Blaw CA Notes Test QP With Solution

Business Law
Test # 01
Date:06 June, 2020
Total Marks: 30 Marks
Time Allowed:60 Minutes
INSTRUCTIONS
➢ Each new question shall be started from a new page. Otherwise Question will not be
checked.
➢ Using any pen other than black shall result in cancellation of paper.
➢ Writing page number on top of the page is compulsory for the facilitation of marking.
Q#1
Naveed, Hameed and Lateef are partners in a firm whose sole purpose is to promote the research in the field
of science. None of these three partners have intended to generate profit out of this partnership nor are they
desirous of investing their surplus funds in any other venture. Hameed has suggested the other partners that
they should be registered under the Companies Act 2017 for the purpose of getting the advantage of a limited
liability.
Naveed is of the view that getting registration as a company also suits them but is not willing to get any sort
of license from any authority, except applying to registrar for registering the company. Lateef in return told
his other partners that getting license is the basic condition for the purpose of getting such company
registered but Naveed insisted that Companies Act 2017 have not made it mandatory to get licence and the
making of application for getting the said licence is a voluntary requirement as per the wording of relevant
section of Companies Act 2017.
Required:
Being a Corporate Law Advisor, suggest these partners the
• Guidance about whether getting licence from any authority is a necessary requirement or not; and
• Effect of cancellation of licence. (07 marks)
Q # 2:
VRS Company Limited is holding 45% of total equity shares in SV Company Limited. The Board of Directors of
SV Company Limited (incorporated on January 1, 2014) decided to raise the share capital by issuing further
Equity shares. BOD resolved not to offer any shares to VRS Company Limited on the ground that it was
already holding a high % of the total number of shares already issued in SV Company Limited. The Articles of
Association of SV Company Limited provides that the new shares be offered to the existing shareholders of
the company. On March 01,2020 new shares were offered to all the shareholders and such information is also
concealed from VRS Company Limited. Referring to the provisions of the Company Act,2017 Describe the
conditions which should be complied, by SV Company limited, to file an appeal in Court. (02 Marks)
Q # 3:
1. High Aim Private Limited wants to change its Principal-line of business clause of the Memorandum of
Association of the Company. It needs:
a) Shareholder approval by way of Ordinary Resolution
b) Shareholder approval is not required for change of object clause of the company.
c) Shareholder approval by way of Special Resolution
d) The approval from Tribunal for changing object clause of the company.
2. Sapan and Shani made a name reservation application accompanied by requisite fee to the Registrar
for forming a new private company. The Registrar accorded its approval for reservation of most
preferred name Sapanjay Softwares Private Ltd. on 6th July, 2020. In how many days, necessary
documents for incorporation of the company must be submitted to the Registrar so that the reserved
name does not get lapsed.
a) Within 10 days from the date of approval
b) Within 20 days from the date of approval
c) Within 45 days from the date of approval
d) Within 60 days from the date of approval
3. Mr. Pushkar wishes to start his own venture with an idea of recycling of plastic waste. He wants to
secure himself by limiting his liability also he doesn’t want to include any other person as a director
OR investor He approaches you for your advice so as to decide on which type of entity he should
incorporate mainly based on the aspects as he wishes. Kindly suggest a suitable form of entity from
the following:
a) Guarantee Limited
b) Private Limited Company
c) Single member company SMC
d) Not for profit organization
4. Vivek is in trading business whereby he supplies handmade gloves and socks to many charitable
trusts who supports the elderly people. Vivek now wants to expand his business and wants to reap
the benefits of company form of organization by opening his business as a Not for profit
Organization. Advise Vivek:
a) Vivek cannot form a NOT for Profit as he is in trading business
b) Vivek can form a NOT for profit Organization
c) Trading business is including in the list of objects, specified by SECP
d) None of the above
5. Mr. Superman is a truck driver formed a Single member company for testing trucks. The name of
the company is Thhok Diya Limited. There are 20 employees (Drivers) of the company and Mr.
Superman was also an employee. It is a policy of the company to compensate its employees in case
of damage of death. At one day Mr. Superman drove a truck and went into accident with bicycle
and lost his life. Now his widow wants to claim compensation from Thhok Diya Limited. Whether
wife of the Superman can receive the compensation from the company?
a) Yes
b) No
c) Partly Yes
d) Partly No
6. Mahesh is a creditor of an unlimited company. The company was wound-up. Mahesh, therefore,
wants to sue the members of the company to recover the dues. Advise Mahesh regarding the
remedy available to him.
a) As it is an unlimited liability company Mahesh can sue the members
b)As it is an unlimited liability company Mahesh can sue the members as well as the company
c) Mahesh cannot sue the members or the company even though the liability is unlimited
d)Mahesh can sue the company but not the members as the members liability is unlimited
towards the company and not towards the creditors.
7. Six persons are the only members of Tab (Pvt.) Ltd. All of them went to USA on apleasure trip by
airplane. On the way, the plane crashed and all the six members died. Does Tab (Pvt.) Limited still
exist?
a) As all the members forming the company are dead the company shall also die.
b)As all the members of the company are dead the Court shall decide as to whether the
company shall continue or not
c) As the company has a separate legal entity having an existence separate from its
members the death of the members shall not affect the existence of the company.
d)As all the members of the company are dead the Registrar shall strike off the name of the
company.
8. Kamran and Ijaz made a name reservation application accompanied by requisite fee to the
registrar for forming a new private company. The registrar accorded its approval for
reservation of most preferred name KI software private limited on 7th July, 2019. By which
date necessary documents for incorporation of the company must be submitted to the
registrar so that the reserved name does not get lapsed.
a) Latest by 20th July, 2019
b) Latest by 27th august, 2019
c) Latest by 5th September, 2019
d) Latest by 8th September, 2019
9. Mr. Zameer and his 5 friends want to register a Public company Named as “Stylo Shoes”- an
unlisted public company. Name of the company shall be mentioned on MOA of the company
as
a) Stylo Shoes- an unlisted company
b) Stylo Shoes limited- an unlisted company
c) Stylo Shoes limited
d) Stylo Shoes
10. Supertech Computers private limited has 120 members. It sends notice to all of them. 20
members did not attend the meeting. Out of remaining 100 members, 20 members abstained
from voting. Advice the company, how many members should vote in favor of resolution, if it
has to be passed as a special resolution?
a) 60 votes
b) 80 votes
c) 75 votes
d) 20 votes
(10 marks)
Q # 4:
a)
The Articles of Association of Surya Private limited (SPL). provided that the maximum number of Directors in
the company shall be 15. Presently, the company is having 12 directors. The Board of Directors of the said
company desired to increase the number of directors to 16. Advise whether under the provisions of the
Companies Act, 2017, briefly explain the requirement which should have been complied for this change.
(03 Marks)
b)
Mr. A and B are partners in Ab Trading firm. With Passage of time, there is increasing trend in revenue. Now
partners decide to incorporate a private company with the name of AB trading Private limited to expand their
business in large scale. As a legal advisor, advise them about necessary documents required. (04 marks)
Business Law
Suggested Solution #01
Sol # 1:
As per the requirements of Companies Act 2017:
No association shall be registered as a company without getting a licence granted under that section:
• That intends to be formed as a limited company for promoting certain objects including Research;
and
• Such company
(i) intends to apply the company’s profits and other income in promoting its objects; and
(ii) prohibits the payment of dividends to the company’s members;
So, Naveed’s point of view shall not be considered valid and they shall have to apply to SECP for getting a
licence as they are meeting the above said criteria. However, for getting a licence they would have to prove
that their objects and activities are not and shall not, at any time, be against the laws, public order, security,
sovereignty and national interests of Pakistan.
Effect of revocation of License:

• Alpha School shall stop all its activities except the recovery of money owed to it, if any;
• Alpha School shall not solicit or receive donations from any source; and
• All the net assets of School shall, in a specified manner, be transferred to another company licensed,
preferably having similar or identical objects, within 90 days of revocation or any extended period (if
allowed by the SECP)
• A reasonable amount to meet expenses of voluntary winding up or making an application to the registrar
for striking off the name may be retained by the company.
• After such transfer, the members and officers of the first School or any of their family members shall not
be eligible to hold any office in later company for next 5 years.
Process:
• After compliance of above requirements, Board of directors shall file within 15 days, a report to registrar
containing such information and documents as may be specified.
• Within 30 days of acceptance of the report by registrar BOD shall
i. Initiate necessary proceedings for voluntary winding up; or
ii. Make an application to registrar for striking the name of company off the register (if it has no
assets and liabilities)
• If requirements not complied with on a timely basis; SECP may appoint an administrator to manage affairs
of company and initiate proceedings for winding up.
Marking Scheme:
2 Marks for above decision and 5 marks for effect 5 Marks
Sol # 2:
As per the Companies Act 2017:
“Any member(s) of affected class representing at least 10% shares of that class may apply to court for an
order against resolution.
Such application should be filed within 30 days of resolution”.
In the given situation, VRS company limited ‘s rights are effected by SV company Limited. By complaining of
above conditions VRS Company limited can apply in Court.
Marking Scheme:
2 Marks for above provision 2 Marks
Sol # 3:
1 C 4 A 7 C 10 c
2 D 5 A 8 C
3 c 6 B 9 c
Sol # 4:
a)
• Company may, by special resolution, alter its AOA
• Any alteration shall be as valid as if originally contained in AOA
• A copy of altered AOA shall be filed with registrar within 30 days
• Registrar shall register the same.
In the given situation, BOD wants to change the clause mentioned in the AOA of the Company. For such
alteration, Company is required to comply above requirements.
Marking Scheme:
3 Marks for above provision 3 Marks
b)
Following documents are required to form a company
• Getting availability of suitable name from registrar
• Preparing Memorandum of Association (MOA)
• Preparing Articles of Association (AOA)
• Filing documents with registrar
• Obtaining the “certificate of incorporation” of company
Marking Scheme:
1 Marks for each document 4 Marks
Business Law
Test # 02
Date:13th June, 2020
INSTRUCTIONS
checked.
Q # 1:
Zimmay’Dar Limited, a public limited company, had convened a general meeting at 11:00 a.m. on March 25, 2018
to consider and if deemed fit, pass a special resolution approving the disposal of a major segment of the company.
The meeting commenced at 11:19 a.m. as the quorum was not present at the scheduled time and was attended by
200 members (including 20 members represented through proxies) holding 2,000,000 shares in aggregate. After an
intense debate, voting was held through show of hands and the chairman declared resolution successful as 154
votes were casted in favour of the resolution. On March 31, 2018, the shareholders who gave a dissenting vote in
the meeting, lodged a protest with the company claiming that the resolution was invalid on account of the
following reasons:
(i) Mr. Ambani who voted for the resolution was represented through a proxy Mr. Mittel, which was deposited at
11:47 a.m. on March 22, 2018. Since March 23rd was a public holiday, condition of depositing proxy at least 48
hours before meeting, could not be met.
(ii) Mr. Boota a shareholder with a holding of 50,000 shares was represented by two proxies i.e. Mr. Cobra (30,000
shares) & Mr. Delta (20,000 shares). Both proxies were counted for the purpose of voting.
(iii) JK (Pvt) Limited holding 20,000 shares of company, were represented by Mr Jamal, who is neither the director
nor the employee of company. He also voted in favour of resolution.
(iv) Shareholders who lodged the protest hold 600,000 shares and therefore the resolution was approved by
shareholders holding 70% voting rights only.
(v) Since meeting could not be held on time, it became invalid and should be called again.
Required: Discuss the validity of the resolution under the Companies Act 2017, in view of the complaint lodged by
the dissenting shareholders. (10 Marks)
Q#2:
1. The quorum of a general meeting, in case of public listed company:
a) 5 members
b) 15 members
c) 20 members
d) 10 members
2. All general meetings other than “annual general meeting” and “statutory meeting “are called:
a) Special resolution
b) Special meetings
c) Ordinary meetings
d) Extra ordinary meetings
3. If an advertisement invites public for the subscription or purchase of any shares, it is:
a) Document
b) Book & paper
c) Prospectus
d) All
4. No prospectus shall be issued or an advertisement of a prospectus in newspaper shall appear less than _______
days before subscription list
a) 3 days
b) 5 days
c) 21 days
d) 7 days
5. Under the companies act, 2017, listed company shall constitute quorum for the general meeting as:
a) Either ten members or 25% of its total strength. Provided that quorum shall not be less
than two members
b) Either eight members or 10% of its total strength.
c) Either eight members or 25% of its total strength whichever is less. Provided that
quorum shall not be less than three members.
d) Ten members present in person or through video link having 25% voting power on their
own account or as a proxy
6. Moon (Private) Limited incorporated on 23rd oct, 2017. As per compliance requirement, company shall
hold its statutory meeting within 9 months from date of incorporation or within 180 days from the date
of commencement of business. What is due date for holding a statutory meeting?
a) 30th September, 2018
b) 30th December, 2018
c) 31st December, 2018
d) Not required to hold this meeting.
7. Dwapar equipment finance limited, a non-banking finance company (NBFC), is desirous of offering
secured, redeemable, non-convertible 9% debentures to the public in three or more tranches over a
certain period of time. Which kind of prospectus it is required to issue so that its purpose is served and
there arises no need to take out a fresh prospectus for second and subsequent offer of securities.
a) Deemed prospectus.
b) Shelf prospectus.
c) Supplement prospectus.
d) Abridged prospectus.
8. If any information is concealed from prospectus then, who will be liable?
a) All officers of the Company
b) All Directors
c) Expert
d) All of above (who knew the fact)
9. The minutes of the general meetings can be inspected by the members during the business hours,
subject to such reasonable restrictions as the company may by its articles or in general meeting impose
so that not less than ________ hours in each day be allowed for inspections:
a) 5 hours
b) 3 hours
c) 2 hours
d) 7 hours
10. The notice of AGM of a listed company, in case of its being dispatched in normal course, shall also be
published at least in one issue of:
a) Daily newspaper in English Language
b) Daily newspaper in Urdu Language
c) Both
d) None
(10 Marks)
Q#3:
Under the provisions of Companies Act 2017/ Securities Act 2015, Explain:
a) What is the procedure to be followed, when a quorum is not completed in adjourned meeting?
(02 marks)
b) With a view to issue shares to the general public of a prospectus containing some false information
was issued by a company. Mr. X received a copy of the prospectus from the company, but did not
apply for allotment of any shares. The allotment of shares to the general public was completed by the
company within the stipulated period. A few months later, Mr. X bought 2000 shares through the
stock exchange at a higher price which later on fell sharply. X sold these shares at a heavy loss. Mr. X
claims damages from the company for the loss suffered on the ground that the prospectus issued by
the company contained a false statement. Referring to the provisions of the Companies Act, examine
whether X’s claim for damages is justified. (03 marks)
c) Modern Furnitures Limited (MFL) was willing to purchase wood trees in Changha mangha. Its
prospectus contained some important extracts from an expert report giving the number of wood
trees and other relevant information in Changha Mangha. Total cost of this contract is Rs. 20 million
and MFL has taken the subscription from general public by issuing of prospectus. The report state
that this purchase contract will be valid till 3 years. After 1.5 years, company wishes to extend this
contract till 5 years and these conditions are also agreed with contracting party. MFL wants to inform
this information to its stakeholders. Referring, to the provisions of the Companies Act, examine how
company can inform. (03 marks)
d) Sadiq Limited (SL) is a listed company having a reputable business in Pakistan and also have
international worth of its products. SL earns 40% revenue by exporting its product. SL invest its extra
funds in purchasing of shares in others company and it has purchased 17% shares of Arif Private
Limited (APL). Foe the year ending June 2020, APL hold its AGM on 23th August, 2020. Being a
member of APL, SL also receive the notice of AGM and SL wants to attend this meeting due to holding
of major portion shares of APL.
You are the legal advisor of SL. Under the Companies Act 2017, advice the Company about how can it
present itself in AGM. (02 Marks)
Business Law
Suggested Solution # 02
Sol # 01:
The various situations given in the question are discussed hereunder:
(i) As per the requirements of the Companies Act 2017 (Sec 137); the proxies must be lodged with
the company not later than 48 hours before the time for holding a meeting. And in
calculating this no account shall be taken of any part of the day that is not a working day.
As the instrument is not deposited 72 hours (48 hours plus public holiday) before the meeting time,
it shall not be considered valid and shall not be counted for the purpose of voting. However, if the
appointed proxy was also a member, he would be counted in his personal capacity.
(ii) As per the requirements of Companies Act 2017 a member shall not be entitled to appoint more
than one proxy to attend any one meeting. If any member appoints more than one proxy for any
one meeting and more than one instrument of proxy are deposited with the company, all such
instruments of proxy shall be rendered invalid. Accordingly, votes casted by Mr. Cobra and Delta as
proxies would be invalid. However, if both these persons were also member of the company, they
would be counted in their personal capacity
(iii) As per the requirements of Companies Act 2017 (Sec 138), a company which is a member of
another company may, by resolution of the directors, authorize any person to act as its
representative at any meeting of that other company. Therefore Mr. Jamal's vote is valid.
(iv) As per the requirements of Companies Act 2017, at any general meeting, a resolution put to the
vote of the meeting shall be decided on show of hands, unless a poll is demanded. The concerned
shareholders should have demanded a poll before or on the declaration of the result of the voting
by show of hands and not after the meeting is concluded. Therefore, the shareholder's protest is not
valid.
(v) As per the requirements of Companies Act 2017 (Sec 135); if within half an hour from the time
appointed for the meeting, a quorum is not present, the meeting, may either be dissolved or
adjourned. Since the quorum was present within 30 minutes, the meeting is valid.
Conclusion:
In view of the above the resolution would be deemed to have been duly passed even after if the
proxies in point (i) and (ii) are not counted as more than 75% valid votes were casted at the meeting.
Marking Scheme:
02 Marks for each point 10 Marks
Sol # 02:
Sol # 3:
1 D 4 D 7 B 10 C
2 D 5 d 8 D
3 C 6 D 9 c
Sol # 3:
a)
As Per the Companies Act 2017:
If quorum not present within half hour at adjourned meeting, quorum shall be not less than 2
members present personally or through video link (unless articles provide otherwise)
Marking Scheme:
2 Marks for provision 2 Marks
b)
Mr. X is not an original allottee of shares
• since he purchased the shares from the market, and not from the company.
Mr. X cannot claim damages from the company.
• since Mr. X is not an original allottee of shares;
• since Mr. X did not subscribe for shares on the faith of a misleading prospectus
Marking Scheme:
1 Mark for each point 3 Marks
c)
As per the Securities Act 2015:
A supplement to the prospectus invites the general public for subscription of the security(ies)
earlier offered to the public through shelf‐prospectus. The supplement to the prospectus for
each offering contains updated disclosures. It also provides such information as prescribed by
the Commission.
In the given situation, Company want to inform an updated information to its Stakeholders. So, Company can issue
a Supplement of prospectus which will contain an updated disclosure about contract made for purchasing wood
tree
Marking Scheme:
2 Marks for provision and 1 mark for conclusion 3 Marks
d)
Under the Companies Act 2017:
If a company is member of another company, it may authorize any of its officials or any other person to act as its
representative there. Such representative shall have same powers, which an individual shareholder of that other
company possesses at that meeting.
In the given situation, SL wants ton attend this meeting. So, SL can send its representative in meeting, who will
have same power as SL.
Marking Scheme:
Business Law
Test # 03
INSTRUCTIONS
checked.
Q # 1:
As per the requirements of Companies Act 2017, comment on the appropriateness or otherwise of the
following statements:
a)A director has recently disposed of his shares and due to this disposal, his directorship status is also no
more. (03 Marks)
b) A director is planning to assign his directorship to his brother, who wants to join that seat for some
months. But the Companies Act 2017 have expressly prohibited any sort of such assignment (03 Marks)
c) A director wants to enter into a contract with company for supply some of his own merchandise to the
company on market rates. But he has only taken approval of directors and not the members. (03 Marks)
d) Company has offered to position of Chairman to their existing Chief Executive which is a violation of law
(02 Marks)
e) Spouse of a director in Habib Bank Limited have taken loan from the company without approval of
members and SECP and hence is a contravention of the Companies Act 2017 (02 Marks)
f) Requirement of minimum number of Director for each category of company (02 Marks)
g) Directors have fixed the number of directors to be elected as 14, exactly 39 days before AGM. After 10 days
some members met and are much worried as they only wanted to fix 10 seats for elected director. As the time
remaining in hand is less than 35 days, now this is impossible to change the numbers so fixed (02 Marks)
h) A director of a private company had an interest in a contract of company and haven’t disclosed his interest
to other directors and also have participated in voting on that business claiming that company law hasn’t
mandated it to disclose interest or refrain from voting for a director of a private company. (03 Marks)
Q #2:
1. S Limited, incorporated on 30th Oct, 2018, has 10 subscribers to Memorandum out of which 2 are
Private Limited companies & remaining individuals. There is nothing mention in any of documents
as to who shall be first directors. Advise on appointment of first directors to manage affairs of
company.
a) All subscribers to Memorandum shall be deemed to be first directors.
b) 2 Private limited companies being subscribers to Memorandum decide to who shall be first
directors.
c) All individual subscribers to Memorandum shall be deemed to be first directors.
d) As company requires minimum three directors, eight individual subscribers shall choose 2
from among themselves & one shall be chosen by two private limited companies from among
themselves.
2. Bata limited, a listed company, has 9 directors in the board. During the financial year of 30 th June,
2020, one of the directors was removed due to falling in ineligibility criteria. As per the Companies
Act 2017,
a) Board is required to fill this vacancy within 90 days
b) Members will fill this vacancy through voting
c) No need to fill, because the requirement of minimum directors is fulfilled
d) None of above
3. Mr. Haasan, a director of a listed company, get suffered from COVID-19 on 10th March 2020 and
was absent from 4 consecutive meetings of board and expenses of his treatment, are also borne by
Company (as the company knew the fact). As per the Companies Act 2017, Should he vacate the
office of director?
a) Yes
b) No
c) Partly Yes
d) Partly No
4. ABC Private limited, having 5.0 million share capital, wants to enter in a contract with P Limited, a
public company, for purchasing of raw material. One of the Director, Mr. Sham of ABC Private
Limited is also hold 7% share of P Limited. What would be the course of action in the First Board
Meeting of ABC Private Limited for this Contract:
a) Mr. Sham can Attend and vote in this meeting
b) Mr. Sham cannot vote only, but can attend this Meeting
c) Notice of the meeting shall notice sent to Mr. sham
d) Both I & ii
5. CEO can be appointed within…….
a) 30 days of AGM
b) 15 days of board Meeting
c) 14 Days of Board Election
d) 14 days of AGM
6. Sole Sale agent can be appointed with the approval of………
a) Directors
b) Members
c) Registrar
d) Commission
7. A chief executive of _________ company shall not directly or indirectly engage in any business which is of
same nature and directly completes with the business carried on by the company of which he is chief
executive or by a subsidiary of such a company:
a) Holding company
b) Subsidiary company
c) Public company
d) Private company
8. No person shall be appointed as a director of a company if he is:
a) Minor
b) of unsound mind
c) Insolvent
d) All
9. All notices received by the company, related to the consent of candidates for appointment as a director,
shall be transmitted to the members not later than _________ before the date of the meeting:
a) 14 days
b) 7 days
c) 21 days
d) 28 days
10. A director of XYZ, a Private Limited Takes a loan from its company. Due to some reasons, he fails
To repay debt in given time period. He requested board of directors to give him time for repayment
Of debt. Which of below statements is correct with respect to exercise of power in given case?
a) Power to fix time limit to repay debt due from director can be exercised only by members by special
resolution at a general meeting.
b) Power to fix time limit to repay debt due from director can be exercised by board of company itself
c) Power to give extension to a loan of a director rests with members (and not the directors)
d) Board not exercise this power if provision on repayment of debt is contained in AOA of company
(10 Marks)
Business Law
Sol # 1:
a) As per the requirements of the Companies Act 2017:
A person shall not be eligible for appointment as a director of a company, if he is not a member except following
persons
(i) a person representing a member which is not a natural person;
(ii) a whole-time director who is an employee of the company;
(iii) a chief executive; or
(iv) a person representing a creditor or other special interests by virtue of contractual arrangements;
By disposing of the shares, the director has ceased to be a member. Accordingly, the given statement would be
valid and he is also ineligible to act as director unless he is, in any of the above, mentioned categories
b) As per the requirements of the Companies Act 2017:

A director of any company shall not assign his office to any other person and any such appointment shall be void
from day first. However, as an exception, the appointment with the approval of board, of an alternate or
substitute director to act for him during his absence from Pakistan of not less than 90 days is allowed
If the director in the scenario wants to appoint brother for some months, he may use the option
with approval of other directors if he is planning a foreign visit of at least 90 days. It is also
important to note that the brother must also be eligible to act as director.
c) As per the requirements of the Companies Act 2017;

The directors have the power to authorise a director or the firm of which he is a partner or any partner of such
firm or a private company of which he is a member or director to enter into any contract with the company for
making sale, purchase or supply of goods or rendering services with the company; Moreover, the transactions with
related party that are on arm’s length basis.
The given statement is not valid because directors need not to take approval from members.
d) As per the requirements of the Companies Act 2017:

The Commission may specify the classes of companies for which the chairman and chief executive shall not be the
same individual.
If the scenario relates to the company specifically prohibited to do same, both positions must not
be allocated to same personnel. Other than those companies, both positions are allowed to be
allocated to the same person
e) As per the requirements of the Companies Act 2017:

A company shall not make a loan to a director unless the transaction has been approved by a resolution of the
members of the company. Moreover, for listed company, approval of the Commission shall also be required before
sanctioning of any such loan.
However, as an exception this section shall not apply to a company which in the ordinary course of
its business provides loans or gives guarantees or securities for the due repayment of any loan.
In the given scenario as the ordinary course of business of HBL is provision of such loan therefore
the approval of members and SECP is not mandatory.
f) As per the requirements of the Companies Act 2017:

SMC At least 1
Other private At least 2
Public (unlisted) At least 3
Public (listed) At least 7
No person shall be a director (including alternate director) at same time in more than such
number of companies as may be specified
(this limit shall not include the directorships in a listed subsidiary)
g) As per the requirements of the Companies Act 2017;
Existing directors shall fix the number of directors to be elected in the general meeting, not later than 35 days
before convening of such meeting and the number of directors so fixed shall not be changed except with the prior
approval of the general meeting in which election is to be held.
Therefore, the given statement is not valid because members can change the numbering at the
general meeting at which election is to be conducted
h) As Per the Companies Act 2017:

Disclosure of interest by director have not given any exemption to director of any company for disclosing his
interest at a meeting of directors, however an exemption to directors of private company not being a subsidiary or
holding of a public company from the prohibition of voting at that meeting of director.
Therefore, the given statement is valid to the extent of exemption from restriction of voting but the same is not
valid regarding the exemption to disclose the interest.
Marking Scheme:
1 Marks for provision and 1 mark for decision for each 20 Marks
Sol # 2:
1 C 4 B 7 C 10 C
2 A 5 C 8 D
3 b 6 D 9 b
Business Law
Test # 04
INSTRUCTIONS
checked.
Q # 1:
The Annual General Meeting of ABC Limited declared a dividend at the rate of 30 percent payable on paid up
equity share capital of the Company as recommended by Board of Directors on 30th April, 2019. But the
Company did not to post the dividend warrant to Mr. Ranjan, an equity shareholder of the Company, up to
30th June, 2019, due to personal rivalry with one of the directors of the company. Under the Companies Act
2017, explain the penalty, which the company have to pay in the case of delay in payment of dividend.
(03 Marks)
Q # 2:
The Director of Kayi Limited proposed dividend at 12% on equity shares for the financial year 2018-19. The
same was approved in the annual general meeting of the company held on 20th September, 2019. The
Directors declared the approved dividends. They seek your opinion on the following matters:
(i) Mr. Bamsi, holding equity shares of face value of 1.0 million has not paid an amount of Rs. 100,000
towards call money on shares. Can the same be adjusted against the dividend amount payable to him?
(ii)Ms. Nini was the holder of 1,000 equity shares on 31st March, 2019, but she has transferred the shares to
Mr. Noyan, whose name has been registered on 20th May, 2019. Who will be entitled to the above dividend?
(04 Marks)
Q # 3:
a)
The Board of directors of Bharat Limited has a practical problem. The registered office of the company is
situated in a classified backward area of Baluchistan. The Board wants to keep its books of account at its
corporate office in Quetta which is conveniently located. The Board seeks your advice about the feasibility of
maintaining the accounting records at a place other than the registered office of the company. Advise.
(02 Marks)
b)
Explain the requirements to be followed by a listed company regarding the preparation, filing and other legal
formalities for the quarterly accounts (05 Marks)
Q # 4:
1.Atlas Limited (AL) a pharmaceutical company was having its manufacturing plant in Kohat, KPK. The
address of its registered office as informed to the registrar of AL was of one of its director’s office,
situated at Sheikhupura, Punjab. To comply with the provisions of the companies act, 2017 it was
keeping all its books of accounts, other relevant papers and financial statements at its registered office.
After sometime directors of the company found it difficult to maintain such books etc.at the registered
office, so in a duly convened meeting of the board of the directors, it was decided that the books of
accounts and other relevant papers be kept at the office situated in Kohat. Within which time period
the registrar must be given notice about such decision of the board:
a. Within 30 days from the date of taking such decision by the board.
b. Within 15 days from the date it starts maintaining its books of accounts at the office situated
at Kohat.
c. Within 30 days from the date it starts maintaining its books of accounts at the office situated
at Kohat.
d. Within 7 days from the date of taking such decision by the board.
2.Financial year is:
a. Calender year
b. Not calender year
c. Period in respect of which any profit & loss account is prepared
d. Both ii) & iii)
3.YOYO Limited, a listed company having business of sale and purchase of land, sold its 5 pieces of land
and gain from this disposal is Rs. 35 million on 21th July 2019. The Company want to declare the
interim dividend from this gain. As per The Companies Act 2017, advice the company whether it can
declare?
a. Yes
b. No
c. By passing ordinary resolution
d. Only after passing special resolution
4.For withholding of dividend prior approval of……. is required

a. Members
b. Directors
c. Commission
d. Registrar
5.Approval of Commission (for withholding dividend) shall be taken within……. Days of declaration
a. 30
b. 15
c. 21
d. 45
6.There would be no offense if Dividend cannot be paid due to
a. Operation of law
b. If instructions are given by member
c. If there is some amount which is recoverable from member
d. All of the above
7.Mr. Shoaib is a shareholder of O Limited. Company announce interim dividends and the amount,
which will be paid to Mr. Shoaib is R. 50,000. 2 months ago, Mr. Shoaib purchase stationary products
from the company of Rs. 45,000 on credit and not paid yet. As Per the Companies Act 2017, Total
amount which is to be paid to Mr. Shoaib is Rs……
a. 45,000
b. 50,000
c. 95.000
d. 5.000
8.Ruchir Marcons Limited. which provides marketing and consultancy services is keen to have a
‘significant influence’ in Ruchika Marketing Limited so that it becomes its ‘associate company’. For
having ‘significant influence’ Ruchir Marcons Limited needs to control certain percentage of total
voting power of Ruchika Marketing Limited What is
that?
a. For creating ‘significant influence’ Ruchir Marcons Limited must control at least 5% of total voting
power of Ruchika Marketing Limited.
b. For creating ‘significant influence’ Ruchir Marcons Limited must control at least 10% of total voting
c. For creating ‘significant influence’ Ruchir Marcons Limited must control at least 15% of total voting
d. For creating ‘significant influence’ Ruchir Marcons Limited must control at least 20% of total
voting power of Ruchika Marketing Limited.
9.Member of the Company can also demand a copy of the Quarterly accounts. The company will
dispatch a copy to member by
a. Getting fee of Rs. 50
b. Getting fee of Rs. 150
c. Free of cost
d. Getting fee of Rs. 100
10.The registered office of the company is situated in Lahore. The company wants to keep its financial
statement and books and papers at DG Khan. The company may do so by:
a. Passing a Board Resolution and giving a notice of the new address to the Registrar within 7 days of
the resolution.
b. Passing an Ordinary Resolution and giving a notice of the new address to the Registrar within 7 days
of the resolution
c. Passing a Special Resolution and giving a notice of the new address to the Registrar within 7 days of
the resolution
d. Just giving a notice of the new address to the Registrar within 7 days of the shifting
(10 Marks)
Q # 5:
Jahangeer Limited (JL) is considering the following options to invest its excess funds of Rs.250 million:
i. Acquire 19.5% shareholdings in Faryal Limited (FL) for Rs. 115 million. FL is a growing company and
is expected to fetch higher returns in futures, having 3 projects in CPAC.
ii. Grant a loan of Rs. 100 million to Bahaar (Private) Limited (BPL) for launching a new product named
Beta Chemical. The loan would carry interest at the rate 8%, whereas the market rate of interest is
9.25%. Currently all the activities of BPL’s are managed by 2 directors of JL, named Asad and Numan.
Under the provisions of the Companies Act, 2017 specify the condition(s) which JL must fulfill before opting
for any of the above investment options. (06 Marks)
Business Law
Sol # 1:
As per the Companies Act 2017,
1. Chief executive may be fined for an amount up to Rs. 5 Million
2. imprisonment for a term which may extend to 2 years.
3. Ineligible to become a director or Chief Executive of any company for next 5 years.
Marking Scheme:
1 Marks for each provision 3 Marks
(i)
“Where the dividend is declared by a company and there remains calls in arrears and any other sum due from
a member, in such case no offence shall be deemed to have been committed where the dividend has been
lawfully adjusted by the company against any sum due to it from the shareholder”.
As per the facts given in the question, Mr. Bamsi is holding equity shares of face value of Rs. 1.0 Million
and has not paid an amount of Rs. 100,000 towards call money on shares. Referring to the above provision,
Mr. Ashok is eligible to get Rs.120,000 towards dividend, out of which an amount of Rs. 100,000 can be
adjusted towards call money due on his shares. Rs.20,000 can be paid to him in cash or by cheque or in any
electronic mode.
(ii)
According to Companies Act 2017,
“Dividend shall be payable only to the registered shareholder of the share or to his order or to his banker.”
Facts in the given case state that Ms. Nini, the holder of equity shares transferred the shares to Mr. Noyan
whose name has been registered on 20th May 2019. Since, he became the registered shareholder before the
declaration of the dividend in the Annual general meeting of the company held on 20th September 2019, so,
Mr. Noyan will be entitled to the dividend.
Marking Scheme:
2 Marks for each case 4 Marks
As Per Companies Act 2017:

Books must be kept at registered office of the company
Directors may opt to keep these books at some other place
• Pass a resolution in directors meeting and
• intimate Registrar within 7 days of that
In the given situation, Director wants to keep accounts other than registered office, so above procedure must
be followed for this.
Marking Scheme:
• Every listed company shall prepare quarterly financial statements within the period of-
- 30 days of the close of 1st and 3rd quarters of its year of accounts; and
- 60 days of the close of 2nd quarter of its year of accounts:
• SECP may, on application by company, extend the period of filing 1st quarter accounts for a period
not exceeding 30 days (if company was allowed extension in previous year AGM)
• Half yearly accounts (i.e. 2nd Quarter) shall be subject to limited scope review by auditors of
company in such manner, term and conditions as may be determined by ICAP and approved by SECP.
• Quarterly financial statements shall be
- Posted on company’s website for information of its members
(for such time as may be specified by SECP)
- Transmitted electronically to SECP, securities exchange and registrar within 30/60 days
- Dispatched in physical form, if so requested by any member, without any fee
• Requirements of approval & authentication of final accounts are also applicable to the quarterly
accounts
Marking Scheme:
1 Marks for each point 05 Marks
Sol # 4:
1 D 4 C 7 D 10 A
2 C 5 D 8 D
3 a 6 D 9 C
Sol # 5:
(i)
“Directors of a company has power to make investment in other company (which are not associated of the
company)”
In the given situation JL has no relation with FL, so JL’s directors can make investment in JL by passing
resolution in Board Meeting.
(ii)
As per the Companies Act 2017,
“If companies or undertakings are under common management/control.”
In the given situation, JL and BPL are under common management, therefore JL can give loan through
following manner:
• Special Resolution (It shall indicate nature, period, amount of investment and related terms and
conditions)
• No variation in the nature and terms & conditions of investment or an increase in amount without
passing a special resolution.
• It should be done through a written agreement specifying the terms and conditions
• Return on investment shall not be less than borrowing cost of investing company or rate as may be
specified by SECP. (i.e 9.25%)
• Directors shall certify that the investment is made after due diligence and that the borrower has the
ability to repay loan.
Marking Scheme:
2 Marks for (i) and 4 marks for (ii) 6 Marks
Business Law
Test # 05
Date:4th July, 2020
INSTRUCTIONS
checked.
Q # 1:
a)
A shop-keeper displayed a pair of dress in the show room and a price tag of Rs.2,000 (Negotiable) was
attached to the dress. Ms. Lovely looked at the tag and rushed to the cash counter. Then she asked the shop
keeper to receive the payment and pack up the dress. The shopkeeper refused to hand over the dress to Ms.
Lovely in consideration of the price stated in the price tag attached to the dress.
Ms. Lovely seeks your advice whether she can sue the shopkeeper for the above cause under the Contract Act,
1872. (04 Marks)
b)
Mr. Ramesh promised to pay 50,000 to his wife Mrs. Lali so that she can spend the sum on her 30th birthday.
Mrs. Lali insisted her husband to make a written agreement and the agreement was registered under the law.
Mrs. Ramesh failed to pay the specified amount to his wife Mrs. Lali. Mrs. Lali wants to file a suit against Mr.
Ramesh and recover the promised amount. Referring to the applicable provisions of the Contract Act, 1872.
Advice whether Mrs. Lali will succeed. (03 Marks)
Q # 2:
a)
P sells by auction to Q a horse which P knows to be unsound. The horse appears to be sound but P knows
about the unsoundness of the horse. Is this contract valid in the following circumstances?
i. If P says nothing about the unsoundness of the horse to Q.
ii. If P says nothing about it to Q who is P’s daughter who has just come of age.
iii. If Q says to P “If you do not deny it, I shall assume that the horse is sound.” P says nothing. (03 Marks)
b)
Mr. SAMANT owned a motor car. He approached Mr. CHHOTU and offered to sale his motor car for Rs. 3.0
million. Mr. SAMANT told Mr. CHHOTU that the motor car is running at the rate of 30 KMs per litre of petrol.
Both the fuel meter and the speed meter of the car were working perfectly. Mr. CHHOTU agreed with the
proposal of Mr. SAMANT and took delivery of the car by paying Rs. 3.0 million to Mr. SAMANT.
After 10 days, Mr. CHHOTU came back with the car and stated that the claim made by Mr. SAMANT regarding
fuel efficiency was not correct and therefore there was a case of misrepresentation.
Referring to the provisions of the Contract Act, 1872, decide and write whether Mr. CHHOTU can rescind the
contract in the above ground. (04 Marks)
c)
Ishaan, 17 years old, injured during a road accident and lost mantel memory. Due to this incident, now he is
incompetent to make contract with anyone. He is admitted in Mantel hospital, Lahore and total cost for his
operation is Rs. 5.67 million. Gohar, his uncle, agreed to pay this amount and after operation it is sure that
Ishaan will recover and will become a competent person.
Ishaan possesses assets worth Rs 10 million. After recovery of health, Ishaan fails to pay back this amount to
Gohar.
Gohar now wants to recover the amount from Ishaan out of his assets. Decide whether Gohar would succeed
referring to the provisions of the Contract Act, 1872. (03 Marks)
d)
A student was induced by his teacher to sell his brand-new car to the latter at less than the purchase price to
secure more marks in the examination. Accordingly, the car was sold. However, the father of the student
persuaded him to sue his teacher. State on what ground the student can sue the teacher? (03 Marks)
Q # 3:
1. A invites B for coffee in coffee-day restaurant and B accepts the invitation. On the appointed date, B goes
there but A is not found. In this case
a) B has no remedy against A
b) B has to wait for another invitation from A
c) B has the right to sue A for not honoring his words
d) A has to invite B again, to perform the promise
2. A contract creates
a) Rights and obligations of the parties to it
b) Obligations of the parties to it
c) Mutual understanding between the parties to it
d) Mutual lawful rights and obligations of the parties to it
3. A offers B to sell his house for Rs. 1.5 million and directs him to send his acceptance only by e-mail B
sends A letter of acceptance by post. This is
a) valid acceptance
b) invalid acceptance
c) valid acceptance if a does not reject
d) no acceptance at all
4. Communication of a proposal is complete when it comes to the knowledge of

a) The person to whom it is made
b) The proposer
c) Either (a) or (b)
d) SECP
5. A, a Minor, entered into a contract for borrowing a sum of Rs 40,000 out of which lender paid him a sum
of Rs.18,000 A executed mortgage of property in favor of the lender. The mortgage is
a) Valid for any amount
b) Valid to the extent of Rs. 40,000
c) Invalid
d) Validated on attaining majority
6. A minor can be held personally liable

a) For chaque issued by him
b) For promises made by him with other joint promisors
c) For guarantee given by him
7. A husband, by a registered agreement promised to pay wife Rs.5,000 per month. There was no
consideration moving from the wife to the husband. This contract is
a) Void
b) Illegal
c) Valid
d) Unenforceable
8. A wrote to B inquiring price of rifles suggesting that he might buy as many as 50. On receipt of
information he telegraphed, “Send three rifles” Due to telegraphic mistake, message was transmitted as
“Send the rifles”. B dispatched 50 rifles. In this case
a) There is no contract
b) There is a valid contract
c) A has to accept the loss on 50 rifles
d) A has to accept the loss on 3 rifles
9. In which of the following cases, of mistake of both the parties, the contract is void ab initio because of
complete absence of consent
a) Where there is error as to the nature of the contract
b) Where there is error as to the identity of the parties
c) Where there is error as to the subject matter of the contract
d) All of the above
10. A bought share in a Company on the faith of a prospectus that contained an untrue statement as to the
directorship of B. A had never heard of B and hence such statement was immaterial from his view point. A
claim damages for fraud. His claim will be dismissed on the ground that
a) There was no fraud
b) It is a subject matter covered under Companies Act
c) The untrue statement had not induced him to buy the shares
d) All of the above
(10 Marks)
Business Law
Sol # 1:
a)
As per the provisions of The Contract Act, 1872:
A person making an invitation to offer does not make an offer rather invites the other party to make an offer.
The object of invitation is to show he is willing to deal with any person who on the basis of this invitation is
ready to enter into a contract.
In the above case a dress was displayed at the shop window with a price tag of 2,000. Ms. Lovely intending to
buy it makes the payment and asks the shopkeeper to pack it. The shopkeeper refuses to sell it. As the price tag
on the dress was just an invitation to offer the shopkeeper was not bound to sell the dress to Ms. Lovely on her
offer to buy.
Thus Ms. Lovely cannot sue the shopkeeper.
Marking Scheme:
2 Marks for provision and 2 marks for decision 4 Marks
b)
As per the provisions of the contract Act, 1872
to make a valid contract it must be supported by consideration and must intend to create a legal relationship.
However, where a contract without consideration may be formed and shall be binding on the parties. In this
case where a contract:
i. Is in writing
ii. registered under the law
iii. made on account of natural love and affection and
iv. between the parties standing in a near relation to each other,
it will be enforceable at law even if there is no consideration. In the above case Mr. Ramesh promised to give
his wife a sum of 50,000 for his birthday. The wife Mrs. Lali got the promise in writing and got it registered.
The contract though not supported by consideration was made on account of love and affection and was
written and registered. Hence the contract between Mr. Ramesh and his wife Mrs. Lali is valid and
enforceable.
Thus if Mrs. Lali will sue Mr. Ramesh she will succeed.
Marking Scheme:
2 Marks for provision and 1 mark for decision 3 Marks
Sol # 2:
a)
According to Contract Act, 1872,
mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud.
However, in the following cases silence as to the fact of the subject matter shall be considered as fraud:
i. If the circumstances of the case are such that, regard being had to them, it is the duty of the person
keeping silent to speak, or
ii. Where his silence equals to his speech
In the above case P auctions a horse and sells it to Q. P knows that the horse is unsound even though it looks it
is sound. P fails to disclose the fact to Q. As already stated above it is not the duty of the party to disclose any
fact about the subject matter. Hence P was under no obligation to disclose the unsoundness of the horse to Q.
i. Thus this contract is valid as silence is not fraud.
ii. If Q is P’s daughter it is his duty to disclose the defects in the goods to Q and if he fails to do so it a
mount to fraud. Thus, this contract is not valid.
iii. In this case P’s silence shows that he agrees to the fact that the horse is sound. So, his silence equals
to his speech and hence the contract is not valid.
Marking Scheme:
1 mark for each 3 Marks
b)
As per the Contract Act, 1872,
when consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract
voidable at the option of the party whose consent was so caused. A party to contract, whose consent was
caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and
that he shall be put in the position in which he would have been if the representations made had been true.
However if one party tries to use fraud or misrepresentation to induce the other party to contract but the
other party if he would have used his diligence would have come to know the facts the contract shall be valid
and the aggrieved party sha;; have no remedies against the other party.
In the above case Samant sold his car to Chhotu by making a false statement that the car was running at the
rate of 30 KMs per letr. Both the fuel meter and the speed meter were working properly and if Chhotu would
have checked he would have come to know about the fact. Though Samant tries to defraud Chhotu, Chhotu if
he would have used his diligence would have come to know the facts.
Therefore, the contract is not voidable. Hence, Mr. Chhotu cannot rescind the contract on the above ground.
Marking Scheme:
c)
According to the Contract Act, 1872,
every person is competent to contract who is of the age of majority according to the law to which he is
subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject.
However, prescribes the liability of a minor for the supply of the things which are the necessaries of life to
him. It says that though minor is not personally liable to pay the price of necessaries supplied to him or
money lent for the purpose, the supplier or lender will be entitled to claim the money/price of goods or
services which are necessaries suited to his condition of life provided that the minor has a property. The
liability of minor is only to the extent of the minor’s property.
Thus, according to the above provision, Vishal will be entitled to recover the amount of loan given to Ishaan
for payment of the operation from the property of the minor.
Marking Scheme:
d)
As per the Contract Act, 1872,
A contract is said to be induced by undue influence where the relation subsisting between the parties are
such that one party is in a position to dominate the will of the other and uses it to obtain an unfair advantage
over the other. A person has a domination position over the other when there is a real, apparent or fiduciary
relation between them. A contract induced by undue influence is voidable and can be terminated by the
aggrieved party.
In the above the teacher induced the student to sell his new car at a price lesser than the purchase price to
secure good marks. Here the teacher and student are in a fiduciary relation and the teacher having the
dominating position is forcing the student to contract. The contract is thus induced by undue influence.
Hence the student can sue his teacher on the ground of undue influence.
Marking Scheme:
Sol # 3:
1 A 4 A 7 C 10 a
2 D 5 C 8 A
3 B 6 D 9 C
Business Law
Mid-Term
Date: 11th July, 2020
Time Allowed:3 hours and 15 minutes
INSTRUCTIONS
checked.
Section A – Multiple Choice Questions
Q #1: Select the most appropriate answer from the options available for each of the following Multiple-Choice
Questions (MCQs). Each MCQ carries ONE (01) mark.
1. ABC Pvt. Limited, company is a private limited having 5 members only. All the members of the
company were going by car in relation to some business. An accident took place and all of them
died. Whether existence of the company has also come to the end?
a) Yes
b) No
c) Partly yes
d) Partly no
2. It is the duty of Registrar to……….
a) Keeps the records of mortgages and charges
b) track of company routine documents
c) maintain the records of companies
d) All of above
3. Mr. Zeeshan is an employee in a Pakistan Stock Exchange and he wants to prepare some
feasibility reports on request of some potential investors for a company named as “XYZ Limited”.
For the preparation of the reports he requires Memorandum & Articles of association of the
company. Whether he can obtain such copies of Memorandum & Articles of Association from
“XYZ Limited”.
a) Yes
b) No
c) Partly yes
d) Partly No
4. Which one of the following clauses cannot be altered…?
a) Name clause
b) Liability Clause
c) Subscription Clause
d) Registered office Clause
5. A share is a……….
a) Property
b) Income
c) Liability
d) Expense
6. Ordinary shares are…….
a) Equity share
b) Interest base share
c) Investment share
d) None of above
7. Total profit of Sun Limited (SL) is Rs. 10 million for the year ending 31st March, 2020. After
Paying the amount to preference shareholders, available profit for Equity shareholders is Rs 0.8
million. Board of Directors of SL decide to issue bonus shares to its equity shareholders. For this
issuance SL is required to issue a circular to all its equity shareholder. As per the Securities Act
2015, whether this circular is said to be as prospectus OR it is required to approve from
Commission.
a) Yes
b) No
c) Partly Yes
d) Partly No
8. If any information is concealed from prospectus then, who will be liable?
a) All officers of the Company
b) All Directors
c) Expert
d) All of above (who knew the fact)
9. If the directors do not proceed within 21 days from the date of requisition being so deposited to
cause a meeting to be called, the requisitions may themselves call the meeting, but in either case
any meeting so called shall be held within ______ from the date of deposit of the requisition:
a) 120 days
b) 45 days
c) 90 days
d) 6 months
10. The minutes of the general meetings can be inspected by the members during the business
hours, subject to such reasonable restrictions as the company may by its articles or in general
meeting impose so that not less than ________ hours in each day be allowed for inspections:
a) 5 hours
b) 3 hours
c) 2 hours
d) 7 hours
11. The directors of accompany by resolution passed by not less than __________ of the total number of
directors for the time being or the company by a special resolution, may remove a chief executive
before the expiration of his term of office:
a) 1/10
b) 3/4
c) ½
d) None
12. A chief executive of _________ company shall not directly or indirectly engage in any business which is
of same nature and directly completes with the business carried on by the company of which he is chief
executive or by a subsidiary of such a company:
a) Holding company
b) Subsidiary company
c) Public company
d) Private company
13. Which one of the following companies, is required to appoint share Registrar?
a) Public Company
b) Private Company
c) Public Listed Company
d) All of the Above
14. Central Depositary company Hold 35% share of F Limited and 32% shares of G Limited. As
per the Companies Act 2017, Whether these companies are associated company?
a) Yes
b) No
c) Partly Yes
d) Partly No
15. Company is required to hold Register, which have included the descriptions of investment
a) Held by Company’s name
b) Not held By Company’s name
c) Investment in associated only
d) Both I & II
16. During the financial year of 30th june,2020. Wateen limited took a loan from MCB bank of Rs
100 billion for construction of a new plant. Due to public notice from government, company
cannot construct this plant now, due to air pollution and also fail to repay the loan and amount
of interest. The directors of the company want to communicate this information to the members
of the company. As per the companies act 2017, this information shall be communicated in:
a) Audit report of the company
b) In chairman review report
c) By sending an extra circular to all members
d) In director report of the company
17. Which one the following companies, is required to include business review in director’s
report?
a) Public company
b) Subsidiaries of a public company
c) Listed company
d) Both I & ii
18. A Contracts with B to beat his business competitor. This is an example of
a) Valid Contract
b) Illegal agreement
c) Voidable Contract
d) Unenforceable Contract
19. According to provisions of Contract Act, 1872 void agreement and void contract is the same.
a) True
b) False
c) Partly True
d) Partly False
20. If A say to B “I offer to sell my car to you for Rs. 2.0 million and B accepts the offer by saying clearly “I
accept your offer”. It is an
a) Implied offer
b) Express offer
c) General offer
d) Counter offer
21. A advertises in paper that any person who found his lost dog can get a reward of Rs. 5000. Any
person who finds the dog can claim the reward. This is a case of
a) General offer
b) Specific offer
c) Implied offer
d) Invalid offer
22. A, a minor bought 11 expensive coats from B. He was, at that time, adequately provided with clothes,
but B did not know this fact. In such a case
a) Minor is personally liable to pay for the coat
b) Minor’s property can be attached for payment
c) Minor is liable since he has Misled into supply of coats
d) Minor is not liable at all
23. Contracts with an alien enemy before the declaration of war, which are against the national interest,
are
a) Terminated
b) Not affected at all
c) Suspended and revived after war
24. A promise to pay for past services is valid and binding even though it is without consideration.
However, for the validity of such promise, the past services should have been rendered
a) Voluntarily
b) At promisor’s request
c) Under compulsion
d) Under some contract
25. For the enforcement of promise to pay a time –barred debt without consideration, which of the
following conditions is not required?
a) It must be in writing
b) It must be express
c) It must be signed by the promisor
d) It must be registered in a Court of law
26. A applies to a Banker for a loan when the money market is very stringent Banker says that loan could
be provided only at such high interest A’s consent is
a) Not obtained by undue Influence
b) Obtained by undue influence
c) Not obtained by coercion
d) Obtained by fraud
27. To employ “coercion”, relationship between the parties is
a) Necessary
b) Not necessary
c) Required
d) Presumed
28. A, fraudulently sold his car to B. After-wards, B came to known about the fraud, but instead of
complaining, he further sold the car to C. in this case, B’s right to rescind the contract is
a) lost
b) not lost
c) strengthened
29. Goods displayed in a shop with a 20% flat discount board attached in front wall of the shop.
a) An offer
b) An Invitation to offer
c) A Counter offer
d) A contra-offer
30. There are 9 directors in a listed company and out of which 2 officers of the directors have
fallen vacant. What will be the quorum for the board meeting?
a) 2
b) 3
c) 4
d) 5
Section B – Mercantile Law
Q # 2:
Adele and Bella are sisters. On 1st November Adele meets her sister for a dinner and tells her that she is looking
for a new sports car. Bella replies that she wants to sell her red Ferrari as there is now a better model available
and that she is happy to sell it to her sister on a business basis. Bella says she wants about Rs.10 million for it.
That evening Adele sends an email to Bella saying, ‘I accept your offer to sell the car for Rs.10 million and will
transfer the money in a few days. On 3rd November Bella sends Adele an email that says: Don't be stupid I
wouldn’t sell the car for that, I want Rs.10.25 million for it. To avoid any further misunderstanding, do not email
me again unless you do not want the car at this price. Adele was so annoyed on reading the first sentence of
Bella’s email that she deleted it without reading further and did not reply. Three weeks later Bella rang Adele
and demanded Rs.10.25 million, offering to deliver the car.
Under the Contract Act 1872, Discuss the validity of contract and whether Bella can file a suit against Adele.
(05 Marks)
Q # 3:
a)
Zahid, aged 16 years, was studying in an engineering college. On 1 March, 2019 he took a loan of Rs. 1 lack
from Shakar for the payment of his college fee and agreed to pay by 30th May, 2019. Zahid possesses assets
worth Rs. 10 lacks. On due date Zahid fails to pay back the loan to Shakar.
Under the Contract Act 1872, Whether Shakar would succeed to recover his amount? (03 Marks)
b)
Father promised to pay his son a sum of Rs. 50,000 for bike if the son passed C.A examination in the first
attempt. The son passed the examination in the first attempt, but father failed to pay the amount as promised.
Son files a suit for recovery of the amount. State along with reasons whether son can recover the amount
under the Contract Act, 1872? (03 Marks)
c)
Usman transferred his house to his wife through a registered document on her birthday. Later on, after
divorce Usman’s ex-wife demanded Usman to give the possession of that house, which Usman refused. On
what ground Usman can hold the agreement as void? (02 Marks)
d)
Moeed offered to sell his land to Naima for Rs. 1,280,000 Naima replied purporting to accept the offer and
enclosed a cheque for Rs. 80,000. She also promised to pay the balance of Rs. 1,200,000 in monthly
installments of Rs. 50,000 each.
Under the Contract Act 1872, Examine the legal position whether the contract is valid. of this. (02 Marks)
Section C – Company Law
Q # 4:
a)
On 29 April 2019, a memorandum of association of Descon Limited (DL) was filed for registration in the office
of Registrar. However, on 25 May 2019, a letter from the registrar office was received by the subscribers to
the memorandum in which the registration was refused on the ground that the objects stated in the
memorandum were inappropriate. Describe what course of action is available to DL in the above situation,
according to the Companies Act, 2017. (03 Marks)
b)
Sudarshan Exports Limited (SEL) was dealing in export of rubber to specified foreign countries. The company
was willing to purchase rubber trees in Chiniot and due to insufficient funds, company wants to issue a
prospectus to general public for subscription. The prospectus issued by the company contained some
important extracts of the expert report and number of trees in Chiniot. The report was found untrue. Mr. Saim
purchased the shares of Sudarshan Exports Limited (SEL) on the basis of the expert report published in the
prospectus. Will Mr. Saim have any remedy against SEL? (03 Marks)
Q # 5:
On 20 February 2019, the directors of Bay Reham Limited (BRL), a listed company, had declared an interim
dividend for the year ended 30 June 2018. Subsequently, the company has been awarded a major business
contract for which the company needs funds immediately.
Consequently, the management wishes to defer payment of the interim dividend. In view of the provisions of
the Companies Act, 2017 you are required to explain:
i. Whether BRL can defer the payment of interim dividend. (01 Marks)
ii. The consequences of failure to pay the dividend on time. (03 Marks)
iii. The situations under which delay in payment of dividend shall not be considered as unlawful.
(05 Marks)
Q # 6:
a)
Karamdad Private Limited (KPL) was incorporated on 1st July 2018. Subsequently it was converted into a
public unlisted company on 1st March 2019. Under the provisions of the Companies Act, 2017:
Describe whether the company is required to hold its statutory meeting; if yes, identify the time frame within
which such a meeting must be convened. (03 Marks)
b)
To remove the Managing Director, 40% members of Tiger Farms Limited (TFL) submitted requisition for
holding an extra-ordinary general meeting. The Company failed to call the said meeting and hence the
requisitions held the meeting. Since the Managing Director did not allow the holding of the meeting at the
registered office of the Company, the said meeting was held at some other place and a resolution for removal
of the Managing Director was passed.
Examine the validity of the said meeting and the resolution passed therein under the provisions of the
Companies Act, 2017. (04 Marks)
Q # 7:
a)
Munafiq Limited (ML) has passed a special resolution in an extraordinary general meeting, whereby all the
preference shares issued by ML are to be converted into ordinary shares. Some preference shareholders are
not satisfied with the said conversion and seek your advice with respect to the remedy available to the
preference shareholders after the said conversion. In the light of the Companies Act,2017, Explain the
conditions under which the aggrieved shareholders may approach the Court. (04 Marks)
b)
Alpha Limited (AL) has an Authorized Capital of Rs. 1,000,000 equity shares of the face value of Rs.100/-
each. Some of the shareholders expressed their opinion in the Annual General Meeting that it is very difficult
for them to trade in the shares of the Company in the share market and requested the Company to reduce the
face value of each share up to Rs.10 each and increase the Share capital to Rs. 10,000,000. Under the
Companies Act 2017 Examine the situation. (04 Marks)
c)
State whether the following statements are correct or incorrect.
(i) An insolvent may be a member of the Company.
(ii) A partnership firm may hold shares in a Company by holding shares in the individual names of the
partners as a joint holder. (02 Marks)
Q # 8:
a)
Munaf Khan Limited (MKL) is engaged in the business of leasing vehicles to corporate customers. The Board
of Directors of MKL is considering to authorize one of its directors, Mr. Farigh, to enter into a contract with
Mrs. Naazuk, the Managing Director of Taizraftar Limited (TL), for the purchase of six delivery vans. Mrs.
Naazuk is also the wife of Mr. Farigh.
Under the provisions of the Companies Act,2017 analyses the above situation and advise Mr. Farigh about his
responsibilities towards the company with respect to the above transaction. (05 Marks)
b)
Mr. Babar is currently working as Marketing Manager in ST Limited (STL). Management intends to appoint
him as the Chief Executive of the company. He is willing to accept the offer and has requested for a loan of Rs.
10 million. Moreover, he had also taken a loan in 2009, of which Rs.1 million is still outstanding. State the
conditions as specified in the Companies Act 2017 which STL would need to comply with, in respect of above
loans. (05 Marks)
Q # 9:
a)
In the annual general meeting of Sabzazar Limited (SL) held on September 29, 2019 some of the shareholders
have raised the following objections:
“Notice of the annual general meeting was not received by them although they are resident in Pakistan and
their registered addresses have also been provided to the company”. Comment! (02 Marks)
b)
Under the Companies Act 2017, Define “Member”. (04 Marks)
c)
Sultan Limited (SL) having share capital of Rs. 150 million was incorporated on 13 August 2019, a listed
Company. Before applying to Registrar for obtaining the “Certificate of Commencement of Business”, SL is
required to approve the prospectus and file it to Registrar. Under the Securities Act, 2015, State the
conditions which must be satisfied for obtaining the Certificate of commencement of business. (05 Marks)
d)
The Board of Directors of Reckless Investments Limited (RIL) have allotted shares to the investors of the
company without issuing a prospectus with the Registrar of Companies, Multan. Under the Companies Act
2017, Explain it. (02 marks)
Best of Luck
Business Law
Suggested Solution # Mid-term
Sol # 1:
1 B 11 B 21 A
2 D 12 C 22 D
3 B 13 C 23 C
4 C 14 B 24 A
5 A 15 B 25 D
6 A 16 D 26 A
7 B 17 C 27 B
8 D 18 B 28 A
9 C 19 B 29 B
10 C 20 B 30 C
Sol # 2:
As per the Contract Act 1872:
“An intention of a person to invite others with a view to enter into an agreement, is the invitation to an offer”.
“If Counter offer is made, then it will lapse the original offer”
“If an offer is not accepted within specific time then it will not be presumed to have been accepted (Negative
Confirmation)”
Bella to Adele saying ‘I want about Rs.10 million for it’ is an invitation to treat 1 st November evening: Adele to
Bella email probably an offer to purchase although phrased as an acceptance. 3rd November Adele to Bella
counter offer Consider effect of counter offer destroys previous offer. Bella’s ‘silence’ after 3rd November is not
evidence of acceptance.
No contract concluded.
Marking Scheme:
3 Mark for each provision and 1 mark for situation 05 Marks
discussion and 1 mark for conclusion
Sol # 3:
a)
“An agreement with a minor is void”.
“A person who supplied necessaries to a minor is entitled to be reimbursed from property of such minor.
Such claim is against the property of the minor and not against the minor”.
In the given situation Zahid took loan for paying his college fee. Zahid possess assets worth 10 lakhs and the
amount of loan is Rs. 1 lakh. But A minor cannot be sued, therefore Shakar cannot sue Zahid for this amount.
But shaker can recover this amount from the property of Zahid.
Assumption:
Study is the necessary element of life.
Marking Scheme:
2 Mark for each provision and 1 mark for decision 03 Marks
b)
Agreements made on account of natural love and affection, if it is:
• Expressed in writing,
• Registered under the law,
• Made on account of natural love and affection, and
• Between parties standing in a near relation to each other.
In the given situation father and son stands near relation and also agreement made on the account of natural
love and affection.
If this agreement is registered under law and also made in writing, then Son can sue for this Contract.
Marking Scheme:
2 Mark for provision and 1 mark for decision 03 Marks
c)
“Gifts which are accepted by the donee are called completed gifts and are valid”
In the given situation, Usman has already transferred house to his wife through written deed, so it is a
complete gift.
Therefore, Usman’s refusal is not justifiable and he is bound to give possession to his ex-wife.
Marking Scheme:
d)
“An offer should be accepted without any condition”.
“If any condition is imposed on acceptance, then it would be called counter offer”.
In the given situation, Naima made a counter offer by adding conditions on payment methods. Due to this
original offer shall be lapse and Moeed can accept this new offer (with conditions added by Naima) or can
reject.
But Naima cannot sue Moeed for original offer, because original offer is lapse.
Marking Scheme:
1 Mark for provision and 1 mar for decision 02 Marks
Sol # 4:
a)
The subscribers of the memorandum of association of Descon Limited (DL) or any one of them, authorized by
them in writing, may either supply the deficiency and remove the defect pointed out, or within specified time
of the order of refusal prefer an appeal
(i) Where the order of refusal has been passed by an additional registrar, a joint registrar, a deputy
registrar or an assistant registrar, to the registrar; and
(ii) Where the order of refusal has been passed, or up-held in appeal, by the registrar, to the Commission
within 30 days of refusal.
(iii) An order of the Commission shall be final and shall not be called in question before any Court or
other authority.
Marking Scheme:
b)
Under the Securities Act 2015:
“Where a person has subscribed for securities of a company acting on any statement included in the
prospectus which is misleading and has sustained any loss or damage as a consequence thereof, the company
and every person including an expert shall, be liable to pay compensation to the person who has sustained
such loss or damage”.
In the present case, Mr. Saim purchased the shares of Sudarshan Exports Limited on the basis of the expert
report published in the prospectus. Mr. Saim can claim compensation for any loss or damage that he might
have sustained from the purchase of shares, which has not been mentioned in the given case. Hence, Mr. Saim
will have no remedy against the company had given the consent required to the issue of the prospectus and
had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the
defendant's knowledge, before allotment thereunder.
Marking Scheme:
Sol # 5:
i.
No BRL cannot delay its dividend after announcement

ii.
• Chief executive may be fined for an amount up to Rs. 5 Million
• imprisonment for a term which may extend to 2 years.
• Ineligible to become a director or Chief Executive of any company for next 5 years.
iii.
In following cases, company may withhold dividend after obtaining prior approval of SECP within 45 days of
declaration of dividend
• If dividend cannot be paid due to operation of any law,
• If shareholder has given instructions regarding payment of dividend and such instructions cannot be
followed
• There is a dispute on regarding the right to receive dividend
• If company has withheld the payment of dividend against any sum recoverable from shareholder,
• If non‐ payment of dividend or non ‐posting of the warrant was not due to any default on part of the
company.
Company may also withhold dividend of a member where he has not provided the complete information or
documents as specified by SECP.
Marking Scheme:
Part I, 01 mark for decision 09 Marks
Part ii: 1 mark for each
Part ii, 1 mark for each
Sol # 6:
a)
Applicable on:
• Every public company having share capital
• A private company that converts itself into a public company within one year of its incorporation
Timing:
Earlier of
• 180 days from date of commencement of business; OR
• 9 months from the date of its incorporation
Statutory meeting not required if AGM is held before its due date
In the given situation, Kramdad Private Limited (KPL) is incorporated on 1st July 2018 and its converted into
public company on 1st March 2018 (within 8 months), So, KPL has to held Statutory meeting.
Marking Scheme:
1 Mark for each provision and 1 mark for decision 03 Marks
b)
Companies Act, 2017 makes it obligatory on the Board of Directors to convene an extra ordinary meeting
of members if requisitioned by 10% voting power members. Since 40% of members (presumed to have
40% voting right) submitted the requisition for the meeting, the board of directors has violated the
provisions of law by not calling the meeting.
However, as per the Companies Act, 2017 provides that if Board fails to proceed to call a meeting within 21
days from the date of receipt of a valid requisition. The requisitionists may themselves call a meeting
within 90 days of the date of the requisition, but the expenses will be deducted from the salary of
directors.
Moreover, where a meeting is called by the requisitionists and the registered office is not made available to
them, then the meeting may be held anywhere else. Further, resolutions properly passed at such a meeting,
are binding on the company.
Thus, in the given case, since all the above desired provisions are duly complied with, the meeting held by the
requisitionists and the resolution passed for removing the Managing Director of Tiger Farms Limited shall be
valid.
If the director obtains less votes than the minimum votes obtain by last appointed directors, then such
director will be removed. The resolution shall be recorded in the minutes of the company.
Marking Scheme:
Sol # 7:
a)
As per the Companies Act 2017;
• Any member(s) of affected class representing at least 10% shares of that class may apply to court for
an order against resolution
• Such application should be filed within 30 days of resolution.
• Court shall declare resolution null and void if it feels that either;
‐ Company withheld certain facts (that could lead towards non passing of resolution) while
getting the resolution passed; or
‐ Change is prejudicial (harmful) to the interest of members,
• Decision of court shall be final and no appeal can be filed against it
• A copy of court order shall be filed to registrar within 15 days.
Marking Scheme:
1 Mark for each provision 04 Marks
b)
Alpha Limited (AL), (if authorized by AOA), may alter capital clause of its MOA by passing
Special Resolution to:
‐ Increase its share capital by such amount as it thinks fit;
‐ Cancel that part of its authorized capital which has not been paid up till the date of cancellation
(cancellation shall not affect rights of paid up shareholders)
‐ Consolidate shares into larger amount than fixed by MOA
‐ Sub‐divide shares into smaller amount than fixed by MOA
Marking Scheme:
1 Mark for each provision 04 Marks
c)
1. An insolvent person cannot be member of the company, because an insolvent person is disqualified
by law and his assets are transferred to the official assignee for settlement his debt.
2. joint shareholders will be collectively regarded as one shareholder. Partnership firm will be treated
as 1 shareholder of the company Collectively.
Marking Scheme:
Sol # 8:
a)
Being a director, Mr. Farigh is an agent of the shareholders of the company and stands in a fiduciary
relationship with them. So he is required to make all contracts and all transactions in good faith and in best
interest of the company.If a director makes any transaction or enters into any contract on behalf of the
company in which he is interested by any means, he should give a complete disclosure of the nature of his
interest.
In this case, Mr. Farigh is deemed to be indirectly interested in the transaction as his wife is the managing
director in TL. Therefore, Mr. Farigh should give a general notice to the effect to all other directors that he
should be regarded as concerned or interested in the transaction to be entered into with TL and such notice
shall be given at the meeting of the directors at which the question of entering into the contract or
arrangement is first to be taken into consideration.
After disclosing his interest in the transaction, Mr. Farigh should not be part of the director’s meetings in
which such contract or transaction is to be discussed.
Marking Scheme:
2 marks for provision, 2 marks for situation and 1 mark for 05 Marks
conclusion
b)
“Person appointed as chief executive (if not already a director), shall be deemed to be a Director”.
“Company is not allowed, without approval of members through resolution to provide any of these financial
facilities to:
• A director of the company or holding company or any of their relatives (spouse and minor children);
• Provide guarantee or security in connection with a loan made by any person to such a director; or to
any of his relatives;
For Listed companies, approval of SECP is also required
Exception:
This restriction does not apply to a company which in ordinary course of its business provides loans or gives
such guarantees or securities
In the given situation Baber should have to pay his remaining amount of loan for appointment of CEO of the
STL. Baber will be considered as a director of STL.
Marking Scheme:
4 marks for provision, 1 mark for conclusion 05 Marks
Sol # 9:
a)
The notices of the Annual General Meeting were sent to all the shareholders by post at their registered
addresses. According to law when a notice is sent by post, service of the notice shall be deemed to be effected
by properly addressing, prepaying and posting a letter containing the notice and, unless the contrary is
proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.
Marking Scheme:
2 marks for provision 02 Marks
b)
Member:
Subscribers to memorandum of association are deemed to have agreed to become members of
the company and become members on its registration and every other person‐
‐ to whom is allotted, or who becomes the holder of any class or kind of shares; or
‐ in relation to a company not having a share capital, any person who has agreed to become a
member of the company;
and whose names are entered; in the register of members, are members of the company.
Marking Scheme:
3 marks for definition 04 Marks
c)
Certificate of commencement of business:
Sultan Limited (SL) shall not commence any business or exercise any borrowing powers
unless:
• Shares have been allotted in cash not less than the minimum subscription
• Every director of SL has paid to SL in cash full amount on each of the shares taken or contracted to be
taken by him
• No money is or may become liable to be repaid to applicants for any shares which have been offered
for subscription;
• Filed with the registrar a duly verified declaration by the chief executive or one of the directors and
the secretary in the prescribed form that conditions complied with
• Registrar has issued a certificate of commencement of business (conclusive evidence)
• SL has filed a prospectus or SILOP (Statement in lieu of prospectus)
Any contract made by a company before the date at which it is entitled to commence business shall be
provisional only, and shall not be binding on Co until that date
Marking Scheme:
1 mark for each point 05 Marks
d)
Exceptions where approval of SECP is not required:
• If the securities are offered by the issuer to_
‐ Members of the families of any such members or employees;
In the given situation, RIL is issuing shares to its members (investors), So RIL is not required to get approval
from SECP.
Marking Scheme:
1 mark for each provision and 1 mark for decision 02 Marks
Business Law
Test # 07
Date:18th July, 2020
INSTRUCTIONS
checked.
Q # 1:
Mark the correct option:
1. Which of the following agreements in restraint of trade is valid?
a) Partner not to carry on any business other than that of the firm while he is a partner
b) Outgoing Partner not to carry on any business similar to Firm’s within specified periods or local
limits.
c) Partners not to carry on similar business within specified periods, upon dissolution of Firm
d) All of the above
2. If any part of a single consideration for one or more objects, or any one or any part of any one of
several consideration of a single object is unlawful, then:
a) Only that object shall be held void but the agreement shall be valid
b) The agreement shall be void
c) The agreement shall be voidable at the option of either party to the agreement
d) The agreement is still considered valid
3. A promise to pay B Rs 50,000 if B secures him an employment in the public service. The agreement is
a) Enforceable
b) Void
c) Valid
d) Voidable
4. Agreements which create monopolies are

a) in restraint of Freedom of Trade
b) opposed to public policy
c) void
d) All of the above
5. The difference between contingent contract and wagering agreement are as follows
a) A contingent agreement, consists of reciprocal promises whereas a wagering contract may not
contain reciprocal promises
b) In wagering agreement, the uncertain event is the sole determining factor while in a contingent
contract the event is only collateral
c) Wagering agreement consists of performing parties may not involve, whereas in contingent contract
parties of the contract give performance
d) All of the above
6. A agrees to pay Rs 50,000 to B if she brings a Dinosaur from forest.

a) This is void agreement
b) This is a quasi-contract
c) This is an implied contract
d) This is a wagering conduct
7. If a person who is incapable of entering into a contract is supplied with necessaries by another
person, then the latter shall:
a) Be reimbursed for such supplies by a relative of the incapable person and that relative must be
capable of contracting
b) Be reimbursed for such supplies from such incapable person, directly
c) Be reimbursed for such supplies from the property of such incapable person
d) Not entitled to be reimbursed at all
8. A person enjoying the benefits of a lawful non-gratuitous act of another

a) is not liable to compensate that another
b) that another cannot claim any compensation
c) is liable to compensate for that
d) has to perform the same non-gratuitous act in return
9. A agreed to decorate B’s flat for a lump sum of Rs.300,000. A did the work but B complained of faulty
workmanship. It cost B Rs.50, 000 to remedy the defect. A can recover from B …….
a) Rs.300,000
b) Rs.50, 000
c) Rs.250,000
d) Rs.350,000
10. C, an owner of a magazine, engaged P to write a book to be published by installments in his magazine.
After a few installments were published, the magazine was abandoned. In this case …….
a) P does not have any remedy against C
b) P can claim payment on quantum meruit for the part already published
c) P has to complete the book through his own magazine
d) P should not complete the book at all
(10 Marks)
Q # 2:
a)
X' agreed to become an assistant for 2 years to 'Y' who was practicing Chartered Accountant at Sialkot. It was
also agreed that during the term of agreement 'X' will not practice as a Chartered Accountant on his own
account within 20 kms of the office of 'Y' at Sialkot. At the end of one year, 'X' left the assistantship of 'Y'
and started practice on his own account within the said area of 20 kms.
Referring to the provisions of the Contract Act, 1872, decide whether 'X' could be restrained from doing so?
(03 Marks)
b)
Moeed and Muslim agree that Moeed shall sell a house to Muslim for Rs. 350,000 but that, if Muslim uses it is
as a gambling house. But if not then Muslim will pay Moeed 2.0 million for it. Discuss the validity of contract.
(02 Marks)
c)
Sun Flowers Limited (SFL), a leading oil manufacturer in Eastern Punjab, wants to enter into an agreement
with another emerging manufacturer, Coconut Limited (CL) in that area for not selling the products below the
price of its own products. Please comment on the legality of such agreement. (02 Marks)
d)
Finch divorced Emily and agreed not to visit his 2 years old daughter in consideration of Emily’s promise that
she will not marry again. After three years Finch want to spend some time with his daughter, whereas Emily
resists that as agreed she haven’t married and Finch must not come to visit their daughter. Can Finch visit his
daughter? (02 Marks)
Q # 2:
a)
Cray started working as an accountant in order to reimburse the cost of his mobile (which he took from his
sister), Keira, and agreed with her that if he cannot earn the amount from this job, he will work in Keira’s
mart as an accountant for a month. Discuss the validity and type of the contract. (02 Marks)
b)
Pearl is a zamindar. He has leased his land to Maxwell, a farmer. However, Pearl fails to pay the revenue due to
the government. After sending notices and not receiving the payment, the government releases an advertisement
for sale of the land (which is leased to Maxwell). Maxwell’s lease agreement is annulled.
Maxwell does not want to let go of the land since he has worked hard on the land and it has started yielding good
produce. In order to prevent the sale, Maxwell pays the government the amount due from Pearl. Under the
Contract Act 1872, Discuss whether Maxwell can recover this amount from Pearl. (03 marks)
c)
The aim of such an award is based on an implied agreement to pay for what has been done by an indvidual. It
is likely where one party has already performed part of his obligations and the other party then repudiates
the contract.
Under the Contract Act 1872, Explain the situation where consideration is to be rewarded on the basis of
Quantum meruit. (06 Marks)
Business Law
Sol # 1:
1 D 4 D 7 C 10 B
2 B 5 D 8 C
3 B 6 A 9 C
Sol # 2:
a)
As per the Contract Act, 1872
Every agreement by which any person is restrained from exercising a lawful profession, trade or business of
any kind, is to that extent void. However, in the case of the service agreements restraint of trade is valid. In
an agreement of service by which a person binds himself during the term of agreement not to take service
with anyone else directly or indirectly to promote any business in direct competition with that of his
employer is not in restraint of trade, so it is a valid contract.
In the instant case, X agreed to become an assistant of Y for 2 years. The terms of the agreement were that
during this term X will not practice as a CA within 20 KMs of the office of Y. After one-year X left the service of
Y and started his own practice within the said 20 KMs.
As the contract between X and Y though in restraint of trade was absolutely valid, X’s practice was a breach of
contract.
Marking Scheme:
b)
As per the Contract Act 1872,
“In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone
can be enforced”.
In the given situation, the contract between Moeed and Muslim for selling the house of Rs.2.0million is a valid
agreement. But an alternate agreement for selling this house for Rs. 350,000, for using it as a gambling, is a
void agreement.
Marking Scheme:
c)
As per the contract Act 1872,
“Trade combinations which have been formed to regulate the business or to fix prices are valid”.
In the given situation, SFL and CL made an agreement for fixing the price of products in the market. So, it is a
valid agreement.
Marking Scheme:
d)
Agreement to restraint of parental rights is a void agreement
The right of guardianship cannot be bartered away by any agreement.
In the given situation, the agreement between Emily and Finch is a void agreement. Emily cannot stop for
exercising his parent rights
Marking Scheme:
Sol # 3:
a)
It is a contingent contract.
“Contingent contract on Non-happening the certain event”.
In the given situation the contract will be valid when the Cray will fail to reimburse the amount of his mobile
to his sister, Keira. Then Cray will bound to work as an accountant in the mart of keira.
Marking Scheme:
1 Marks for type of contract and 1 mark for validity 2 Marks
b)
“A person, who is interested in the payment of money which another is bound by law to pay, and who pays it,
is entitled to be reimbursed by the other. Following conditions must be met
▪ The payment made should be bona fide for the protection of one’s interest
▪ The payment should not be a voluntary one
▪ The payment must be such as the other party was bound by law to pay”
In the given situation, there is a Quasi contract between Pearl and Maxwell. Pearl made payment on the behalf
of Maxwell, Because Maxwell was interested in the payment.
Now Maxwell is bound to pay this amount to Pearl.
Marking Scheme:
2 mark for provision and 1 mark for decision 03 Marks
c)
Quantum meruit applies in the following cases:
1. Void agreement or contract that becomes void60
Any person who has received any advantage under such agreement or contract is bound to restore it, or to
make compensation for it to the person from whom he received it.
2. Person enjoying benefit of non-gratuitous act / goods61

Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so
gratuitously and such other person enjoys the benefit thereof, the latter is bound to make compensation to
former in respect of, or to restore, thing so done or delivered.
3. Act preventing completion of performance62

If a party does not complete the contract or prevents the other party from completing it, the aggrieved party
can sue on quantum meruit.
4. Divisible contract63
The party at default may sue on a quantum meruit if the contract is divisible and the party not at default has
enjoyed benefits of the part performance.
5. Indivisible contract performed completely but badly (i.e. with faults)64

Party at default may claim the amount agreed after deducting any amount which the other party has paid to
remove faults.
6. Express or implied contract to render services but no remuneration is pre-settled in such a
case reasonable remuneration is payable.
Marking Scheme:
1 mark for each 6 Marks
Business Law
Test # 08
Date:25th July, 2020
INSTRUCTIONS
checked.
Q # 1:
a)
Mr. Rich aspired to get a self-portrait made by an artist. He went to the workshop of Mr. Poor an artist and
asked whether he could sketch the former's portrait on oil painting canvass. Mr. Poor agreed to the offer and
asked for 50,000 as full advance payment for the above creative work. Mr. Poor clarified that the painting
shall be completed in 10 sittings and shall take 3 months. On reaching to the workshop for the 6 sitting, Mr.
Rich was informed that Mr. Poor became paralyzed and would not be able to paint for near future. Mr. Poor
had a son Mr. K who was still pursuing his studies and had not taken up his father’s profession yet?
Discuss in light of the Contract Act, 1872?
i. Can Mr. Rich ask Mr. K to complete the artistic work in lieu of his father?
ii. Could Mr. Rich ask Mr. K for refund of money paid in advance to his father? (04 Marks)
b)
PM Limited contracts with Gupta Traders to make and deliver certain machinery to them by 30th June 2020
for 21.50 million. Due to labor strike for COVID-19, PM Ltd. could not manufacture and deliver the machinery
to Gupta Traders. Later Gupta Traders procured the machinery from another manufacturer for 22.75 million.
Gupta Traders was also prevented from performing a contract which it had made with Zenith Traders at the
time of their contract with PM Limited, for 24.75 million, were compelled to pay compensation for breach of
contract. Calculate the amount of compensation which Gupta Traders can claim from PM Limited, Referring to
the legal provisions of the Contract Act, 1872. (03 Marks)
c)
“An anticipatory breach of contract is a breach of contract occurring before the time fixed for performance
has arrived”. Discuss stating also the effect of anticipatory breach on contracts (04 Marks)
Q# 2:
Mark the Correct option:
1. A contract to deliver 1,000 bags of rice at Rs 100 per bag on a future date. On the due date he refuses
to deliver. Market Price on that day is Rs 120 per bag. Which Damages can be granted by court?
a) Ordinary damage
b) Special damages
c) Remote damages
d) Vindicative damages
2. The damages awarded by way of punishment are called

a) Special Damages
b) Ordinary Damages
c) Exemplary Damages
d) Nominal Damages
3. Liquidated damages mean an amount of ………. that may result from breach of contract
a) actual loss
b) loss suffered
c) pre-estimated probable loss
d) Profit of another transaction
4. A, a singer, agreed with B to perform at his theatre for two months, on a condition that during that
period, he would not perform anywhere else, B could move to the Court for
a) grant of injunction restraining A from performing in other places
b) specific performance
c) allowing B to perform in other places
d) all of the above
5. X owes Rs. 10,000 to Y under a contract. It is agreed between X, Y & Z that Y shall henceforth accept Z
as his debtor instead of X for the same amount. Old debt of X is discharged and a new debt from Z to Y
is contracted. This is:
a) Alteration of contract
b) Rescission of contract
c) Novation of contract
d) Change in contract
6. A agrees to marry B and B Promises to bring as consideration of marriage for A, stars in

consideration of marriage. The agreement is
a) Void
b) Valid
c) Voidable
7. A entered into a contract with B for supply of 100 bicycles manufactured by C. C become defaulter. In
this case
a) A is not discharged
b) A is discharged
c) Contract becomes void
d) Contract becomes voidable
8. When two or more persons have made a joint promise, then, unless a contrary intention appears
from the contract, all such persons must fulfil the promise:
a) Jointly
b) Severally
c) Jointly or severally
d) Jointly and severally
9. Drugs Limited contracts with Supermarket Limited to manufacture and supply 50 cases of a drug
called SuperX. Supermarket Limited pay the contract money, Rs.5.0 million to Drugs Limited but
before delivery takes place the Government introduces a law banning the manufacture and supply of
SuperX. Can Supermarket Limited enforce the contract?
a) No, the contract is frustrated.
b) No, there is a breach of contract.
c) Yes, because Supermarket Ltd has already paid the contract price of Rs.5.0 million.
d) Yes, the contract was legal when it was made.
10. Performance of a contract may be in the form of

a) actual
b) attempted
c) either (a) or (b)
d) both (a) and (b)
(10 Marks)
Q # 3:
a)
Earlier this year Lina, the headmistress of St Lucia Primary School in Brisbane, decided to arrange a trip for
one of her classes. She decided that the trip would be to the Gold Coast Koala Sanctuary. Accordingly, she
approached the Go-Fast Coach Company (a small coach company based in Brisbane) who agreed to transport
the relevant class to the Gold Coast Koala Sanctuary, and back to Brisbane on the relevant day using one of
their coaches. The price agreed was Rs.5.0 million. Lina paid 2.0 million in advance and it was agreed that the
remaining Rs.3.0 million would be paid at the end of the trip.
Discuss EACH of the following alternative, and unconnected, scenarios:

(i) On the day before the trip most of Lina’s class develop a class assignment for class and so Lina
decides to cancel the trip. Lina informs the Go-Fast Coach Company that she no longer needs a
coach. The Go-Fast Coach Company demand full payment.
(ii) The coach which Go Fast Coaches intended to use for the trip is Damaged by sudden fire on the
day before the trip. There is no other coach. Go-Fast Coaches Ltd, therefore, inform Lina that they
are unable to provide the transport for the trip.
(iii) The Gold Coast Koala Sanctuary is closed because of an outbreak of contagious disease of COVID-
19. Therefore, the trip declared cancelled. (06 Marks)
b) Under the Contract Act 1872, explain the situation where Specific Performance is not maintainable.
(03 Marks)
Business Law
Sol # 1:
a)
As per the provisions of The Contract Act, 1872:
A contract which involves the use of personal skill or is founded on personal consideration comes to an end on
the death or inability of the promisor. Generally, on the death or inability of the promisor his legal
representatives are bound to perform the contract unless a contrary intention appears from the contract. But
their liability under a contract is limited to the value of the property they inherit from the deceased. Further
when an agreement is discovered to be void or when a contract becomes void, any person who has received
any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the
person from whom he received it.
In the above case Mr. Rich asks Mr. Poor to sketch his portrait and pays him the money in advance. The sketch
was to complete in 10 sittings. On the 6th sitting Mr. Rich was informed that Mr. Poor was paralyzed. As the
contract is of personal skill, he cannot ask Mr. Poor’s son to perform the contact.
Thus.
i. Mr. Rich cannot ask Mr. K to complete the artistic work in lieu of his father Mr. Poor.
ii. Mr. Rich can ask Mr. K for refund of money paid in advance to his father, Mr. Poor.
Marking Scheme:
b)
As per the Contract Act, 1872:
When a contract has been breached, the party who suffers by such a breach is entitled to receive from the
other party compensation for any loss or damage caused to him in the usual course from such breach or
which the parties knew when they made the contract, to be likely to result from the breach of it. Such
compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
In estimating the loss or damage from a breach of contract, the means which existed of remedying the
inconvenience caused by the non-performance of the contract must be taken into account. In case of special
damages, they are recoverable if the other party had notice of it.
In the above case PM Limited had contracted and delivers machinery to Gupta Traders. Due to labor strike it
was unable to deliver the machinery to Gupta Traders. As PM Limited has breached the contract it is liable to
compensate Gupta Traders for the loss of 1.25 million (i.e. 22.75– 21.50 million) which had naturally arisen
due to default in performing the contract by the specified date. Regarding the amount of compensation which
Gupta Traders were compelled to make to Zenith Traders, it depends upon the fact whether PM Limited knew
about the contract of Gupta Traders for supply of the contracted machinery to Zenith Traders on the specified
date. If so, PM Limited is also obliged to reimburse the compensation which Gupta Traders had to pay to
Zenith Traders for breach of contract. Otherwise PM Limited is not liable for that.
Thus, Gupta Traders can recover 1.25 million as loss. The compensation they paid to Zenith Traders could be
recovered if the notice of the same was given to PM Limited
Marking Scheme:
2 Marks for provision and 1 mark for calculation 3 Marks
c)
An anticipatory breach of contract is a breach of contract occurring before the time fixed for performance has
arrived. When the promisor refuses altogether to perform his, promise and signifies his unwillingness even
before the time for performance has arrived, it is called Anticipatory Breach.
The Contract Act, 1872 deals with anticipatory breach of contract and provides as follows: "When a party to a
contract has refused to perform or disable himself from performing, his promise in its entirety, the promise
may put an end to the contract, unless he has signified, by words or conduct, to continue the contract. Effect of
anticipatory breach:
The promisee is excused from performance or from further performance. Further he gets an option:
i. To either treat the contract as “rescinded and sue the other party for damages from breach of
contract immediately without waiting until the due date of performance; or
ii. He may elect not to rescind but to treat the contract as still operative, and wait for the time of
performance and then hold the other party responsible for the consequences of non-
performance. But in this case, he will keep the contract alive for the benefit of the other party as
well as his own, and the guilty party, if he so decides on re-consideration, may still perform his
part of the contract and can also take advantage of any supervening impossibility which may
have the effect of discharging the contract.
Marking Scheme:
4 Marks for explanation 4 Marks
Sol # 2:
1 A 4 A 7 A 10 C
2 C 5 C 8 D
3 C 6 A 9 A
Q # 3:
i.
Go Fast Coaches will wish to argue that there is an anticipatory breach by Lina namely a breach that occurs
before the time at which performance is due. The anticipatory breach takes. In many cases there will be a
clear statement by one party that they no longer intend to perform the contract. This intention must be
communicated to the other party.
ii.
As per The Contract Act 1872:
“When contract is valid at time of formation and becomes impossible to perform subsequently Contract
becomes void when an act becomes impossible after the formation of the contract. (and is beyond the control
of promisor)”
“If subject matter is destroyed after formation of contract without fault of either party.
In the given situation, Coach was damaged and the situation is beyond the control of both parties. Therefore,
the Contract become void
iii.
Recission:
Cancellation of a contract by mutual agreement of parties
Due to the given situation, it is not possible for both parties to perform their obligation as per the terms of
contract. Therefore, only Recission option is available for them.
Marking Scheme:
Suit for specific performance is not maintainable where:

Monetary compensation is considered as an adequate remedy
Contract is of personal nature (e.g. contract of services)
Court cannot supervise the performance of the contract (e.g. construction of building)
One of the parties is a minor
Contract is inequitable to either party
Marking Scheme:
Business Law
Test # 9
Date: 15 August, 2020
Time Allowed: 60 Minutes
INSTRUCTIONS
checked.
Q # 1:
a)
Give any four differences between bailment and pledge. (05 Marks)
b)
Ramesh and Suresh were engaged in business having same nature. Ramesh stands surety for Suresh for any
amount which Kamlesh may lend to Suresh from time to time during the next 6months subject to a maximum
of Rs. 85,000. 3 months later, Ramesh revokes the guarantee, when Kamlesh had lent to Suresh Rs. 35,000.
Decide whether Ramesh is discharged from all the liabilities to Kamlesh for any subsequent loan under the
provisions of the Contract Act, 1872. Would your answer differ in case Suresh makes a default in paying back
to Kamlesh the money already borrowed i.e. Rs. 35,000? (05 Marks)
Q # 2:
Mark the correct option
1. A Del-credre agent acts as
a) Guarantor
b) Agent
c) Both of the above
d) None
2. Light made an offer to Managing Director of a company. Managing Director accepted the offer though
he had no authority to do so. Subsequently Light withdrew the offer but the company ratified the
Managing Director’s acceptance. State which of the statement given hereunder is correct:
a) Light was bound with the offer
b) An offer once accepted cannot be withdrawn
c) Both option (a) & (b) is correct
d) Light is not bound to an offer
3. A is residing in Doha and has a house in Lahore. A appoints B by a power of attorney to take care of
his house. State the nature of agency created between A and B
a) Implied agency
b) Agency by ratification
c) Agency by necessity
d) Express agency
4. Ali appointed Kalim his agent. Kalim exceeds authority that actually vested in him by Ali. Now Ali:
a) may accept or revokes the agent’s act
b) must accept the agent’s act’
c) should revoke the agent’s act
d) none of above
5. What is a continuing guarantee?
a) A guarantee which continues even after the contract comes to an end
b) A guarantee which shall be applicable to any other person who becomes a party to the contract
c) A guarantee which extends to a series of transaction
d) A guarantee which continues till the contract does not come to an end
6. S and P go into a shop. S says to the shopkeeper, C, “Let P have the goods, and if he does not pay you, I
will. “This is a
a) Contract of Guarantee
b) Contract of Indemnity
c) Wagering agreement
d) Quasi-contract
7. A contract to save B against the consequences of any proceedings which C may take against B in
respect of a certain sum of 500 rupees. This is a
a) Contract of guarantee
b) Quasi contract
c) Contract of indemnity
d) Void contract
8. X transfers possession or custody of the farmland to his son, S. S shall pay rent or a lease fee in
return. S only receives custody and control of the property, but X still owns it. X is thus responsible
for paying the property taxes and is liable for what happens on the land. This kind of contract or
arrangement is called:
a) Guarantee
b) Bailment
c) Pledge
d) Set off
9. Gratuitous bailment means bailment ___________

a) For the exclusive benefit of bailor
b) For the exclusive benefit of bailee
c) Either (a) or (b)
d) For the mutual benefit of bailor and bailee
10. Delivery of key of a car to a friend is an example of __________

a) Physical delivery
b) Symbolic delivery
c) Constructive delivery
d) None of these
Q # 3:
Identify the type of agency and validity of contract in each independent situation:
i. Irfan tells khizar in the presence and within the hearing of Imran the he (Irfan) is Imran’s agent.
Imran does not contradict this statement and keep quiet. Later on, Khizar enters into a transaction
with Irfan believing honestly that Irfan is Imran’s agent and Irfan committed Fraud with Khizar in
this transaction.
ii. Rashid buys 5 bags of wheat on the behalf of Nabi. Nabi did not know about this, but Rashid was the
best friend of Nabi and this matter was discussed in their friend’s birthday party that Nabi want to
buy wheat of a good quality. Nabi ratify this act later on.
iii. Aslam direct Badar, his solicitor, to sell his estate by auction and to employ an auctioneer for the
purpose. Badar names Sameer, an auctioneer, to conduct the sale.
iv. Amir appoints Moin, a minor, as his agent to sell his watch for cash at a price not less than Rs. 700.
Moin sells it to Dilawar for Rs. 350.
v. Amanat enters into contract with Raza for buying Raza’s motor car as agent of Dilawar and without
Dilawar’s consent. Raza repudiated the contract before Dilawar comes to know of it. Dilawar
subsequently ratifies and sue to enforce the contract. (10 Marks)
Business Law
Sol # 1:
a)
Distinction between bailment and pledge:
The following are the distinction between bailment and pledge:
As to purpose: Pledge is a variety of bailment. Under pledge goods are bailed as a security for a loan or a
performance of a promise. In regular bailment the goods are bailed for other purpose than the two referred
above. The bailee takes them for repairs, safe custody etc.
As to right of sale: The pledgee enjoys the right to sell only on default by the pledgor to repay the debt or
perform his promise, that too only after giving due notice. In bailment the bailee, generally, cannot sell the
goods. He can either retain or sue for non-payment of dues.
As to right of using goods: Pledgee has no right to use goods. A bailee can, if the terms so provide, use the
goods.
Consideration: In pledge there is always a consideration whereas in a bailment there may or may not be
consideration.
Discharge of contract: Pledge is discharged on the payment of debt or performance of promise whereas
bailment is discharged as the purpose is accomplished or after specified time.
Marking Scheme:
1 mark for 1 difference 05 Marks
b)
Revocation of continuing guarantee:
Revocation of a continuing guarantees as to future transactions which can be done mainly in the following
two ways:
By Notice: A continuing guarantee may at any time be revoked by the surety as to future transactions, by
giving notice to the creditor.
By death of surety: The death of the surety operates, in the absence of any contract to the contrary, as a
revocation of a continuing guarantee, so far as regards future transactions.
So far as the transactions before revocation are concerned, the liability of the surety for previous transactions
(i.e. before revocation) remains.
Thus, applying the above provisions in the given case,

Ramesh is discharged from all the liabilities to Kamlesh for any subsequent loan.
Answer in the second case would differ i.e. Ramesh is liable to Kamlesh for Rs. 35,000 on default of Suresh
since the loan was taken before the notice of revocation was given to Kamlesh.
Marking Scheme:
3 marks for provision 2 marks for decision 05 Marks
Sol # 2
1 C 4 A 7 C 10 B
2 C 5 C 8 B
3 D 6 A 9 C
Sol # 3:
i.
Where a person makes a representation to third parties that another person has authority to act as his agent,
even though he has not actually been appointed as agent, then is called agency by Estoppel.
In the given situation, Estoppel agency relation is created between Irfan and Imran. Principal (Imran) is bound
for all the act of Irfan (Agent), acting as an agent.
However, Irfan agent committed fraud with Khizar (third party), So Irfan is liable personally for this act.
ii.
When a person does not actually have actual authority as an agent negotiates with a third party, claiming to be
an agent of a named principal; the person who has been named as principal might then choose to accept (i.e.
ratify) the contract with the third party this is called agency by ratification.
In the given situation there is Agency by ratification between rashid and Nabi and Nabi is now bound for the
Act of Rashid, legally.
iii.
A person who is named by the agent, on an authority from the principal, to act for principal. This person will
be called as Co-agent.
In the given situation Sameer’s name is given by Badar but Sameer is a co-agent. Aslam (principal) is liable for
Sameer act and Sameer is directly reportable to Aslam.
iv.
As between the principal and a third person, any person, even a minor may become an agent. But no person
who is not of the age of majority and of sound mind can become an agent, so as to be responsible to his principal.
Thus, if a person who is not competent to contract is appointed as an agent, the principal is liable to the third
party for the acts of the agent. Thus, in the given case, Dilawar gets a good title to the watch. Moin is not liable
to Amir for his negligence in the performance of his duties.
v.
When a person does not actually have actual authority as an agent negotiates with a third party, claiming to be
an agent of a named principal; the person who has been named as principal might then choose to accept (i.e.
ratify) the contract with the third party this is called agency by ratification.
In the given situation there is Agency by ratification between Amanat and dilawar and Dilawar is now bound
for the Act of Amanat, legally.
Marking Scheme:
2 marks for each 10 Marks
Business Law
Test # 10
Date: 22th August, 2020
Time Allowed: 60 Minutes
INSTRUCTIONS
checked.
Q # 1:
a)
X, Y, Z are partners in a firm. They jointly promised to pay Rs.300,000 to D. Y becomes insolvent and his
private assets are sufficient to pay 1/5 of his share of debts. X is compelled to pay the whole amount to D.
Examining the provisions of The Partnership Act 1932, decide the extent to which X can recover the amount
from Z. (03 marks)
b)
X and Y are partners in the firm. X introduce A, a manager, as his partner to Z. A remained silent. Z a trader
believing that A is a partner, 100 TV set to the firm on credit. After expiry of the credit period, Z did not get
the amount of TV sets sold to the firm. Z filed a suit against X and A for recovery of amount. identify the type
of partner and validity of the suit. (04 marks)
Q # 2:
a)
A and B and C started a cloth business in Shah alim market LHR, for a period of five years, the business
resulted in a loss of Rs 10,000 in the first year, Rs 15,000 I the second year and Rs 18,000 in the third year, B
and C wish to dissolve the firm while A want to continue the business, Advise A and B? (03 Marks)
b)
A, B and C are partners in a firm called ABC Firm. A, with the intention of deceiving D, a supplier of office
stationery, buys certain stationery on behalf of the ABC Firm. The stationery is of use in the ordinary course
of the firm’s business. A does not give the stationery to the firm, instead brings it to his own use. The supplier
D, who is unaware of the private use of stationery by A, claims the price from the firm. The firm refuses to
pay for the price, on the ground that the stationery was never received by it (firm). Referring to the
provisions of the Partnership Act, 1932 decide:
• Whether the Firm’s contention shall be tenable?
• What would be your answer if a part of the stationery so purchased by A was delivered to the firm by
him, and the rest of the stationery was used by him for private use, about which neither the firm nor
the supplier D was aware? (06 Marks)
c)
Differentiate between civil and criminal law. (04 marks)
Q # 3:
Mark the correct option:
1. A and B entered into an agreement to carry on a business of manufacturing and selling toys. Each one
of them contributed Rs. 3.5 million as their capital with a condition that A and B will share the profits
equally, but the loss, if any, is to be borne by A alone. Referring to the provisions of the Partnership
Act, 1932 decide whether there exists a partnership between A and B.
(a) There is no partnership between A and B.
(b) A is sub-partner of B
(c) There is partnership by holding out
(d) There is partnership between A and B. A is partner in profit only.
2. In the absence of any such agreement, express or implied, the property of the firm is deemed to
include……………
(a) All property, rights and interests which have been brought into the common stock for the purposes of
the partnership by individual partners, whether at the commencement of the business or
subsequently added thereto
(b) Those acquired in the course of the business with money belonging to the firm
(c) The goodwill of the business
(d) All of above
3. A minor may be admitted to the benefits of a partnership with the consent of………….
(a) Majority partners
(b) All other partners
(c) 75% partners
(d) None of above
4. N and Z, the co-owners of a house, use the house as a hotel managed either by themselves or by a
duly appointed mange for their common profit. Is there a partnership relation between the parties?
(a) Yes
(b) No
(c) Partly yes
(d) Can’t say
5. Which of this arrangement indicates a partnership?

(a) Ram agrees with Shyam a goldsmith, to buy and furnish gold to Shyam to be worked upon by him
and sold, and that they shall share the resulting profit or loss.
(b) Ram and Shyam agree to work together as carpenters but Ram shall receive all profit and shall
pay wages to Shyam.
(c) Ram and shyam are joint owners of a ship.
(d) Ram, a publisher, agrees to publish at his own expense a book written by Shyam and to pay
Shyam half the net profit
6. Nitin, a partner of a firm dealing in computers gives an order for wine worth Rs. 10,000 in firm’s
name. Discuss the liability?
(a) The firm is liable to pay Rs. 10,000.
(b) The firm can sale the wine to other.
(c) It does not relate to normal business of the firm. The firm will not be bound by it as act is not within
implied authority of a partner.
(d) None of above
7. Every partner whether active or dormant, has a right of free access to all………. Of the business and
also to examine and copy them.
(a) Records
(b) Books
(c) Records, books and account
(d) None of above
8. ICAP can make rules for the exams.

(a) This is the example of delegated legislation
(b) ICAP has a constitutional right of making rules
(c) The rules of ICAP are called statutes
(d) None of the above.
9. When a bill is presented to President after passing from both the houses of parliament
(a) The President will assent the bill
(b) The President will send the bill back to joint session of the parliament
(c) The President will refuse to assent the bill
(d) The President will hold any of the above three, options
10. Fundamental Rights means:

(a) Right of protection of property rights
(b) Right of equality of citizens
(c) Right of education
(d) All of the above
Business Law
Sol # 1:
a)
Y’s share was Rs.1,00,000 out of which only Rs. 20,000 (1/5) were recovered from his property. The loss of
Rs. 80,000 will be divided equally between X and Z. Hence, the liability of X comes to Rs 140,000. If now X
pays entire Rs. 300,000 then he can recover Rs. 140,000 from Z.
Marking Scheme:
2 Marks for Y’s liability and 1 marks for Z’s liability 03 Marks
b)
As per the Partnership Act 1932:

“Where a person (appears to be Principal) has previously represented to a third party that another person
(appears to be agent) has the authority to act as his agent and:
- Authority was subsequently taken away/ended, but
- Third parties who previously dealt with the agent have not been informed of this fact”.
“Mutual Agency is one of the key element of partnership, in which partners are mutual agent of each other”
In the given Situation, X represent as a partner to Z (which is Partnership by estoppel) and A made the
transaction with Z. Z (third Party) was believing that A is a partner of the firm and has authority to act on the
behalf of the firm
Now firm is liable for the act of A. And also pay compensation to Z. Third party can claim the compensation
from A OR any partner of the firm.
Marking Scheme:
Sol # 2:
a)
As per the partnership Act 1932,
“A partner has a right to retire with the consent of all partners or in accordance with an express agreement
between the parties (particular partnership)”.
In given situation the firm is particular partnership for the period of 5 years. So C& B cannot retire without
the consent of A,
Therefor they cannot dissolve the firm.
Marking Scheme:
b)
The problem in the question is based on the ‘Implied Authority’ of a partner. The act of a partner, which is
done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of
a partner to bind the firm conferred by this section is called his ‘Implied Authority’. Furthermore, every
partner is in contemplation of law the general and accredited agent of the partnership and may consequently
bind all the other partners by his acts in all matters which are within the scope and object of the partnership
Hence, if the partnership is of a general commercial nature, he may buy goods on account of the partnership.
Considering the above provisions and explanation, the questions as asked in the problem may be answered as
under:
(i) The firm’s contention is not tenable, for the reason that the partner, in the usual course of the
business on behalf of the firm has an implied authority to bind the firm. The firm is, therefore, liable for the
price of the goods,
(ii) In the second case also the answer would be the same as above, i.e. the implied authority of the
partner binds the firm.
In both the cases, however, the firm ABC can take action against A, the partner but it has to pay the price of
stationery to the supplier D.
Marking Scheme:
3 marks for provision and 1.5 marks for each decision 06 Marks
c)
Criminal law Civil law
Establishes acceptable standards of Deals in disputes b/w individuals &
behavior. organizations.
Establishes conducts that are unacceptable. Establishes rights & obligations between
parties.
A violation of the criminal law is a crime. A violation of the civil law is a tort (a
wrongdoing),
Punishment is in form of imprisonment Punishment in the form of remedies but not
and/or fines. include imprisonment.
Prosecution is brought to court by State Prosecution is brought to court by one party
The guilt of an accused person needs to be The court needs to be satisfied “on the
proved “beyond all reasonable doubts”. balance of probabilities” that a person is
Burden of proof is much greater. liable.
Criminal Law is established by the methods Civil law may be established by statute or by
given in sources of law section. case law (common law), codification,
interpretation of law, consideration, etc.
Sol # 3:
1 D 4 B 7 C 10 D
2 D 5 A 8 A
3 B 6 C 9 D

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Business Law

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