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PCLJ
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Table of Contents

INDEX OF AUTHORITIES...............................................................................................................................2
STATEMENT OF JURISDICTION....................................................................................................................3
STATEMENT OF FACTS........................................................................................................................43
STATEMENT OF ISSUES..............................................................................................................................86
SUMMARY OF ARGUMENTS....................................................................................................................106
WRITTEN PLEADINGS...............................................................................................................................117
PRAYER..................................................................................................................................................1814
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INDEX OF AUTHORITIES

 Constitution of Pakistan Article (185) clauses (2 & 3)

 Contract Act 1872
 Contract Act 1872 Interpretation Clause
 Contract Act 1872 section 2(a)
 Contract Act 1872 section 3
 Contract Act 1872 section 182
 Qanun-e-Shahadat
 1990 SCMR 28
 2012 SCMR 773
 2002 SCMR 1150
 2012 CLD 1659
 2008 CLC 175
 PLD 2008 SC 146
 PLD 1998 Pesh. 52
 PLD 981 Kar, 170
 PLD 2008 SC 146
 Jewett v. Palmer, 7 Johns. Ch. 65 (N. Y. 1823)
 Pomeroy, Equity Jurisprudence (4th ed.)
 Osterberger v. Hites Constr. Co., 599 S.W.2d 221 (Mo. C. App. 1980)
 Lloyd v Banks (1868) LR 3 Ch App 488.
 Jared v Clements [1903] 1 Ch 428.
 Pomeroy, Equity Jurisprudence (4th ed.)
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STATEMENT OF JURISDICTION

The honorable court has jurisdiction to try and entertain this appeal under article (185), clause (3)
of the Constitution of Pakistan, which states as follows:

“An appeal to the Supreme Court from a judgment, decree, order or sentence of a
High Court in a case to which clause (2) does not apply shall lie only if the
Supreme Court grants leave to appeal.”

Whereby, it is stated that Supreme Court of Pakistan has granted a leave to appeal
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STATEMENT OF FACTS
 Until 2016 Jhangoo Petrol Pty Ltd carried on a petrol station business under the name ‘JP’.
One of the stations owned and operated by JP is ‘Petrol First’ in Lahore. In July 2016, JP
appointed Usman, one if its directors to oversee sale on its behalf.
 Amna was an employee of Qalandar Pty Ltd (QL) and was authorized to represent it. She
contacted JP, to express QL’s interest in the purchase of Petrol First.
 On 17 July Amna inspected the property and financial records including a valuation report of
JP, in the presence Usman. During that inspection Amna conveyed Qalandar’s interest in
Petrol First station and further states the following:
(a) That any contract would be conditional on "due diligence";
(b) That the contract would contain conditions relating to an environmental site assessment
and;
(c) That he would need to see the "financials" for the business for the last two completed
financial years.
 In emails of 25 July 2016, Usman provided further records of the Petrol station "to assist with
due diligence" including a profit and loss statement.
 In a subsequent telephone call she expressed her interest to know JP’s terms so she could get
authority to make a formal offer.
 On 3 August 2016 Usman sent an email to Amna that read,
“Further to our discussion this afternoon, the Seller JP has indicated that it would
sign a contract on the following terms:
a. Purchase price being PKR 100 million for the business on a going concern basis
with deposit being PKR 5 million (5%).
b. Condition of sale being subject to environmental investigations to the buyer’s
satisfaction on or within 40 days from the date of the contract.
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c. Due diligence being conducted to the buyer’s satisfaction on or within 40 days

from the date of the contract.
Please find attached for your review the draft contract of sale. Please reply with
any additional questions.”
 On 4 August, Usman and Amna had further telephone discussions. In those discussions
Amna said that they are willing to proceed to contract, generally on the terms of Usman’s
email of 3 August including the terms on due diligence, environmental investigations and
outstanding ‘financial records’. Usman asked that this be put in writing.
 On 10 August 2016, Amna sent an email to Usman as follows:
“Further to our various discussions, I can confirm our offer of PKR 100 million
by Qalandar Pty (ltd), for the purchase of the Petrol First Station business at 61
Davis Highway, Lahore. This offer includes all the previous discussions on
contract execution and due diligence. We are hopeful of affecting an exchange of
contracts next Monday but, need acceptance of our offer immediately, so we are
in a position to instruct the appropriate consultants to carry out the necessary
investigations. I look forward to receiving your client's confirmation that our offer
is accepted, as clearly both parties are now going to start incurring significant
expenses."
 Approximately 45 minutes later, Usman sent an email to Amna in response to the offer
email. It was copied to Saad, the in-house legal counsel for JP and the other directors on the
board of JP. It contained the following:
“We accept the offer which we understand will be subject to execution of the
Contract provided (with agreed amendments) on Monday, including due diligence
period and the provision of all information/reports etc. that are obtained by the
purchaser during the due diligence period. We look forward to progressing the
matter further on Monday."
 On 13 August, Khan (the solicitor for QL) sent an email to Usman, which contained the
following:
“I act on behalf of Qalandar pty. (ltd) in the above matter and I have been
instructed to forward to you an amended Contract for the Sale of Business at
Petrol First Station. My instructions are that my client would like to exchange this
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contract as soon as possible. Accordingly, would you please arrange for the
contract to be completed by inserting the purchase price in Item N of the Contract
Schedule and have the contract signed by the seller and forwarded for signing by
my clients?”
Attached to the email was a draft contract with annexures which identified QL as
the purchaser and included two conditions:
a. "Due Diligence" which allowed the purchaser to: conduct due diligence enquiries
within 40 days of the contract date,
b. “Environmental Conditions" which required the purchaser to do certain things.
 On 17 August, Usman sent an email to Amna, saying the he received an email from JP Board
of Directors stating that JP does not accept the contract due to the change in/addition of
conditions to what was proposed to us last week. That as a result of these changes they did
not feel comfortable with how the rest of the due diligence would have proceeded if the
above 'start' was indicative of the future dealings. Usman’s email further stated that he has
been been instructed to inform Amna and Qalandar that the sellers have entered into another
contract for the sale of the Petrol First Station.
 In fact JP sold the Petrol First Station to Consortium Pty Ltd (Consortium) for the amount of
PKR 95 million. Consortium paid the deposit price of PKR 4,950,000 and started immediate
construction and other work on Petrol First to make it more suitable according to their needs.
However, during this time the overall physical possession of Petrol First remains with JP.
 While they were in the middle of this work, JP informed that the price was mistakenly quoted
to them and they were not willing to sell for less than 100 million. If Consortium would not
agree to this then JP will not relinquish physical possession to Consortium and any and all
maintenance work carried out by Consortium would need to be stopped. In case of
disagreement JP would ask the court for temporary injunction against the sale order and any
claim by Consortium and initiate legal proceedings for the permanent solution to any
purported dispute.
 Fearing that this would result in financial loss and delay for Consortium, it agreed to pay
PKR 5 million more for Petrol First. Now all the physical work on Petrol First has finished
and Consortium has taken full physical possession of Petrol First. Consortium refuses to pay
the extra 5 million to JP.
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 Qalandar’s argue that a "valid and binding agreement" exists between QL and JP with respect
to the sale and purchase of the business and have instructed Khan to bring a claim against JP
for wrongful termination/recession of the contract of sale of Petrol First Station.
 The Civil Court have determined that the case can proceed to trial stage and have asked
counsels for QL and JP to present arguments.
 The Civil Court gave judgment in favour of JP and Consortium.
 QL appealed to High Court and the High Court affirmed the decision of the lower court.
 Supreme Court has granted the leave for appeal to QL.
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STATEMENT OF ISSUES

The issues on which arguments are to be presented before the Supreme Court from the Counsels
representing JP and QL are:

 What is the effect of the ‘Subject to Contract’ and ‘Due Diligence’ clause on the binding
quality of the alleged contract between JP and QL? Whether, such clauses were inserted
keeping in view the established law on this subject matter?
 Whether, if at all, the doctrine nemo dat quod non habet factum applies here?
 What, if any is the effect of a bona fide purchaser on the alleged legal relations between
JP and QL?
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SUMMARY OF ARGUMENTS

1. This case is related to contract and formation of contractual relations and binding quality
of agreements and their contemplation and execution whether that concluded contract
here negotiations between the parties took place via email where the offer was made
‘subject to contract’ and accepted ‘subject to execution of the contract’ the question is
whether the emails constitute a contract or not? Under these clauses defender claims that
a contract did not take place between them and QL.
2. Law of contract has been promulgated with the spirit that there should be some statutory
legal lines between which contracting parties should act and their obligations to each
other should not be violated. 1This principle does apply as it was agreed between QL and
JP that petrol first would be sold to QL but now JP cannot transfer Petrol first to QL for it
is a property of Consortium.
3. Consortium is a bona fide purchaser without notice, according to standards of law and as
already proven by above mentioned grounds, it can retain the property.

1
(2008 CLC 175).
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WRITTEN PLEADINGS

 What is the effect of the ‘Subject to Contract’ and ‘Due Diligence’ clause on the
binding quality of the alleged contract between JP and QL?

Law of contract has been promulgated with the spirit that there should be some statutory legal
lines between which contracting parties should act and their obligations to each other should not
be violated. 2

One of the stations owned and operated by JP is ‘Petrol First’ in Lahore. In July 2016, JP
appointed Usman, one if its directors to oversee sale on its behalf as a general agent 3. Amna was
an employee of Qalandar Pty Ltd (QL) and was authorized to represent it as a universal agent 4.
Amna contacted JP, to express QL’s interest in the purchase of Petrol First. Expressions of
interest were sought and negotiations took place with representatives of the parties. Most of
those negotiations were by email.
In the offer email these words are used: “This offer is of course subject to contract and due
diligence as previously discussed.” A proposal is merely an offer to be bound by a promise. It is
a declaration by the proposer of his intention to be bound by an obligation if the offeree fulfils or
undertakes to fulfil certain conditions. It is only on the acceptance of the offer or the proposal
that the offer becomes a promise. Therefore, when an instrument is so worded as to be binding
only on the promisor, it is in point of law only an offer and until both parties are bound, neither
party is bound. Such instrument is no more than a proposal because unless the person to whom
the offer is made signifies his willingness to accept it, the proposal will not in law, ripen into an
agreement. An agreement between the parties, wherein vendee had agreed to reconvey the
property to the vendors as soon as they themselves had raised the money was a unilateral offer

2
(2008 CLC 175)
3
Contract Act 1872 section 182
4
Contract Act 1872 section 182
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by the vendee to vendors, containing an indication that such offer was accepted by the vendors,
for none of them had signed that Iqrarnama in token of its acceptance5.

The word promise in the Act is used in a narrow sense to mean an accepted proposal. The
technical use of the word ‘promise’ in the Contract Act is far narrower than the popular use.
Express words of promise often are in law no more than a proposal. It is the promise or promises
only which can give rise to an agreement which, if enforceable by law, is a contract, but if not, is
a void agreement.An agreement as the Courts have said is nothing more than a manifestation of
mutual assent by two or more parties legally competent persons to one another. Mere signing of
a letter could not be termed as “valid agreement” within the meaning of section 2(e). 6

Offer must be clear: An offer which does not contain any particulars as to the things offered,
does not constitute a proposal properly so called. Therefore, where one person by letter asks for
the consent of another to a certain transaction without stating the consideration. It is not an offer.

Statement not requiring acceptance is not an offer To constitute an offer the statement by one
party must be such as would require acceptance by the other party to become effective. A
statement which is unilateral in nature and complete in itself would not amount to an offer.

Agreement is in some respects a broader term than contract or even the bargain or promise. It
covers executed sales, gifts and other transfer of property. For constitution of valid agreement
there must be at least two persons i.e., promisor and promise who agree with their free consent
for a lawful object and legal consideration. 7

Existence of written contract between written parties is not essential as contract could be inferred
from conduct of parties. Voluntary promise not creating any legal obligation between parties
would not amount to a contract. 8

Promise and agreement

Every “promise” as defined by clause (b) of section 2 is not necessarily an “agreement” falling
within clause (e) also. The acceptance of a proposal may bring into existence a promise but to
have an agreement it is very essential that there should be consideration for the promise. A
5
(1990 SCMR 28)
6
(2012 CLD 1659)
7
(2008 CLC 175)
8
(PLD 2008 SC 146)
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promise ripens into an agreement only after an offer has been accepted by the offeree and until
there is such an agreement the question whether there was any consideration for the promise
would not arise at all. Where elements of offer of sale, acceptance of such offer and
consideration were fully established by evidence on record, the same was held to be specifically
enforceable. 9

In order to constitute a binding agreement, the intention of the parties must be distinct and
common to both; an agreement does not admit if difference.

Agreement must be in proper form

Failure to comply with statutory provisions relating to the manner in which a particular
agreement should be made would render it void.

Contract being a bilateral document has to be reduced into writing by means of an agreement
enforceable by law between the person who had made the proposal and the one who had
accepted the same, or those who had made an offer to do a particular thing and accepted the
same. Agreement enforceable by law is a contract. 10

The definition of contract in section 2 of the Contract Act appears to be built upon a succession
of definition of the elements which go to make a contract, that is to say, proposal, acceptance,
promise, promisor, promise, consideration and agreement. Therefore, to constitute an agreement,
It was necessary that there was an unconditional offer and same was accepted by competent
person or authority giving rise to accrual of rights to parties to such agreement.

True test for deciding whether a valid contract was made between the parties or not was to
ascertain if the parties were of one mind on all the material terms at the time it had been finalized
and whether they intended that the matter was closed and concluded between them. 11

Oral agreement, however, requires for proof clearest and most satisfactory evidence. From the
fact that respondent had not signed any of the documents or no document was duly signed by
both parties, it cannot be inferred that a valid agreement existed. 12

9
(PLD 1998 Pesh. 52)
10
(2012 SCMR 773)
11
(2002 SCMR 1150)
12
(PLD 981 Kar, 170)
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It was made known to the plaintiff that the defendant would sign a contract on the terms set out
in the email from Usman of 3RD August 2016. On the following day the plaintiffs (through
Amna) emailed the defendant (through Usman) and confirmed their offer and emphasized the
need for expedition: We are hopeful of effecting an exchange of contracts next Monday but
need acceptance of our offer immediately so we are in a position to instruct the appropriate
consultants to carry out the necessary investigations.” (Emphasis added) The words used by the
plaintiffs as to the effect of acceptance is clear from the closing words of the email: “I look
forward receiving your client’s confirmation that our offer is accepted as clearly both parties
are now going to start incurring significant expenses.” (Emphasis added). In other words, the
parties were to commence the tasks necessary to complete the contract: the engagement of
consultants, the preparation of financial and other documents and so on. In order to determine in
what areas the parties were, and were not, in agreement, and what matters they considered
necessary in order for an agreement to exist, it is legitimate to examine their subsequent conduct.
Where correspondence between the parties after an informal agreement refers to important terms
and conditions not mentioned during that informal discussion, it may more readily be inferred
that the earlier discussion was simply a preliminary negotiation and not a binding agreement;
Depending on the size, importance and complexity of the subject matter, the less formal the
initial agreement, the less likely it will be that it was intended to be legally binding and
enforceable. Thus, an oral discussion which contemplates a subsequent formal written agreement
is less likely to have been intended to have been immediately binding; It is necessary in every
case to consider the nature and importance of the transaction which the parties contemplate.
Where the agreement concerns a large sum, or concerns a significant transaction, it is less likely
to have been intended to be presently binding; Depending on the subject matter, where the
parties have not used solicitors but intended to do so for the drawing up of their formal
agreement, that may also be a factor which will point to the non-existence of a binding
agreement until the contemplated formalities have been agreed; and Where a binding agreement
is said to have been formed as a result of correspondence, it is necessary to look at that
correspondence as a whole. It is wrong to isolate any part of the correspondence from the rest in
order to prove or disprove the existence of a binding agreement. The same approach should be
taken to the analysis of words and phrases within the correspondence. Reference to an
‘agreement’ having been reached does not necessarily prove the existence of a presently binding
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contract. Conversely, references to a ‘proposed’ agreement, and similar expressions, will not
necessarily mean that no agreement presently exists. It is a question of how the words are to be
interpreted in their context, and in the light of the correspondence, viewed as a whole. Existence
of written contract between written parties is not essentialas contract could be inferred from
conduct of parties. Voluntary promise not creating any legal obligation between parties would
not amount to a contract. 13

 Whether, if at all, the doctrine nemo dat quod non habet factum applies here?

JP claims that there was no intention to be legally bound by that exchange and, in any event,
there is no sufficient written memorandum or note to satisfy the contract for sale conditions
in writing and signed by the party to be charged or by some person by the party lawfully
authorized and according to this doctrine JP cannot take petrol first from Consortium and
give it to QL since Consortium is a bona-fide purchaser
 Literal Meaning Of The Doctrine: “No one gives what he doesn't have”
 Nemo Dat Rule:It is a legal rule, sometimes called the nemo dat rule, which states that
the purchase of a possession from someone who has no ownership right to it also denies
the purchaser any ownership title.
 One Cannot Transfer More Rights Then He Has:
It is equivalent to the civil (continental) "Nemo plus iuris ad aliumtransferrepotest quam
ipse habet" rule, which means “one cannot transfer more rights than he has”.
The rule usually stays valid even if the purchaser does not know that the seller has no right to
claim ownership of the object of the transaction (a bona fide purchaser); however, in many
cases, more than one innocent party is involved, making judgment difficult for courts and
leading to numerous exceptions to the general rule that aim to give a degree of protection to
bona fide purchasers and original owners.
 What, if any is the effect of a bona fide purchaser on the alleged legal relations of
QL and JP?

Ascertaining the fact in the light of arguments given above, there was no valid contract
whatsoever between JP and QL. And Consortium is a bona fide purchaser of value without

13
(PLD 2008 SC 146)
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notice; therefore it has no liability towards either JP or QL as regard to the said property which
now rightfully belongs to it.

Pomeroy in his book Equity Jurisprudence states:

“In general, it is requisite that the money be paid or advanced, the property
transferred or the right surrendered, at the time of the conveyance, and as a part of
the transaction, in order that it may be the valuable consideration which can
protect the purchaser.”14

The facts stated show that Consortium did pay the money which served as a valuable
consideration for the contract and is therefore a bona fide purchaser of value without notice; after
buying the property they constructed over it and now have its full possession. A mere unproved
claim of agreement cannot by any means deprive Consortium of its ownership of Petrol First.

Proof that Consortium was a Bona Fide Purchaser

A bona fide purchaser who purchases chattels or land in good faith, according to Pomeroy,
necessarily:

“A contemporaneous advance or loan of money, or a sale, transfer, or exchange of

property, made at the time of the purchase.”15

Considering Consortium paid the amount of 95 million as per stated in the contract first agreed
upon by both parties, that itself is a proof of property bought in good faith.

a) Consideration must be paid before notice:

“Not only must there be a valuable consideration in fact, but it must be paid
before notice of the prior claim. Notice after the agreement for the purchase is
made, but before any payment, will destroy the character of a bona fide
purchaser.”16

Nowhere the facts suggest that Consortium had a notice of claim prior to their payment of
consideration.

14
Pomeroy, Equity Jurisprudence (4th ed.)
15
Ibid.
16
Jewett v. Palmer, 7 Johns. Ch. 65 (N. Y. 1823)
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b) The Amount of Consideration is generally immaterial:

It must be noted that generally the amount of value paid is immaterial, however if it’s
grossly small then it represents a deal made in bad faith. However Consortium readily
paid the deposit price as per the conditions of contract.
c) Assumption of a new legal obligation where it is not revocable:
Consortium, by paying the deposit price had formed a new legal obligation, of which the
revocation wouldn’t have been, possible had an issue of defective title rose. That alone is
the proof of sufficient good faith on its part.17

Moreover, it was the duty of JP to disclose to Consortium that any prior claim existed on the
property, if there was any, as might be understood by the following excerpt from an American
case law:
“The duty to disclose arises when contracting parties do not stand on equal
footing because one possesses superior knowledge not reasonably available to the
other.”18
The fact to be taken under consideration is that apparently Consortium has neither:
i. Actual notice of the property being claimed by anyone, which would thereby prevent
them of being derogated from the status of bona fide purchasers.19
ii. Nor, they had any imputed notice whatsoever of QL’s claim over the property.20

Effect on QL and JP’s alleged relations

The grounds for this final argument are rooted in the grounds above mentioned, since there
does not exist any binding agreement between QL and JP, and since Consortium is by all
standards a bona fide purchaser without notice, Consortium will retain and keep the
possession along with title of the property rightfully.

PRAYER
Wherefore, in light of issues raised, arguments advanced and authorities cited, it is humbly
prayed before the Honorable Court that it may be graciously pleased to:
17
Pomeroy, Equity Jurisprudence (4th ed.)
18
Osterberger v. Hites Constr. Co., 599 S.W.2d 221 (Mo. C. App. 1980)
19
Lloyd v Banks (1868) LR 3 Ch App 488.
20
Jared v Clements [1903] 1 Ch 428.
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a) Dismiss the appeal for specific performance of contract or any compensation demanded
thereto or any appeal of sustenance of High Court orders.
b) Dismiss the appeal of dispossession of the said property from Consortium.
c) Grant any other decree as it may deem fit.