of acceptance is valid there is no
contract between parties.
Page 1 of 2
Answer # 4
Relevant Legal Provision:

if there are alternate promises and one of them is illegal, only the legal one can be enforced.

This agreement is valid. However, BT is liable to provide only imported rice cookers. Promise to
provide smuggled rice cooker is void, being illegal.
Answer # 5
(a) Decision and Basis of Decision:

Y is bound to pay because he has accepted X's implied offer by conduct (i.e. by not stopping X from
polishing the shoes).
(b) Decision and Basis of Decision:

Any terms and conditions of offer must be communicated at time of agreement. Here, the owner of the
hotel was liable because these terms were communicated after the contract.
(THE END)
Page 2 of 2
19 October 2023

Test – 2
(i) Answer all SIX questions.
(iii) Attempt each part of the question on fresh page.
Q. 1 (a) C is called to be a witness in a court trial for G, who promises to pay C some money for the trouble.
After the trial, G doesn't pay C as promised. C decides to sue G to get the money. Is C entitled to get the
money that G promised? (03)
(b) Akram and Wasim are neighbors in a small town. They have known each other for years and often
engage in trade. One day, they decide to enter into an agreement. Akram promises to pay Wasim Rs.1,000
in exchange for goods that Wasim would deliver later. The agreement states that Wasim could either deliver
rice, which is a legal item, or smuggled opium, which is illegal.
Requirement:
Is the agreement between Akram and Wasim legally enforceable? (03)
Q. 2 Kedar Nath is the secretary of a community organization in Howrah, responsible for building a new Town
Hall. Gorie Mohammad, a local businessman, agrees to contribute Rs. 100,000 to help with the
construction. Trusting Gorie's promise, Kedar Nath signs a contract with Sunil Construction Co., a local
contractor. The contract stipulates that the Town Hall will be completed within six months, and payment
will be made in four installments.
After the first installment is paid, Gorie Mohammad decides he no longer wants to contribute his promised
Rs. 100. Kedar Nath is now concerned about how to meet the future payments to the contractor. He
believes Gorie should be held accountable for his original promise.
Requirement:
Is Gorie Mohammad legally obligated to pay the Rs. 100,000 he promised towards the construction of the
Town Hall? (03)
Q. 3 (a) Azam runs a busy accounting firm in a bustling city. He's been looking for a qualified accountant to help
him manage the increasing workload. After interviewing several candidates, he hires Babar for the position.
During the hiring process, Azam tells Babar, "I promise to make you happy here." Babar is thrilled and
immediately resigns from his old job to start work at Azam's firm.
Requirement:
Based on the Contract Act 1872, is Azam's promise legally binding? (03)
Audit & Assurance Page 2 of 2
(b)
Azam owns a two-story house located in the prime residential area of the city. Babar, interested in buying a
property, approaches Azam. After some discussions, Azam agrees to sell the house to Babar for Rs.
10,000,000. However, they make an additional agreement: if Babar uses the house for gambling activities,
then the price for the house will be Rs. 50,000,000 instead of Rs. 10,000,000.
Requirement:
Discuss the enforceability of this agreement between Azam and Babar under the Contract Act 1872. (03)
Q. 4 (a) Two crew members left a ship during its trip from London to the Baltic and back. The captain couldn't
find replacements, so he told the remaining crew that if they worked extra hard to get the ship back home,
they would get the pay of the two who left. Was the captain's promise legally binding? (03)
(b) A minor fraudulently represented to moneylender that he was of full age, and obtained a loan of Rs.
10,000. Has the money lender any right of action against the minor for the money lent or for damages of
fraudulent representation? (04)
Q. 5 In case of each of the following situations, state the conditions, as specified under the Contract Act, 1872
which must be fulfilled to make a binding contract.
(i) In February 2014, Raheel promised to pay Rs. 300,000 to Sameer against a debt of Rs. 500,000 which
was due for payment in March 2010. (03)
(ii) Shazia promised to pay Rs. 100,000 to her brother Rauf on account of his University fees for three years.
(03)
Q. 6 State whether a valid contract is created in following cases. Also state brief reason.
(a) A finds B's purse and gives it to him. B promises to give ARs.50.
(b) A rescued B from drowning in the river, and B, appreciating the service that has been rendered, promises
to pay Rs.1,000 to A.
(c) A supports B’s infant son. B promises to pay A's expenses in so doing.
(d) A for natural love and affection, promises to give his son B,Rs.1,000. A puts his promise to B into
writing and registers it.
(e) A registered agreement, whereby an elder brother, on account of natural love and affection, promised to
pay the debts of his younger brother.
(f) A husband, after referring to quarrels and disagreement between him and his wife, executed a registered
document in favour of his wife, agreeing to pay for separate residence and maintenance. (06)
(THE END)
Answer # 1
(a)
A promise to do what someone is already bound to do is not a valid consideration.

C would not be entitled to get the money that G promised, because everyone is legally obligated to
appear in court if summoned.
Marking Plan
Marks
• State Relevant Legal Provision 1.0
 State Decision 1.0
 State Basis of Decision 1.0
.
(b)
If there are alternate promises and one of them is illegal, only the legal one can be enforced.

This is a valid contract to deliver rice and a void agreement as to the opium, because dealing in smuggled
opium is illegal which cannot be enforced.
Marking Plan
Marks
.
Answer # 2

A promise to contribute to charity would be enforceable if, on the faith of the promise, promisee takes
steps and undertakes a liability.

Gorie Mohammad is liable to pay the agreed amount because on the basis of his promise Kedar Nath
has made contract with Sunil Construction Co and has incurred liability.
Marking Plan
Marks
.
Page 1 of 4
Answer # 3
(a)
Object, Consideration or other terms and conditions of an agreement must be certain, or capable of
being certain.

This agreement is not legally binding, because Azam’s promise to make Babar happy is uncertain or
illusory.
Marking Plan
Marks
.
(b)
If there are dependent promises i.e. first to do legal things and secondly illegal things, the first set of
promises is contract but second is a void agreement.

In this case, first agreement to sell house for Rs. 10 million is a valid agreement, however second
agreement to pay additional amount if house is used for gambling is not valid because it is illegal.
Marking Plan
Marks
.
Answer # 4
(a)
A promise to do what someone is already bound to do is not a valid consideration.

Captain’s promise is legally binding on him because crew was asked to work ‘extra hard’ which means
they were asked to work more than their existing obligations.
Page 2 of 4
Marking Plan
Marks
.
(b)
1. A contract is void against minor.
2. A misrepresentation by a minor about their age usually doesn't change this position in the eyes of
the law

Money lender cannot take any action against minor, because he lent money to a minor which is a void
agreement.
No action for fraudulent representation can be taken against minor because rule of estoppel does not
apply on minor.
Marking Plan
Marks
• State Relevant Legal Provisions [1 + 1 ] 2.0
 State Decision [0.5 + 0.5] 1.0
 State Basis of Decision [0.5 + 0.5] 1.0
.
Answer # 5
(i)
An agreement to pay a time-barred debt is enforceable provided:
1. Debt is time barred, and cannot be recovered as per law of limitation, and
2. It is made in writing, and
3. Signed by debtor or his authorized agent.

This agreement will be legally binding only if above conditions # 2 & 3 are also fulfilled,
Marking Plan
Marks
 Stating Decision & Basis of Decision with “IF”. 1.0
.
Page 3 of 4
(ii)

Agreement on account of natural love and affection is valid even without consideration if it is:
1. Between parties having a near relation to each other, and
2. Made on account of natural love and affection, and
3. Expressed in writing, and
4. Registered under the law for registration of documents.

This agreement will be legally binding only if above conditions # 3 & 4 are also fulfilled,
Marking Plan
Marks
 Stating Decision & Basis of Decision with “IF”. 1.0
.
Answer # 6
(a) Valid contract created because promise to compensate for past voluntary services is valid.
(b) Valid contract created because promise to compensate for past voluntary services is valid.
(c) Valid contract created because consideration may move from/to third parties.
(d) Valid contract created because conditions for agreement on account of natural love and affection are
met.
(e) Valid contract created because conditions for agreement on account of natural love and affection are
met.
(f) Valid contract not created because this agreement is without consideration and there is no natural
love and affection between parties.
Marking Plan
Marks
 Stating whether contract is valid or not. [0.5 * 6] 3.0
 State Reason. [0.5 * 6] 3.0
.
(THE END)
Page 4 of 4
26 October 2023

Test – 3
(i) Answer all FOUR questions.
Q. 1 When a contract is said to be induced by undue influence and under what circumstances a person is deemed
to be in a position to dominate the will of other person? (05)
Q. 2 (a) Briefly discuss the concept of “consensus ad idem”. (03)

(b)Define coercion. What is the difference between coercion and undue influence? (07)
Q. 3 Define consent for the purpose of a contract? The consent is said to be ‘Free’ when it is not caused by
certain factors specified in Contract Act, 1872. List those factors. (04)
Q. 4 Jannat Bibi is a wealthy old widow who owns 3 bungalows in Lahore. Until recently she suffered from
hallucination that she was pursued by demons. About two months ago she enrolled herself for the treatment
offered by a Spiritual Adviser.
Whilst she was receiving treatment as a resident at the Spiritual Adviser’s house, he told her that he needed
a bungalow to house the persons seeking his treatment and impressed upon her that her assistance was
required in this matter. This prompted Jannat Bibi to state that she would help the Spiritual Adviser as soon
as she recovered from her ailment. She returned home last week.
A day after she returned home she signed a contract prepared by die Spiritual Adviser’s lawyer agreeing to
sell one of her bungalows in Lahore to Spiritual Adviser for Rs. 8 million. The market value of the
bungalow’ is Rs.20 million. Now’ she says that she regrets having signed the contract and seeks your advice
whether she could avoid the contract on any ground.
Advise Jannat Bibi. (05)
(THE END)
Answer # 1
When a contract is induced by Undue Influence:

A contract is caused by undue influence if:
 one party is in a close relation/position to dominate the will of other [01 Mark] , and
 dominant party uses that position to obtain an unfair advantage. [01 Mark]
Circumstances when a person is in a position to dominate the will of other person:

A person is deemed to be in a position to dominate the will of other if:
1. he holds Real or Apparent Authority [0.5 Mark] (e.g. Employer and Employee, Police officer and
Accused, Tax officer and Tax payer) [0.5 Mark].
2. he has Fiduciary Relationship[0.5 Mark] (e.g. Parent and Child, Guardian and Minor, Advocate
and Client, Trustee and Beneficiary, Fiancé and Fiancée) [0.5 Mark]
3. other person’s mental capacity is affected due to age, illness etc. [0.5 Mark] (e.g. Doctor and Patient,
Medical Attendant and Patient, a Family Member and an Enfeebled Old Man) [0.5 Mark]
Marking Plan
Marks
• 02 marks for Definition 1.0
 01 mark for each circumstance [0.5 for mentioning category, 0.5 for two examples
3.0
in each category]
.
Answer # 2
(a)
When two persons agree upon the same thing in the same sense, this is called “consensus-ad-idem”.
If there is no consent, agreement is void.
(b)
Coercion:
"Coercion" is:
 the committing (or threatening to commit) any act forbidden by Pakistan Penal Code [01 Mark], or
 unlawful detaining (or threatening to detain) any property, [01 Mark]
 with the intention of causing other person to enter into an agreement. [01 Mark]
Page 1 of 3
Difference between Coercion and Undue Influence:
Coercion Undue Influence

Parties to a contract are related to
Parties to a contract may or may not
Relationship each other under some sort of
be related to each other.
relationship.
Consent is obtained by giving a threat
Consent Consent is obtained by dominating
of an offence or committing an
(obtained by) the will.
offence
Nature of Pressure It involves physical pressure. It involves mental pressure.
It can be exercised even by a stranger It is exercised usually by a party to
By whom
to the contract. a contract and not by a stranger.
It can be exercised even on a stranger It can be exercised only on a party
On whom
to the contract. to a contract.
Burden of proof on party rescinding It may be assumed by the law in
Burden/Onus of Proof
the contract. some cases.
Criminal liability Criminal liability is incurred. Criminal liability is not incurred.
Objective is to compel a person to Objective is to obtain an unfair
Reason
enter into a contract. advantage.
The aggrieved party has to restore the The party avoiding the contract
Restoration of benefit
benefit received. may or may not restore benefit.
Marking Plan
Marks
• Definition of Consensus ad idem 3.0
 1 mark for each point in definition of Coercion 3.0
 0.5 mark for each point of difference between Coercion and Undue influence 4.0
.
Answer # 3
Consent:
Two persons are said to consent when they agree upon the same thing in the same sense. [01 Mark]
Factors:
Consent is said to be free when it is not caused by [0.5 Mark]
(a) coercion [0.5 Mark], or
(b) undue influence [0.5 Mark], or
(c) fraud [0.5 Mark], or
(d) misrepresentation [0.5 Mark], or
(e) mistake" [0.5 Mark].
Marking Plan
Marks
• 1 mark for definition 1.0
 0.5 mark for each factor 3.0
.
Page 2 of 3
Answer # 4

If consent of a party is not free, the contract becomes voidable at the option of aggrieved party. [01 Mark]
Further, in case of spiritual adviser and his student/patient, law assumes the existence of undue
influence [01 Mark].

In this case, assumption of undue influence applies, particularly when price is also not adequate [01 Mark].
Therefore, Jannat Bib can avoid the contract [01 Mark] on account of consent not being free (due to undue
influence) [01 Mark].
Marking Plan
Marks
 Decision and Basis of Decision 3.0
.
(THE END)
Page 3 of 3
02 November 2023

Test – 4
Q. 1 Explain in the following scenarios whether Party A has committed fraud with Party B or not. (05)
(a) Mr. A sold a car by Auction to Mr. B which was damaged in an accident and repaired by Mr. A. Mr. A
did not disclose this fact to Mr. B
(b) Mr. A's car was damaged in an accident and repaired by him. Mr. B purchased car from Mr. A on a
condition that major repair was not carried out in Past. Mr. A said nothing.
Q. 2 What will be the effect on a contract, if one party to the contract remains silent on a fact which is likely to
affect the willingness of the other party to enter into the contract? You are required to explain the above
with the help of suitable examples. (04)
Q. 3 Taimur, the owner of a super store, wishes to sell his business which includes the goodwill and the lease of
the business premises. In January 2010, he enters into negotiations with Saeed who has just arrived in
Pakistan with his life savings. Taimur tells him that the profits over the last 5 years have just averaged Rs. 2
million per annum. He offers to allow Saeed to inspect the annual accounts but Saeed refuses to do so. The
negotiations go on for a further 3 months.
On 1st May 2010, Taimur states that in his opinion, that business has an extremely profitable future. On 1st
June 2010, Saeed enters into a contract with Taimur whereby the business, including the goodwill and the
lease of the premises are transferred to Saeed for Rs.20 million. On 14th June 2010, Saeed realizes the true
state of affairs. He also discovered that the average profit for the previous 5 years was only Rs. 1 million per
annum Discuss the position of both parties. Support your answer with legal arguments. (06)
Q. 4 Comment on legality and enforceability of agreement in each of the following situations:
(a) Kamil and Raza agree that Kamil shall sell a house to Raza for Rs. 2,000,000 but if Raza uses it as
gambling house, Raza will pay Rs. 4,000,000 for it. (04)
(b) A & B carried on business in a certain locality in Karachi. A promised to stop business in that locality, if B
pays him Rs. 100,000. A stopped its business but B did not pay him the promised money. (03)
Q. 5 Shamsila, a specialist doctor is running a hospital in Lahore. She employed another lady doctor Rizwana, as
a physician for a period of three years on a salary of Rs.20,000 per month.
The agreement between Dr. Shamsila and Dr Rizwana provided that after the termination of her
employment Dr. Rizwana should not practice as a doctor in Lahore within a radius of 20 kilometers of her
hospital for a period of one year, and if Dr. Rizwana did so, she should pay Rs.240,000 (one year salary) to
Dr. Shamsila’s hospital as “liquidated damages”.
Immediately after the completion of her contract, Dr. Rizwana begins to practice as a physician next door to
Dr. Shamsila’s hospital. Dr. Shamsila sued Dr. Rizwana for the recovery of Rs. 240,000.
You are required to answer the relevant provisions of law along with reasons whether Dr. Shamsila will be
able to recover the liquidated damages from Dr. Rizwana or not. (04)
Q. 6 Briefly explain whether there is valid agreement in following cases:
(a) A and B entered into an agreement whereby they agreed that neither of them would appeal against the
trial court’s decision in respect of dispute between them.
(b) A promised to buy a horse from B for Rs. 2,000 if the horse proved lucky.
(c) Two co-widows made an agreement that if any of them remarried, she should forfeit her right to her share
in the deceased husband’s property. (06)
(THE END)
Answer # 1 [Adapted from Summer 2012 Attempt of PIPFA]
(a)
If a person remains silent about something and does not disclose material facts which may affect
decision of other party, it is not a fraud. [01 Mark]

[0.5 Mark]
A has not committed any fraud in this case because buyer had duty to inspect the good before
buying [0.5 Mark].
(b)
If silence is equivalent to speech, then keeping silent about material defects is considered fraud. [01 Mark]

In this situation, silence of A is equivalent to speech that car did not have major repair [01 Mark]. Therefore,
there is a fraud by A [01 Mark].
Answer # 2 [Adapted from Spring 2003 Attempt of ICAP]
Keeping silence on material facts regarding subject matter of the contract, is not fraud. [01 Mark]
However, in following cases keeping silent is considered fraud:

 Silence is equivalent to speech [0.5 Mark]
o Example: Horse is unsound and buyer asks “"If you do not deny it, I shall assume that
the horse is sound." Seller says nothing. [01 Mark]
 There is a duty/legal obligation to disclose such fact [0.5 Mark]

o Example: Fiduciary relationship like parent-child, trustee-beneficiary. [01 Mark]
Answer # 3 [Adapted from Winter 2017 Attempt of PIPFA]

An agreement caused by fraud is voidable at the option of aggrieved party, however:
o A statement of opinion or intentions is not a fraud. [01 Mark]
o Contract is not voidable if aggrieved party had the means of discovering the truth with
ordinary diligence. [01 Mark]
Position of Taimur:
As Taimur did not make factual statement when he said “in his opinion, ________” therefore, this is not
a fraud. [01 Mark] Taimur has not liability towards Saeed. [01 Mark]
Position of Saeed:
As Saeed had means of discovering the truth with ordinary diligence when Taimur offered him to
inspect the annual accounts [01 Mark], therefore this contract is not voidable for Saeed. He is liable to
complete the contract and has no remedy. [01 Mark]
Page 1 of 3
Answer # 4 [Adapted from Winter 2015 Attempt of PIPFA]
(a)
Legal Provision:
If there are promises first to do legal things and secondly illegal things, the first set of promises if contract
but second is a void agreement. [02 Mark]

Agreement to sell house for Rs. 2,000,000 is valid. However, the other part of the agreement to pay Rs.
4,000,000 is void as gambling is illegal. [02 Mark]
(b)
Legal Provision:
Agreements in restraint of trade, are void. [01 Mark]

A cannot recover money as agreement to stop business in consideration of money is void (being in
restraint of trade). [02 Mark]
Marking Plan
Marks
.
Legal Provision:
Agreement to prevent the employee from accepting a similar engagement after the termination of his
services if valid, provided:
1. Purpose of such restriction is to protect the interest, goodwill or trade secret of employer, and
2. Such restriction is for resalable specified period and local limits.

Dr. Shamsila can recover the damages of Rs. 240,000 from Dr. Rizwana as the given restriction appears
for reasonable specified period and local limits.
Marking Plan
Marks
.
Page 2 of 3

(a)
An agreement not to file an appeal in upper court of law is not in restraint of legal proceedings. [01 Mark]

This agreement is valid. [01 Mark]
(b)
An agreement must have certain terms and condition. [01 Mark]

As being lucky, does not have certain meanings. Therefore, this agreement is void. [01 Mark]
(c)
An agreement in restraint of marriage is void. [01 Mark]

As agreement between co-widows is prohibiting re-marriage, therefore, it is void. [01 Mark]
Marking Plan
Marks
• State Relevant Legal Provision [1 mark x 3 situations] 3.0
 Decision and Basis of Decision [1 mark x 3 situations] 3.0
.
(THE END)
Page 3 of 3
09 November 2023

Assessment Test – 1
(i) Answer all SEVEN questions.
Q. 1 Select the most appropriate answer from the options available for each of the following Multiple Choice
Questions (MCQs). Each MCQ carries ONE mark.
(i) 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
(ii) 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 borne?

(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
(iii) 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
(iv) 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
(v) 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
(05)
Q. 2 Aamir, a minor falsely representing himself to be of age (of majority), enters into an agreement to sell his
property to Arif and receives from him as price a sum of Rs. 720,000 in advance. Out of this sum, the minor
purchases a car for Rs. 600,000 and spends the rest on pleasure trip. After the minor has attained majority,
Arif sues him for the transfer of the property or in the alternate for the refund of Rs. 720,000 and damages.
How would you decide? (05)
Q. 3 “An agreement in restraint of trade is void”. State the exceptions to this rule as given in the Partnership Act,
1932. (04)
Q. 4 (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. 5 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.
Under the provisions of the Contract Act, 1872 discuss the status of the agreement between Maria and EJ.
(02)
Q. 6 Briefly describe the rules regarding the enforcement of different kinds of contingent contracts. (06)
Q. 7 State whether following are contingent contract or otherwise. Please also explain that in case of contingent
contract when it will be enforceable by law.
i) A agrees to pay B Rs. 50,000 if he proves that two straight lines can enclose a space.
ii) A agrees to construct a building for B for Rs. 1,000,0000 on the condition that the payment will be made
on completion of building.
iii) A agrees to sell his house to B for Rs. 100,000 if his father does not return within two years from United
States of America.
iv) A agrees to pay Rs. 2,000 to B, if B marries C. B marries D, but after a month D dies, and B marries C.
(06)
(THE END)
Suggested Solution – Assessment Test # 1
Answer # 1 [Adapted from various ICAP Past Papers]
(i) C
(ii) B
(iii) D
(iv) A
(v) D
Marking Plan
Marks
• 1 mark for each correct MCQ 5.0
.
Answer # 2 [Adapted from Spring 2015 Attempt of ICMA Pakistan]

Agreement by a minor cannot be enforced against him [01 mark]. A minor can only be liable to pay if a
person supplies necessities of life (e.g. paying expenses for living, medicine, studies) to a minor [01 mark].
Such person can recover the reasonable price from the property of minor.

 Property of minor:
Arif cannot receive property of minor because agreement was made when Aamir was minor, and
hence void against him. [01 mark]
 Refund of Rs. 720,000:

Arif can also not recover this amount, because it was not given for necessities of life [01 mark].
However, he can take back (i.e. restore/restitution) property bought from his money which is still
in the hands of minor i.e. Car [01 mark].
Marking Plan
Marks
• Stating relevant legal provision 2.0
• Decision regarding claim on property of minor 1.0
• Decision regarding refund or money lent 2.0
.
Page 1 of 4
Sale of Goodwill:
If a person sells goodwill of his business, he can be stopped from carrying on similar business for
specified period or for specified local limits [01 mark].
Specified period and local limits must be reasonable (having regard to the nature of the business). [0.5 mark]
Agreements between partners:

1. Existing partners may agree that they shall not carry on any other business. [01 mark]
2. An outgoing partner may agree that he shall not carry similar business for specified period or for
specified local limits. [01 mark]
Specified period and local limits must be reasonable (having regard to the nature of the business). [0.5 mark]
Marking Plan
Marks
• Exception of sale of good will 1.5
 Exception of partners’ agreement 2.5
.
(a)
Zain has exercised undue influence on Karim because Karim is an enfeebled old man, and Zain was his
attendant (in a position to dominate his will). Further, inadequate price also indicates existence of undue
influence. [01 mark]
Further, Zain also gave false statement to Karim that price of his land is low which amounts to Fraud. [01
mark]
Therefore, Karim can file a case against Zain rescind the contract and claim for damages on account of
both Undue Influence and Fraud. [01 mark]
(b)
Agreement to transfer land:
This is an agreement without consideration. on account of nature love and affection.
Such an agreement is valid even without consideration if it is:
 Between parties having a near relation to each other [0.5 mark], and
 Made on account of natural love and affection [0.5 mark], and
 Expressed in writing [0.5 mark], and
 Registered under the law for registration of documents. [0.5 mark]
Agreement to reimburse expenses:

An agreement to pay for past voluntary services is valid even without consideration. Hence, promise to
reimburse expenses to Wajis is valid. [01 mark]
Page 2 of 4

As Maria knew that she did not have insufficient funds in bank account, therefore, it amounts to be fraud
[1.0 mark]
. Agreement is voidable at the option of EJ [1.0 mark].
EJ can rescind the contract and can demand return of necklace, alongwith damages [1.0 mark].
Marking Plan
Marks
 Decision and Basis of Decision [maximum marks] 2.0
.
Answer # 6 [Adapted from Autumn 2004 Attempt of ICAP]
Kind of Contingent
Rule Regarding performance of Contingent Contract
Contract
If time is fixed:
 Contract can be enforced only when event happens within time
specified.
Contracts contingent  Contract cannot be enforced if event becomes impossible or time
upon the happening of passes.
an event.
If time is not fixed:
 Contract can be enforced only when event happens.
 Contract cannot be enforced if event becomes impossible.
If time is fixed:
 Contract can be enforced only when event becomes impossible
or does not happen within time specified.
Contracts contingent  Contract cannot be enforced if even happens within time
upon the non- specified.
happening of an event.
If time is not fixed:
 Contract can be enforced only when event becomes impossible.
 Contract cannot be enforced if event happens.
Agreements contingent
upon impossible Such agreements are void ab-initio.
events.
Contracts contingent Such event shall be considered impossible if that person does anything
upon the future by which it becomes impossible to perform the contract within any
conduct of a person. definite time.
Marking Plan
Marks
• Rule for contracts contingent on happening [1 for time fixed, 1 for time not fixed] 2.0
 Rule for contracts contingent on non-happening [1 for time fixed, 1 for time not fixed] 2.0
 Other contracts [1 for each contract] 2.0
.
Page 3 of 4
Answer # 7 [Adapted from Autumn 2002 Attempt of ICAP]
(i) Contract is void being impossible.

(ii) Not contingent contract. Payment is consideration, not collateral event.
(iii) Contingent contract. It will be enforced if father does not return within two years.
(iv) Contingent contract. But it became void when B marries D being impossible to do at that time. It
cannot be enforced even subsequently B marries C.
Marking Plan
Marks
• Stating whether or not contingent contract [0.5 mark x 4 situations] 2.0
 Decision on enforceability [1 mark x 4 situations] 4.0
.
(THE END)
Page 4 of 4
16 November 2023
BUSINESS LAW
Test – 5
Q.1 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 (04)
adjustment made by SL.
Q.2 Under the provision of Contract Act, 1872, briefly describe the different situations whereby a
contract is discharged by mutual agreement. (10)
Q.3 Danish owes a sum of Rs. 100,000 to Adil against three different agreements. In March 2008,
Danish sent a cheque of Rs. 70,000 and Adil appropriated the amount in the following manner:
Year of agreement Amount Rupees Appropriation by Adil
2005 20,000 20,000

2006 40,000 10,000
2007 40,000 40,000
Total 100,000 70,000
The loan taken in 2006 has been guaranteed by Feroze who has demanded that Adil must
appropriate Rs. 40,000 against the debt guaranteed by him. Explain whether Adil is bound to
accept Feroze’s point of view. (04)
Q.4 Bushra enterd into a contract with Akhtar, the manager of a radio programme, to conduct a
show, twice a week, during the next three months. Bushra did not appear for the sixth show. She
conducted the next show but soon thereafter Akhtar rescinded the contract and informed her that
her services were no longer required as she failed to conduct the sixth show. Narrate the rights of
Akhtar and Bushra in the above situation. (05)
(i) The effect of refusal to accept a properly made offer of performance is that:
(a) The promisor is not responsible for non-performance and can sue the promisee for the breach
of contract.
(b) Such offer lapses on rejection by the offeree.
(c) The contract is rendered voidable at the option of promisor.
(d) The contract is discharged by anticipatory breach.
(ii) When the seller is ready and willing to deliver the goods and requests the buyer to take
delivery and the buyer does not take delivery of the goods within reasonable time after such
request, the buyer is liable to the seller for:
(a) Any loss occasioned by his neglect or refusal to take delivery.
(b) A reasonable charge for the care and custody of the goods.
(c) Damages for non acceptance in case seller sues him.
(d) All of the above.
(iii) Rao promises to deliver 50 bags of sugar to Bilal on 30 August 2013 on payment of a price of
Rs. 82,000. Rao dies before that date.
(a) The contract stands discharged on Rao’s death.
(b) The contract cannot be enforced either by Rao’s representatives or by Bilal.
(c) Rao’s representatives are bound to deliver 50 bags of sugar to Bilal.
(d) Bilal cannot enforce the contract as it was only a promise.
(iv) Karim borrowed Rs. 500,000 from Bashir in 2002. The debt became time-barred under the
limitation law. However, Karim met Bashir in 2009 and verbally acknowledged his liability to the
extent of Rs. 300,000. Can Bashir hold Karim liable?
(a) No, the promise should be for entire debt.
(b) Yes, the promise is valid as an exception to agreement without consideration.
(c) No, because it is not a written and signed promise.
(d) Yes, he admitted his liability partly in satisfaction of whole debt.
(v) The effect of refusal to accept a properly made offer of performance is that:
(a) The promisor is not responsible for non-performance and can sue the promisee for the breach
of contract.
(b) Such offer lapses on rejection by the offeree.
(c) The contract is rendered voidable at the option of promisor.
(d) The contract is discharged by anticipatory breach.
(05)
(THE END)
CAF 4: Business Laws
Q.1

If debtor does not intimate about which debt to settle, creditor can adjust any previous debt. However, disputed debt cannot be
adjusted.

As late payment surcharge is a disputed debt, therefore, SL cannot adjust this surcharge from payment received from APL.
Q.2
Novation:
Novation means parties agree to substitute a new contract in place of old contract. Parties to the new contract may also change.
After novation, parties cannot demand the performance of old contract.
Alteration:
Alteration means a material change in the terms of a contract, with mutual consent of the parties. Parties to the contract remain
same.
Rescission:
Rescission means cancellation of the contract by mutual consent, before the date of performance (without substitution of new
contract).
Remission:
Remission means acceptance of a lesser fulfillment of the original promise made (e.g. accepting a lesser amount of debt or
extending time for performance of contract).
Waiver:
Waiver means a person surrenders his legal right under the contract. Thus, other party is released from his obligation.
Promisee’s neglect/refusal:
If promisee does not give promisor reasonable facilities for the performance of the contract, promisor is discharged by such
neglect or refusal.
Q.3

If debtor does not intimate about which debt to settle, creditor can adjust any previous debt including time-barred debt.

The payment is correctly applied by Adil and the objection of Feroze is not valid. because Danish did not make any appropriation
of payment. Therefore, Bilal is free to decide the debt to which this payment should be applied.
A. 4
If aggrieved party subsequently accepts the late delivery of goods/services, he cannot rescind the contract. However, it can claim
Damages for loss because of delay, provided he gives notice at time of acceptance.

Contract is not voidable now because Akhtar has accepted the subsequent performance of Bushra.
However, he is entitled to compensation for damage sustained by him through Bushra's failure to sing on the sixth night provided
he gave notice at time of acceptance.
A. 5

(i) A
(ii) D
(iii) C
(iv) C
(v) A
(THE END)
Page 1 of 1
23 November 2023

Test – 6
Q. 1 Select most appropriate option in following MCQs.
(i) 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
(ii) Promises which form the consideration for each other are:
(a) joint promises
(b) unenforceable promises
(c) reciprocal promises
(d) quasi promises
(iii) Pervaiz contracted with Dilbar, a comedian, for performance in a live show and paid Rs. 200,000 in
advance. Before the show, Dilbar had an accident and was hospitalized. He could not appear in the show
due to which Pervaiz suffered a loss of Rs. 500,000. Dilbar is liable to pay Pervaiz:
(a) Rs. 200,000
(b) Rs. 500,000
(c) Rs. 700,000
(d) Nothing as his absence was not wilful.
(iv) Jahan agreed to sell two of his motorcycles to Khurram at a price to be fixed by Lehri. Lehri refused to
fix the price of the motorcycles. By that time, Khurram had taken delivery of one motorcycle. What option
is available to Jahan?
(a) Deliver the other motorcycle and demand market price for both the motorcycles.
(b) Demand return of the motorcycle from Khurram as Lehri failed to fix the price.
(c) Demand a reasonable price for the motorcycle that was delivered and need not deliver the other
motorcycle.
(d) All of the above.
(v) Rao promises to deliver 50 bags of sugar to Bilal on 30 August 2013 on payment of a price of Rs. 82,000.
Rao dies before that date.
(a) The contract stands discharged on Rao’s death.
(b) The contract cannot be enforced either by Rao’s representatives or by Bilal.
(c) Rao’s representatives are bound to deliver 50 bags of sugar to Bilal.
(d) Bilal cannot enforce the contract as it was only a promise. (05)
Q. 2 Briefly describe the rules specified in the Contract Act, 1872 in respect of the following.
(i) Time and place for performance where these have not been specified in the contract; (03)
(ii) Effect of release by promisee of one of the joint promisors. (02)
Q. 3 Under the provisions of the Contract Act 1872, explain any four rules regarding the performance of
reciprocal promises. (04)
Q. 4 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. 5 (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)
(THE END)
Answer # 1
Correct
MCQ # Correct Option MCQ # Correct Option MCQ #
Option
1 (d) 3 (a) 5 (c)
2 (c) 4 (c)
(each mcq carry 01 mark)
Answer # 2
(i)
If time is not specified in contract:

Contract must be performed within a reasonable time(0.5 mark). The question “what is a reasonable time” is a
question of fact depending on each particular case.
Further, contract must be performed on a working day and within the usual hours of business(01 mark).
If place is not specified in contract:

Promisor must apply (ask) promisee to specify place, and to perform the contract at that place(01 mark).
Promisee must specify a proper place (e.g. at warehouse or shop, and not at a public place) (0.5 mark). The
question “what is a proper place” is a question of fact depending on each particular case.
(ii)
If promisee releases a promisor, other promisors are not released automatically(01 mark). However, such
released person is liable to contribute to other promisors(01 mark).
Answer # 3
1. When promises are to be performed simultaneously (Mutual and Concurrent Promises) (0.5 mark).
When promises are to be performed simultaneously, they must be performed simultaneously(0.5 mark). A
party need not perform his promise if other party is not ready and willing to perform his reciprocal
promise(0.5 mark).
2. When the order of Performance is expressly fixed by the contract (Mutual and Dependent
Promises) (0.5 mark).
 When order of performance is fixed, promises must be performed in that order. A party need not
perform his promise if other party fails to perform his promise(0.5 mark).
 When order of performance is not fixed, such promise must be performed in the order, which the
nature of the transaction requires(0.5 mark).
3. Preventing the Performance(0.5 mark): (Promisee’s neglect/refusal)

If promisee does not give reasonable facilities or prevents promisor from performing his promise:
 Promisor is discharged from his liability, and contract becomes voidable(0.5 mark).
 He can claim damages (for loss), and compensation (for work already performed) (0.5 mark).
Page 1 of 3
4. Performance of Legal and Illegal promises(0.5 mark):

 If there are alternative promises (including legal, and illegal), then only legal alternative
can be enforced(0.5 mark).
 If there are different agreements in a contract (first to do legal and then to do illegal
things), then only first legal set can be enforced(0.5 mark).
Marking Plan:
• Up to 1.25 marks for explaining each rule 5.0 marks
Answer # 4
(a)
Joint promisors are jointly and severally liable to perform the contract(01 mark).

Yes. Danish can recover entire amount of loan even only from Noman on due date(01 mark).
(b)
If all promisors die, their legal representatives are liable(01 mark).

Yes. Danish can recover loan from legal representatives of Farhan, Noman and Salman. However, The
liability of legal representatives is limited to the amount of estate of the deceased(01 mark).
(c)
If promisee releases a promisor, such released person is liable to contribute to other promisors(01 mark).

Yes. If Noman and Salman pay the debt more than their due share, then they can recover it from Farhan
even if Danish released him(01 mark).
Marking Plan:
(a) Discussing that Danish can recover the loan of Rs 600,000 from Noman. 2.0 marks
(b) Discussing that Danish can recover the loan from legal representatives jointly. 2.0 marks
(c) Identifying that Farhan can be held liable for the loan towards Noman and Salman 2.0 marks
irrespective of being released by Danish.
Page 2 of 3
Answer # 5
(i)
Unless agreed otherwise, all promisors are jointly and severely liable for promise(01 mark).
Position of Faizan:
Saiqa is liable for whole amount borrowed, and Faizan can recover reaming Rs. 150,000 from Saiqa(01 mark).
Position of Saiqa:
If Saiqa pays for more than her share, she can recover excess amount from other joint promisor
i.e. Alia(01 mark).
(ii)
Release of one joint promisor does not release other joint promisors. Promisor so released is still liable to
other joint-promisors(01 mark).
Position of Faizan:
Release of Alia does not release Saiqa. After release of Alia, Faizan can claim full amount from
Saiqa(0.5 mark).
Position of Saiqa:
Release of Alia does not release her towards other joint promisor ie. Saiqa. If Saiqa pays full amount to
Faizan, she is able to recover excess amount (Rs. 150,000) from Alia(0.5 mark).
Marking Plan:
(i)
• Identify that Saiqa and Alia are joint promisors. 1.0 mark
• Discuss that Faizan can demand remaining from Saiqa. 1.0 mark
• Discuss that Saiqa may subsequently recover paid amount from Saiqa 1.0 mark
(ii)
• Identify that Saiqa and Alia are joint promisors. 1.0 mark
• Discuss that Faizan can recover full payment of loan from Saiqa. 0.5 mark
• Discuss that Saiqa may subsequently recover Rs 150,000 from Alia 0.5 mark
(THE END)
Page 3 of 3
30 November 2023
BUSINESS LAW
Test – 7
Q.1 Select the most appropriate options:
(i) It is based upon the principle that no one shall be allowed to enrich himself at the expense of another:
(a) Implied contract
(b) Express contract
(c) Quasi contract
(d) None of these
(ii) Quantum meriut means:

(a) An instrument having equal importance in the eye of law.
(b) Value of work which can be recovered by the plaintiff.
(c) An act performed with honesty.
(d) Beyond the scope of the case.
(iii) Which of the following is NOT the right of the finder of lost goods?
(a) To sue for reward announced by the owner of the goods.
(b) To sell the goods if owner is not found and the goods are of perishable nature.
(c) To sue for the recovery of expenses incurred by him.
(d) To exercise lien over goods for expenses incurred by him.
(iv) 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
(04)
Q.2 Under the provisions of the Contract Act, 1872 describe constructive contracts and identify the circumstances
in which a constructive contract may be formed. (05)
Q.3 (a) In case of each of the following situations, state the conditions, as specified under the Contract Act, 1872
which must be fulfilled to make a binding contract.
(i) In February 2014, Raheel promised to pay Rs. 300,000 to Sameer against a debt of Rs. 500,000 which was
due for payment in March 2010. (03)
(ii) Shazia promised to pay Rs. 100,000 to her brother Rauf on account of his University fees for three years.
(03)
(b) Maya paid the electricity bill of her neighbour Wasi to avoid disconnection. Later, she claimed the amount
of the bill from Wasi. Explain whether Maya is entitled for the claim. (04)
Q.4 Under the provisions of Contract Act, 1872, what are the duties of the finder of lost goods? Under what
conditions a finder of goods can exercise his right of sale? (03)
Q.5 Imran contracted with Yousuf for taking bricks to the second floor of Yousuf’s under construction house.
However, stairs to the second floor were blocked as Yousuf had dumped some construction materials on the
stairs. Discuss the rights of Imran. (03)
Q.6 Omair did not pay rent of his shop for 3 months. Qasim, a mutual friend, with the good intention of mending
the relationship between Omair and the landlord, paid the rent. After a year, Omair promised to repay Qasim.
With reference to the relevant provisions of the Contract Act, 1872 explain whether Qasim can enforce this
promise. (03)
(THE END)
Answer # 1

1. (c)
2 (b)
3 (c)
4 (c)
(each MCQ carry 01 mark)
Answer # 2
Constructive Contract:
A quasi contract is not an actual contract between parties, it is created by law on the basis of principle of
equity i.e. “no one should get benefit at the expense of other”.
Types of Constructive Contracts:

1. Necessaries Supplied to Minor or Person of unsound mind:
If a person supplies necessities of life to a minor or lunatic or to their dependents, he can recover the
reasonable price from the property of such incompetent person.
2. Money Paid for Another Person by Interested Person:

If an interested person pays the legal obligation of another person, he is entitled to recover the amount from
that another person.
3. Non-Gratuitous Act:
If a person lawfully provides goods or services to another person, without intention to do it gratuitously, he
can recover compensation (or restore things).
4. Finder of Goods:
Finder of the lost goods is responsible to:
 take care of goods, and
 take reasonable steps to trace its true owner.
5. Money paid by Mistake or Under Coercion:

A person to whom money has been paid, or something delivered by mistake or under coercion, must repay
or return it.
Marking Plan:
• Describing constructive contracts. 01 mark

• Up to 01 marks for identifying each circumstance. 04 mark
Page 1 of 3
Answer # 3
(a)
(i) This is an agreement to pay a time-barred debt(0.5mark). It can be enforced if:

 Debt cannot be recovered because of law of limitation(01 mark), and
 It is made in writing(0.5mark), and
 Signed by debtor or his authorized agent(01 mark).
(ii) This is an agreement made on account of natural love and affection(01 mark). It can be enforced if it is:
 Between parties having a near relation to each other(0.5 mark), and
 Made on account of natural love and affection(0.5 mark), and
 Expressed in writing(0.5 mark), and
 Registered under the law for registration of documents(0.5 mark).
(b)

If an interested person pays the legal obligation of another person(0.5 mark), he is entitled to recover the
amount from that another person, if following conditions are satisfied:
 Payment must be such as the other party was bound by law to pay(01 mark).
 Payment should be bonafide for the protection of interested party’s own interest(01 mark).

Maya can recover the amount from Wasi if she paid the amount as interested party(1.5 mark).
Answer # 4
Duties of finder of lost goods:

Finder of the lost goods is responsible to:
 take care of goods as much as a man or ordinary prudence would take of his own goods(01 mark), and
 take reasonable steps to trace its true owner(01 mark).
Right of Sale:
Finder of the lost goods has rights to sell goods when goods are of perishable nature(0.5 mark), or when the
lawful charges amount to 2/3rd of value of goods(0.5 mark).
Answer # 5

If a party prevents the other party to complete the contract, contract becomes voidable at the option of
aggrieved party(01 mark), and aggrieved party can claim compensation from other party(01 mark).

Imran can claim damages from Yousuf(0.5 mark) for any loss which he may sustain in consequence of the non-
performance of the contract(0.5 mark).
Page 2 of 3
Answer # 6

An agreement to compensate for past voluntary services is valid, even if without consideration(01 mark).

Although the rent payment by Qasim is not a payment by interested party(01 mark), however, Qasim can still
receive the past voluntary payment because Omair has subsequently agreed to repay this amount to
Qasim(01 mark).
(THE END)
Page 3 of 3
06 December 2023
Additional reading time – 5 minutes

Term Test – 1
(i) Answer all EIGHT questions.
(iii) Attempt each question on fresh page.
Q.1 Karim bought a textile mill from Laeeq on his assurance and a certificate from Registrar that
the mill and its assets were free from any encumbrance. Later, Karim received a notice for
payment of mortgage dues and found that the certificate of Registrar was forged by Laeeq.
What rights are available to Karim under the Contract Act, 1872? (04)
Q.2 (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. (04)
(b) In view of the provisions of Contract Act, 1872 explain the general rule “Agreement in
restraint of legal proceedings is void”. State the exceptions to the above rule.
(04)
Q.3 Bushra enterd into a contract with Akhtar, the manager of a radio programme, to conduct a
show, twice a week, during the next three months. Bushra did not appear for the sixth show.
She conducted the next show but soon thereafter Akhtar rescinded the contract and
informed her that her services were no longer required as she failed to conduct the sixth
show. Narrate the rights of Akhtar and Bushra in the above situation. (05)
Q.4 Talib was indebted to Bashir for Rs. 10,000. On Talib’s request Bashir agreed to accept
Jahangir as his debtor, in place of Talib. Jahangir failed to make payment on due date.
Under the provisions of Contract Act, 1872 you are required to explain whether Bashir can
now demand payment from Talib. (02)
Q.5 Briefly explain five rules regarding performance of reciprocal promises under the provisions
of the Contract Act, 1872. (05)
Q.6 Identify the situations in which the consent is said to be free. List the various modes in
which a contract may be discharged under the provisions of Contract Act, 1872. (05)
Q.7 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:
(a) 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)
(b) 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.8 Tariq was seriously ill and needed money for his operation. Murad agreed to lend him Rs.
100,000 at 15% per annum. The rate of interest prevalent in the market was 10% per annum.
Later, Tariq refused to pay interest in excess of 10% claiming that he entered into the
agreement under undue influence of Murad. Do you agree with Tariq? Explain with
appropriate reasons. (05)
(THE END)
Suggested Solution – Term Test # 1
A. 1

If consent is not free, Contract is voidable at the option of aggrieved party.(01 mark)

This contract is voidable the option of Karim, because Consent of Karim was not free as it was caused
(01 mark)
by fraud . However, contract will not be voidable if Karim could have discovered the truth with
ordinary diligence. (01 mark)
(01
Karim can claim damages from Laeeq if he rescinds the contract, or even if he insists on performance
mark)
.
A. 2
(a)
Aggrieved party cannot rescind the contract in following cases:
1. If aggrieved party had the means of discovering the truth with ordinary diligence.(01 mark)
(01 mark)
2. If aggrieved party did not act on the basis of misrepresentation.
3. If aggrieved party takes a benefit under the contract after becoming aware of misrepresentation(01
mark).
4. If an innocent third party acquires interest in the property in good faith for consideration.(01 mark)
5. If the parties cannot be restored to their original position.(01 mark)
Marking Plan:
• 01 mark for describing each situation where contract obtained by misrepresentation 4.0 marks
cannot be rescinded.
(b)
In following cases, agreements in restraint of legal proceedings are valid.
1. Parties can agree to refer dispute between them to Arbitration.(01 mark)
(01
2. Parties can make an out-of-court settlement, and may submit arbitration agreement to court.
mark)
3. Parties can agree that they will not file an appeal in upper court of law.(01 mark)
(01 mark)
4. Parties can choose any one court of law (between equally competent courts) to file suit.
Marking Plan:
• 01 mark for describing each exception to the general rule. 4.0 marks
A. 3
Page 1 of 4
If aggrieved party subsequently accepts the late delivery of goods/services, he cannot rescind the
(01 mark)
contract . However, it can claim Damages for loss because of delay, provided he gives notice at
time of acceptance.

(01
Contract is not voidable now because Akhtar has accepted the subsequent performance of Bushra
mark)
. However, he is entitled to compensation for damage sustained by him through Bushra's failure to
(01 mark) (01 mark)
sing on the sixth night provided he gave notice at time of acceptance .
A. 4

(0.5 mark)
After novation, parties cannot demand the performance of old contract .

(0.5 mark)
Bashir cannot demand payment from Talib because original contract between Bashir and Talib
(01 mark)
ended when Bashir accepted Jahangir as his debtor.
A. 5
1. When promises are to be performed simultaneously (Mutual and Concurrent Promises):

Such promises must be performed simultaneously. A party need not perform his promise if other
party is not ready and willing to perform his promise.
2. When the order of performance is expressly fixed by the contract (called Mutual and
Dependent Promises).
Such promises must be performed in the order specified. A party need not perform his promise if
other party fails to perform his promise.
3. Where the order is not expressly fixed by the contract (called Mutual and Independent
Promises).
Such promise must be performed in the order, which the nature of the transaction requires.
4. Illegal promise:
 If there are alternative promises (including legal, and illegal), then only legal alternative
can be enforced.
 If there are different agreements in a contract (first to do legal and then to do illegal
things), then only legal set can be enforced.
5. Refusing/Neglecting/Preventing party to perform the promise:

If one party prevents the other from performing his promise, aggrieved party has following
remedies:
 Contract becomes voidable at his option.
Page 2 of 4
 Damages for breach of contract

 Compensation, for part of work already performed (on the basis of Quantum Meruit)
Marking Plan:
• 1.25 marks for explaining each rule. 5.0 marks
A. 6
Free Consent:
Consent is said to be free when it is not caused by (a) coercion, or (b) undue influence, or (c) fraud, or (d)
misrepresentation, or (e) mistake".
Modes of discharge of contract:

1. Discharge by Performance
2. Discharge by Mutual Agreement
a. Novation
b. Alteration
c. Rescission
d. Remission
e. Waiver
f. Promisee’s neglect/refusal
3. Discharge by operation of law
a. By Death
b. By Insolvency
c. By Unauthorised Material Alteration
4. Discharge by Impossibility of Performance
a. Initial Impossibility
b. Supervening Impossibility
5. Discharge by lapse of time
6. Discharge by Breach of contract
a. Actual Breach of Contract
b. Anticipatory Breach of Contract
Marking Plan:
• 01 mark for explaining free consent. 1.0 mark

• 01 mark for mentioning each mode 4.0 marks
A. 7
(a)
If consent is not free, contract is voidable at the option of aggrieved party.

In this situation, actor has caused coercion when he threatened to damage the products. Therefore,
consent is not free and this contract is voidable at the option of BT.
Page 3 of 4
(b)
For a valid contract, its terms and conditions must be certain.

In this situation, BT agreed to give either 10% or 15% discount which shows that price has not been
finalized for television sets. Therefore, no valid contract has been formed due to uncertainty. HL cannot
hold BT liable for breach of contract.
Marking Plan:
(a) 2.0 marks

• Discussing contract was established under coercion without free consent 1.0 mark
• Identifying that the contract is voidable at the option of BT
(b)
• Identifying that agreement is void due to uncertainty of price 2.0 marks
• Discussing that BT cannot be held liable towards HL 1.0 mark
A. 8

If consent is not free, Contract is voidable at the option of aggrieved party.(01 mark)

Agreement to pay interest @ 15% is voidable at the option of Tariq if his consent was not free and was
(01 mark)
caused by Undue Influence.
(01 mark)
However, law does not presume undue influence in the case of creditor and debtor , therefore, it
(01 mark)
is Tariq who will have to prove that undue influence was exercised.
If Tariq fails to prove undue influence, agreement will remain valid and he will have to pay interest @
(01 mark)
15%.
(THE END)
Page 4 of 4
14 December 2023
Additional reading time – None.
BUSINESS LAW
Test – 8
Q.1 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. (06)
Q.2 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. (02)
Q.3 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)
Q.4 (a) Taqi, Aziz, Zohair and Ikram are partners in Moon Enterprises, an unregistered firm, engaged in trading
business. Ikram contracted on behalf of the firm to supply two tons of sugar to Mohsin in special bags of eight
kg each. However, Ikram packed the sugar in bags of ten kg each. Consequently, Mohsin accepted the sugar
but refused to pay the full amount resulting in a loss of Rs. 52,000 to the firm.
In the light of the provisions of Partnership Act, 1932 explain the following:
(i) Can Zohair file a suit against Ikram for the recovery of the loss as it was caused due to Ikram’s mistake? (03)
(ii) Can Moon Enterprises file a suit against Mohsin for the recovery of the full amount? (03)
(b) The partners in a firm had decided that no partner shall have the right to buy or sell goods beyond the value
of Rs 500,000 without the consent of other partners. Owing to a sudden slump in the market, the prices crashed
and one of the partners, in order to save the firm from loss, sold all the perishable stock worth Rs. 700,000
without consulting the other partners. Is the firm bound to honour this transaction? (03)
Q.5 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)
(THE END)
Answer # 1
Analysis of the situation:

Arif has expressly given Moiz authority to manage his business. Therefore, Moiz is acting as agent of
(01 mark)
Arif .
Liabilities of Arif towards Moiz:

 Agent has authority to do acts to protect his principal from loss in case of emergency. Therefore, Arif
(01 mark)
should compensate Moiz with respect to repair charges of deep-freezer . Arif should also bear
the discount offered by Moiz as it was offered to protect principal from loss during emergency situation
(01 mark)
.
 It is also right of agent to receive remuneration for his services. Therefore, Arif should pay reasonable
(01 mark)
remuneration Moiz for his services in the business of agency.
Rights of Arif against Moiz:

Agent has duty to act in accordance with instructions of Principal. Selling of meat at discounted rate was
(01 mark)
necessary when freezer was not working properly. However, Moiz exceeded his authority when
he continued to sell the meat at discounted rates. In this case, if Arif does not ratify Moiz’s act, he has right
(01 mark)
to recover loss occurred from Moiz.
Answer # 2
(0.5 mark)
KRL has pretended itself to be an agent of GB without knowledge and authority of GB . As act
had been done without authority from GB, GB has two options i.e. either to ratify the act or disown the
(0.5 mark)
act.
If GB ratifies the act:

Ratification will have same effect as if the act had been performed with his authority. KSL will have no
(0.5 mark)
liability in this case.
If GB disowns the act:

Contract will be between KRL and Tameer Associates. KRL will compensate Tameer Associates if any loss
(0.5 mark)
is suffered to them due to breach of contract.
Answer # 3
Nature of contractual relationship between Fauzia and Mirza Baig:

Fauzia is acting on behalf of Mirza Baig at his shop, therefore, the relationship between both is of Principal
(01 mark)
and Agent.
Duties Breached by Fauzia:

Fauzia has breached duty by:
(01 mark)
1. displaying and selling her own items using her principal’s resources.
(01
2. selling items at a rate higher than recommended by Mirza and keeping extra amount to herself.
mark)
Rights available to Mirza Baig:

(01 mark)
1. Mirza can take back all the profits earned by Fauzia from selling her own items.
(01 mark)
2. Mirza can also take back the amount extra charged by Fauzia on selling his principal’s items.
Answer # 4
(a)
(01 mark)
(i) Every partner has duty to attend diligently to his duties in the conduct of the business . If a loss is
(01 mark)
occurred due to negligence of a partner, it is his duty to compensate firm.
(01 mark)
Therefore, Zohair can file suit against Ikram and recover the loss from him.
(ii)
(01 mark)
Yes, firm can recover the amount from Mohsin , As Mohsin has accepted the sugar, therefore he is liable to
(01 mark)
pay . However, Mohsin can claim damages by stating his intention at time of accepting delivery on deviated
(01 mark)
terms.
(b)
(01 mark)
The firm is bound to honour an act of the partner (even if he is not authorized to do so in ordinary
(01 mark)
circumstances).which is done to protect the firm from loss provided it is an act which a man of ordinary
(01 mark)
prudence will perform under similar circumstances.
Answer # 5
(01
Any act done by a partner on behalf of the firm which falls within his implied authority binds the firm unless
mark) (01 mark)
, the person with whom he is dealing knows about the restriction.
(01 mark)
Under the given scenario, the firm and all the partners are jointly and severally liable to pay the entire
(01 mark)
amount to Wajid as he was unaware of any such restriction on partners authority.
(THE END)
21 December 2023
BUSINESS LAW
(i) Answer all THREE questions.
Test – 9
Q.1 Select most appropriate option.
(i) Choose the INCORRECT statement. In the absence of a contract to the contrary,
(a) A partner is not entitled to receive remuneration for taking part in the conduct of the business
(b) The partners are entitled to share profits equally
(c) The partners are entitled to interest on capital subscribed by them
(d) A partner shall indemnify the firm for any loss caused to it by his willful neglect (01)
(ii) A new partner can be admitted into a firm:

(a) With the consent of majority of the partners.
(b) With the consent of all the partners.
(c) With the consent of senior most partner.
(d) With the consent of a court. (01)
(iii) The implied authority of a partner does NOT empower him to:
(a) Submit a business dispute to arbitration
(b) Withdraw a suit filed on behalf of the firm
(c) Open a banking account on behalf of the firm
(d) All the above (01)
(iv) 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 (01)
(v) 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 (02)
(vi) 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)
Q.2 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.
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. Being the consultant of DT, consider the
following matters under the Partnership Act, 1932:
(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)
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 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 w uh 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)
(THE END)
Answer # 1

(i) c
(ii) b
(iii) d
(iv) a
(v) c
(vi) b
Answer # 2
(i)
No partner is allowed to draw any salary from partnership, unless agreed between partners.

Noman’s view point is not valid. If salaries to partners are not agreed between partners, no salary will be given
either to Salim or Noman.
However, if partners agree, Salary can be given to Salim or Noman.
(ii)
A partner cannot engage in competing business, without consent of other partners.

Salim’s view point is not valid. No profit of Noman’s family business will be paid to DT as Noman had already
disclosed his interest in competing family business.
[Note for Students: whether Denim Fabric is competing business with Velvet Fabric is a question of judgment, however, decision
remains same whether it is considered as competing business or not]
(iii)
A partner is entitled to receive interest on loans or advances given to firm @ 6% p.a. or as agreed

Ahmed’s view point is not valid. Although he is entitled to receive interest on advance given to firm, however,
interest will be given @ 6% i.e. 900,000 * 6% * 4/12 = 18,000 (instead of Rs. 27,000).
(iv)
Goodwill is a partnership property and every partner has right on it.

Noman’s statement is incorrect. Unless agreed otherwise between partners, other partners can use the brand name
if Noman leaves the partnership.
Marking Plan:
(i)
• Discuss that Noman’s disagreement with Salim’s Salary is valid 1.5 marks
• Discuss that salary can be paid to Noman if all partners agree 1.5 marks
(b)
• Discuss when Noman is liable to pay personal profit to other partners 2.5 marks
• Identify that Salim’s argument is not valid 0.5 mark
(c)
• Discuss that maximum 6% interest per annum may be paid on such payment 2.0 marks
• Conclude that Ahmed is entitled to receive profit of Rs. 10,000 1.0 mark
(d)
• Discuss that property of the firm includes goodwill 1.0 mark
• Conclude that Noman’s claim on DT’s goodwill is not Valid 2.0 marks
Answer # 3
(a)
In partnership, decisions are taken on the basis of majority of votes. However, to change nature of business, consent
of all partners is required.

(i)
Reduce material cost by using low-quality leather in production.
This decision relates to day to day business operations, and is to be made by majority of votes. This proposal cannot
be executed even if Akmal agrees with the proposal as Akmal is a silent partner and Salam (either alone or with
Akmal) does not have vote of majority.
(ii)
Discontinue production activities and invest KTC's capital in real estate.
This decision relates to change in nature of business, and is to be made with consent of all partners. As Nadir does
not give his consent, therefore, this proposal cannot be executed even if Akmal agrees with it.
(b)
Which type of partnership is suitable for Zara:

Zara wants to create partnership for a specified period of 5 years. Therefore, “Particular Partnership” is suitable
for her. Under such partnership, a period is specified in the partnership deed and partnership ends on expiry of
such specified period.
Statutory rights and duties of both Zara and Zaheer which can be restricted or extended:
Rights of Partners which can be modified through agreement:
1. Right to take part in the conduct of the business.
2. Right to be consulted.
3. Right of access to books or accounts.
4. Right to share profits equally.
5. Right to receive interest on capital.
6. Right to receive interest on advance.
7. Right to be indemnified.
8. Right to retire.
9. Right of outgoing partner (to receive interest @ 6% or share of profit.
10. Rights of partners after a change in firm (remain same as were before the change)
Duties of Partners which can be modified through agreement:

1. Duty to use firm’s property exclusively for the firm:
2. Duty not to engage in competing business:
3. Duty not to assign/transfer his interest:
4. Duty to contribute to the losses:
5. Duty to indemnify for willful neglect:
6. Duty to perform diligently his duties:
7. Duty to work without remuneration:
Marking Plan:
(a) Discussing the possibility of executing the proposals presented by Salman:
• If Akmal agrees with proposal no. (i) only 3.0. marks
• If Akmal agrees with proposal no. (ii) only 3.0. marks
(b)
• Discussing the type of Partnership suitable for Zara 1.0 mark
• 0.5 mark for discussing each statutory right/duty of Zara and Zaheer which can 7.0 marks
be restricted/extended in Zara’s favour in respect of Zaheer Bridals.
(THE END)
28 December 2023
BUSINESS LAW
Test – 10
Q.1 On 1st April 2022, Bilal, Umar, Ayesha, and Farah formed a partnership to operate a software development
company named 'ByteWise Solutions' in Karachi, Pakistan. The partnership agreement stated that in the
event of any partner's death, their next of kin would be admitted to the benefits of the partnership.
Tragically, on 20th May 2022, Farah passed away in an unexpected incident. Her 17-year-old son, Hasan,
was subsequently admitted to the benefits of ByteWise Solutions. Hasan's 18th birthday is approaching on
15th January 2023.
Advise Hasan regarding his rights and liabilities in respect of ByteWise Solutions upon reaching the age of
majority. (05)
Q.2 Adeel, who runs a successful electronics store, has a close relationship with Khalid, a reputed investor in
Lahore. Adeel, claiming to be Khalid's business partner, approached Raza, a well-known supplier of
electronic goods, to purchase a large quantity of high-end laptops for his store expansion. Raza, believing
Adeel's claim about his partnership with Khalid, agreed to the sale on credit. However, Adeel failed to make
the payment, leading Raza to sue Khalid for the recovery of the debt.
Discuss, under the Partnership Act, 1932, whether Khalid is liable to pay the outstanding amount to Raza.
(04)
Q.3 Kamran, Ali, and Raza were partners in a construction company named 'BuildCon Associates'. On 15th July
2017, Kamran was declared bankrupt by the court. Under the provisions of the Partnership Act, 1932,
determine whether Kamran can still be considered a partner in 'BuildCon Associates' after his bankruptcy.
Additionally, also discuss the effects of such a declaration on Kamran’s obligations. (03)
Q.4 Saad, Bilal, and Usman are partners in a company called 'SkyHigh Enterprises'. Without informing Bilal and
Usman, Saad sold a valuable piece of the company's land to his acquaintance, Zohaib, and misappropriated
the funds received from the sale.
Determine, with reference to Partnership Act, 1932, the legal options available to Bilal and Usman. (06)
Q.5 In a partnership firm consisting of X, Y, and Z, an agreement was made with Supplier E to deliver certain
electronics on credit. However, before the delivery, Z passed away. Unaware of Z’s death, E went ahead and
supplied the electronics as agreed. Later, X and Y both faced financial difficulties and were unable to pay E.
Can E can hold Z’s estate liable for the debt incurred after Z’s death? (03)
Q.6 M, N, and O are partners in a business called 'Optima Solutions'. O is a silent partner in the firm. N and O
decide to retire, and M continues to run the business. Subsequently, M encounters financial troubles and
becomes insolvent. 'Alpha Bank', a creditor of 'Optima Solutions', unaware of the retirement of N and O,
attempts to hold them accountable for the debt.
Can N and O are liable for the debt incurred by M after their retirement. (04)
(THE END)
A.1
Hasan will reach the age of majority on 15th January 2023. (0.5 mark) He has a six-month window from this
date, i.e., until 14th July 2023, to publicly announce his decision regarding his partnership status (0.5 mark)
in ByteWise Solutions. He must decide whether:
i. To elect to become a full partner in the firm, (0.5 mark) or
ii. To elect not to become a partner in the firm. (0.5 mark)
If Hasan elects to become a partner:

i. He will inherit the share in the property and profits of ByteWise Solutions that was originally Farah’s. (0.5
mark)
ii. He will also become personally liable for all actions and dealings of the firm from the date he was admitted
to the benefits of the partnership as a minor. (0.5 mark)
If Hasan chooses not to become a partner:

i. His status as a minor in the firm will continue until he issues the public notice of his decision. (0.5 mark)
ii. He will not be liable for any actions of the firm that occur after the date of his public notice. (0.5 mark)
iii. He is entitled to his share of the profits and property accrued up to the date of the notice and can legally
pursue claims against the other partners for this entitlement. (01 mark)
A.2
A person may be deemed liable as a partner if:
i. They represent themselves, or allow others to represent them, as a partner in a firm, (01 mark) and
ii. A third party extends credit to the firm based on this representation. (01 mark)
1. If Khalid was aware of Adeel’s representation and permitted it:

Khalid would be considered a partner by estoppel. In this scenario, he would be liable to pay the
outstanding amount to Raza. (01 mark)
2. If Khalid was unaware of Adeel’s representation, or did not permit it:

Khalid would not be considered a partner by estoppel in this case. Therefore, he would not be liable for
the outstanding amount owed to Raza. (01 mark)
A.3
Status of Kamran as a Partner:
According to the Partnership Act, 1932, Kamran ceases to be a partner in 'BuildCon Associates' from the
date the court declared him bankrupt, i.e., 15th July 2017. (01 mark)
Effects of the Bankruptcy on Kamran:

i. Post-bankruptcy, Kamran is not responsible for any actions taken by 'BuildCon Associates' after 15th July
2017. (0.5 mark)
ii. Similarly, 'BuildCon Associates' is not liable for any of Kamran’s actions after the date of his bankruptcy.
(0.5 mark)
iii. However, Kamran’s estate remains liable for any debts or obligations incurred before his bankruptcy on
15th July 2017 (01 mark).
A.4
1. If Saad did not have express authority to sell the immovable property:

A partner does not inherently have the authority to transfer immovable property belonging to the firm.
(1.5 mark)

'SkyHigh Enterprises' is not liable for Saad's unauthorized act. Zohaib must pursue legal action against
Saad individually for any grievance. (1.5 mark)
2. If Saad had express authority to sell the immovable property:

If a partner, acting within their apparent authority, receives money from a third party and misapplies it,
the firm is liable. (01 mark) The partner who commits the wrongful act must bear the entire loss and indemnify
the firm. This loss cannot be distributed among all partners. (01 mark)

i. Bilal and Usman have the right to demand indemnification from Saad. (0.5 mark)
ii. Additionally, they can consider dissolving the partnership due to Saad’s fraudulent actions. (0.5 mark)
A.5

The estate of a deceased partner is not liable for any actions of the firm that occur after the partner's death.
(01 mark)
This holds true even if there is no public notice given about the death. (0.5 mark)

E cannot hold Z’s estate liable for the debt incurred after Z’s death. (0.5 mark) The liability for the debt rests
with the surviving partners, X and Y, and their ability to pay, not with Z’s estate. (01 mark)
A.6

If an active partner retires without publicly announcing their retirement, and their name continues to be
associated with the firm, they can be held liable to third parties. (02 marks)

i. N, being an active partner, will be liable to 'Alpha Bank' if he did not issue a public notice of his retirement.
(01 mark)
ii. O, as a silent partner, will not be liable for debts incurred after his retirement, provided the retirement
was properly communicated or is evident from the circumstances. (01 mark)
(THE END)
04 January 2024
BUSINESS LAW
(i) Answer all SEVEN questions.
Test – 11
Q.1 Under the provisions of the Negotiable Instruments Act, 1881 briefly describe payment in due
course. (04)
Q.2 A made out a cheque writing “Pay to B” and delivered the same to him. Afterwards, B put his
signature on the back of the cheque and delivered it to C.
You are required to briefly explain:
(i) The bearer and order instruments and how they can be negotiated.
(ii) What type of endorsement has been made by B?
(iii) Whether C is entitled to receive the payment of cheque. (06)
Q.3 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)
Q.4 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)
Q.5 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) Saqi draws a bill payable to Zubair or order. Zubair indorses it to Habib without adding the
word ‘or order’ or any equivalent words thereof. Advise whether Habib may further negotiate the
instrument. (02)
(b) A drew a bill payable by B which is due after three months. It passed through several hands
before X became its holder. On presentation by X, B refused to pay the bill. Discuss the rights of
X. (03)
Q.7 (a) Wali made a promissory note in favour of Yaseen for an amount of Rs. 50,000. Wali died
and the note was found by Wali’s brother among his papers which he delivered to Yaseen.
Yaseen sued Wali’s legal representative.
In the light of the provisions of Negotiable Instruments Act, 1881 you are required to explain
whether Yaseen can recover the amount. (02)
(b) A bill was drawn payable to ‘Ahmed or order’. It was lost subsequently. Basheer who found
the bill forged Ahmed’s signature and endorsed it to Chawla who took it for value and in good
faith.
Can it be considered payment in due course if drawee paid the amount to Chawla? (04)
(THE END)
A.1
Payment in due course means payment which fulfills following conditions:
1. Payment in accordance with apparent tenure of the instrument:
Payment must be made on or after maturity. Payment made before maturity in not a payment in
due course. (01 mark)
2. Payment in good faith and without negligence.
Payer must honestly believe that person demanding the payment is legally entitled to it. There
must be no suspicious about his title. (01 mark)
3. Payment to a person who is in possession of the negotiable instrument. (01 mark)
4. Payment in money only (or in cheque or other medium if holder agrees to accept it). (01 mark)
A.2
(i)
Bearer Instrument:
Bearer instrument means an instrument which is expressed to be payable to bearer, or on which last
endorsement is blank. (01 mark)
It can be negotiated by mere delivery. (01 mark)
Order Instrument:
If a negotiable instrument is payable to a particular named person or at his order, it is called Order
Instrument. (01 mark)
It can be negotiated by endorsement and delivery. (01 mark)
(01 mark)
(ii) B has made blank endorsement in which endorser only signs. By blank endorsement, this
instrument has now become bearer instrument. (01 mark)
(iii) Yes. C is the holder of a bearer instrument. (01 mark) He is entitled to receive the amount of cheque
provided he receives it in good faith and for consideration. (01 mark)
A.3
A paying bank shall not be liable to true owner of the cheque for loss if banker makes payment in due
course. (01 mark)

This will be considered a payment in due course and banker will be discharged from liability as banks
cannot verify signatures of any person other than their customers and Saleem is not account holder of
bank. (01 mark)
A.4
A person becomes holder in due course of an instrument if he receives it in good faith, and for
consideration.
(01 mark)

Shoiab’s title was defective, and Amna received it without consideration therefore Aamna is not a holder
in due course. (01 mark) However, as landlord has received the cheque in good faith for consideration
(assuming he did not have knowledge of defective title of Aamna) from Aamna, he becomes holder in
due course and is entitled to recover the amount of the cheque. (01 mark)
A.5
A person becomes holder in due course of an instrument if he receives it in good faith, and for
consideration. (01 mark)

(i) Kallash has received the promissory note in good faith and for consideration, therefore Sakhi is liable
to pay Rs. 150,000 to Kallash. (01 mark)
(ii) Chaplousy has not received promissory note for consideration, therefore, he does not become holder
in due course. Sakhi is liable for Rs. 100,000 only. (01 mark)
(iii) Ayyash has received the promissory note in good faith and for consideration, (0.5 mark) therefore Sakhi
is liable to pay to Ayyash but only maximum amount covered by stamp i.e. Rs. 200,000. (01 mark)
A.6
(a)
An instrument becomes an order instrument even if only name of the endorsee is written on it. (01 mark)

Habib can further negotiate the instrument. (01 mark)
(b)
Upon acceptance, drawee becomes liable to pay the bill according to its tenor. (01 mark)

X can claim the amount of bill from B who is the principal debtor. (01 mark)
When B refused to pay or is unable to pay, X can claim the amount from all intervening parties who
transferred/endorsed the instrument. (01 mark)
A.7
(a)
Voluntary delivery is necessary for a negotiable instrument (or its negotiation). (01 mark)

As maker of the note (Wali) did not make voluntary delivery to Yaseen, therefore Yaseen cannot recover
the amount on the basis of this instrument. (01 mark)
(b)
Bill of Exchange, if paid without enquiry as to the payee will be considered negligence and the payment
will not be treated as payment in due course. (02 marks)

If Drawee paid amount after making due inquires and being satisfied that Chawla is entitled to receive
the payment, this will be considered a payment in due course. (02 marks)
(THE END)
11 January 2024
Additional reading time – 08 minutes
BUSINESS LAW
(i) Answer all ELEVEN questions.
Term Test – 2
Q.1 Under the provisions of the Negotiable Instruments Act, 1881 explain different types of crossing
of cheque along with their respective effects. (06)
Q.2 Bromine Traders (BT) is engaged in the business of import, purchase and supply of electronic
items. During the year, BT entered into the following contract for supply of products.
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)
Q.3 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)
Q.4 Marvi, Zahid and Ahmed were partners in a firm of Consultants. Marvi, without informing
Zahid and Ahmed started her own business of fashion garments. Zahid and Ahmed on knowing
the fact expelled Marvi from the partnership.
Under the provisions of Partnership Act, 1932 briefly describe whether Zahid and Ahmed were
justified in their act. Would Marvi be liable for the acts of partners or the firm after her expulsion
from the partnership? (05)
Q.5 (a) What liabilities does the drawer of a bill of exchange incur under the Negotiable Instruments
Act, 1881? (01)
(b) When must a bank refuse payment against a cheque? (03)
Q.6 A borrowed Rs. 50,000 from B by giving a promissory note in his individual capacity. He used
the proceeds of the note in the partnership business. While A had gone abroad for medical
reasons, B sued the partnership as the promissory note became overdue.
With reference to both the Partnership Act, 1932, and Negotiable Instruments Act, 1881, explain
whether the firm is liable to pay the amount. Would it make any difference if A had informed B
that the borrowing was being made for the purpose of the firm? (06)
Q.7 Arif ordered certain goods based on samples received from Zahid and sent a crossed cheque
representing payment in advance. The goods arrived next day but are different from the sample.
(a) If Arif wishes to repudiate the contract, how should he proceed to stop the bank from
honouring the cheque? (02)
(b) If the bank pays despite the aforesaid notice then what will be the legal position of the bank
in relation to Arif and Zahid? (03)
Q.8 State with reasons whether the bills in the following situation will be categorized as inland or
foreign instrument
(a) A bill drawn in Lahore on a merchant of Lahore but made payable in London. (01)
(b) A bill drawn in Karachi on a merchant of London but made payable in Quetta. (01)
(c) A bill of exchange drawn in Multan on a merchant of Paris and made payable in Paris. (01)
Q.9 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.10 State with brief reasons whether the following are promissory notes or not?
(i) “I am bound to pay Rs.1,000 which I have taken from you.”
(ii) “I promise to pay B Rs.1,000 when he delivers the goods.”
(iii) “I promise to pay B Rs.1,000 after deducting therefrom any money which he may owe me.”
(iv) “I promise to pay B 100 shares and 500 debentures of ABC Ltd.” (04)
(i). 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
(ii). 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
(iii). If the finder of a lost bill obtains payment, the person who pays in due course:
(a) Is liable to all prior parties.
(b) Continues to be liable to the person who lost the bill.
(c) Does not get a valid discharge for the bill.
(d) Gets a valid discharge for the bill.
(iv). The making, acceptance or endorsement of a promissory note, bill of exchange or cheque is
completed by:
(a) Signature of maker, acceptor or endorser.
(b) Delivery, actual or constructive.
(c) Endorsement and delivery thereof.
(d) Presentment for payment.
(v). Which of the following is NOT the characteristic of a cheque?

(a) It must be in writing.
(b) It is definite and unconditional.
(c) It must be signed by the drawee.
(d) It contains an order to pay.
(05)
(THE END)
A.1
There are three types of crossing of cheques i.e. General Crossing, Special Crossing, Restrictive Crossing.
General Crossing:
Explanation: In this crossing, two parallel lines are drawn on left top corner of a cheque (with or without words “&
(01 mark)
Co”).
Effect: A generally crossed cheque is credited into account only, and is not paid in cash. (01 mark)
Special Crossing:
Explanation: In this crossing, name of a banker is added on the face of a cheque. Parallel lines are not necessary.
(01 mark)
Effect: A specially crossed cheque can be collected from drawee only by that bank whose name appears on face of
(01 mark)
cheque (or by his agent for collection).
Restrictive Crossing:
(01 mark)
Explanation: When in general crossing, words “A/C Payee” are added, it is called Restrictive crossing.
Effect: A restrictively crossed cheque must be credited only to the account of payee. It becomes “not negotiable”.
(01 mark)
A.2

(01 mark)
Default of a third party on whose work promisor relied, does not come under supervening impossibility.
In case of breach of contract, party at fault shall pay damages to aggrieved party. (01 mark)

(0.5 mark)
BT has breached the contract with IL by not supplying ovens to IL.
(0.5 mark)
BT will pay ordinary damages to IL.
A.3
(i)
If an agent exceeds his authority, transaction is not binding on principal. (01 mark)

Akmal did not authorize Noman to buy sheeps and Noman exceeded his authority. Therefore, this transaction is
not binding on Akmal. (01 mark)
 Noman is liable to Fahad, if Fahad knew that Noman is exceeding his authority. (0.5 mark)
 Noman is liable to Akmal and Akmal is liable to Fahad if Fahad did not know that Noman is exceeding his
(0.5 mark)
authority.
(ii)
If an agent exceeds his authority and principal ratifies it, transaction becomes binding on principal.

Akmal has ratified/impliedly accepted the transaction by selling the sheeps. Therefore, this transaction is now
binding on Akmal.
A.4
A partner shall not carry on:
 similar/competing business (unless allowed in partnership agreement). (0.5 mark)
(0.5 mark)
 any other business, if prohibited in partnership agreement.

Fashion garments business is not a competing business of consultancy business, therefore, Marvi can engage in such
business if not prohibited specifically by partnership agreement. (01 mark)
If partnership agreement prohibits Marvi from doing any other business:

Zahid and Ahmed are justified in their act. Marvi will also have to indemnify partnership, and will return her share
of profit from business of fashion garments. (01 mark)
If partnership agreement does not prohibit Marvi from doing other business:
Zahid and Ahmed are not justified in their act. (01 mark)
Acts of firm after expulsion of Marvi:

Marvi will not be liable for acts of firm or other partners if public notice of her exit from firm is given. (01 mark)
A.5
(a) The drawer is liable on a bill of exchange as principal debtor until the drawee accepts the bill. (01 mark)
(b) A banker must refuse payment of a cheque on:

1) notice of adjudication of the customer as an insolvent (01 mark)
2) countermand of payment (01 mark)
3) notice of the customer’s death (01 mark)
A.6

A partner can bind firm with his act provided:
1. The act must be done in the ordinary course of business of the firm and in usual way. (01 mark)
2. The act must be done as agent of the firm, in the name of the firm, or with an intention to bind the firm.
(01 mark)
Firm is not liable to pay the debt as A gave promissory note in his individual capacity i.e. it was not in the name of
the firm which indicates it was not intention of A to bind the firm. (02 marks)
If A had informed B that borrowing was being made for the purpose of the firm, then it would have meant that A
intended to bind the firm. In this case, the firm would have been liable to pay the amount of promissory note. (02
marks)
A.7
(a) Arif must countermand the payment of the cheque. He must notify bank about the details of cheque and should
instruct bank to stop the payment. (02 marks)
(b) If bank pays the cheque despite such notice, this will not be a payment in due course. Bank is liable to compensate
to Arif. (02 marks) However, bank can recover the amount from Zahid. (01 mark)
A.8
(a) Inland, as it is drawn in Pakistan and on a resident of Pakistan. (01 mark)
(b) Inland, as it is drawn in Pakistan and payable in Pakistan. (01 mark)
(c) Foreign, though it is drawn in Pakistan but is neither payable in Pakistan or to a resident of Pakistan. (01 mark)
A.9
(i) This instrument is in the nature of Promissory Note, but is not a valid promissory note because amount is
not certain (i.e. amount of interest not mentioned). (01 mark)
(ii) This instrument is in the nature of Bill of Exchange, but and it is valid if signed by drawer and drawee. (01
mark)
(iii) This instrument is in the nature of Promissory Note, but is not a valid promissory note because there is
acknowledgement of debt but no commitment to pay the amount of debt. Further, amount of interest is
also uncertain. (01 mark)
A.10
(i) This is not a valid promissory note because it is mere acknowledgement of debt but no commitment to pay.
(01 mark)
(ii) This is not a valid promissory note because it is conditional to uncertain event. (01 mark)
(iii) This is not a valid promissory note because amount to be deducted is not certain. (01 mark)
(iv) This is not a valid promissory note because it is not in money only. (01 mark)
A.11
SUGGESTED SOLUTIONS
MCQ # Correct Option MCQ # Correct Option MCQ # Correct Option
1 D 3 D 5 C
2 A 4 B 6 D
(THE END)
18 January 2024
BUSINESS LAW
Test – 12
Q.1 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)
Q.2 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)
Q.3 A cheque is drawn payable to 'B or order'. It is stolen and B's endorsement is forged. The banker pays the
cheque in due course. Is the banker discharged from liability? Would it make any difference if the drawer's
signature were forged? (03)
Q.4 Mr. Tariq Ali, a respected client of the First National Bank of Pakistan, passed away unexpectedly on the 5th
of April. His nephew and legal heir, Mr. Ahmed Khan, notified the bank of Mr. Tariq’s demise on the 15th of
April.
(i) A cheque dated 10th March, issued by Mr. Tariq Ali, was presented and honored by the bank on the
3rd of April.
(ii) Another cheque, also dated in March, was presented for payment on the 10th of April and was
subsequently paid by the bank.
(iii) A third cheque, issued in early March, was presented to the bank on the 16th of April, a day after the
bank was notified of Mr. Tariq Ali’s death, and was paid out.
Required:
Assess the validity of the bank’s actions in the above cases. (06)
Q.5 Mr. Haris Ali, a customer of the United Bank of Pakistan (UBP), issues several cheques under different
circumstances. Subsequently, various instances of cheque fraud occur, calling into question the liability of the
banks involved.
 Scenario (a): Haris issued a Rs. 15,000 cheque on UBP to Asif, with 'account payee only' crossing. A
different person, also named Asif (holding an account at Standard Bank), fraudulently obtained the
cheque and deposited it into his account. UBP honored the cheque in favor of Standard Bank, which then
credited the amount to the fraudulent Asif’s account. The fraudulent Asif withdrew the funds.
 Scenario (b): Haris issued a Rs. 15,000 cheque on UBP to Bilal, with general crossing. The cheque was
stolen by Bashir, who presented it at the UBP counter. UBP paid the amount over the counter.
 Scenario (c): Haris issued a Rs. 15,000 cheque on UBP to Bilal, with 'account payee only' crossing. The
cheque was stolen by Bashir, who altered the crossing to make it appear uncrossed. Bashir then presented
the cheque at the UBP counter, and UBP paid the amount over the counter.
 Scenario (d): Haris issued a Rs. 15,000 cheque on UBP to Asif, with 'account payee only' crossing. The
fraudulent Asif (having an account at Standard Bank) stole the cheque, deposited it into his account, and
withdrew the funds. Standard Bank then sent the cheque to UBP for collection. UBP paid Standard Bank
in due course.
 Scenario (e): Haris issued a Rs. 15,000 cheque on UBP to Asif, with 'account payee only' crossing. The
fraudulent Asif deposited the cheque into his account at Standard Bank and withdrew the funds.
Standard Bank credited the amount in good faith and without negligence before sending the cheque to
UBP for collection. UBP paid Standard Bank in due course.
 Scenario (f): Haris issued a Rs. 15,000 cheque on UBP to Bilal, with 'account payee only' crossing. Bashir
stole the cheque, altered the crossing to appear as a general crossing, and deposited it into his account at
Standard Bank. Standard Bank, acting in good faith and without negligence, collected the payment from
UBP and credited Bashir’s account, who then withdrew the amount.
Required:
Comment whether liability of any bank arises in above cases. (12)
(THE END)
Suggested Solu�on – Test # 12
Q. 1
Crossing by Holder:
(01 mark)
 If a cheque is uncrossed, holder may cross it Generally, or Specially.
 If a cheque is crossed Generally, holder may cross it Specially. (01 mark)
(01
 If a cheque is crossed generally or specially, Holder may also add words “not negotiable” on cheque.
mark)
Crossing by Banker:
If a cheque is sent to bank for collection,
 Banker may cross it Specially to himself. (01 mark)
 If cheque is crossed specially, the banker may again cross it specially to another banker as his agent for
(01 mark)
collection.
Q. 2
Effect of adding words “Not Negotiable” on a Cheque:

1. It does not restrict future transferability of cheque. (1.5 marks)
2. However, a holder with a defective title cannot transfer a good title to a subsequent holder. (1.5 marks)
Q. 3

A paying bank shall not be liable to true owner of the cheque for loss if banker makes payment in due course. (01
mark)

If signature of endorser is forged:
This will be considered a payment in due course and banker will be discharged from liability as banks cannot verify
(01 mark)
signatures of any person other than their customers.
If signature of drawer is forged:

This will not be a payment in due course and liability of banker will not be discharged from liability as banker has
(01 mark)
to verify signatures of drawer (from specimen signature) before payment.
Q. 4
1. Payment Before Death Notification (i)

(0.5 mark)
• Validity: Valid.
• Reason: The cheque was presented and paid before the demise of Mr. Tariq Ali was known to the
bank. Hence, the bank acted in good faith under the assumption of Mr. Tariq Ali’s living status.
(1.5 marks)
2. Payment After Death, Before Notification (ii)

(0.5 mark)
• Validity: Valid.
• Reason: Despite Mr. Tariq Ali’s passing, the bank was not informed until the 15th of April.
Payments made before this date are considered valid as the bank had no knowledge of the
(1.5 marks)
customer’s death.
3. Payment After Death Notification (iii)
(0.5 mark)
• Validity: Invalid.
• Reason: The payment of the cheque after the bank was informed of Mr. Tariq Ali’s death on the
15th of April renders the transaction invalid. The bank is liable and should compensate Mr.
(1.5 marks)
Ahmed Khan, the legal representative, for this oversight.
Q. 5
1. Scenario (a):
• UBP, as the paying bank, is not liable for the payment to the holder of defective title as it paid the
(02 marks)
amount in good faith and without negligence.
2. Scenario (b):
• UBP's payment of the crossed cheque over the counter is not a payment in due course. UBP is
(02 marks)
liable to Bilal for the loss.
3. Scenario (c):
• UBP's payment is in due course, as the cheque was altered in such a way that it appeared
(02 marks)
uncrossed.
4. Scenario (d):
• Standard Bank, as the collecting bank, is protected if it acted in good faith and without
negligence, received payment on behalf of a customer, and the cheque was already crossed before
(02 marks)
coming into its possession.
5. Scenario (e):
• Standard Bank is protected and not liable to the true owner (the real Asif) since protection is still
(02 marks)
available even if the amount was provisionally credited by the bank.
6. Scenario (f):
• Neither UBP nor Standard Bank is liable if they made payment in due course without negligence,
(02 marks)
as the cheque was altered in such a way that it appeared generally crossed.
(THE END)
25 January 2024
BUSINESS LAW
Test – 13
Q.1 (a) Which activities are considered an offence of money laundering. (05)
(b) State the punishment for a company and its officers if they are involved in money laundering. (04)
Q.2 Under what circumstances, State Bank of Pakistan can revoke license of a Designated Payment System (DPS).
(06)
Q.3 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)
Q.4 Define the term “Sensitive Personal Data” under Personal Data Protection Bill, 2020. (03)
Q.5 Under the provisions of the Competition Act, 2010:

(i) explain ‘Product market’ and ‘Geographic market’. (04)
(ii) list down six types of agreements that are considered as prohibited. (03)
(THE END)
CAF 4: Business Law
Q.1
(a) When is a person guilty of offence of money laundering:
A person is guilty of offence of money laundering if he knows (or having reasons to believe) that a
property is proceeds of crime (01 mark) and still:
1. Acquire, converts, possess, use or transfer such property. (01 mark)
2. Conceals the true nature, origin, location, ownership, movement of such property. (01 mark)
3. Holds or possess such property on behalf of any other person. (01 mark)
A person shall also be guilty if he participates, aids, or counsels to commit above acts. (01 mark)
(b) For Legal Persons: (i.e. company)

• If a company commits money laundering, it will be liable of fine upto Rs. 100 million. (01 mark)
• Any director, officer or employee of such legal person who is found guilty, shall be liable for. same
penalty as above for individuals. (01 mark)
For Individuals: (i.e. natural person)

If a person commits money laundering, he will be liable of:
• Imprisonment upto 10 Years (but not less than 1 year). (0.75 mark)
• Fine upto Rs. 25 million. (0.75 mark)
• Forfeiture of property involved in money laundering (or property of equal value). (0.5 mark)
Q.2 State Bank may revoke designation of a DPS if:

1. DPS ceases to operate effectively as PS. (01 mark)
2. Operator has knowingly submitted materially false or misleading information to State Bank. (01 mark)
3. Operator or Settlement Institution is in winding up. (01 mark)
4. There is violation of terms and conditions of designation. (01 mark)
5. State Bank considers it in public interest to revoke the designation. (01 mark)
State Bank shall not revoke a designation without giving notice and hearing opportunity to Operator.
However, State Bank can suspend a designation (until final order is issued) without giving notice if there is
immediate systematic risk. (01 mark)
Q.3
1. When a person, with dishonest intent, gains unauthorized access to information system or data.
2. When a person, with dishonest intent, makes unauthorized copying or transmission of data.
3. When a person, with dishonest intent, makes interference with or damaging information system or data.
4. When a person, with dishonest intent, gains unauthorized access to critical infrastructure information
system or data.
5. When a person, with dishonest intent, makes unauthorized copying or transmission of critical
infrastructure data.
6. When a person, with dishonest intent, makes interference with critical infrastructure information system
or data.
7. If someone prepares or spreads information to glorify a terrorist or an offence of terrorism or activities
of such prescribed persons/ organizations.
(01 mark for each point, subject to maximum of 05 marks)
Page 1 of 2
CAF 4: Business Law
Q.4 Sensitive Personal Data:

It means data relating to Access Controls (i.e usernames and passwords) (01 mark) which provides access to:
• Financial information (e.g bank account, debit/credit card other payment instruments) (0.5 mark)
• Password, Biometric Data (0.5 mark)
• Medical Records (including physical, psychological or mental health records) (0.5 mark)
• Religious belief, ethnicity. (0.5 mark)
Q.5
(i) Product Market:

It means all those products and/or services which are regarded as interchangeable or substitutable by the
consumer, because of product's features, prices and uses. (02 marks)
Geographic Market:
Area in which undertakings are involved in supply of goods or services and in which conditions of
competition are similar. (02 marks)
(ii) Prohibited Agreements:

1.Dividing or sharing markets for the goods or services (e.g. by territories, by volume of sales, by type of
goods).
2. Fixing the quantity of production, distribution or sale.
3. Collusive tendering or bidding for sales or purchase.
4. Fixing the purchase or sale price or imposing other restrictive trading conditions
5. Limiting technical development or investment with regard to production, distribution or sale of
goods/services.
6. Applying dissimilar conditions to equivalent transactions with other trading parties.
7. Making contract dependent on acceptance of supplementary unrelated obligations by other parties.
(0.5 mark for each point, subject to maximum of 03 marks)
(THE END)
Page 2 of 2

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CAF:04

Test Number Syllabus

Test # 2 Syllabus: Ch. # 3

Test # 3 Syllabus: Ch. # 04 [LO 1 to LO 3]

Test # 4 Syllabus: Ch. # 04 [LO 4 to LO 10]

Assessment # 1 Syllabus: Ch. # 3, 4 & 5

Test # 5 Syllabus: Ch. # 6

Test # 6 Syllabus: Ch. # 7

Test # 7 Syllabus: Ch. # 8

Term Test # 1 Syllabus: Ch. # 2 to 9

Test # 8 Syllabus: Ch. # 10, 11

Test # 9 Syllabus: Ch. # 12, 13

Test # 10 Syllabus: Ch. # 13

Test # 11 Syllabus: Ch. # 14

Term Test # 2 Syllabus: Ch. # 8, 9, 10, 11, 12, 13, 14, 15

Test # 12 Syllabus: Ch. # 15

Test # 13 Syllabus: Ch. # 14, 17, 18

CAF 4 – BUSINESS LAW

Which of the following statements is correct?

How would the contract be affected if:

MCQ # Correct Option

(a) A proposal cannot be revoked after acceptance by offeree.

Acceptance is communicated as against offeror when it is put in the course of transmission so as

(b) Relevant legal Provision:

Decision and Basis of Decision:

Relevant legal Provision:

Decision and Basis of Decision:

Relevant Legal Provision:

Decision and Basis of Decision:

(a) Decision and Basis of Decision:

(b) Decision and Basis of Decision:

CAF 4 – BUSINESS LAW

Decision and Basis of Decision:

Decision and Basis of Decision:

Relevant Legal Provision:

Decision and Basis of Decision:

Decision and Basis of Decision:

Decision and Basis of Decision:

Decision and Basis of Decision:

Decision and Basis of Decision:

Decision and Basis of Decision:

Relevant Legal Provision:

Decision and Basis of Decision:

CAF 4 – BUSINESS LAW

Q. 2 (a) Briefly discuss the concept of “consensus ad idem”. (03)

Advise Jannat Bibi. (05)

When a contract is induced by Undue Influence:

Circumstances when a person is in a position to dominate the will of other person:

Difference between Coercion and Undue Influence:

Coercion Undue Influence

Relevant Legal Provision:

Decision and Basis of Decision:

CAF 4 – BUSINESS LAW

Q. 4 Comment on legality and enforceability of agreement in each of the following situations:

Q. 6 Briefly explain whether there is valid agreement in following cases:

Answer # 1 [Adapted from Summer 2012 Attempt of PIPFA]

Decision and Basis of Decision:

Decision and Basis of Decision: