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BUSINESS LAW

BUSINESS LAW

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BUSINESS LAW

WHAT IS LAW? MEANING ? DEFINITION?

WHAT DO YOU SAY?

VARIOUS MEANINGS AND DEFINITIONS
‡ One view is that it is not capable of definition ‡ But this cannot be the answer nor solve the problem ‡ The confusion in defining law arises out of the different purposes to be achieved e.g: ‡ Law has been defined by various individuals from different points of view ‡ Various schools of law define it from different angles: -basis of nature -on source -terms of effect on society -end or purpose of law

MEANINGS AND DEFINITIONS: Contd.
‡ Generally and the most commonly accepted definition is A rule of action to which men are obliged to make their conduct comfortable ‡ Law is the command of the sovereign. It imposes a duty and is backed by a sanction. Command, duty and sanction are three elements of law

LAW MAKING:PROCESS ‡ ‡ ‡ ‡ ‡ Difference between Law and Ordinance Bill----Proposal Committees of the House Approval by the Legislature Assent by the President. .

. the law is the central stage. ‡ Law forms the foundation on which any civilized society is based.WHY STUDY LAW? ‡ Obvious! Course Requirement ‡ Study of law improves powers of reasoning. through corporate law to international relations. Nature has its own laws. So does society. clarity of thought and the ability to analyze and express complicated ideas ‡ A greater appreciation of the workings of the system and the parts that ensure it s functioning. ‡ Law effects all aspects of life and society and is the mechanism for change employed by governments across the globe.From the protection of life and liberty.

e. purpose of law is the welfare of the people in the world and also salvation after death.PURPOSE OF LAW ‡ Object of law is to maintain law and order in the country i. not merely in respect of life on this earth but also life hereafter. ‡ Muslim: the end of the law is to promote the welfare of man both individually and socially. police functions ‡ Another view limit natural liberty . . ‡ Hindu view . Man is born free but is in chains everywhere.

Customs. Rules or regulations of voluntary organizations e. Divine Law. Laws of science e. 7. Emphasis on the will and physical force of the organized political community. IMPERATIVE LAW. practices. Principles of natural justice. 4.g. associations. traditions with historical sanction and support e. Imposed upon on men by some authority. CUSTOMARY LAW.g building laws. law of gravity NATURAL or MORAL LAW. Universal rules of governance. 8. CONVENTIONAL LAW. 2. 3. jirga TECHNICAL LAW. 5.KINDS OF LAW 1. For efficient conduct of business e. Sum of laws and rules recognized by civilized in their dealings with each other CIVIL LAW.g. Municipal Law. clubs etc. laws of health INTERNATIONAL LAW. 6. PHYSICAL OR SCIENTIFIC LAW . .g.

Rigidity. ‡ Avoids the dangers of arbitrary. 1. 4. wishes and desires. ‡ Uniformity and certainty to the administration of justice. biased and dishonest decisions. 3. ‡ Fixed principles protect the administration of justice from the errors of individual judgment ‡ More reliable than whims. . Conservative Formalism Complex. 2.ADVANTAGES AND DISADANTAGES.

‡ For medium and large scale business in Pakistan limited company is the preferred form . Where the Government undertakes an enterprise either a statutory corporation or limited company.STARTING BUSINESS BUSINESS LAW IN PAKISTAN ‡ Legal form under which operating ‡ Main forms of business organizations by PRIVATE sector in Pakistan: ‡ Sole Proprietorship ‡ Partnership ‡ Limited Liability Company ‡ Joint venture ‡ PUBLIC SECTOR.

CONTD. ‡ Law divided into PARTS and each deals with a particular subject e. Part IV Incorporation of Companies ‡ Sections ‡ Sub Sections ‡ DEFINITIONS: The word or a term specifically defined has a special meaning assigned to it and replaces its ordinary meeting.g. Part III SECP.g. Otherwise have their ordinary dictionary meaning e. ‡ Proceed in alphabetical order ‡ Section 7 Company means a company formed and registered under this Ordinance or an existing Company . Part II Jurisdiction og Courts.

‡ COMPANY LAW IN PAKISTAN: 1. Securities and Exchange Commission of Pakistan for administration of companies and Registrar of Companies appointed by SECP. Legal regime for establishment and regulation of companies in Pakistan ‡ SECP. 4. To cater for needs of expanding sectors the law amended in 1991.COMPANIES ORDINANCE. Companies Act 1913 was adopted in Pakistan in Pakistan after 1947 Administered by Provinces till 1973 (new Constitution) and then taken over by Federal Government. 2. Previous law repealed. New law promulgated on October 8. 1984 . 3. 1984 ‡ COMPANIES ORDINANCE. 1999 and 2002 .

.CONTD: OBJECTIVES of COMPANIES ORDINANCE: Healthy growth of the corporate enterprises Protection of investors and creditors Promotion of investment Development of economy.

incurring debts. endowed with a perpetual succession and an entity apart from its members. and suing and being sued in the same manner as an individual Under the law three different types of companies: Limited by shares Limited by Guarantee Unlimited liability Two types of limited companies: A Private Limited A Public Limited (Listed and Unlisted) . It is capable of holding property. It signifies assent by means of common seal.CONTD: A company is an artificial person created by law.

Shared ownership by contributors of capital .COMPANY: CHARACTERISTICS Five core characteristics: 1. Transferable Shares 4. Legal personality/entity 2. Centralized management under a board structure 5. Limited Liability 3.

Not to put their interest at risk by interim arrangement ‡ Management operate the company ‡ As they are born when issued a certificate of incorporation they also die when they go bankrupt .CONTD: ‡ Granted a charter/permission (incorporated) by the competent authority (SECP/Registrar of Companies) ‡ A separate legal entity distinct from its members is created with its own privileges and liabilities ‡ It can sue and can be sued ‡ Creation of a specific law safeguarding the interests of the stakeholders.

. ‡ Can be convicted of criminal offence like fraud. misstatements etc.LIMITED LIABILITY ‡ If the company fails shareholders normally only stand to lose their investment and the employees their jobs but neither will be further liable for debts that are outstanding against the company s creditors.

Unlimited Company. Liability limited by Memorandum of Association to such amount as members may respectively undertake to contribute to the assets on being wound up . He is free from his liability at the end of the year from his ceasing to be a member. 3. Company Limited by Guarantee. Each person becoming a member (shareholder) of the company acquires one or more shares in which the Company s capital is divided.KINDS OF COMPANIES ‡ THREE: 1. Company Limited by Shares. . 2. More akin to a partnership where each member liable to all the debts of the company. His liability is limited to his share holding.

CONTINUED ‡ May be registered under the Law as: ‡ Private: restricts number of members to 50. is the most common vehicle for carrying out business in Pakistan. Not Private deemed to be public Listed/Quoted Unlisted/Unquoted. A company limited by shares. whether private or public. Single Member: Only one subscriber to the Memorandum of Association. A private limited company for all intents and purposes of the Company Ordinance . invitation to public to subscribe and right to transfer its shares ‡ Public: Three or more persons associate to form.

PRIVATE vs PUBLIC
‡ Difference 1. Subscription 2. Transfer of shares 3. Members 4. Upper Limit of Members 5. Certificate of Commencement 6. Min. subscription 7. Prospectus or statement in lieu of 8. Filing of Accounts 9. Qualification of Auditors 10. Investment in associate company

PRIVATE vs. PUBLIC -Contd:
11. Restriction on CEO 12.Statutory Meeting and Report ADVANTAGES OF PRIVATE COMPANY

DEFINITIONS.
‡ MEMORANDUM OF ASSOCIATION . Sets out the constitution of the Company. The foundation on which the Company s structure is based. Defines scope of activities. Tells what it does spelling out its objectives 1. Name 2. Province of registration. 3. Objects 4. Limited by shares or guarantee A STATEMENT OF THE OBJECTS OF THE COMPANY, ITS POSITION AND ITS RELATION TO THE WORLD WITHOUT

DEFINITIONS Contd:
‡ ARTICLES OF ASSOCIATION A document regulating the rights of the member of company among themselves. The manner in in which the business of the company shall be conducted. Dealing with the whole internal arrangement of the Company. Originally framed when the Company incorporated. Subsequent changes by special resolution RULES AND REGULATIONS PRESCRIBED FOR THE INTERNAL MANAGEMENT OF A COMPANY.

3. or purchase of any shares or debentures of a company 1.PROSPECTUS ‡ A document which invites persons to take shares in a company and set forth the advantages of the company. advertisement or other intimation. Public companies issuing prospectus required to file application to SECP for approval of prospectus for publication. Contains the information for invitation of subscription from the public Any notice. offering to the public for subscription. Discussed and approved by the Board of Directors 2. Date of application to SECP and no publication unless prospectus registered with SECP . circular.

Prospectus to include: ‡ Memorandum ‡ Number of shares fixed ‡ Particulars of directors and managers ‡ Minimum subscription before allotment ‡ Number and amount of shares and debentures ‡ Particulars of vendors ‡ Auditors ‡ Interest of every director ‡ LIABILITY OF PERSON ISSUING PROSPECTUS IF IT IS NOT ACCORDING TO PROVISIONS OF LAW. .PROSPECTUS Contd.

SHARES ‡ Prospectus: Invitation to the public to make offers to the company ‡ Application: from the public is an offer to take them ‡ Allotment. ‡ Registered: Name of share allottee is entered in the Register and becomes a member of the company ‡ Shareholder : The person who holds a share by having his name on the register. acceptance of the offer by the company creating a contract between the parties ‡ Allotment complete when notice of allotment issued. ‡ Distinctive number for each share .

An act of a member. Transmission: By devolution of law e.g.SHARES: TRANSFER Transfer: The making over to another the document(shares in public companies) by one to another. bankruptcy etc. by death. PROCEDURE: ‡ Apply: Transferor or transferee to the Company ‡ Checking and Verification: By the Company ‡ Notice: Maybe issued by Company ‡ Processed ‡ Approval: BOD or Committee of BOD ‡ Register of Members: Entry and Delivery Normally transfer of shares is not refused by Company (defective/invalid) .

Hold office till first AGM 3. Not trustees of individual shareholders 8.MANAGEMENT ‡ Articles of Association: Rules and Regulations drawn up for the conduct of a Company. Trustees of Company s assets 7. Delegated duty to manage affairs of the Company 6. One who directs a business 4. Persons of the select body of shareholders of a Company 5. ‡ DIRECTORS 1. Enters into contract on behalf of Company . First Directors determined in writing by majority of subscribers of the memorandum 2.

DIRECTORS----Contd. State of Company s affairs 2. Number of Directors: ‡ SMC: At least one ‡ Private: Not less than two ‡ Unlisted Public: Not less than three ‡ Listed Public: Not less than seven DIRECTORS REPORT. Attach with every Balance Sheet: 1. Re-appropriation of profits 4. 9. . Disclose material changes 5. Recommendation for dividend 3. Explanation on any adverse remarks of auditors.

Hold office till first AGM ‡ Subsequent by the BOD within 14 days of vacancy ‡ Till successor appointed continues to work ‡ Conflict of Interest . directly or indirectly engage in any business which directly competes with the business of the Company. CHIEF EXECUTIVE ‡ An individual entrusted with powers to manage to affairs of the Company ‡ Subject to control and direction of directors ‡ Includes a director or any other person ‡ First appointment within 15 days of commencing business by Directors. .MANANGEMENT: Contd.

MANAGEMENT: Contd. ‡ ‡ ‡ ‡ SECRETARY: An officer of the Company Responsible for the compliance by the Company of its statutory duties Listed company shall have whole time Secretary Prescribed qualifications under the Law .

MANAGEMENT: Contd. ‡ Comply with directions ‡ Appointed at each AGM ‡ Hold office till conclusion of next AGM ‡ Removal through Special Resolution. . AUDITORS: ‡ To carry out audit an examination of accounts which may be detailed or administrative.

monies received. method and prospects ‡ STATUTORY REPORT: Report submitted by the directors 21 days before the Statutory Meeting to every member .COMPANY MEETINGS STATUTORY MEETING ‡ Limited Company (share capital and guarantee) not less than three months or more than 6 months of entitled to commence business hold general meeting ‡ Held once in a lifetime ‡ Purpose to put before shareholders all important facts shares taken up. contracts entered. preliminary expenses ‡ Furnish particulars for shareholders to discuss ‡ Management.

Auditors and Directors Reports.B. within four months close of financial year At it consider accounts . Declaration of dividend Appointment /remuneration of auditors Election/appointment of directors.MEETINGS: Contd. ‡ ‡ ‡ ‡ ‡ ‡ ANNUAL GENERAL MEETING: First meeting within eighteen months of its incorporation Subsequent once at least in one year. Profit and Loss Account.S. .

By those requisitioning it MEETING OF BOARD OF DIRECTORS: ‡ Quorum ‡ Minimum number of meetings . Directors on their own initiative 2. By the directors on requisition by shareholders 3.MEETINGS: Contd. EXTRA ORDINARY GENERAL MEETING ‡ All general meetings other than Statutory or AGM ‡ Conduct special business ‡ Called in three ways: 1.

RESOLUTIONS Any proposal at a Company Meeting and put to the vote ‡ Ordinary: decided by a bare majority ‡ Extraordinary or Special: requires a majority of three-fourths to carry it ‡ Resolution by Circulation: Urgent. cannot wait for next BOD .

are determined by directors . Revenue and expenditures 3. Assets 4. conditions etc.AUDIT AND ACCOUNTS It is mandatory for every company to maintain proper books of account. Cash receipts and payments i. Maintained for: 1.e. Cost accounting records ‡ Books to be kept at Company s registered office ‡ Can be inspected by Directors during business hours in office ‡ If members wish to inspect then the place. Cash Book 2. Liabilities 5. time.

S. ‡ Company auditors has right of access to books of accounts ‡ Auditors duty to make a report to the members of the company on the books of account ‡ Registrar of Companies can inspect books for reasons recorded in writing ‡ Authenticated: B.AUDIT and ACCOUNTS---Contd. P/L Ac approved by Directors INTERNAL AUDIT: ‡ Listed Company to have internal audit function ‡ Audit Committee of the BOD .

WINDING UP ‡ Artificial Person. the balance. which may be by reason of insolvency. Born has to die ‡ Winding up is the closing up of a company s concern. remaining is paid back to the members in proportion to the contribution made by them to the capital of the company . and after satisfaction of the debts. or otherwise ‡ Winding up is a proceeding by means of which the dissolution of a company is brought about and its assets realised and applied in payment of its debts. if any.

Memorandum of Association etc. Compulsory winding up by the Court e. 2.g. defaults (statutory reports etc. Voluntary winding up by: a) Members b) Creditors 3. violation of Company s Ordinance. Voluntary winding up under the supervision of the court . unable to pay debts. ‡ Modes of winding up: 1.WINDING UP----Contd. special resolution by the Company.).

still remains in the company until its dissolution ‡ DISSOLUTION: Puts an end to the existence of a company i. ‡ BANKRUPTCY: In it the whole estate.WINDING UP---Contd. is taken out of the bankrupt and is vested in the trustee ‡ WINDING UP : The estate.e. both legal and equitable. . realising the assets and paying the money over to the creditors. completely wound up or court feels that official liquidator cannot proceed with the winding up ‡ LIQUIDATION: Process of distributing a bankrupt s estate i.e. legal or equitable.

‡ An associate in a firm. . manufacturing or other undertaking ‡ One who dances with another.LAW RELATING TO PARTNERSHIP PARTNER: ‡ One who partakes or shares with another ‡ An associate ‡ One who has a share with another or others in some commercial. A member of a firm or partnership.

occupation.PARTNERSHIP PARTNERSHIP: ‡ The state or condition of being a partner ‡ The association of two or more persons for the purpose of undertaking and prosecuting conjointly any business. FIRM: ‡ Persons who enter into partnership are collectively called a firm . labour skill in some business and to share the profits thereof between them ‡ A type of business entity in which partners share with each the profits or losses of the business. or calling ‡ The which subsists between persons who have agreed to combine their property.

PARTNERSHIP--Contd ‡ In Pakistan for small to medium size business set ups the common mode of business. ‡ Maybe registered or not. . ‡ Favoured over corporate structure (companies) as no dividend is levied. ‡ Advantage of structural flexibility and formality of relationship between partners. Not compulsory ‡ Registered firms have the advantage of tax and consequences of litigation. ‡ But partners exposed to greater personal liability than the shareholders of a company.

PARTNERSHIP LAW IN PAKISTAN PARTNERSHIP ACT 1932 ‡ Is the law governing regulation of partnerships in Pakistan.IX of 1932 ‡ Adopted and followed by the Government of Pakistan . ‡ Law passed by the Indian Legislature in 1932. ‡ No. 1932. ‡ The Governor General of India gave assent on April 8.

Preliminary 2. Relations of Partners to Third Parties . The Nature of Partnership 3. Relations of Partners to One Another 4.PARTENERSHIP ACT Contd. SCHEME OF LAW: ‡ Divided into 8 Chapters ‡ Sections 74 ‡ Schedule 1 CHAPTERS: 1.

Supplemental SCHEDULE: Fees Prescribed . 5. Dissolution of a Firm 7.PARTNERSHIP ACT Contd. Incoming and Outgoing Partners 6. Registration of Firms 8.

DEFINITIONS ‡ Intention to economise words ‡ Does not lay down general principles ‡ With reference to the whole Act and with reference to the content ACT OF A FIRM ‡ Binds every one of the partners ‡ An act in which every one of them had actually participated ‡ Gives rise to a right enforceable by or against the firm .

BUSINESS : ‡ Includes every trade. occupation and profession. would result in profit ‡ Must be in existence ‡ May be temporary or permanent (indefinite) . any activity which.DEFINITIONS Contd. ‡ An Inclusive and not Exhaustive definition ‡ General and vague ‡ Broadly. if successful. ‡ Includes and not Means.

PARTNERSHIP: The relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all ‡ Persons who have entered into partnership with one another are individually called partners and collectively a firm and the name under which their business is carried on is called the firm name ‡ A voluntary act between two or more persons. .DEFINITIONS Contd.

or some or all of them ‡ In lawful commerce or business ‡ Understanding that there shall be communion of profits or thereof between them. effects. labour and skill. ‡ Contains the following elements/essentials .PARTNERSHIP---Contd. ‡ Placing their money.

‡ Carried on by all or any of the persons concerned acting for all.PARTNERSHIP---Contd. . ESSENTIALS: ‡ Association of two or more persons to carry on a business ‡ An agreement entered into by all concerned ‡ Agreement must share the profits ‡ Business must be carried on.

PARTNERSHIP--.Contd. . Association of two or more persons: ‡ A group of persons with no legal relations (no mutual rights and liabilities) not a partnership ‡ No existence or responsibility separately from its partners. ‡ All elements must be present before a group of persons can be called partners ‡ Elements may appear to overlap but are distinct ‡ Existence of partnership is a question of fact.

g. An Agreement: ‡ Agreement arises only as a result of an agreement. founded on good faith. express or implied ‡ Created by a contract. joint operation (heirs on death ) ‡ Voluntary contractual ‡ Lawful agreement.ESSENTIALS OF PARTNERSHIP Contd. for lawful object between competent persons ‡ Can even come into being upon an oral agreement . it does not arise by operation of law e.

ESSENTIALS OF PARTNERSHIP Contd. Sharing Profits: ‡ An essential element of partnership agreement ‡ Different from clubs. ‡ How to be shared left to the parties themselves ‡ Sharing of losses not essential. charitable associations etc. societies. ‡ Profits refer to net profits. .

Carrying of Business: ‡ Must be carried on by all or by any concerned acting for all ‡ Business must be lawful ‡ Mutual agency ‡ True test of partnership.ESSENTIALS OF PARTNERSHIP---Contd. .

PARTNERS ‡ ‡ ‡ ‡ ‡ ‡ ‡ Can be entered into by every competent person Attained age of majority Of sound mind Disqualified from any law to which he is subject Unsound mind Married woman is competent Minor cannot become a partner but can be admitted to benefits of partnership. .

.PARTNERS--. WORKING PARTNER: ‡ Not necessarily a partner in business ‡ Maybe only an employee ‡ Gets a share in the net profits ‡ Remuneration for services rendered.Contd.

goodwill etc. ‡ Business under any name or style ‡ Taking care of rules like trade name. .FIRM Firm: ‡ Persons who have collectively entered into partnership with one another is collectively called a firm ‡ Name under which business is carried is Firm Name.

Business of banking more than 10 2.1913: 1.ILLEGAL PARTNERSHIP ‡ Object of partnership is unlawful. enjoys civil and personal rights as a citizen ‡ Against international comity. . Section 4 of Companies Act. Any other business more than 20 ‡ With an alien enemy (alien friend). Section 23 of Contract Act ‡ Number of persons entering into partnership exceed the permitted.

PARTNERSHIP---DISTINGUISHED CO-OWNERSHIP ‡ Akin but different ‡ Partnership result of an agreement ‡ Mutual rights and obligations different ‡ Consent of all trade/business: Examples ‡ Transfer of interests .

Transfer of interest 4. Liability to debts 6. Contract 7. Creation Legal formalities/agreement 3. Agents of others 5. Person---Legal 2. Private arrangements 8.PARTNERSHIP---DISTINGUISHED COMPANY: 1. Number .

Sue and be sued 13. Property 11. Restrictions 12.Death Dissolution 10.Registration 15. Decree 14. 9.PARTNERSHIP DISTINGUISHED--Contd. Shareholder .

bind other members of the club.PARTNERSHIP/DISTINGUISHED--Contd. .e. CLUB: ‡ Entirely different ‡ Club members not liable for acts of other members ‡ Not liable to be creditor of club ‡ Liability extent of Club s regulations ‡ No implied authority i.

PARTNERSHIP DISTINGUISHED Contd. TRADE ASSOCIATION: ‡ Mutual agency does not exist .

PARTNERSHIP---EXISTENCE HOW TO DETERMINE: ‡ Real relation between the partners ‡ Mainly a question of fact ‡ Onus to prove on the appellant .

Duty of good faith and common advantage ‡ Carry on business to the greatest common advantage ‡ Just and faithful to each other .PARTNERS RELATIONS TO ONE ANOTHER ‡ Relations between partners defined ‡ Freedom to arrange their own affairs among themselves ‡ Mutual rights and duties regulated by contract Duties and liabilities on a partner: 1.

‡ Use knowledge and skill for benefit of firm ‡ Not personal advantage ‡ In case of loss to firm by fraud of a partner--indemnify firm (make good the loss) 2.PARTNERS RELATIONS TO ONE ANOTHER Contd. Duty to render true accounts and full information: ‡ Not to mix with personal business ‡ Disclose full facts. .

PARTNERS---RELATIONS TO ONE ANOTHER Contd. ‡ Rights and duties of partners determined by contract between them. ‡ Contract varied only by consent of all partners ‡ In conduct of business every partner has right to: 1. Take part in conduct of business 2. inspect and copy books of account 3. Express opinion. Access. Majority opinion .

Entitled to share equally 3.PARTNERS RELATIONS TO ONE ANOTHER Contd. Subject to contract: 1. Advance by partner to firm (over and above capital) entitled to profit (interest) . ‡ Mutual rights and liabilities. Not entitled to any remuneration 2.

.PARTNERS RELATIONS TO ONE ANOTHER Contd. PROPERTY OF FIRM: ‡ Inclusive definition 1. All property and rights originally brought to the stock of the firm 2. Rights and interests acquired with money belonging to the firm. Deemed. Acquired by purchase or otherwise during the course of the business 3. Goodwill of the business 4.

PARTNERS RELATIONS TO ONE ANOTHER---Contd. reputation and coonection of a business . GOODWILL: ‡ Not defined ‡ The whole advantage. whatever it may be. of the reputation and connection of the firm ‡ Intangible ‡ Easy to describe. difficult to define ‡ It is benefit and advantage of the good name.

trade or profession. .GOODWILL---Contd. ‡ ‡ ‡ ‡ No independent existence Cannot subsist by itself Attached to business Attribute of a business.

APPLICATION OF PROPERTY: ‡ Shall be held ‡ Shall be used ‡ By the partners ‡ Used by the partners ‡ Exclusively for purposes of business ‡ Common benefit of all partners ‡ One partner cannot use assets for personal benefits .PARTNERS RELATIONS TO ONE ANOTHER Contd.

. Shall account for and pay profits made in that business.PARTNERS RELATIONS TO ONE ANOTHER---Contd. use of property or connection--of the firm. Shall account for and pay to the firm ‡ Carries on any business----same structure and competing with the firm. PERSONAL PROFITS OF PARTNERS ‡ Subject to contract ‡ If a partner derives personal profits ---transaction.

. ‡ Cannot carry on competing business during subsistence of partnership ‡ In that case pay to firm all profits.PARTNERS RELATIONS TO ONE ANOTHER---Contd.

PARTNERS RELATIONS TO ONE ANOTHER---Contd. Three situations. RIGHTS AND DUTIES AFTER CHANGE IN FIRM General rules laid down for determination of rights and duties of partners. In case of: ‡ Change in constitution: Rights and duties remain the same as immediately before change ‡ After expiry of term of firm. remain the same ‡ Additional undertakings are carried out . No effect on registration.

‡ ‡ ‡ ‡ CHANGE IN CONSTITUTION Partnership not dissolved Mutual rights and duties of partners Remain same in reconstituted firm Same as immediately before reconstitution . 1.PARTNERS RELATIONS TO ONE ANOTHER Contd.

. AFTER EXPIRY OF TERM OF OFFICE: ‡ In spite of being constituted for fixed term carries on business ‡ Term expired ‡ Mutual rights and duties remain the same ‡ Same as before expiry.PARTNERS RELATIONS TO ONE ANOTHER Contd. 2.

3. ADDITIONAL UNDERTAKINGS ARE CARRIED OUT: ‡ Originally constituted to carry out one or more undertakings ‡ Carries out other undertakings ‡ Mutual rights and duties in the new undertaking same as in old .PARTNERS RELATIONS TO ONE ANOTHER Contd.

PARTNERS RELATIONS TO THIRD PARTIES. ‡ Agency is the essence of partnership ‡ Partner is both an agent and principal ‡ Relation between partners of principals ‡ To third parties agents of the firm ‡ Acting on behalf of firm can bind co-partners ‡ Acting in personal capacity personal liability . Rights and duties of partners as regards to third parties PRINCIPAL AND AGENT.

PARTNERS RELATIONS TO THIRD PARTIES IMPLIED AUTHORITY: ‡ Important ‡ The act of a partner which binds the firm ‡ This authority of the partner which binds the firm is his implied authority ‡ To exercise implied authority necessary that: 1. Act must be done in the conduct of business of the kind carried on by the firm .

2. .PARNERS RELATIONS TO THIRD PARTIES Contd. Must be done in the firm name or in any other manner expressing or implying an intention to bind the firms Relevant factors: ‡ Nature of business ‡ Practice of persons engaged in it.Must be done in the way which is usual in such business 3.

FRAUDULENT ACT----IMPLIED AUTHORITY? ‡ Liability of firm on fraudulent act of partner ‡ Partner s implied authority ‡ Factor principal answerable for acts of agent ‡ Firm liable ‡ Firm not liable if collusion between partner and third party ‡ If third party bona fide then firm liable .PARTNERS RELATIONS TO THIRD PARTIES Contd.

Open on behalf of firm BANK ACCOUNt 3. Submit dispute relating to firm s business for ARBITRATION.PARTNERS RELATIONS TO THIRD PARTIES Contd. 2. Compromise/relinquish CLAIM (part) of firm 4. WITHDRAW suit/proceeding filed on behalf of firm . IMPLIED AUTHORITY ACTS OF THE PARTNER WHICH DO NOT BIND THE FIRM: 1.

.PARTNERS RELATIONS TO ONE ANOTHER Contd. ADMIT liability in suit/proceeding against firm 6. ACQUIRE immovable property on behalf of firm 7. ‡ SET off PERSONAL DEBTS against debts due to firm. ENTER into PARTNERSHIP on behalf of firm May also include: ‡ Bind the firm by giving GUARANTEE in respect of debts of third parties. 5. TRANSFER immovable property belonging to firm 8.

WRONGFUL ACT: Wrongful act/omission during ordinary course of Business loss to third party then firm responsible . RIGHTFUL ACT: Every partner jointly and severally responsible 2. ‡ SET OFF DECREE obtained by firm for less than the decreed amount ‡ ACCEPT FULLY PAID SHARES in satisfaction of debts due to firm.PARTNERS RELATIONS TO THIRD PARTIES Contd. LIABILITY OF PARTNER 1.

PARTNERS---RELATIONS TO THIRD PARTIES.HOLDING OUT: Where a person by word or conduct induces another to believe him and acts accordingly he cannot subsequently deny the existence of such facts ‡ Becomes personally responsible ‡ Does not become member in the firm ‡ Not entitled to any rights as against those in the firm ‡ Does not become agent of the firm . 4. MISAPPLICATION: Partner or firm misapplies money or property Received from third party firm is liable 5.

Share property and profits Sue for accounts on severing ties with firm On attaining majority option of becoming member On attaining majority option to leave Not personally responsible for acts of firm . May inspect/access accounts 3. 5.PARTNERS RELATIONS TO THIRD PARTIES Contd. 6. 4. RIGHTS: 1. Admitted to benefit 2. 7. No partnership wholly of minors. MINORS (according to law) Cannot be a partner May be admitted to benefits of partnership Cannot declare as partners but only that entitled to benefits.

Within 6 months of majority can sever connection 2. On majority if a member then personally responsible to third parties 3. Fails to give public notice he becomes a member after 6 months. .PARTNERS RELATIONS TO THIRD PARTIES Contd. LIABILITIES: 1. Share liable for acts of firm.

PARTNERS---INCOMING AND OUTGOING Partnership a contract based on good faith implies that no new partner can be introduced without the consent of all the partners INCOMING PARTNER: ‡ Subject to contract between partners ‡ Introduction subject to consent of all existing partners ‡ Not liable to any acts of firm before coming a partner ‡ Liability after becoming a partner .

‡ Unless he expressly agrees ‡ Liability of a minor on becoming a member from the time he was admitted to benefits of partnership .PARTNERS INCOMING AND OUTGOING ‡ A new partner usually has no personal liability.

PARTNERS INCOMING AND OUTGOING OUTGOING PARTNER: Leaves the firm. Expulsion 3. Retirement 2. Insolvency 4. Becomes outgoing by: 1. No longer a partner in the partnership. . Subject to contract not entitled to benefits. Death.

RETIREMENT: Three rules how a partner can retire: ‡ With the consent of all partners ‡ In accordance with an express agreement by all partners ‡ Giving written notice to all to all partners Liability on Retirement ‡ To third party for acts before retirement.PARTNERS INCOMING AND OUTGOING Contd. discharged by an agreement with third party and reconstituted firm ‡ Otherwise liability continues until public notice given .

PARTNERS INCOMING AND OUTGOING EXPULSION: ‡ Governed by contract ‡ Majority cannot expel except in good faith ‡ Conferred by express agreement ‡ If conferred powers then exercised by majority Liability on Expulsion: Same as in case of retirement. .

PARTNERS INCOMING AND OUTGOING INSOLVENCY: The condition which marks a person s liability to meet full monetary obligations. Ceases to pay debts in the ordinary course of business or cannot pay as they become due ‡ On being declared an insolvent ceases to be a partner on the date of order ‡ Firm not necessarily dissolved depending on the contract ‡ Firm automatically dissolved if all partners (but one)declared insolvent .

PARTNERS INCOMING AND OUTGOING Liability: ‡ After insolvency estate not liable to any act of firm ‡ Firm not bound by acts of partner DEATH: ‡ If by agreement firm not dissolved on death estate of deceased not liable to any act of firm ‡ If by agreement firm dissolved surviving members responsible till public notice given .

Rights and liabilities of partners 4.DISSOLUTION OF FIRM So far: 1. 5. Partners inter se third persons. . Formation of partnership 2. Changes in a firm without dissolution i. Nature of partnership 3.e reconstitution where business continues as before.

It may take place: .DISSOLUTION Contd. Breaking up or the extinction which subsisted between all the partners of the firm. There are various ways of dissolution of firm. ‡ Of partnership: The discontinuance of a partnership from any legal cause. ‡ Literal Meaning: Breaking Up.

DISSOLUTION---Contd 1. When object of partnership is illegal and carrying on of business becomes unlawful 3.COMPULSORY: Occurrence of events making dissolution unavoidable e. it cannot function and stands dissolved on its own death . AGREEMENT: By agreement (consent) between all the partners or according to the contract amongst themselves 2. ‡ Insolvency of all partners or all except one (when only one remains then no longer a partnership) ‡ Unlawful business.g. CONTINGENCIES: Activities for which firm constituted coming to an end.

DISSOLUTION Contd. ‡ Expiry of the fixed term for which the firm was constituted ‡ The undertaking or particular adventure for which constitutes firm has been completed ‡ Death of partner as partnership based on personal relations ‡ A partner declared insolvent .

AT WILL: Any partner can give notice in writing to all partners of his intention to dissolve. Dissolution from date mentioned in notice if not then from date of communication of notice . Definite term not specified exists only during pleasure of all partners.DISSOLUTION Contd. 4.

DISSOLUTION---Contd. incapable of performing duties ‡ Conduct: Guilty of conduct to effect carrying of business. BY COURT Seven grounds in which the Court on any can order dissolution on a suit filed by a partner ‡ Unsound mind: As it is necessary to protect the interest of the insane and other partners ‡ Permanent Incapacity: Due to illness. . 5. moral turpitude. Connected with business and damage it. mental or physical but should be of permanent nature. professional misconduct.

Mutual confidence does not exist and continuance not practical. destroying old account books. false in books of account etc. ‡ Conduct: Willful and persistent breach of agreements relating to firm or conduct e.DISSOLUTION CONTD.g. Judicial discretion with regard to circumstances and exigencies. . ‡ Motive: Business cannot be continued only at a loss as motive of every partnership is profit ‡ Any other ground: just and equitable to dissolve. ‡ Transfer of share: by a partner of his whole share to a third party.

Liability for acts of partners: ‡ Liable to third parties until public notice is given. Surplus to be distributes amongst partners. Not to prejudice and protect rights of third parties ‡ Right of business: Apply property of firm in payment of debts and liabilities of firm.DISSOLUTION AND AFTER. ‡ Authority: of partners binding each other continue in order to finish unfinished business and complete dissolution. Authority to wind up .

followed by capital and balance if any divided ratably ‡ Debts: Joint debts paid from property of firm and separate from separate property of firm ‡ Goodwill: It can be included in assets and can be sold separately or along with property of firm . then partners ratably for advances (distinguish from capital). then capital and lastly partners individually on basis of sharing profit ratio Assets of firm first debts of third parties. ‡ Settlement of accounts: Losses first paid out of profits.DISSOLUTION AND AFTER Contd.

REGISTRATION OF FIRMS ‡ Law provides for registration of firms but has not imposed any penalties for non registration ‡ Non registration does not partnership agreement void ‡ Optional for a firm to get itself registered or not ‡ Prudence dictates registration is implications of non registration are serious ‡ Non registration imposes certain disabilities for enforcing claims in courts .

REGISTRATION OF FIRMS. ‡ Each Province has its own Rules ‡ Registrars of firms appointed by the Provincial Government and defines areas of jurisdiction. PROCRDURE: 1. Application by firm to Registrar of Firms on prescribed form: ‡ Name of firm ‡ Place or principal place of business ‡ Names of any other place where business is carried on .

REGISTRATION OF FIRMS Contd. Restriction on use of names like Government. ‡ Date on which each partner joined the firm ‡ Names and permanent address ‡ Duration of firm Signed and verified by all partners. . Sending/submitting the application to the Registrar of Firms in the area of jurisdiction. Jinnah etc. Registration is only of a firm which is in existence and not which has been dissolved.

REGISTRATION OF FIRMS Contd. Registration takes place after receipt of statement (application) by Registrar and after verifying all particulars filed and compliance made makes an entry in the Register of Firms Once a firm has been registered further and subsequent changes like: ‡ Name and place of business ‡ Opening and closing of branches ‡ Name and addresses of partners ‡ Changes in and dissolution of a firm Can be made by intimating the Registrar who shall make an entry in the Register of Firms .

‡ In case of a court order regarding a registered firm the Registrar shall make consequential entries in the Register The Register of Firms is open to inspection by any person on payment of prescribed fees The entries and any subsequent changes in Register of Firms is conclusive proof of facts. Original documents filed with the Registrar shall be the conclusive proof.REGISTRATION OF FIRMS Contd. .

REGISTRATION OF FIRMS Contd. If firm not registered and person suing not registered as a partner cannot bring a suit to enforce a right arising from a contract ‡ Against the firm ‡ Against any past or present partner of firm . NON REGISTRATION: Mentioned earlier is not mandatory and does not make a partnership illegal but its effects: 1.

Claim to set off and other proceedings to enforce any right arising from a contract. No suit to enforce a right arising from a contract shall be instituted by or on behalf of firm against any third party But this does not effect the right of a third party to proceed against an unregistered firm and its partners. . 2.REGISTRATION OF FIRMS Contd. 3.

Right of third party to sue firm or any partner 2.REGISTRATION OF FIRMS Contd. Receiver to realise property of an insolvent partner 4. BUT Non Registration does NOT effect: 1. Right of partner to sue for dissolution 3. Firm or its partners having no place of business in Pakistan .

PUBLIC NOTICE ‡ By intimation to Registrar of Firms ‡ By publication in official Gazette ‡ In at least one vernacular newspaper circulating in the district. .

g. what kind of promises should be legally binding.LAW GOVERNING CONTRACTS Keeping promises is important to a stable society. the formation and keeping of promises. Like other types of law. Contract law deals with. and expectations at a given point in time e. legally void or invalid. contract law reflects social values. what excuses are accepted for breaking promises. among other things. interests. Resolving .

In business law and the legal environment of business.LAW GOVERNING CONTRACTS-Contd. ‡ Promulgated on 25th. such questions is the essence of contract law. The law which governs contracts is THE CONTRACT ACT of 1872.1872 ‡ Technically Act IX ‡ Chapters 10 ‡ Sections 237 . questions and disputes concerning contracts arise daily. April.

Voidable Contracts and Void Agreements ‡ CHAPTER III Of Contingent Contracts.1872 ‡ CHAPTER I Of the Communication Acceptance and Revocation of Proposals.CONTRACT ACT. ‡ CHAPTER II Of Contracts. .

CONTRACT ACT. 1872 ‡ CHAPTER IV Of the Performance of Contracts ‡ CHAPTER V Of Certain Relations Resembling Those Created By Contract. ‡ CHAPTER VI Of The Consequences of Breach of Conract ‡ CHAPTER VII Repealed .

CONTRACT ACT, 1872
‡ CHAPTER VIII Of Indemnity and Guarantee ‡ CHAPTER IX Of Bailment ‡ CHAPTER X Agency. The first 6 chapters lay down the general principles on which all contracts are based, while the rest deal with the important classes of commercial contracts viz. indemnity and guarantee, bailment, agency ,

CONTRACT ACT
‡ Extends to whole of Pakistan ‡ Main source of law regulating contracts in Pakistan law ‡ Determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. ‡ Contract creates right and duties upon contracting parties ‡ The Act deals with the enforcement of these rights and duties upon the parties.

FUNCTION OF CONTRACTS
‡ No aspect of life is entirely free of contractual relationships ‡ Contract law is designed to provide stability for both buyers and sellers ‡ Followed in business agreements to avoid potential problems ‡ Necessary to ensure compliance

WHAT ARE CONTRACTS
An agreement or mutual promise upon lawful consideration or cause which binds the parties to a performance; a bargain; a compact. PROMISE: An undertaking by one man with another for the performance or the non-performance of some particular thing. A verbal covenant PROPOSAL: When one person signifies to another his

A proposal when accepted becomes a promise. . When the person to whom the proposal is made signifies his assent thereto. the proposal is said to be accepted. he is said to make a proposal.WHAT ARE CONTRACTS Contd. Willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence. The person making the proposal is called the promisor. The person accepting the proposal is called the promisee.

WHAT ARE CONTRACTS
The first step towards a contract is for the parties to get into communication with each other. This is done by one of them making a proposal. An offer to do or not do something, and that offer must be made for the purpose of being agreed to The next step is that the person, with a view to whose assent the proposal is made, should express his concurrence in the act or abstinence. The proposal now becomes a promise.

CONTRACT--DEFINITION
‡ A contract is an agreement that can be enforced in court. It is formed by two or more parties who agree to perform or to refrain from performing some act now or in the future, ‡ Is an agreement enforceable at law. It is bilateral document meant to create legal relationship

INTERPRETATION CLAUSE DEFINITIONS
INTERPRETATION OF CLAUSE is a section of a statute which defines the meaning of certain words occurring in other sections. Aims to introduce some of the words and expressions as are used in Contracts Act with their peculiar meanings and connotations. Words used to be understood in specific sense In this Act the following words and expressions are used in the following senses, unless, a contrary intention appears from the context:

INTERPRETTION CLAUSE
PROPOSAL: Is declaration by the proposer of his intention to be bound by an obligation if the offeree fulfills or undertakes to fulfill certain conditions A proposal is made when one person signifies to another his willingness to do or abstain from doing anything, with view to obtaining the assent of that other to such act or abstinence The starting point for a contract

There must only be a proposal but there must be an acceptance of the proposal by the other side Every promise is an accepted proposal . The proposal when accepted becomes a promise.INTERPRETATION CLAUSE PROMISE: The technical use is narrower than the popular use.

INTERPRETATION CLAUSE PROMISOR: Person making the proposal PROMISEE: Person accepting the proposal The promisor and the promisee must be two different persons The two must exist to constitute a contract .

done or promised to be done. at the desire of the promisor. ‡ At the desire of the promisor ‡ The promisee or any other person ‡ Must have done or abstained from doing.INTERPRETATION CLAUSE CONSIDERATION: Act. or ‡ Must do or abstain from doing or ‡ Must promise to do or abstain from doing something .

forming consideration for each other.INTERPRETATION CLAUSE AGREEMENT: ‡ Every promise and every set of promises. ‡ An agreement that the law will enforce is a contract. ‡ Regarded as a contract when it is enforceable by law. ‡ An accepted proposal. . Result of a proposal from one side and its acceptance by the other.

INTERPRETATION CLAUSE VOID AGREEMENT: ‡ Not enforceable at law ‡ Lawful having a lawful consideration. Entered into with a lawful object ‡ Every contract is an agreement but every agreement is not a contract. ‡ Agreement enforceable at law when it is not against public policy. having not been hatched through fraud or deceit. . without consideration. immoral.

Promisee . Promisor 5. Acceptance 3. Proposal 2. Promise 4.INTERPRETATION CLAUSE CONTRACT: ‡ An agreement ‡ Agreement enforceable by law ‡ Succession of definitions of the elements: 1.

.Agreement A bilateral document meant to create legal relationship. Consideration 7.INTERPRETATION CLAUSE 6. It is conceived by valid acceptance of a valid offer at the desire of the promisor.

Voidable contract enforceable at law at the option of the parties. . Has no legal value.INTERPRETATION CLAUSE VOIDABLE CONTRACT: ‡ Enforceable at the option of one party to the contract but the party can exercise this option once. ‡ One of the parties may affirm or reject at its option ‡ Different from void contract which is abinitio void. Cannot be enforced at law.

INTERPRETATION CLAUSE VOID CONTRACT: ‡ Difference between void agreement and void contract ‡ Ceases to be enforceable by law e. .g. impossible unlawful.

‡ Not a mere mental assent to the terms of an offer.ACCEPTANCE AND REVOCATION Before a proposal is accepted there is: COMMUNIUCATION: Communicate: Imparting of news or information on one side and reception and understanding on the other Rule when communication of proposal is considered complete.PROPOSALS COMMUNICATION. ‡ Some act done with the intention of communicating the resolution to the other party ‡ Mere intention not communicated by words or conduct cannot give rise to a contract .

The acquiescence to an offer of a party makes the agreement enforceable in law. ‡ Communication of an acceptance is complete. as against the proposer. . when it is put in course of transmission to him. Signifying one s assent to the proposal made by another.COMMUNICATION ‡ Communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. Acceptance Agreeing to a previous act or promise to do by another.

as against the person who makes it. the cancelling of an authority once given. The making void of a deed that was in force. when it is put it is put into course of transmission to the person who made it . REVOCATION: The calling back of a thing done.REVOCATION. The communication of a revocation is complete.

An acceptance may be revoked at any time before the communication of the acceptance is complete against the acceptor but not afterwards .REVOCATION A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterwards.

If the proposal is conditional or qualified by the failure of the acceptor to fulfill the condition precedent 4. By the death or insanity of the proposer. by: 1. Lapse of stipulated time in the proposal 3. if the fact comes to the knowledge of the acceptor before acceptance . obviously before it becomes a contract. Communication of notice of revocation 2.REVOCATION A proposal can be revoked.

‡ An agreement (proposal and acceptance.CONTRACTS VALID? A valid contract has the elements necessary for contract formation.e. contractual capacity: . ‡ Supported by legally sufficient consideration ‡ For legal purpose ‡ Made by parties who have the legal capacity to enter into the contract i.

Free Consent i.e. when not caused by: .CONTRACTS---VALID? 1. No other disqualification like foreign enemy 4. and of forming a rational judgment as to its effect upon his interest 3. Sound mind: at the time making contract is capable of understanding it. Age of majority: when supplies made to minor binding on him and his estate responsible for payment 2.

Domination of a weak mind by a strong mind.CONTRACTS---VALID? ‡ Coercion. ‡ Fraud: False representation of fact made with a knowledge of it ‡ Misrepresentation. ‡ Undue influence. It becomes voidable at the option of the person whose consent was obtained by coercion. causing a party to make a mistake. .

mode. ‡ In case of death binding on legal heirs unless contrary to it from the contract. TIME AND PLACE OF PERFORMANCE: ‡ When promisor to perform without demand from the promisee and no time fixed then promisor must perform within reasonable time ( reference to nature of character of goods dealt. Deals with time. and order of performance as also who is bound to perform and who can demand performance ‡ Parties to contract must perform or offer to perform their respective performances unless dispensed by law.CONTRACT PERFORMANCE. surrounding circumstances. facts of case) .

Breach entitles the party to repudiate the contract .CONTRACT---PERFORMANCE To be performed when promisee applies then it his (promisee) responsibility to apply---proper place and within usual business hours If no application from promisee then duty of promisor to apply to promisee When parties agree on the time of performance of any obligation under the contract and is made a condition of the contract then time is the essence of the contract.

‡ Every promisee may dispense with or remit wholly or in part the performance of the promise. Circumstances: ‡ Parties agree to substitute a new contract.CONTRACT--PERFORMANCE Avoiding the contract. ‡ Contract is ab initio void . rescind or alter original.

make over or set over to another. Maybe: 1. interest or rights----Assignment of contract: transfer of rights or liabilities under a contract. Assignment by act of parties: cannot be . Operation by law: in cases of bankruptcy or purchase or loss of interest of law 2.CONTRACT--ASSIGNMENT ASSIGN is to transfer. ASSIGNMENT is the act of transferring to another all or part of one s property.

CONTRACT--ASSIGNMENT assigned (liability passed on) without the consent of other party. Benefit can be assigned over to other party provided the benefit does not entail any liability. . Where personal considerations are involved contracts cannot be assigned.

CONTRACT TERMINATION &DISCHARGE The contractual ties may be loosened and the parties wholly freed from the rights and liabilities under the contract by: 1. . Waive rights and by waiver other party discharged. Contract discharged by the same process which created it by mutual agreement: ‡ Waiver: Parties agree to demand performance. By Agreement.

CONTRACT--TERMINATION&DISCHARGE. Will discharge either party from performance. ‡ Novation or Substituted Agreement: Mutual desire of the parties to substitute a new contract in place of old. By Breach: A contract may be broken. 2. By Performance: Duties undertaken by either party fulfilled. Old contract need not be performed. 3. It maybe: .

One of the parties contracted to marriage goes mad. ‡ By Renunciation: before performance is due ‡ By impossibility created by other party before performance is due. ‡ Impossibility e.CONTRACT TERMINATION & DISCHARGE. . 4. By operation of Law: ‡ Merger ‡ Bankruptcy. change in law ‡ Frustration e.g.g.

Court orders one party. Cannot claim for indirect loss 2. Damages: The amount is to the extent of damages. to carry out the agreement. Usually not granted where damages sufficient compensation to the party.CONTRACT---BREACH In case of breach of contract three remedies are available to the other party: 1. For loss which is direct result of breach. at the suit of the other. Specific Performance of the Contracts: Actual carrying out of contract by a party. .

CONTRACT---BREACH 3. An order or judgment of a court restraining some person or persons from doing certain things which are detrimental to the interests of another or others. It is considered to be a negative remedy . Injunction.

g. ‡ The uncertainty and futurity of the event to which the contract is related. Liability of performance is not absolute but depends upon the happening or not happening of certain event . CONTINGENT CONTRACT: A contract to do or not do something unless such event takes place e.CONTRACTS SPECIAL TYPES. life insurance where contract is complete only when the insurer passes away.

. Contingency should relate to a matter collateral to the main purpose of the agreement ‡ The contingency should not depend on the mere will and pleasure of a party. but must depend on the act of a party.CONTRACTS---SPECIAL TYPES ‡ The event being collateral to the event..

. or by the conduct of any other person e.g. A contracts to indemnify B against the consequences of any proceeding which C may take against B in respect of a certain amount.CONTRACTS SPECIAL TYPES INDEMNITY: An undertaking to make good monetary or other loss or damage CONTRACT OF INDEMNITY: By which one party promises to save the other from loss caused to him by the conduct of the promisor himself.

INDEMNITY The person (A) who gives the indemnity is called the indemnifier and the person (B) for whose protection it is given called the indemnity-holder or indemnified. Promise of indemnity may be expressed or implied. caused by the (a) promisor himself or (b) by any other person. Excludes loss from accidents like fire etc. Scope of indemnity is restricted to those cases where there is a promise to indemnify against loss. .

reducing or ascertaining the claim ‡ Can compromise a claim on best term he can and then bring an action on the contract of indemnity . the promisee acting within the scope of his authority.. ‡ Recover all cost reasonably covered in resisting. His rights: ‡ Entitled to claim all damages which he may have been compelled to pay.INDEMNITY INDEMNITY HOLDER: The person to whom the indemnity is given i.e.

Surety: Person who gives the guarantee. or discharge the liability of a third person in case of his default. Contract of Guarantee: to perform the promise. Principal Debtor: Person in respect of whose default the guarantee is given. .GUARANTEE Guarantee is a promise to be answerable for the debt. default or miscarriage of another. When a third person promises to pay debt owed by another in the event the debtor does not pay a guarantee relationship is created. Creditor: Person to whom the guarantee is given.

It is not a unilateral contract. . The function of a contract of guarantee is to enable a person to get a loan. There must be an offer and acceptance. A is the principal debtor. B the creditor and C the surety. or goods on credit or an employment Mutual assent is an essential element of a contract of guarantee.GUARANTEE A takes a loan from B when C guaranteed repayment of the loan.

.GUARANTEE ESSENTIALS: ‡ It is a contract ‡ To perform the promise or ‡ To discharge the liability ‡ Of a third person ‡ In case of his default ‡ The contract may either be written or oral.

GUARANTEE Differences between Contracts of Guarantee and Indemnity: 1. In Indemnity an original and direct engagement. In case of Guarantee there are 3 parties. Indemnity is for reimbursement of loss . In case of Indemnity 2 parties 2. In case of Guarantee there is a Principal debtor. independent of the existence of the third party 3. Guarantee exists for the security of the creditor.

Signifying a contract resulting from delivery. .BAILMENT Bailment from bailler (French) meaning to deliver. goods in a cold store. parcel to TCS. Bailment implies a sort of relationship in which the personal property of one person temporarily goes into the possession of another.g. leaving a car for repair. The ownership of the articles or goods is in one person and the possession in another e. cloth to a tailor.

BAILMENT Contd. The delivery of goods by one person the bailor to another the bailee for some purpose. without transfer of title by bailor to a bailee usually under an agreement. be returned or otherwise disposed of according to the direction of the person delivering it. when purpose is accomplished. . Obligations and duties arise from the bailment relationship. upon a contract that they shall. Formed by the delivery of personal property .

BAILMENT Contd.Bailor reserves right to claim redelivery of goods deposited. Delivered goods to be returned according to directions of bailor when purpose accomplished. Delivery of goods. 3. . Not transfer of ownership. CHARACTERISTICS: 1. Delivery of possession is temporary but it is for some purpose. 4. Delivery of possession is essential. Only movable properties can be bailed. that would be sale or exchange 2.

Becomes responsible for any loss.BAILMENT Contd. ‡ Not to mix goods with his own goods ‡ Not to set an adverse title to the goods ‡ Return the goods after purpose or period of bailment is over. RIGHTS AND DUTIES OF BAILEE and BAILOR. DUTIES of BAILEE: ‡ Take care of the goods entrusted to him reasonable. . ‡ Not to make unauthorized use of goods entrusted to him.

.BAILMENT Contd. Option also with bailor. DUTIES of BAILOR: ‡ To disclose defects of goods bailed ‡ To bear extraordinary expenses ‡ Compensate or indemnify for reasons not entitled to make bailment AGAINST THIRD PARTIES: If use or possession wrongfully deprived by third party bailee can claim damages.

. ‡ Period or purpose of bailment over ‡ Gratuitous bailment terminated any time by bailor ‡ On death of bailor or bailee gratuious bailment.BAILMENT Contd. TERMINATION: ‡ Bailee wrongfully uses or disposes goods.

AGENCY. The principal has the right to control the agent s conduct in matters entrusted to the agent. One of the most common. relationship between (agent) who agrees to represent or act for the other (principal). important and pervasive legal relationship is that of the agency. and the agent must exercise its powers for the benefit of . Since it is not possible for every person to do everything by self. the allows the person to be represented in the performance of person s legal acts by another and gives acts done by such representative the same effect as they would have done it by self.

express or implied. The principal. the principal only. corporate officer.g. . can conduct multiple business operations simultaneously in various locations e. AGENCY: A legal relationship between a person and another called the principal for whom he acts. by using agents.AGENCY Contd. There must be an authority from the principal.

Principal the person for whom such act is done or who is so represented.AGENCY Contd. . Is founded upon a contract. Agent a person employed to do any act for another or so represent the other in dealings with the third person. either express or implies. by which one of the parties confides to the other the management of some business to be transacted in his name and on his account and by the other assumes to do business and to render an account of it.

are involved. agent. He is not responsible for his acts to the principal.AGENCY Contd. Sub Agent a person employed and acting under the control of the original agent. In every transaction of agency three persons. DUTIES OF PRINCIPAL TO AGENT: . principal and third party to whom such representation is made. He is only responsible to the agent.

Compensate for injury caused by principal s neglect RIGHTS OF AGENTS: 1. until commission due received 4. Indemnified by principal for lawful acts 5. documents etc.AGENCY Contd. Indemnified by principal for acts done in good faith. Entitled to commission (subject to contract) 3. Entitled to retain property. 1. 3. Indemnify for acts done in good faith. Right of retainer out of sums received on principal s account 2. . Indemnify him against all lawful acts done in exercise of conferred authority 2.

3. 2.AGENCY Contd. Entitled to examine accounts. 5. Agent to carry out business according to principal s directions as a prudent man. Agent cannot delegate authority without consent. Agent to obtain instructions from principal 4. RIGHTS OF PRINCIPAL: 1. . Can repudiate transaction if agent carries out business in his own account.

3. By Ratification when a previous unauthorised act is approved and made valid. By Necessity when an emergency acts without authority 4. By Direct Appointment when agents authority is expressly given 2. . Principal induces third person that the acts done by his agent are by his authority. grounded on one s own act). 5.AGENCY Contd. By Implication when agency is inferred from dealings between two persons. By Estoppel (a plea in bar. CREATION : 1.

Knowledge of death not required.AGENCY Contd. TERMINATION: BY ACT OF PARTIES: ‡ Lapse of Time: Period for agency relationship expires. Automatic and immediate. . ‡ Purpose Achieved ‡ Occurrence of Specific Event ‡ Mutual Agreement BY OPERATION OF LAW: ‡ Death or mental incompetence.

SALE OF GOODS ACT.This Chapter VII was repealed and a new law Sale of Goods Act 1930 promulgated. Chapters 7 Sections 66 . 1930 was part of the Contract Act 1872 (Chapter VII Sections 76 to 123).1930 Initially the Sale of Goods Act . Pakistan adopted the in August 1947. The Sale of Goods Act has.

SALE OF GOODS ACT Chapter I : Preliminary (Sections 1-3) Chapter II Formation of the Contract (Sections 4-17) Chapter III Effects of the Contract (Sections 18-30) Chapter IV Performance of the Contract (Sections 31-44) Chapter V Rights of Unpaid Seller Against the Goods (Sections 45to 55) .

The payment of price is very important. Maybe absolute or conditional.SALE OF GOODS ACT Chapter VI: Suits for breach of the Contract (Sections 55-61) Chapter VII: Miscellaneous (Sections 62-66) A contract of sales of goods is a contract in accordance to which the seller either transfers or agrees to transfer the property in goods to the buyer for a price. Maybe between one part owner and other .

when executed. Briefly these are: ‡ Existence of goods. which form the subject matter of the sale. will result in the passing of the property in the goods for a price ‡ The payment or promise of a price ‡ The passing of the title. . ‡ The contract (bargain).SALE OF GOODS ACT Sale of Goods consists of a number of essential ingredients and if one of them is missing there is no sale.

and it must be moveable. The expression Sale of Goods is a composite expression consisting of various elements Sale is said to be the passing of title from the seller to the buyer. Tangible property has physical existence. . services. Title is the formal right of ownership of property.SALE OF GOODS ACT Contd. the item of property must be tangible. Good. The price may be payable in money or in other goods.

. a debt. Actionable claims and money cannot be bought and sold. which can only be recovered through a suit. Money is recognised currency in circulation but not foreign.g. Actionable claims is a thing which a person cannot make use or enjoy e.SALE OF GOODS ACT Contd. Goods mean every kind of moveable property other than actionable claims and money and includes stock and shares. growing crops etc.

SALE OF GOODS ACT Contd.
Goods: Kinds. 1 Existing: either owned or possessed by the seller at the time of contract (e.g. agent). Subject goods must be in actual or possible existence ‡ Specific: identified and agreed upon at the time of contract. Actually identified, ‡ Ascertained: Wider import than specific. Become ascertained subsequent to the contract ‡ Unascertained: Not specifically defined but defined only by description.

SALE OF GOODS ACT Contd.
2. FUTURE: Seller does not own or possess at time of contract but he will manufacture, acquire, or produce after making the contract. Actually an agreement to sell . Sale only of goods where ownership. 3. CONTINGENT: Sale dependent upon a contingency which may or may not happen. This may be absolute or conditional.

SALE OF GOODS ACT Contd.
SALE: When under a contract the goods is transferred from the seller to the buyer. VALID SALE: ESSENTIALS ‡ Parties competent to contract ‡ Mutual assent ‡ Transfer of property SM1 ‡ A price may be paid or promised.

Slide 187 SM1 e may
Shariq Mehmood, 6/22/2010

General and Particular property. DIFFERENCES. Sale is an executed contract i. Executed. It becomes a sale when time elapses or conditions fulfilled. In sale transfer of property with rights.e. DISTINGUISHED 1. AGREEMENT: Transfer of property to take place at a future time or subject to fulfillment of some conditions. In agreement a remedy only . sale plus conveyance 2. SALE : AGREEMENT and CONTRACT.SALE OF GOODS ACT---Contd. Executory.

. Risk of loss: In agreement of seller and in sale of buyer.e. damages. 4. 6. Damages: In agreement right of damages only while in sale when ownership passed seller can sue.SALE OF GOODS ACT Contd. In sale buyer has personal remedy and to the goods which seller has. Right to resell: Seller at liberty to sell in agreement 5. 3. Remedy: In agreement buyer only personal remedy i.

IN AGREEMENT OWNERSHIP HAS NOT PASSED TO THE BUYER.Insolvency: Seller becomes insolvent buyer can claim rate able dividend.SALE OF GOODS ACT Contd. IN SALE OWNERSHIP OF GOODS HAS PASSED TO THE BUYER. If permanently insolvent entitled to recover goods from official receiver.s . 7.

PRICE: SM2 ‡ No sale can take place without a price. ‡ Means money and nothing else. .SALE OF GOODS ACT Contd. ‡ Money actually paid or promised to be paid ‡ Cash or credit sale ‡ If consideration other money then no sale. ‡ If no valuable consideration for voluntary surrender of goods then it is a Gift.

Slide 191 SM2 e Shariq Mehmood. 6/23/2010 .

SALE OF GOODS ACT Contd. FIXING PRICE: Either be certain and definite or determinable by some method of calculation or prescribed criterion. MODES: ‡ Expressly stated in the contract. ‡ Manner provided in the contract ‡ Determined in the course of dealings between the parties . Parties free to fix any price.

Part payment in advance for due performance of contract. If contract honoured then adjusted against price otherwise forfeited by seller. ‡ When nothing then when contract executed then reasonable price ‡ To be fixed by the valuation of third party provided the third party accepts. EARNEST MONEY. in currency of the country.SALE OF GOODS ACT Contd. Payment. subject to contract. .

MY CONCEPT OF HAPPINESS MUNNA BHAI MBBS TENSION NAA LO ABSENCE OF WORRY THE CONQUEST OF HAPPINESS BERTRAND RUSSEL .

They do not make me sick discussing their duty to God.MY CONCEPT OF HAPPINESS I think I could turn and live with animals. . I stand and look at them long and long They do not sweat and whine about their condition. they are so placid and self-contained. They do not lie awake in the dark and weep for their sins.

Not one kneels to another. WALT WHITMAN . Not one is respectable or unhappy over the whole earth. nor to his kind that lived thousands of years ago.MY CONCEPT OF HAPPINESS Not one is dissatisfied. not one is demented with the mania of owning things.

It is essential to the main purpose of the contract. CONDITION: A qualification. If the parties to a contract regard the term as essential it is a condition and if not then it is a warranty. or terminates the obligations of the contracting parties. or clause in a contract. . commitments and performance make up a contract. the occurrence of which creates. suspends.SALE OF GOODS ACT Contd. Has option to treat condition as warranty and claim damages. CONDITIONS AND WARRANTIES: Various statements. Some are vital to the contract and others subsidiary. Breach of which gives right to treat the contract as repudiated. provision.

the breach of it gives rise to claim for damages but not to reject goods and repudiate the contract. Conditions and Warranties are either expressed or implied.SALE OF GOODS ACT Contd. IMPLIED CONDITIONS: ‡ In case of sale seller has a right to sell goods. WARRANTY: A stipulation collateral to the main purpose of the contract. When agreement to sell right when the property is to pass .

‡ When sale of goods by description then the goods should correspond with the description and of merchantable quality ‡ When description accompanied by sample then the goods should correspond accordingly.SALE OF GOODS ACT Contd. ‡ When particular purpose expressed by buyer then goods should be fit for such purpose ‡ When sold by sample then bulk should correspond with sample .

Sale of goods open to inspection. but if he is asked about any defect he must truthfully give out. The seller need not point out any defect in them. ‡ Quality for particular fitness annexed. IMPLIED WARRANTIES: ‡ Buyer has right of possession and free from any encumbrance. CAVEAT EMPTOR Buyer Beware. Based on the general rule .SALE OF GOODS ACT Contd.

‡ When bought by description goods should be of merchantable quality. It is for him to satisfy about the purchase.SALE OF GOODS ACT Contd. exceptions: ‡ When particular purpose intimated by the buyer to the seller then seller to supply accordingly. The buyer relies on his own skill and judgment when he makes a purchase. that there is no implied condition or warranty as to the quality or fitness for any particular purpose of goods supplied under a contract of sale'. .

‡ Creditor of seller of goods has no claim once the title has passed on to the buyer. TITLE and OWNERSHIP---TRANSFER ‡ Between seller and buyer ‡ If ownership passed on to buyer then loss is buyer s risk even if goods in seller s possession.SALE OF GOODS ACT Contd. ‡ Buyer cannot acquire a better title to the goods than the seller .

SALE OF GOODS ACT Contd. ‡ If stolen goods bought buyer acquires no title ‡ Seller should be owner of goods or selling under authority of owner. ‡ Sale complete with fall of hammer ‡ Seller cannot bid ‡ Pretended biddings render sales voidable at the option of buyer . AUCTION SALES: ‡ Each lot is a separate contract.

. ‡ No defects in knowledge ‡ Undertakes to give possession against price paid ‡ Possession will not be disturbed. AUCTION IMPLIED WARRANTIES: ‡ Authority to sell.SALE OF GOODS ACT Contd.

1881 The vast number of commercial transactions that take place daily in the modern business world would be inconceivable without negotiable instruments.NEGOTIABLE INSTRUMENTS ACT. INSTRUMENT: A formal legal writing. NEGOTIABLE INSTRUMENT: A signed writing that contains an unconditional promise or order to pay an exact sum of money on demand or at an exact future time to specific . A written document of formal legal kind.

or to bearer e. or both.g. it is essential that the instrument be easily transferable without danger of being uncollectable. a cheque. This is an essential function of negotiable instruments. .1881 person or order. A negotiable instrument can function in two ways--as a substitute for money (cheque) or as an extension of credit (promissory note). For a negotiable instrument to operate practically as either a substitute for money or a credit device.NEGOTIABLE INSTRUMENTS ACT.

The law regulates the issue and negotiations of notes. . bills and cheques. It has 17 Chapters and 139 Sections. December 1881(XXVI of 1881) and was adopted by Pakistan on August 14. The Act was promulgated on 19th. 1881.NEGOTIABLE INSTRUMENTS ACT. 1947.1881 The law relating to negotiable instrument in Pakistan is contained in the Negotiable Instruments Act..

1881 ‡ CHAPTER I --PRELIMINARY Sections 1-3 ‡ CHAPTER II OF NOTES BILLS AND CHEQUES Sections 4-25 ‡ CHAPTER III PARTIES TO NOTES.BILLS AND CHEQUES Sections 26-45.NEGOTIABLE INSTRUMENTS ACT. ‡ CHAPTER IV OF NEGOTIATION Sections 46-60 .

‡ CHAPTER VI OF PAYMENT AND INTEREST Sections 62-81.NEGOTIABLE INSTRUMENTS ACT. ‡ CHAPTER VII OF DISCHARGE FROM LIABILITY ON NOTES.1881 ‡ CHAPTER V OF PRESENTMENT Sections 61-77. BILLS AND CHEQUES Sections 82-90 ‡ CHAPTER VIII OF NOTICE AND DISHONOUR Sections 91-98 .

1881 ‡ CHAPTER IX OF NOTING AND PROTEST Sections 99-104 CHAPTER X OF REASONABLE TIME Sections 105-107 ‡ CHAPTER XI OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED.NEGOTIABLE INSTRUMENTS ACT. Sections 108-116 .

NEGOTIABLE INSTRUMENTS ACT.1881 ‡ CHAPTER XII-.OF COMPENSATION Section 117 ‡ CHAPTER XIII SPECIAL RULES OF EVIDENCE Sections 118-122. ‡ CHAPTER XIV SPECIAL PROVISIONS RELATING TO CHEQUES Sections 122-A-131-C ‡ CHAPTER XV SPECIAL PROVISIONS RELATING TO BILLS OF EXCHANGE Sections 131-D -133. .

1881 ‡ CHAPTER XVI OF INTERNATIONAL LAW Sections 134-137 ‡ CHAPTER XVII NOTARIES PUBLIC Sections 138-139.NEGOTIABLE INSTRUMENTS ACT. .

NEGOTIABLE INSTRUMENTS ACT. 1881 ESSENTIAL FEATURES: ‡ An instrument in writing ‡ Transferable by delivery with or without endorsement ‡ Confers upon the transferee a title unaffected by equities ‡ Gives the holder a right to sue in his own name ‡ Sue without giving notice of assignment to any previous party liable in respect of it. .

The aspect of negotiability differentiates a negotiable instrument from ordinary goods. Promissory Note 2. 1. MEANS.NEGOTIABLE INSTRUMENTS ACT. Cheque or Bill of Exchange. not withstanding any defect in the title of the person from whom he took it of which he (transferee) was unaware. 1881 It is thus a property which may be acquired by any person who takes it bonafide and for value. .

signed by the maker. only to or to the order of a certain person. the one to whom the promise is made) e. The law defines it as an instrument in writing (not being a bank or currency note) containing an unconditional undertaking. A written promise made by one person (the maker of the promise) to pay to another (the payee. or to the bearer of the instrument.: .g. 1881 PROMISSORY NOTES. to pay a certain sum of money.NEGOTIABLE INSTRUMENTS ACT.

ESSENTIALS: 1. owe you Rs. Oral excluded. 2. engraving. . S. 5. Must contain promise to pay. An express promise to pay and not an acknowledgement of debt. I.000 ‡ Mr. Must be in writing.000 The first is a promissory note while the latter is not. Writing includes printing.NEGOTIABLE INSTRUMENTS ACT. 5. typewriting etc.1881 ‡ I promise to S or order Rs.

.NEGOTIABLE INSTRUMENTS ACT.Promise to pay must be unconditional.1881 3. 6. 5. entering the contract and undertaking to pay.Maker must be a certain person. 4. Not dependant on contingency.Must be signed by the maker. Definite and incapable of variation. It authenticates the document.Sum payable must be certain. Without it incomplete.

Sum payable on demand or at a fixed determinable future and the payee must be certain. Maker cannot be the payee. Anything in addition then not a promissory note. . Sum payable in money only. 8.1881 7.NEGOTIABLE INSTRUMENTS ACT.

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