Business law

BY: Qais Wardak

BUSINESS:
Business is any legal and economic activity that involves the
production of goods and services, and buying and selling of
goods and services for the purpose of earning profit
OR
All economic activities connected with production and
exchange of goods and services to earn profit is called
business.
 Cont…
• “Business is any activity concerned with the production or exchange of goods or
with rendering (implementation, placement) of financial or other services to the
public for profit”

“Business includes all the profitable and trade activities that provides goods
And services to the people with an objective to earn profit”
 Legal forms of business ownership:
• 1-Sole proprietorship
• D.W.T Stafford defines it in the following words.
• “It is a simplest form of business which is owned and controlled by one man.”
• “Sole Proprietorship is a type of business organization in which one person owns and operates a
business.” (Mr. Martin)
Eg:
• 1. Retailer
• 2. Carpenter
• 3. Barber
• 4. Shoes shop
• 5. Restaurant
Features of Sole Proprietorship:
• Ownership
• Formation
• Capital
• Unlimited liability
• Direct relationship with customers
• Limited life
• Profit and loss
Advantages of Sole Proprietorship:
• Easy Formation
• Easy Transfer
• Entire Profit and Control
• Secrecy
• Independence
• Personal Interest
• Management
• Easy Ending
 Disadvantages of Sole Proprietorship:
• Lack of Capital
• Management Problem
• Lack of Specializations
• Unlimited Liability
• Difficulty in Expansion
• Not Durable (Hard)
 Partnership
Partnership is the relation between persons who have agreed to share profit of
business carried on by all or any of them acting for all.
Or
When two or more persons became joint owners of a business and share the profits
and losses is called Partnership”
 
 Cont…
2.Partnership:
• When two or more persons run any legal business under a contract, it is called
Partnership. The persons who formed the partnership are individually called
“partners”. And collectively they are called “firm”. This type of business was
introduced due to following shortages of sole trader ship.
I. Shortage of capital.
II. Burden of loss.
III.Failure of managing business affairs.
 Cont…
• “Partnership is the relation between persons who have agreed to share profit of
business carried on by all or any of them acting for all.”
Or
• “When two or more persons became joint owners of a business and share the
profits and losses as agreed is called Partnership”.
 Important points of partnership:
1. Partnership is the relation between two or more persons.
2. This relation is only for the purpose of business.
3. The main purpose of this business is to earn profit.
4. Profits of business are divided among the partners.
5. Partners do an agreement.
6. In partnership, every partner can take a part in the business activity.
 Features of Partnership
• Formation:
There must be at least two persons and maximum twenty to form a partnership and all such
persons must be competent (capable, able) to contract.

Management:
In a partnership business, every partner has a right to take part in its management. The
important business decisions are taken with the permission of all other partners.

 
Restriction on Transfer of Interest:
No partner can transfer his share to any other person without the prior consent or willingness of
all other partners.
 Advantages of Partnership
Distribution of Loss:
If a firm suffers a loss its loss is distributed among all the partners so single person
does not bear all the loss.
Skilled Workers:
In this business a firm can hire the services of qualified and experienced persons
due to strong financial position. It increases the profit of the firm.
Larger capital:
In Sole Proprietorship, the sources of capital remain limited. On the other hand in
Partnership every partner provides capital.
 Disadvantages of Partnership:
Delay in Decision:
• In the partnership all the decision are made by mutual consultation. Sometimes delay in
decisions becomes the cause of loss.
Misunderstanding:
• Generally there is a chance of misunderstanding and dispute among the partners. It becomes the
cause of business failure.
Limited Life of the Business:
• The life of this business is very limited. If any partner dies or new enters into the business, the
old partnership may come to an end. In case of internal differences also it can be dissolved and
liquefied.
  Lack of secrecy:
• In case of disputes among the partners the business secrets can be revealed & discovered
whereas, it does not happen in sole Proprietorship.
 Kinds of Partners
1. Active Partner:
• Active partner is the person who provides his share in capital and also takes active
part in the management. The development of business depends upon the active
partners.
 2. Sleeping Partners:
• These partners only provide capital and also share the profit and loss of the
business. A sleeping partner does not take part in the management of a firm.
3. Secret partner:
• He takes active part in the business but public does not know him as a partner of
the firm. He is liable to pay all the debts of the firm.
4. Minor Partner:
• A minor may become partner with the consent all the partners. A minor is only
admitted in the profits of the business. He has no liability of loss.
 Duties of partners

1) To be sincere(‫ستګو‬2‫ )را‬and faithful:-

• Every partner should be fair and faithful in dealing with other partners.

2) Common advantage:-
• Every partner should perform his duties for the common advantage of all the
partners.
 
3) To keep the secrecy:-
• It is the duties of the partner that he should maintain the secrecy of the business
from the other.
 Rights of partners
1)Right of profit:-
• All the partners are entitled to share the profits of the firms.
 
2)Right of opinion:-
• Every partner has right to express his opinion relating to business activities. but
the nature of business can not be change by a single partner.

3)Right of management:-
• Every partner has a right to take part in the management of the business.
 Liabilities of partners

1)Loss liability:-
• In case of loss each partner will equally contribute the loss if there is no
agreement.
2)Liability of all action:-
• All the partners of the firms are jointly responsible for all the actions done by the
firms
What is Law?
Law:
• Laws are actually rules and guidelines that are set up by the social
institutions to govern behavior of the individuals. These laws are
made by Government officials.
• Laws set out standards, procedures and principles that must be
followed.
• There are various types of laws framed like criminal laws, civil laws,
and international laws. Breaking a law is a punishable crime and has
drastic penalties such as, jail time.
Justice:
• Formations of justice are at the heart of any legal system. People will
only follow a law if they believe it is fair.
• Justice is a concept that is based on equality, honesty, ethics etc. This
concept states that all individuals must be treated equal and the
same. The term justice is a huge part of law and almost all aspects of
law are based on this concept.
• The term as a part of law suggests that law must be right and equal
for everyone
THE INSTITUTIONS OF THE LEGAL STRUCTURE
OF AFGHANISTAN:
1-The Constitution
1. A constitution arranges basic rules and principles of government
into a written document.
2. It is the supreme law of the land.
3. It create and allocate power between the legislative, executive, and
judicial branches of the government.
4. Constitution is the source of law.
Cont…
• In November 2003, a constitutional Loya Jirga was arranged, the Loya
Jirga was convened “as the supreme sign of the will of the Afghan
people… to adopt a constitution that care for the establishment of
lasting peace in Afghanistan.” 502 representatives all areas of
Afghanistan came to an agreement on January 4, 2004, and the
current Constitution came into force. The constitution is meant to be
a permanent guiding structure for the government of Afghanistan.
2- Statutory Law
• Statutes must be passed by both houses of the National Assembly and
signed by the President, after which it becomes controlling law.
Statutory law, however, is subordinate to the Constitution and can be
changed by a subsequent National Assembly and President.
• Ex: Traffic laws
• Red lights
• Drinking Wine Age of drinking
• Alcohol Buying and selling
 3- The Executive Branch:
• The executive branch of a government generally concerns the authority to
enforce the law and to ensure the laws are carried out as planned. The
executive branch of the government of
Afghanistan is made up of the President, the ministries,
 What is Business Law:
• business law is a broad set of legal rules that governs commercial and business
relations in a country. It covers contracts, company formation and suspension,
property purchase and sale, bank transactions, loan and guarantee matters, tax
difficulties, as well as dispute purpose.
• Business law is a key part of the legal structural design of a country.
 Sources of the business law in Afghanistan:
A-Formal Sources
• 1-The sharia law
• Article 3 of the 2004 Constitution, states that all commercial laws in Afghanistan
be dependable with Islam.
• Article 130 of the 2004 Constitution states that when the Constitution or other
laws do not provide guidance on a legal issue, then Hanafi jurisprudence may be
applied.
What jurisprudence means?
• the philosophy of law
• The word jurisprudence derives from the Latin term juris prudentia,
which means "the study, knowledge, or science of law." In the United
States jurisprudence commonly means the philosophy of law.
 2- The Constitution:
• On January4, 2004, a constitutional Loya Jirga approved Afghanistan’s current
Constitution. The 2004 Constitution is the supreme law of the Islamic Republic of
Afghanistan It codifies Afghanistan’s triple system of government and specifies
the powers of the Presidency, National Assembly, and Judiciary, as well as those
of the provincial administrations and the Loya Jirga itself.
 3-Statutory Law
• Under Article 94 of the Constitution, statutory law is law passed by
both houses of the National Assembly and signed by the President.
• There are several key commercial statutes and codes, Together, they
provide the framework for Afghanistan’s commercial law system.
 4-The Executive Branch
• The President, among other duties, is responsible for commanding the armed
forces of Afghanistan, convening the Loya Jirga, and appointing members of the
Supreme Court as well as Ministers. The President often acts as the policy-making
body in Afghanistan, suggesting laws and improvements. The executive branch is
included of ministries each responsible for a different practical portfolio. The
most important ministries for the commercial laws are:
• Ministry of Commerce and Industry
• Ministry of Finance
 5-The Judicial Branch:
• The judicial branch is an independent and coequal branch of government. The
Supreme Court is the highest judicial organ in Afghanistan and oversees the lower
courts.
6-The Legislative Branch:
The National Assembly is charged with passing, modifying, and revoking laws, and
with approving the governmental budget. It is divided into two branches, the
Wolesi Jirga and the Meshrano Jirga.
 7-Da Afghanistan Bank:
• Da Afghanistan Bank is the central bank of Afghanistan. Article2 of the2004
Constitution States da Afghanistan Bank shall be independent and the central
bank of the state. Currency issuance as well as formulating and implementing the
monetary policy of the country shall be, according to provisions of the law.
• 8-The Afghan Investment Support Agency (AISA):
• The Afghan Investment Support Agency (AISA) is the primary agency responsible
for registering and establishing every foreign and domestic business in
Afghanistan.
 B- Informal Sources:
1-Hawala Banking
• Money exchange dealers, or Hawaladars, provide a well-organized, informal
banking and financial services system throughout Afghanistan.
2-Informal Credit Practices
• Informal credit in Afghanistan is the religious and moral obligation embedded in
Islam to help those in need, Informal credit is so heavily based on the nature of
the social relationship that exists between the transacting parties that repayment
terms are frequently not set.
 Cont…
3- Legal and Local Pluralisms:
• Informal institutions are based upon local custom, tradition, and
religious practices and have existed in Afghanistan for centuries. The
three principal types are: shuras of the Ulema (Islamic scholars), shuras
of elders, and shuras of local commanders. These institutions are
important sources for the settling of commercial disputes.
 Who is a Businessman?
• A businessperson is a person involved in business.
• A businessman is a person who run the business
activities.
• A person who invests money and efforts to enjoy
some legal or lawful activities in order to earn
money and profit by selling goods and other useful
services.
 Types:
There are two types of qualities of a good
businessman , That are followings:
1. Professional Qualities
2. Personal Qualities
Professional Qualities:
 Professional Qualities:
1. Knowledge of Business
The Businessman should have knowledge of his Business. He
should have the knowledge of finance, marketing, income
tax law, etc.
2. Knowledge of Laws
He must be well aware with laws relating to business such as tax
law, business, commercial law, etc.

3. Knowledge about Technology

This is the age of computer. Thus, a good businessman must have
knowledge that how to use computer's essential application that help
in business effectively.

4. Financial Management
An entrepreneur tries to meet the financial needs from internal and
external sources. A good businessman manages the finance in such a
way that it gives him maximum profit.
5. Ability of Innovation
In this modern age new products and services attract the
customer easily. So, a good businessman should have ability to
produce and introduce new goods and services according to new
idea and need of modern age.

6. Ability of Planning
It is a basic quality of a businessman that he should posses the
ability to plan his business techniques for his business. In such
say that every decision gives much profit to the proprietor.
 7. Ability of Leadership
A businessman has a quality of leadership. He is the leader of his
employees and should he able to guide the workers in a good way.
Listens skilfully
Enthuses and inspires
Acts creatively and decisively
Dependable and reliable
Educated and aware
Results driven
8. Research on Business

A good businessman always pay attention on research work. He also

uses his experience to minimize the cost of production and maximize
the profit.
9. Responsible Person
A businessman has authority over the workers. He is responsible for
various activities of his employees. He can't shift his
responsibilities on the head of other people in case of any problem.

10. Marketing Skills

A good businessman must have a marketing skill in order to promote
his business. He must know the best target market for his
products.
11. Conceptual Skills
The entrepreneur should be able to coordinate and
integrate the conceptual skills of organization. The
executives should be involved for the achievement of
common objective.
12. To Keep Discipline
The Business leader should follow certain principles to
perform his duties. He should be punctual/ontime and
dutiful. A sense of duty is describable for discipline. The
absence of discipline is the end of any business.
13. Up to date Knowledge
It is the age of competition. A good businessman must
aware and up to date knowledge. Thus he could make
better decisions for making maximum profit in less time
period.
Personal Qualities:
1. Hard Worker
Being a businessman , it is necessary to must be hard
worker and capable of working for long hour. A lazy and
inefficient can't compete the market.
2. Good Personality
Good personality is a symbol of success in business. The
winning personality creates good impression and makes
friendly relationship with customer and buyers.
3. Foresight
A good businessman should be careful about the future
expectations. If he fails to estimate the future demand of
public then he will suffer a loss.
4. Courageous/ Brave
A businessman must have the courageous ability. He has to
deal with many problems relating to his work. He must be
able to solve the various sort of difficult problems.
5. Honesty
A businessman has a quality of honesty that he should be
honest and sincere/ honest in public dealing. There should
be no fraud and commercial bribery in business.
6. Sympathetic/ Understanding Attitude
A businessman always loves his workers. He should be aware of
the feelings, problems and limitations of his workers and try to
solve them.
7. Co-operation
A businessman is in the grip of so many difficult problems. He
should cooperate with employees for better production. His
cooperation with customers may increase attraction and increase
sales volume.
8. Punctual/On-Time & Regular
A businessman is the symbol of success in every field of life.
So, a businessman must be punctual and regular in his job. He
should come to work and perform all the duties well in time.
9. Technical Skills
A businessman should have a specialize knowledge and
technical skills for understanding and completing the
process of production.
10. Team Spirit
A entrepreneur must build up a team spirit among the group
members. He should be aware of the nature, talent and
belief of the workers with him.
11. Good Reputation/Standing
In business dealings good reputation is an asset for the
good businessman. A good person always improves his
goodwill and expands the business.
12. Flexibility
A good businessman must be flexible. So that according to
circumstance he can change his decision.
 Small Business:
Different countries defined these categories in their own way:
• In the United Kingdom small firms were defined in 1969 as
“individuals having less than 200 employees. It should be run by its
owner and should have a relatively small share of its market”.
• In Denmark, a small business is one with fewer than 49 employees; a
medium one has 50 to 199 employees and large business employees
over 200 people.
 …Cont
In France, it was defined as “ a company with less than 10 employees, they are
categorized all the business as follows:
I. Less than 10 employees (very small enterprise)
II. 10 to 40 employees (small enterprises)
III. 50 to 500 employees (medium enterprises).
IV. Over 500 employees (large enterprises)
 Cont…
• Nowadays, a generalized definition is in practice and it says an SME
entity is defined as a business with an investment in productive
assets (not including land and building) ranging between rupees 2
to 40 million and employing among 10 to 99 workers.
• Small: Among10 to 35 employees and productive assets ranging 2 to
20 million,
• Medium: Among 36 to 99 employees and productive assets range of
rupees 20 to 40 million.
 Concept of Small Business:
Clifford Baum back regards small business as one that is:
• Actively managed by its owner
• Highly personalized
• Largely local in its area of operation
• Relatively small in size
 Key Terms:

1. Merchandising: Buying, Selling and Promoting Goods.

2. Enterprise: A company or business project or the courage and
willingness to undertake/start business projects or a business activity
3. Retailing: The sale of goods to the general public.
4. Wholesale: Buying and selling the goods in large quality from
manufacturers.

Small Businessman:
“Small businessman do not have a business title or keep the commercial
registry books and neither are they affected by the economic failure
regulations”
 Law Related Responsibility of Businessman:
• Article 28: The following are to be registered by merchants and
commercial firms:
• Name of the person or firm.
• Father's name.
• Place and date of birth.
• Citizenship of person or firm.
Cont…

• Business title.
• Field of business.
• Kind of firm as well as its date of establishment and home office.
• Capital of firm (small business are exceptions).
• Individual authorized to sign in affairs of the firm.
BUSINESSMAN vs. ENTREPRENEUR
Have you ever wondered what’s the
difference between the two? Business
people and entrepreneurs have many
similarities. They both provide jobs
for the unemployed, give solutions to
the consumers, and help in
developing the economy of a certain
nation. However, they are not the
same kind of people.
 On The Originality Of Idea
A businessman can make a
business out of an unoriginal
business or product idea. He
enters into existing businesses,
such as franchising and
retailing. He chooses a hot and
profitable business idea
regardless of whether it is his
original idea or borrowed from
someone else.
An entrepreneur is an
inventor and the first creator of
a product. He invests time,
energy and money on his own
idea. He doesn’t start a
business from an unoriginal
idea. That is why he starts on a
start-up while a
businessman starts on a
business.
 On The Purpose Of Doing
Most businessmen are doing
business for profit, livelihood, for
reaching their financial goals, and
for becoming their own boss.
Though, there are some business
people who are not profit-oriented
but people-oriented, that is, they
are more concerned on the welfare
of their workers and the
satisfaction of their customers.
Entrepreneurs are more
concerned on changing the world.
They want to pursue their desire
and achieve an ultimate goal. They
are not keen on financial returns,
rather they are focused on what
they can offer to the world. Their
purpose for entrepreneurship is
simply to make a difference in this
world.
 On The Degree Of Risks Taken
Businessmen take calculated and
managed risks. They cannot afford
to lose money and suffer from
bankruptcy. That is why they always
do the Math when it comes to
business.
Entrepreneurs are like sky divers.
They take crazy risks. They often
don’t care of losing time and
money just to pursue their desire.
But since they do it with love, joy
and passion. Entrepreneurs, since
they do the things they love the
most, they do it with the best of
themselves, resulting to greater
success.
 On How He Treats Employees
A business owner is an . An entrepreneur is a
employer and a manager. friend and a leader. He
He hires employees and finds PEOPLE, whom he
workers to help his will never treat as
business grow machines. He invites
them to help them grow.
 On How He Treats Customers
A business owner An entrepreneur sees
usually sees customers customers as his source
as his source of sales of duty and fulfillment.
and revenues. For him, For him, customers are
customers are the his own life blood.
lifeblood of his
business.
 On How He Sees The Competition
A business owner tries An entrepreneur tries
hard to beat his hard to beat his worst
competitors and win the competitor – himself.
competition. He also
considers cooperation
rather than competition
to achieve certain goals.
 On How He Deals With Time
A businessman doesn’t An entrepreneur works
waste time. He always like an artist or a scientist
check the clock and in a lab. His product is his
doesn’t want any work or masterpiece . That is
Openion

output to be delayed out why he can be slow and

of schedule. He is fast could spend a longer
and always on the go. period of time to finish
and perfect his product.
 On How He Sees The World
A businessman sees the An entrepreneur sees the
world as an opportunity. world as a duty rather
He sees it as an than an opportunity.
opportunity to make a
living. He also sees it as
an opportunity help the
people living on it.
 On How He Defines Success
A businessman defines An entrepreneur doesn’t
success as the success of his define success. He simply do
business and its his job and let history
stakeholders. Its defines the success that he
stakeholders include accomplished.
himself, co-owners,
employees, customers,
investors, and even his
community
Both businessmen and entrepreneurs are
supposed to be the kind of people that our
world needs. A businessman needs an
entrepreneur. An entrepreneur may also
need a businessman. There can also be a
person who is partly a businessman and
partly an entrepreneur.
Contract Law:
• A contract is an agreement between two or more parties to perform a service,
provide a product or commit to an act and is enforceable by law.

Business Proposal:

A business proposal is a request by a business or individual to complete a specific

job or project; to supply a service.
The three Ps are the basic ideas that your business proposal should be addressing.

Address the three Ps:

1. problem statement
2. proposed solution
3. pricing
 How to format your business proposal:
• Title page
• Table of contents
• Executive summary
• Approach and methodology
• Qualifications (relevant degree and certificates + past experiences Projects you done)
• Schedule and benchmarks/ Standards
• Cost, payment, and any legal matters
• Benefits
• How long does it have to be? (Time Management + Don’t promise what you can’t deliver!)
Promise

Commitment given by one party (the promisor) to

another (the promisee) to carry out or refrain from
carrying a specified act or acts.
In other words, we can say that any accepted proposal is
called a Promise.
 Agreement:

• A negotiated and usually legally enforceable understanding between

two or more legally competent parties.
• in other words we can say that a proposal which is offered by one
party and it is accepted by other party is called agreement.
• Agreement = Proposal + Acceptance
 Enforceability:
• In order to be enforceable by law, the agreement must create legal obligations
between the parties.
 Four Elements of an Enforceable Contract
1-Mutual consent: Mutual consent of the parties means that one party offers to
enter into an agreement, and the other party accepts the terms of the agreement
that the offering party has proposed.
Offeror Offeree
The person who make the offer is called offeror
The person to whom the offer is made is called offeree
Example : Sale of goods contract
•The Buyer promises to pay the price
•The Seller promises to deliver the goods
 Cont…
2-Consideration: The circumstances or factors that the offeror and the offeree
considered when agreeing to the contract.

Or

Both parties must have provided consideration, Eg, each side must promise to give
or do something for the other.
 Capable parties:

• To be "capable" of making a contract, the parties must understand what

they're doing.

• Article 542 of Civil Code states that: “Every person has the capacity to
accomplish contract except when his capacity is withdrawn or limited by
law “.
 4-Enforceable subject of the contract

• The object of agreement must not be fraudulent, illegal, immoral/corrupt,

opposed to public policy, imply injury to the person or property to another.
 o u r
o r y
k s f i on
ha n pl at
T t e m
c o n
 Kinds of Contract:
Contract can be of the following two kinds which can further be divided:
1. According to Enforceability
2. According to performance
 According to Enforceability:
• 1-Valid Contract
A valid contract is enforceable by law. An agreement becomes enforceable by law
when it fulfills all the essentials of a valid contract. It creates legal obligations
between the parties.
Obligation of parties: In a valid contract, all parties are legally responsible for the
performance of the contract. If one of the parties breaches the contract, the other
party can enforce it through the court of law.
• Example: A agrees to sell a car to B. if it fulfills all the essentials of a contract. It is
a valid contract. If A fails to deliver the car, B can sue him and if B fails to pay, A
can sue him.
The contract become void under the following
circumstances:
• Impossibility of performance
• A contract becomes void before performance when it becomes
impossible to be performed by any party due to any reason.
• Example: shahid agrees to sell his house to shapore after two days.
The house is burnt the next day. The contract becomes void due to
impossibility of performance.
Subsequent Illegality:
• If a contract is made between two parties, but before the
performance of the contract, a new law or change in the existing law
makes the implementation of the contract illegal, the contract
become void.
• Example: Ahmad shah agrees to sell 100 bags of wheat to Qasim.
Before delivery of wheat, the government puts bans/protection on
private trade of wheat. The contract becomes void.
Cont…
Obligation of parties: In a void agreement, the party who has received
any advantage is bound to restore it to the party from which he/she
received it. Both the parties are not responsible for the performance of
the agreement.
Example: A promises to buy a dog from B for Afg. 1,000. The dog was
dead before the contract. The parties were unaware so the agreement
is void.
Unenforceable Contract:
• Such contracts are unenforceable before a court of law due to some
technical defects such as non-deposit of court fee, submission of
unsigned documents, absence of writing, wherever writing required,
absence of registration, wherever required under law. On removal of
these differences, the contract becomes enforceable.
According to Performance:
1-Executed contract
• Such contracts where both parties have completely performed their
respective obligations under the contract.
• Example: Mr. Ali entered into an agreement with Mr. Aslam to sell his
car for Rs 800,000. Mr. Ali delivers the car to Mr. Aslam and he paid
the promised amount i.e. Rs 800,000 to Mr. Ali. Such a contract is
called an executed contract since both parties have performed their
part of promises.
2-Executory contract:
• In such contracts both parties are yet to perform their obligations
under the contract.
• Example: We take the same example as quoted above but with some
difference.
• Mr. Ali entered into an agreement with Mr. Aslam to sell his car for Rs
800,000. Mr. Ali has not yet delivered the car to Mr. Aslam and Mr.
Aslam has not yet paid the promised price that is Rs 800,000 to Mr.
Ali. Such a contract is executory contract since both parties are yet to
perform their part of promises.
 Offer or Proposal:
• when a person shows his willingness to do or not to do something to
obtain the consent of other person it is considered a proposal.
The person making the offer is called the offeror or promisor.
The person to whom the offer is made is called the offeree or promisee.
Example: A offers to sell his computer to Z for Afg. 4500. Here A makes an
offer to Z.
Essentials of a valid Offer:
1-It may be express or implied
• An offer may be made by words or by conduct. An offer which is made
by words spoken or written is called an express offer. The implied
offer appears from the actions.
• Example: Ahmad says to Mahmud that he will sell his motorcycle to
him for Rs. 4000 AFN, it is an express offer.
Example: Wali Railway coolie carries the luggage of khan without
asking to do so, Khan allows him to do so, it is an implied offer.
Cont…
2-Legal Relationship
• It is essential for valid offer that it must be made with the
intention/purpose of creating legal relationship otherwise it will be
only invitation. A social invitation may not have legal relationship.
• Example: Mr. Kamal invites Mr. Aslam to dinner and he accepts. It
does not create any legal relations.
Cont…
3-Clear Terms and Conditions:
• If the terms of an offer are not definite and clear, it cannot be called a
valid offer. An agreement to agree in future is not a contract because
the terms of an agreement are not clear.
• Example: A has two motorcycles. He offers B to sell one motorcycle
for Afg. 23,000. it is not a valid offer because it is not clear which
motor cycle A wants to sell.
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