BISMILLAHIRRAH

MANIR RAHIM

A Study Kit of Business & Commercial Law

 Summary of Questions with the past year reference:
The Contract and Agency Act: 1872

1. An agreement without consideration is void. But there are certain exceptions to this. What are
those exceptions? M/J-13, M/J-05, N/D-03, N/D-08
2. What are the differences between void and voidable contract? M/J-13, M/J-12,M/J-11, N/D-
06,M/J-02
3. Describe the cases when consideration or object of a contract becomes unlawful. M/J-13
4. State various remedies available to the aggrieved party for a breach of contract. M/J-13, N/D-08
5. Describe the ways how an agency may be terminated. N/D-13, M/J-13
6. ―An agreement enforceable by law is a contract‖-Explain. M/J -14, N/D-12,N/D-06, M/J-09
7. Why do you understand by capacity of parties? Is it essential for a valid contract? N/D-13, N/D-
12, N/D-06, M/J-06, N/D-08
8. Define and Distinguish between indemnity and guarantee. M/J-14, N/D-12, M/J-10, N/D-01
9. What is bailment? Classify Bailment. N/D-13, N/D-12,M/J-11
10. What is an offer and acceptance? When will an acceptance be valid? N/D-12
11. Identify the four ways in which an agency can be created? N/D-12, N/D-11,M/J-10
12. Which contracts are declared void by the law? M/J-11
13. What are the essential elements of a valid contract? M/J-12, N/D-11, M/J-02,N/D-09
14. An agreement made without consideration is Void. Discuss. M/J-11
15. Who may employ an agent? Who may be an agent? M/J-12
16. Describe briefly the various modes by which an agency may be terminated. N/D-13, M/J-12,
N/D-10
17. What is an offer according to the contract act 1872? How an offer is revoked? M/J-14, N/D-11
18. Distinguish between executed contract and executory contracts. N/D-11, N/D-08
19. What is bailment without reward? State the rights of a bailee? N/D-13, N/D-11, M/J-10
20. What are the rights of a commercial agent against his principal? N/D-11
21. What are the consequences of breach of condition and warranty? N/D-11, N/D-10, N/D-05, M/J-
02, N/D-08, N/D-09
22. What is consideration of a contract? M/J-11
23. ―A contract caused by mistake is void‖ Discuss. N/D-10
24. What is pledge? State the rights and duties of pawnee? N/D-10
25. Explain the rule of Caveat Emptor. M/J-14, N/D-10, M/J-04, M/J-03
26. ―No one can give better title to the goods than he has himself‖-Discuss the exceptions. N/D-10,
M/J-06, N/D-03, N/D-02, M/J-09
27. ―An invitation to offer is not an offer‖- Elucidate the statement with examples. N/D-10, M/J-09
28. Define proposal and mention the elements of proposal. M/J-14, N/D-08
29. What is contract?
30. What are the essential elements of Contract?
31. Who is mercantile agent? Explain various kinds of mercantile agent? M/J-14
32. What is the difference between contingent contract and Quasi Contract? N/D-13
33. What is agency by ratification? What are the requisites of valid ratification? N/D-13
34. The essential elements of bailment? M/J-11
35. All contracts are agreements but all agreements are not contract? Explain. N/D-10, N/D-13

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36. What are the rights of a bailor and bailee under the contract act? M/J-05
37. What is counter offer? Give example. M/J-05, N/D-02, N/D-01
38. Distinguish between a contingent contract and wagering agreement? N/D-03, M/J-03
39. What do you understand by supervening impossibility? N/D-03,M/J-03, N/D-02, N/D-01, M/J-
08, N/D-09
40. What are the remedies for breach of contract?
41. What do you mean fiduciary relationship?
42. What are the difference between fraud and representation?
43. What is meant by the Uberrimae fidei contracts? What type of contract come within the class of
Uberrimae fidei contracts?
44. How may the termination of contract by mutual agreement occur?

The Sale of Goods Act: 1930

1. What are the implied conditions by operation of law in contracts for the sale of goods? M/J-14,
M/J-13, N/D-12, M/J-08
2. Describe the general rules to delivery of goods in accordance with the Sale of Goods Act 1930.
M/J-13
3. Who is unpaid seller? Point out the rights of unpaid seller. N/D-13, N/D-12, M/J-11, M/J-10,
N/D-05, N/D-03, M/J-09
4. How is a contract of sale made? Distinguish between sale and agreement to sell. M/J-14, N/D-
12, M/J-12, N/D-11, M/J-10, M/J-06, N/D-01, M/J-08
5. When the property in goods passes from the seller to the buyer? N/D-11
6. What is unpaid seller‘s lien and how is the unpaid seller‘s lien terminated? M/J-11
7. Define contract of sale of goods. Mention the essentials of a contract of sale. N/D-13, N/D-10
8. What are the differences between Condition and Warranty?
9. What are the consequences for breach of Warranty?
10. What are the consequences for breach of Condition?

The Partnership Act: 1932

1. What is a partnership deed? Point out the main contents of a partnership deeds. M/J-13, M/J-
11,N/D-02
2. Describe the rules regarding the rights of an outgoing partner to carry on competing business.
M/J-13
3. What are the rules for a minor to become a partner in a firm? Discuss the rights and
responsibilities of a minor becoming a partner of a firm under the partnership act 1932. M/J-13,
M/J-12, N/D-10, N/D-06, N/D-09
4. What is partnership? Discuss in short the different classes of partnership. N/D-12, M/J-11
5. Identify five differences between incorporated companies and ordinary partnership. M/J-12, N/D-
05
6. How does dissolution of a firm take place without the order of the court? M/J-12
7. Write down the rights and duties of a partner in a partnership firm? N/D-11, M/J-10
8. What are the grounds on dissolution of a partnership firms? M/J-11

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9. Who can be a partner?
10. Describe the consequences in case of non registration of a partnership firm ? N/D-13, M/J-03,
M/J-09
11. What are the difference between Partnership and Co-ownership?
12. What are the liabilities of partners to outsiders?

The Negotiable Instrument Act: 1881

1. How a negotiable instrument may be dishonored? What are the duties of a holder of dishonored
bill? According to section 91, a bill of exchange is said to be dishonored by non-acceptance
when? M/J-13
2. Distinction between bill of exchange and Cheque. What do you understand by Holder in due
course? N/D-13, N/D-12, N/D-10, M/J-05, N/D-02, M/J-02
3. Distinguish between bill of exchange and promissory note. M/J-12, M/J-05, N/D-03, M/J-09
4. What do you understand by noting? What is its content? M/J-12
5. Define promissory note? What are the essentials elements? N/D-13, M/J-11, M/J-04, N/D-01,
M/J-09
6. What is crossing a cheque? What are the various types of crossing? M/J-14, M/J-11, M/J-06,
M/J-01, N/D-08, M/J-09
7. What is bill of exchange? What are the essentials of a bill of exchange? N/D-11
8. What is presentment? When the presentment for the acceptance of a bill of exchange is excused?
N/D-11
9. What is acceptance for honor? M/J-11, N/D-03, M/J-03, M/J-08
10. Define negotiable instrument. What are the essential characteristics of a negotiable instrument?
N/D-06, N/D-02, M/J-01
11. Distinguish between dishonor by non-performance and dishonor by non-acceptance of a
negotiable instrument. M/J-09
12. Classification of cheques and its implication?

The Arbitration Act: 2001

1. Who can refer dispute to arbitration? What matters can and what matters cannot be referred to
arbitration? M/J-13, N/D-10, M/J-10, M/J-06, M/J-04, M/J-08, M/J-09
2. What are the modes of Arbitration? What do you mean by remitting the award? N/D-12
3. What is an arbitration agreement? What are the essential elements of an arbitration agreement?
M/J-12
4. Point out the duties of arbitrator? M/J-14, N/D-11
5. What do you mean by an award? What are the grounds on which the court can modify or correct
an award? N/D-13, M/J-11
6. Discuss the ground on which the court can: set aside an award and remit an award for
reconsideration under the arbitration act? M/J-01

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 The Bankruptcy Act: 1997

1. Point out the conditions for filling plaint by creditors and debtors. M/J-13, M/J-04
2. Explain the object of law of bankruptcy? M/J-12, N/D-06, M/J-09
3. Point out the disqualifications of an undercharged bankrupt? M/J-11, N/D-10
4. Which acts are considered as act of bankruptcy? Against whom bankruptcy proceeding be
initiated? N/D-13, N/D-12, M/J-12, N/D-11, N/D-02, M/J-02
5. What is order of adjudication? What are the effects of adjudication under the Bankruptcy act
1997? M/J-11, N/D-05
6. Which properties is ‗Exempted property‘ under the Bankruptcy Act 1997. M/J-14, N/D-10, N/D-
05, N/D-01
7. What do you understand by protected transaction? N/D-13, N/D-02
8. Who may or may not be adjudged bankrupt? M/J-06, N/D-08
9. Under what circumstances can the Court set aside an award made by the Arbitrator? N/D-05

Exam Hints:

 Write down the answers to the point or in brief according to the question.
 Try to use the blue pen to mark points.
 Margin the page accurately with ruler.
 Have to answer all the questions.
 Manage time properly.

Before the Exam Hits:

 Give demo exam by maintaining the time (three or four times), and evaluate your performance by
yourself.
 Allocate the time according to the number e.g. (if the marks is 5 then time to be invested:
[(90/100)*5] = 4.5 minutes. Here 90 minutes total exam time and 100 marks). So allocate all time
and plan your exam tactics in your own way.

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 The Contract and Agency Act: 1872

Q1. An agreement without consideration is void. But there are certain exceptions to this. What are
those exceptions? M/J-13, M/J-05, N/D-03, N/D-08

Following are the exceptional cases where a contract is enforceable even though there is no consideration:

1. Natural love and affection.

2. Voluntary compensation.
3. Time barred debt.
4. Agency.
5. Completed gift.

Q2. What are the differences between void and voidable contract? M/J-13, M/J-12, M/J-11, N/D-06,
M/J-02

Void: An agreement not enforceable by law is said void. [Section-2(g)]

Voidable: An agreement which is enforceable by law at the opinion of one party not the other is
voidable contract. [Section-2(i)]

Point of Difference Void Voidable

Right and A void agreement confers no right on But in case of voidable agreement
obligation any person and creates no obligations the rights and obligations of the
parties concerned are present
unless it becomes void.
Declaration for As a void agreement is void from the But in case of voidable agreement
voiding beginning it is not necessary for the the effected party needs to call the
effected party to declare the agreement void.
agreement void.
Refund the benefit In case of void agreement the party is But in case of voidable agreement
not bound to refund the benefit the party may refund the benefit to
received to the other party the other party, if the agreement
becomes void later on.
Example A contract without consideration, A contract made with undue
which is unlawful. influence, misrepresentation etc.
Note: If you can present the difference of two topics in the above way in exam script, then
it will carry full marks.

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Q3. Describe the cases when consideration or object of a contract becomes unlawful. M/J-13

The consideration or object would be unlawful in the following cases:

a. If the consideration of the object of a contract is forbidden by law.

b. If the consideration is accepted it will defeat the provisions of any law.
c. If the consideration is fraudulent.
d. If the consideration causes any injury to a person or property of another due to any criminal or
wrongful acts.
e. Consideration is immoral.
f. If the court regard the consideration of the agreement as opposed to public policy such as trading
with enemy, interference with courts of justice, agreement to procure marriage for reward, agreement
to create interest against duty.

Q4. State various remedies available to the aggrieved party for a breach of contract. M/J-13, N/D-08

The aggrieved party becomes entitled to the following reliefs:

a. The aggrieved can rescind the contract that he is freed from all types of obligations (Rescission).
b. He can sue damages and can receive compensation for damage caused to him (Suit for damages).
c. When the contract has been partly performed, he can file a suit for the price of the services performed
before breach of contract (Suit for price).
d. The court may direct a party to perform the contract according to the agreed terms (Specific
performance).
e. The court may issue an order and prohibit from doing something which causes breach of contract
(Injunction).

Q5. Describe the ways how an agency may be terminated. N/D-13, M/J-13

i. Termination by act of parties.

ii. Termination by operation of law.

Termination by act of parties:

a. The principal may by notice revoke the authority of the agent and the agent may similarly, by
notice, renounce the business of agency. This revocation and renunciation may be express or
implied by the conduct of the parties. But the principal ca not revoke the authority of the agent in
the following cases
 When the agent has an interest in the subject matter.
 When the authority of agent has exercised his authority so as to bind the principal.
 When the agent has partially exercised his authority.

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Termination by operation of law:

a. After the termination a fixed period.

b. After the performance of the object for which agent was appointed.
c. After the determination of the subject matter.
d. Death or insanity of the principal or agent.
e. If the principal becomes insolvent.
f. If the principal and agent belong to two enemy countries.
g. After the termination of the sub-agent‘s authority.

Q6. “An agreement enforceable by law is a contract”-Explain. M/J -14, N/D-12, N/D-06, M/J-09

The statement implies that in a contract, there must be an agreement and that agreement must be
enforceable by law. An agreement comes into existence whenever one or more person promise to one or
others to do or not to do something. Every promise and every set of promises, forming the consideration for
each other is an agreement. Some agreements cannot be enforced by the courts of law such as agreement to
play cards or to go cinema. An agreement which can be enforced by the courts of law is a contract.

Q7. Why do you understand by capacity of parties? Is it essential for a valid contract? N/D-13, N/D-
12, N/D-06, M/J-06, N/D-08

Capacity of parties means the physical and mental ability to enter into the contract. He who is sound mind
has the capacity. Capacity of parties depend on the soundness of mind which is measured by the capacity to
understand the business concerned and the ability to form a rational judgment as to its effect on a person‘s
interest.

It is essential to have the capacity for a valid contract. Because an idiot and lunatic or insane who do not
have the ability to form rational judgment cannot enter into contract.

Q8. Define and Distinguish between indemnity and guarantee. M/J-14, N/D-12, M/J-10, N/D-01

A contract of indemnity:

A contract by which one party promises to save the other party from loss caused to him by the conduct of
the promisor himself, or by the conduct of any other person.

A contract of guarantee:

A contract to perform the promise or discharge the liability of a third person in case of his default.

Distinguish between contract of indemnity and a contract of guarantee

Point of Contract of Indemnity Contract of Guarantee

Difference
Nature of contract One party promises to save the other
party from loss caused to him by the
conduct of the promisor himself, or by the
conduct of any other person
A contract of guarantee is a
contract
to perform the promise or
discharge the liability of a third

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 person in cage of his default.
Parties Here two parties Here three parties
Number of In a contract of indemnity it is necessary to In a contract of guarantee it is
contract have only one contract necessary to have three contracts
Sue In a contract of indemnity the indemnifier In a contract of guarantee the
can sue only the indemnity holder for his surety can proceed against
loss principal debtor

Q9. What is bailment? Classify Bailment. N/D-13, N/D-12, M/J-11

Bailment:

―Bailment is the delivery of goods by one person to another for some purpose, upon a contract that they
shall, when the purpose is accomplished be returned or otherwise disposed of according to the directions of
the persons delivering them‖.

The person delivering the goods is called the Bailor. The person to whom they are delivered is called the
bailee. The transactions are called bailment.

Different Kinds of bailment:

Bailments may be classified into (1). Gratuitous Bailments and (2). Bailment for reward.

A Gratuitous bailment is one in which neither the bailor nor the bailee is entitled to any remuneration such
as safe custody without charge.

A bailment for reward is one where either the bailor or the bailee is entitled to any remuneration such as a
motor car let out for hire, goods given to any carrier for carriage at a price,

Q10. What is an offer and acceptance? When will an acceptance be valid? N/D-12

A proposal is called an offer, where the proposal is defined in the contract acts as follows: when one person
signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the
assent of that other to such act or abstinence, he is said to make a proposal. A proposal is said to be
accepted when the person to whom the proposal is made signifies his assent thereto.

An acceptance will be valid if:

a. It is absolute and unqualified acceptance of all terms of the offer.

b. An acceptance without any variation in the proposal.
c. Acceptance of offer is not conditional.
d. No counter offer is made.
e. The acceptance is expressed in some usual and reasonable manner.
f. Acceptance has been communicated.
g. Acceptance by appropriate mode.

Q11. Identify the four ways in which an agency can be created? N/D-12, N/D-11, M/J-10

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1. Agency by express agreement:

A contract of agency may be created by express agreement. The agreement may be either oral or written. It
is usual in many cases to appoint an agent by executing a formal power of attorney on a written and
stamped document.

2. Agency by implied agreement:

An agency may be created by the conduct of the parties or the relationship between them.

3. Agency by Estoppel or by holding out:

When a man has by his conduct or statements induced others to believe that a certain person is his agent, he
is precluded from subsequently denying it.

4. Agency by necessity:

Circumstances sometimes force a person to act on behalf of another without any express authority from
him. In such cases, agency of necessity is said to be created.

Q.12 Which contracts are declared void by the law? M/J-11

Under the contract act there are five categories of agreements which are expressly declared to be void. They
are:

1. Agreement in restraint of marriage (sec-26): Every agreement in restraint of marriage of any person
other than a minor is void.
2. Agreement in restraint of trade (Sec-27): Every agreement by which anyone is restrained from
exercising lawful profession, trade or business of any kind, is to that extent void.
3. Agreement in restraint of proceedings (sec-28): Private individuals can not by agreement alter or
vary their personal law or the statute law.
4. Agreement having uncertain meaning (Sec-29): The agreement meaning of which is uncertain or
capable of being made certain is void.
5. Wagering agreement (sec-30): Contract act clearly states that agreements by way of wager are void.

In additions to the above sections, section 56(1) state that agreement to do an impossible act in itself is void.

Q.13 What are the essential elements of a valid contract? M/J-12, N/D-11, M/J-02, N/D-09

Essential elements of a valid contract

1. There must be an agreement such as there must be lawful offer and acceptance.
2. The parties must be competent to contract such as of the age of majority and sound mind.
3. The agreement must be made by the free consent of the parties that is they must have agreed to the
same thing in the same sense.
4. The agreement must be made for lawful consideration and with a lawful object.
5. The agreement must not have expressly declared to be void.

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 6. No form is necessary as a rule but it must in writing attested and registered if so required by any
other law.

Q.14 An agreement made without consideration is Void. Discuss. M/J-11

Consideration is essential element to a contract. Subject to certain exception, an agreement made without
consideration is not enforceable unless each party to the agreement gets something. Consideration is an
essential for the validity of a contract. ―A promise without consideration is a gift, one made for a
consideration is a bargain‖ Salmond and wildfield, law of contract. A promise without consideration is a
gratuitous undertaking and connot create a legal obligation. Under Roman law an agreement without
consideration was called a nudum pactrum and was unenforceable.

Q.15 who may employ an agent? Who may be an agent? M/J-12

Who can appoint an agent?

―Any person who is of the age of majority according to the law to which he is subject and who is of sound
mind, may appoint an agent‖

Who may be an agent?

Any person may be an agent, even a minor. A minor acting as agent can bind the principal to third parties.
But a minor is not himself liable to his principal.

Q.16 Describe briefly the various modes by which an agency may be terminated. N/D-13, M/J-12,
N/D-10

Termination by act of parties

a. The principal may, by notice, revoke the authority of the agent. The agent may similarly, by notice,
renounce the business of the agency. Revocation and renunciation can be express or implied from
the conduct of the parties.

Termination by operation of law

An agency may be terminated by operation of law in any of the following cases:

1. After the termination of the expiry of the time period for which agency was created.
2. After the performance of the object that is object is accomplished or when the accomplishment
becomes impossible.
3. When subject matter of the agency comes to an end.
4. After the death or insanity of the principal or agent.
5. If the principal is adjudicated as insolvent.
6. The principal and agent belong to two different countries and war breaks out of them.
7. When the sub-agent authority comes to an end.

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Q.17 What is an offer according to the contract act 1872? How an offer is revoked? N/D-11

Offer

When one person signifies to another his willingness to do or abstain from doing anything with a view to
obtaining the assent of that other to such act or abstinence, he is said to make an offer or proposal. A
proposal is called an offer. The promisor or the person making the offer is called offeror and the person to
whom such offer is made is called offeree.

Revocation of an offer:

1. By communication of notice of revocation by the proposer or by his authority to the other party.
2. By the lapses of time prescribed in proposal for its acceptance, or if no time is so prescribed, by the
lapses of reasonable time, without communication of the acceptance.
3. By the failure of the acceptor to fulfill the conditions precedent to acceptance.
4. By the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge
of the acceptor before acceptance.
5. By act of the proposer inconsistent with the proposer.

Q.18 Distinguish between executed contract and executory contracts. N/D-11, N/D-08

Depending upon the time of performance contracts are divided into two types 1. Executed contract and
Executory contract.

Executed contract:

Contract which has already been performed in return for a promise. For payment for goods at the time of
those goods are delivered.

Executory contract:

Obligations are to be performed at a later time. A promise to pay for goods which are to be delivered and
paid for at a later date.

Q.19 What is bailment without reward? State the rights of a bailee? N/D-13, N/D-11, M/J-10

Bailment without reward:

Bailment is the delivery of goods by one party to the other for some purpose upon a contract that when the
purpose is accomplished be returned or disposed of according to the directions of the person delivering
them. When a bailee works not for any remuneration is called bailment without reward. Under this
bailment, the bailee is entitled to receive all expenses borne by him relating to the bailment, even though it
is bailment without reward. Such bailment can be terminated at will by the bailor and is terminated by the
death of the bailor or bailee.

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Rights of a bailee:

1. Bailee can by suit enforce the rights of a bailee.

2. The bailee has a right against the bailor for any loss sustained by him due to the fact that the bailor
was entitled to make bailment, receive or give direction regarding the goods.
3. Subject to the agreement, the bailor may deliver back to any one of the several joint owners without
the consent of all.
4. The bailee acting in good faith is not responsible to the true owner if he returns the goods or
delivers them according to the directions of a bailor without title.
5. Bailee has the rights to retain the goods until or unless he is paid.
6. The bailee has to file a suit against third party who does wrong to the goods. Recovery will be
divided between bailee and bailor according to their share.
7. A bailee works without reward cannot exercise rights of resale.

Q.20 What are the rights of a commercial agent against his principal? N/D-11

The followings are the rights of commercial agent

1. An agent can enforce all the duties of the principal.

2. Agent is entitled to be repaid his expenses and to be indemnified by his principal against losses or
liabilities provided his acts are done properly within the limits of his authority.
3. Agent is entitled to receive agreed remuneration for his services by the principal.
4. The agent has the rights to exercise a lien over property owned by the principal.

Q.21 What are the consequences of breach of condition and warranty? N/D-11, N/D-10, N/D-05, M/J-
02, N/D-08, N/D-09

Condition is a term essential to the main purpose of the contract. Warranty is only collateral term, it is
subsidiary to the main purpose of the contract.

The buyer upon breach of condition-

1. Treat the contract as repudiated, reject the goods and claim for damages on the ground that whole
contact is broken.
2. Waive the condition and require the other party to perform the contract.
3. Elect to treat the breach of condition as breach of warranty and claim for damages.
4. In the following cases the buyer is required by law to treat a breach of condition as a breach of
warranty unless there is a term of the contract expressed or implied to the contrary:
a. Where a contract is not severable and the buyer has accepted the goods or part therof.
b. Where the contract is for sale of specific goods and property has passed.

The effect of breach of warranty:

a. The contract cannot be repudiated by either party.

b. The remedy is to claim compensation from the other party for loss directly resulting form
breach of warranty.
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Q.22 What is consideration of a contract? M/J-11

Consideration is an essential element of a contract. It may be defined as some rights, interest, profit or
benefit undertaken by the other. Section 2(d) of the contract act, defines consideration as ‗when ,at the
desire of the promise or, the promise or the any other person had done or abstained from doing or does or
abstains from doing something, such act or abstinence or promise is called a consideration for the promise.

Q.23 “A contract caused by mistake is void” Discuss. N/D-10

Contract by mistake: Mistake may be defined as erroneous belief concerning something. Consent cannot be
said to be free when an agreement is entered into under a mistake. An agreement is to be valid the
contracting parties must agree upon the same thing in the same sense.

Mistake may be (i) mistake by law (ii) mistake of facts. The contract act lays down the following rules
regarding mistakes.

Mistake on a point of law does not affect the contract. Mistake on a point of law in force in a country is to
be treated as mistake of fact.

Mistake of fact: An agreement induced by mistake is void provided the following conditions are fulfilled

 Both the parties to the agreement are mistaken.

 The mistake is as to fact essentials to the agreement.

Unilateral mistake: A mistake by one of the parties does not generally affect the validity of a contract. But if
the mistake is of such a nature as to prevent the existence of free consent, the agreement is void, even
though the mistake is unilateral.

Q.24 What is pledge? State the rights and duties of pawnee? N/D-10

According to the section 172 of the contract act, the bailment of goods as security for payment of a debt or
performance of a promise is called ‗pledge‘. The bailor in this case called paw nor and the bailee is the
Pawnee.

The rights and duties of Pawnee are as follows:

Rights of pawnee:

 The pawnee has the right to retain the goods pledged his dues are paid.
 When the pawnee lends money to the same person/debtor after the date of the pledge without any
further security, it shall be presumed that the rights or retainer extends to the subsequent advances.
 The pawnee has the right to recover all the extraordinary expenses borne by the pawnee for the
preservation of the goods pledged.
 Right to sue the pawnor or sell the goods the goods on default of the pawnor after giving him
reasonable notice of his intention to sell.

14
Duties of Pawnee:

 To take reasonable care of the goods pledged.

 Not to make any unauthorized use of the goods pledged.
 Not to mix the goods with his own.
 Not to do any act that violates the provision the contract act or terms of the contract of pledge.
 To return the goods pledged on receipts of his dues.

Q.25 Explain the rule of Caveat Emptor. M/J-14, N/D-10, M/J-04, M/J-03

The doctrine of caveat emptor: Caveat Emptor is a latin expression which means ‗buyers beware‘. This
expression means that a buyer must buy goods after satisfying himself of their quality and fitness. If he
makes a bad choice he cannot blame the seller of recovery of damages from him. The rule probably
originated at a time when goods were mostly sold in market overt and buyer therefore had reasonable
opportunity to satisfy himself as to the quality of the goods or their fitness.

Exceptions:

 The buyer relies upon the skill and judgment of the seller.
 By custom an implied condition of fitness is annexed to a contract of sale.
 Where there is sale of goods by description.
 Where the seller is guilty of fraud.

Q.26 “No one can give better title to the goods than he has himself”-Discuss the exceptions. N/D-10,
M/J-06, N/D-03, N/D-02, M/J-09

The general rule is that only the owner can transfer the title. If a person transfers an article not belonging to
him, the transferee gets no title. This rule applies to both movable and unmovable goods and property. But
as regards movable goods it is subject to certain exceptions:

1. Estopples: The true owner may be prevented by his conduct from denying the seller‘s authority to
sell.
2. Sale by Mercantile agent: Mercantile agent can give better title to the purchaser even in cases
where the agent act beyond the authority provided certain conditions are fulfilled.
3. Sale by several joint owners: If one of the several joint owners has the sole possession of the
goods by permission of the co-owners.
4. Sale of goods under a voidable agreement.
5. Sale by seller in possession of goods after sale.
6. Buyer in possession of the goods over which seller has some rights.
7. An unpaid seller.
8. Sale under contract act.

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Q.27 “An invitation to offer is not an offer”- Elucidate the statement with examples. N/D-10, M/J-09

An offer must be distinguished from an invitation to receive offer. In the case of an invitation to receive
offer the person sending out the invitation does not make an offer but only invites the other party to make
an offer. His subject is merely to circulate information that he is willing to deal with anybody, who on such
information is willing to open negotiations with him. Such invitations for offers are therefore not offers in
the eyes of law or don not become agreements by their acceptance. For example, an advertisement for sale
of goods by auction, quotations, catalogues of prices or display of goods with prices, a notice that goods
will be sold by tender.

Q28. Define proposal and mention the elements of proposal. M/J-14, N/D-08

Proposal: When one person signifies to another his willingness to do or to abstain from doing anything,
with a view
to obtaining the assent of that other to such act or abstinence, he is said to make a proposal

Revocation of proposal :
A proposal comes to an end, and no longer opens to acceptance under the following circumstances:
i). By notice
ii). By lapse of time
iii). After expiry of reasonable time
iv). By failure of reasonable time
v). By failure of a condition precedent
vi). By death of insanity
vii). Counter proposal.
viii). By refusal

Q29. What is contract?

An agreement enforceable by law is a contract. Therefore in a contract there must be –

i). an agreement
ii). the agreement must be enforceable by law.

There some agreements like an agreement to play cards or to go to a cinema, which cannot be enforced
through the courts of law, are not contract. So an agreement, which can be enforced through the courts of
law, is called a contract.

Thus for the formation of a contract, it is necessary that one party make proposal and the other accepts it.

16
The successive stages from a proposal to a contract is as follows:

Proposal

Promise (When accepted)

Agreement (Forming consideration for eatch other)

Contract (When enforceable in law)

Q30. What are the elements of a contract?

An agreement becomes enforceable by law when it fulfills certain conditions. These conditions, which may
be called the essential elements of a contract, are explained hereunder:-
i). Offer and acceptance
ii). Intention to create legal relationship
iii). Lawful consideration
iv). Capacity of the parties
v). Free consent
vi). Legality of the object
vii). Certainty
viii). Possibility of performance
ix). Void agreement
x). Writing, registration and legal formalities.

Q31. Who is mercantile agent ? explain various kinds of mercantile agent ? M/J-14

Agent: An agent is a person employed to do any act for another or to represent another in dealings with
third person.

Different types of mercantile agent:

1. Broker.
2. Factor.
3. A Commission Agent.
4. Auctioneer.
5. A Del credere Agent.
6. General Agent and Particular Agent.

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Q32. What is the difference between contingent contract and Quasi Contract? N/D-13

Quasi Contract:

When one person obtains a benefit at the expense of another and the circumstances are such that he ought,
equitably, to pay for it, the law will compel payment even though there is no contract between the parties by
which payment is promised. The parties will be put in the same position as they would have occupied if
there was a contract between them. Such cases are called Quasi Contract.
The cases which are to be deemed to be Quasi Contract are describing below:
1. Necessaries for incapable person.
2. Reimbursement of interested person.
3. Benefit of non-gratuitous act.
4. Finder of goods.
5. Delivery by mistake or under coercion

Contingent Contract:

A contingent contract is a contract to do not to do something if some event, collateral to such contract, does
or does not happen.

Example: All contract of insurance and indemnity area contingent contract.

Q33. What are the essential elements of bailment? M/J-11

Bailment:
A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they
shall, when the purpose is accomplished be returned or otherwise disposed of according to the direction of
the person delivering them.
The characteristics of Bailment are given below:
1. Delivery.
2. Purpose
3. Return.
4. Contract.
5. Movable goods.
6. Possession.

The Types of Bailment:

1. Gratuitous Bailment: A gratuitous bailment is one in which neither the bailor, nor the bailee is entitled to
an remuneration
2. Bailment for reward: A bailment for reward is one where either the bailer or the bailee is entitled to
remuneration

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Q34. All contracts are agreements but all agreements are not contract? Explain. Or Distinguish
between contract and agreement. N/D-10, N/D-13

Point of Difference Contract Agreement

Definition An agreement enforceable by law Promise or every set of promises
is forming the consideration for each
contract other, is an agreement
Similarity All contracts are agreements All agreements are not contact

Q35. What are the rights of a bailor and bailee under the contract act ? M/J-05

The rights of Bailor:

The rights of Bailor are enumerated hereunder:
1. Enforcement of rights.
2. Act inconsistent with the terms.
3. Restoration of goods lent gratuitously.

The rights of Bailee:

The rights of Bailee are enumerated hereunder:
1. Enforcement of rights.
2. Bailment by several joint owners.
3. Bailee not responsible on re-delivery to bailor without title.
4. Bailee‘s particular lien.
5. Bailee‘s general lien.

Q36. What is counter offer? Give example. M/J-05, N/D-02, N/D-01

The acceptance shall be unconditional and absolute . If the acceptance is given with any condition changing
anyportion of the original offer then it is known as counter offer.

Example: A offer to B to buy his car for tk.100,000 but B agree to pay tk.90,000 the offer made by B is a
counter offer.
Q37. Distinguish between a contingent contract and wagering agreement ? N/D-03, M/J-03

The distinctions between contingent contract and wagering agreement are given below:

Point of difference Contingent Contract Wagering Contract

1. Validity A Contingent contract is valid A wagering agreement is void
2. Dependency It depends on the happening or It is void
non-happening of an event, but
the
contract is valid
3. Reciprocal promises It may not contain reciprocal It consists of certain reciprocal
promises promises.

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Q38. What do you understand by supervening impossibility? N/D-03,M/J-03, N/D-02, N/D-01, M/J-08,
N/D-09

When enter into contract it is good but subsequently impossible to perform. That condition is called
supervening impossibility of contract.

Frustration of contract by supervening impossibility:

When the common object of a contract can no longer be carried out ,the court may declare the contract to be
at an end. This is known as the doctrine of Frustration.
Supervening impossibility may occur in many ways, some of which are explained below:
1. Destruction of an object.
2. Change of law.
3. Failure of precondition.
4. Death or incapacity of personal services.
5. Outbreak of war.

Some points are given below of cases which do not come within the principal of supervening
impossibility:
1. Difficulty of performances.
2. Commercial impossibility.
3. Strikes, lock-outs, civil disturbances and riots.
4. Failure of one of the objects.

The effects of supervening impossibility:

When the performance of contract becomes subsequently impossible or illegal, the contract becomes void.
There are types of supervening impossibility:
1. Post-contractual impossibility
2. Pre-contractual impossibility

Q39. What do you mean by quantum meruit ? What are the rules regarding the doctrine of quantum
meruit ?

Quantum Meruit:
Quantum Meruit means as much is merited. A person can, under certain circumstances, claim payment for
work done or goods supplied without any contract and in cases where the original contract has terminated
by breach of contract by one party or has become void for some reason. This is known as Doctrine of
Quantum Meruit.
The rules regarding the doctrine of quantum merit are stated below:
1. The injured party entitlement to claim reasonable compensation
2. A person who has done something under the contract which is discovered to be unenforceable by law for
some technical reasons, is entitled to get compensation.
3. Presumption of law regarding an implied agreement to pay for services rendered.

20
4. Where a contract is not divisible into parts and lump sum of money is promised to be paid for the entire
work, part performance does not entitle a party to claim payment quantum meruit.
5. Nothing can be recovered for quantum meruit when there is no evidence of an excess or implied promise
to pay for work already done.
6. A person guilty of breach (violate) of contract cannot claim payment on quantum meruit.

Q40. What are the remedies for breach of contract?

1. Rescission of the contract.

2. Suit for damages.
3. Suit upon Quantum Meruit
4. Specific performance of the contract.
5. Injunction.

Q41. What do you mean fiduciary relationship?

Fiduciary relationship means a relationship of mutual trust and confidence. Such a relationship is supposed
to exist in the following cases:
 father and son
 guardian and ward
 solicitor and client
 doctor and patient
 preceptor and disciple
 trustee and beneficiary

Q42. What are the difference between fraud and representation?

Point of Difference Fraud Misrepresentation

Intention Here implies an intension to deceive No intension to deceive
Sue for damages The aggrieved party can sue for The aggrieved party can't
damages sue for any damage.

Q43. What is meant by the Uberrimae fidei contracts? What type of contract come within the class of
Uberrimae fidei contracts?

Uberrimae fidei contracts are contracts where law imposes upon the parties the duty of making a full
disclosure of all material facts.

The following types of contract come within the class of Uberrimae fidei:
1). Contracts of Insurance
2). Fiduciary relationship
3). Contracts for the sale of immovable property
4). Allotment of shares of companies
5). Family settlement

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Q44. How may the termination of contract by mutual agreement occur?

1. Novation : Novation occurs when a new contract is substituted for an existing contract, either between
the same parties or between the different parties
2. Alteration: Alteration of a contract means change in one or more of the terms of a contract.
3. Remission: Remission may be defined as the acceptance of less than what was contracted for
4. Rescission: Any person interested in a contract in writing may sue have it rescinded.
5. Waiver: It means the abandonment of a right. A party to a contract may waive his rights under the
contract. Thereupon the other party is released from his obligation.
6. Merger: When a superior right and inferior right coincide and meet in one and the same person, the
inferior right vanishes into the superior right. This is known as merger.

Study Link:

 Commercial Law: By Sen & Mitra.

 Business & Commercial Law: ICAB Manual.

22
 The Sale of Goods Act: 1930

Q1. What are the implied conditions by operation of law in contracts for the sale of goods? M/J-14,
M/J-13, N/D-12, M/J-08

1. Conditions as to title: there is an implied condition that in case of sale, seller has a right to sell the
goods and in case of an agreement to sell seller will have the right to sell the goods when the
property is to pass.
2. Sale by description: there is an implied condition that goods shall correspond with the goods
description.
3. Sale by sample: When goods are to be supplied according to a sample agreed upon, the following
conditions are implied:
 The goods shall correspond with the sample.
 The buyer shall have reasonable opportunity to compare the goods with the sample.
 The goods shall be free from defect.
4. Sale by sample and description: when goods are sold by sample as well as by description, the
goods shall correspond with the sample and with the description.
5. Conditions as to fitness and quality: If the sale condition contains the specific requirements of the
buyer, the goods shall correspond with those requirements.

Q2 . Describe the general rules to delivery of goods in accordance with the Sale of Goods Act 1930.
M/J-13

The following are the rules regarding the delivery of goods

I. Place of delivery: the goods are to be delivered at the place where the buyer and seller agreed upon
at the time making agreements.
II. Time: if under the contract, the seller is bound to send the goods to the buyer and no time is fixed
the goods must be sent to the place of buyer within a reasonable time.
III. Third‟s party possession: If the goods at the time of making contract were in the possession of the
third party , no goods will be delivered to the buyer unless or until the third party acknowledges that
goods are being held on behalf of the buyer.
IV. Reasonable hour for delivery.
V. Expense of delivery: in the absence of any contractual agreements, the expenses of putting the
goods in a deliverable condition are to be borne by the seller.

Q3. Who is unpaid seller? Point out the rights of unpaid seller. N/D-13, N/D-12, M/J-11, M/J-10,
N/D-05, N/D-03, M/J-09

Unpaid seller

The seller of goods is deemed to be an unpaid seller (a) when the whole of the price has been paid or
tendered (b) When a bill of exchange or other negotiable instruments has not been received as conditional
payments or the conditions on which it was received has not been fulfilled due to dishonor of the
instruments.

23
Rights of an unpaid seller

a. Against the goods such as seller‘s lien, stoppage in transit and resale.
b. Against the buyer personally such as suits for price, compensation, and interest

Q4. How is a contract of sale made? Distinguish between sale and agreement to sell. M/J-14, N/D-12,
M/J-12, N/D-11, M/J-10, M/J-06, N/D-01, M/J-08

A contract of sale is made when the property in the goods is transferred from the seller to the buyer. The
transaction is a contract of sale even though the price is to be paid later or the delivery is to given in future
provided that the property of goods is transferred from the seller to the buyer.

Distinguish between sale and agreement to sell

1. In case of sale the property of the goods has been transferred from the seller to the buyer. Whereas,
in case of agreement to sell the property in the goods remains with the seller until the agreement to
sell becomes a sale through the expiry of the time or fulfillment of the conditions.
2. In case of sale, goods belong to the buyer and buyer has to bear the loss if the goods are
subsequently damaged.
3. In case of sale, the unpaid seller has certain rights or reliefs‘ such as stoppage in transit, resale. In
case of agreement, the seller‘s remedy is suit for damages.
4. Sale is an executed contract but an agreement to sell is an ‗executory‘ contract.

Q5. When the property in goods passes from the seller to the buyer? N/D-11

Section 15 and 25 of the sale of the goods act lay down the rules which determine when the ownership of
property passes from the seller to the buyer. These rules may be summarized in the following ways:

1. When there is a contract for the transfer or sale of ascertained goods, property does not pass unless
or until property can be ascertained.
2. Property in the goods passes when the party to the agreement has the intention to pass it.
3. When there is an unconditional contract for the sale of specific goods in deliverable state, property
passes when the contract is made.
4. When there is something to do on the part of the seller to bring the goods into deliverable state, the
property passes when the act or thing is done.
5. Where as per the contract, seller need to measure, weigh, and test or need to do other things in order
to determine the price of the goods, the property passes when such act or things are done.
6. Property passes when unconditional appropriation is made by one party with the consent of the
other.
7. Where there is contract to deliver the goods to the carrier, the property so passes when goods are
delivered to the carrier.
8. When goods are sold on approval or sale or return basis the property so passes when the buyer
signifies the approval or acceptance to the seller or retain the goods without giving the notice of
rejection or does not return the goods with the stipulated time.

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Q6. What is unpaid seller‟s lien and how is the unpaid seller‟s lien terminated? M/J-11

Unpaid seller‟s lien: Unpaid seller‘s lien consists of his right to retain possession of the goods even if he is
an agent or bailee of the buyer until payment or tender of price in the following cases:

1. The goods have been sold without credit.

2. The term of the credit has expired and
3. The buyer has become bankrupt.

An unpaid seller who has made part delivery may exercise his lien on the remainder unless the
circumstances of the party delivery constitute a waiver of the lien.

Termination of the unpaid seller‟s lien:

Unpaid seller‘s lien comes to an end-

 Upon delivery of the goods to a carrier or other parties for the purpose of transmission to the buyer
without the reserving the right of disposal.
 Where the buyer or his agent is in lawful possession of the goods.
 By giving up his right of lien.

Q7. Define contract of sale of goods. Mention the essentials of a contract of sale. N/D-13, N/D-10

Section 4(1) of the sale of goods act, 1930 defines that a contract of sale of goods as- a contract where by
the seller transfers or agree to transfer the property in goods to the buyer for a price.

Following are the essentials of a contract of sale

1. There must have at least two parties to enter into a contract of sale.
2. The seller must transfer property that is ownership of the goods to the buyer.
3. Buyer must pay price for receiving the ownership of the goods.
4. The subject matter of the contract is good. According to the section 2(7) goods means any kind of
movable property other than actionable claims and money and includes stock and shares, growing
crops, and grass and things attached to or forming part of the land which are agreed to be served
before sale or contract of sale.
5. Contract of sale includes both sale and agreement to sale.

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Q8. What are the differences between Condition and Warranty?

Point of Difference Condition Warranty

Nature A condition is a stipulation essential to
the main purpose of the contract, the
breach of which gives rise to right to
treat the contract as repudiated
Terms Condition is a term which is
essential to the main purpose of
the contract.
Conversion A breach of condition may under
certain circumstances, be treated
as warranty.
A warranty is a stipulation
collateral to the main purpose of
the contract, the breach of which
gives rise to a claim for damages
but not to a right to reject the
goods and treat the contract as
repudiated
Warranty is only a collateral
term.
But a warranty cannot become a
condition.

Q9. What are the consequences for breach of Warranty?

1). Suit for damages:

A breach of warranty gives rise to claim for damages but not to a right to reject the goods and treat the
contract as repudiated.
2). Adjustment for damages:
A breach of warranty by the seller may rise to claim to the buyer for compensation or making adjustment
from the selling price of the goods

What are the Implied Warranties:

1). The buyer must get quiet possession.

2). The goods must be free from encumbrance.
3). Fitness of goods, required for a purpose, may be warranted by usage of trade.

Q10. What are the consequences for breach of Condition?

1). Repudiation or revocation of goods:

A buyer, upon the breach of condition if it done by the seller, may reject the goods. On the other hand a
seller, upon the breach of condition if the buyer does it, may repudiate the contract.
2). Repudiation of contract:
Where either parties to a contract of sale repudiates the contract before the date of delivery, the other party
may either treat the contract as subsisting and wait till the date of delivery, or he may treat the contract as
rescinded and sue for damages for the breach.
3). Claim for damages:
In the case of any breach of contract, the victim is moreover entitled to claim for damages after repudiation
of goods and contract.

26
 The Partnership Act: 1932

Q1. What is a partnership deed? Point out the main contents of a partnership deeds. M/J-13, M/J-11,
N/D-02

Partnership deed: The document in which the respective rights and obligations of the members of a
partnership are set forth is called partnership deed. It should be drafted with care and be signed by all the
partners. It must be stamped in accordance with the stamp act. Each partner should have a copy of the deed.
The firm should be registered and have a copy of the deed.

The deed should have the following points:

a. Name and address of the firm and its partners.

b. Nature of the business and the town and place where it will be carried on.
c. Date of commencement of the business.
d. The duration of partnership.
e. The amount of the capital contributed by the each partner and the methods of raising finance in
future if so required.
f. The ratio of sharing profit and loss.
g. Interest on partner‘s capital, loan and interest on drawings if any.
h. Salaries and commission payable to partners if any.
i. Methods of preparing accounts and arrangement for audit and safe custody of cash.

Q2. Describe the rules regarding the rights of an outgoing partner to carry on competing business.
M/J-13

An outgoing partner can carry on competing business, but subject to the following conditions

a. He cannot use the firm name.

b. He cannot represent himself as carrying on the business of the firm.
c. Cannot solicit customers of the firm.

An outgoing partner or the representatives of a deceased partner are given a right to share in the profits of
the company in case the business of the firm is carried on without a final settlement of accounts after death
or retirement.

Q3. What are the rules for a minor to become a partner in a firm? Discuss the rights and
responsibilities of a minor becoming a partner of a firm under the partnership act 1932. M/J-13, M/J-
12, N/D-10, N/D-06, N/D-09

Rules

A minor cannot become a partner since he is not bound by contract. But with the consent of all the partners,
he may be admitted to the benefits of partnership.

27
Rights and Responsibilities

a. He has right to the share by the partners in the profits.

b. He has the right to access and inspect all books and accounts.
c. His share will be liable for the acts of the firm, but he will not be personally liable.
d. He has no right to sue against the other partners of the firm for accounts or share of his profits while
he continues to be the members of the firm.
e. He can sue when he is serving his connection with the firm.

Q4. What is partnership? Discuss in short the different classes of partnership. N/D-12, M/J-11

Partnership: Partnership is the relation between persons who have agreed to share the profits of a business
carried on by all or one of them.

Partnerships can be classified as under:

Partnership at will:

A partnership is called a partnership at will when

a. partnership is not for fixed period of time and

b. No provision is made as to when and how the partnership will come to an end.

Particular partnership-Joint Venture:

The partnership is one which is formed to serve particular purpose or to perform a particular undertaking.

Limited partnership:

There is no such partnership in Bangladesh. In England such partnership may be formed in which the
liability of the partners is limited. There must be one partner with unlimited liability.

Q5. Identify five differences between incorporated companies and ordinary partnership. M/J-12,
N/D-05

Factors Company Ordinary partnership

Legal Entity Separate legal entity distinct from its Has no independent existence.
members.
Liability Company liable on its contract. Partners are jointly and severally liable
on partnership contract.
Limit on liability Member‘s liability can be limited by shares Partner‘s liability is unlimited.
or guarantee.
Ownership Company owns asset and ownership not Partners own asset jointly.
affected by change of members.
Transferability Member‘s shares are freely transferable A partner may assign his interest but the
assignee does not become a partner as a

28
 result of transfer.
Limit on No maximum, Minimum one Maximum 20 although a greater number
membership is permitted in some professional
business.

Q6. How does dissolution of a firm take place without the order of the court? M/J-12

Dissolution of a firm takes place without the consent of the parties in the following cases:

1. The death or bankruptcy of a partner.

2. Expiry of a fixed term partnership.
3. Completion or termination of a single joint venture, if applicable.
4. Subsequent Illegality.
5. Notice given by a partner if it is a partnership of indefinite duration.

Q7. Write down the rights and duties of a partner in a partnership firm? N/D-11, M/J-10

In a partnership firm each and every partner has the following rights:

1. Right to conduct or participate in the day to day operation of the business.

2. Can access all books of accounts, and affairs of the firm.
3. Can share profit of the firm equally.
4. Can express opinion on any affairs of the company.
5. Can receive interest on capital.
6. To get indemnity of the losses in conducting affairs of the firm.

Duties of a partner:

1. To do justice, faithfulness, true accounts, disclosure of full information to each other.

2. Each partner should indemnify the firm for any loss causes to the firm for his fraud.
3. To attend diligently to his duties to the firm.
4. It is the duty of the partner not to use the name of the firm for his own benefits.
5. A partner should not earn secret profit.

Q8. What are the grounds on dissolution of a partnership firms? M/J-11

A firm may be dissolved in any of the following ways:

1. By Agreement: A firm may be dissolved any time with the consent of all the partners of the firm.

2. Compulsory dissolution:

 By the adjudication of all the partners or all of the partners but one as insolvent.
 By the happening of any event which makes the business of the firm unlawful.

3. On the happening of certain contingencies: Subject to contract between partners, a firm is dissolved:

29
  If constituted for a fixed term after the expiry of the fixed term.
 If it is constituted for carrying out adventures or undertakings, by the completion thereof.
 By death of a partner.
 By the adjudication of partners as insolvent.

4. By notice: Where the partnership is at will, by giving notice by any partner in writing to all others of his
intention to dissolve the company.

5. Dissolution by the court: at the suit of a partner, the court may dissolve a firm on the following grounds:

 If the partner is of unsound mind.

 If the partner has become permanently incapable of performing his duties as a partner.
 If a partner is guilty of conduct which is likely to affect prejudicially the carrying of the business.
 If partner willfully or consistently commits breach of partnership agreement.
 If the partner has transferred whole of his interest to outsiders.
 Where the business cannot be carried on except loss.
 If the court considers it just and equitable to dissolve the firm.

Q9. Who can be a partner?

Under the Partnership Act, a person may be partner if he has the capacity to enter into a contract. From the
purposes of the Partnership Act, the term ‗person‘ does not include a partnership or a limited company.
Thus a company P cannot form a partnership with a company Q. Similarly, a firm X cannot form a
partnership with firm Y. But all the partners of firm X and all the partners of firm Y can form a single
partnership, subject to the rules regarding the number of partners.

However, it is assumed that except the followings all are eligible to become a partner of a firm:
a. Minor: A minor cannot be a partner. But in an existing partnership, a minor can be admitted into a firm
if all the partners of the firm agree. Such minor gets all the benefits of the partnership.
b. Person of unsound mind: A person who is of unsound mind cannot become a partner.
c. Insolvent: A person, who is adjudged insolvent by the court, cannot become a partner.
d. Company: In a Company the capacity to enter into contract is determined by the Memorandum and
Articles of the Association of the Company. The liability of the members of a firm under the Partnership
Act, for the debts of the firm, is unlimited. But a company cannot incur unlimited liability. Therefore a
company cannot become a partner of a firm.
e. An alien enemy: An alien enemy cannot enter into a contract of partnership with a citizen of the country.
f. Ambassador: Any foreign ambassador in Bangladesh cannot enter into a partnership in the country.

30
Q10. Describe the consequences in case of non registration of a partnership firm? N/D-13, M/J-03,
M/J-09

An un-registered firm and the partners thereof suffer from certain disabilities:

1. A partner of an unregistered firm cannot file a suit (against the firm or any partner thereof) for the
purpose of enforcing a right arising from contract or a right conferred by the Partnership Act.
2. No suit can be filed on behalf of an unregistered firm against any third party for the purpose of enforcing
a right arising from a contract.
3. An un-registered firm cannot claim a set-off in a suit.
4. Cannot claim to the court for the receivable amount exceeding Tk.100 from the third party.

Exceptions:
1. A partner of an unregistered firm can file a suit for the dissolution of the firm and for accounts.
2. Suits can be filed for the realization of the properties of a dissolved firm even though it was registered.
3. The Official Assignee or Receiver can realize the properties of an insolvent partner of an unregistered
firm.
4. There is no bar to suits by unregistered firms and by the partners thereof in areas where the provision
relating to the registration of firms do not apply by notification of State Government under Section 56.
5. Partners have right to claim for his portion of share from access the assets of dissolved firm.
6. An unregistered firm can file a suit (or claim a set off) for a sum of not exceeding Tk. 100.

Q11. What are the difference between Partnership and Co-ownership?

Difference between partner and co-ownership are sited below:

Point of Difference Partnership Co-ownership

Nature Partnership is the relation between persons Co-ownership means joint
who have agreed to share the profits of a ownership
business carried on by all or any of them
acting for all.
Agent In a partnership each partner is the agent of But a co-owner is not the agent of
the others. the other owners
Agreement Partnership always arises out of agreement Co-ownership may arise by
agreement or by operation of law.
Business A partnership always implies a business. Co-ownership may exist without
any business.

Q12. What are the liabilities of partners to outsiders?

1. Liability of a partner for acts of the firm.

2. Liability of the firm for wrongful act of a partner.
3. Liability of firm for misapplication by partners

31
 The negotiable Instrument Act: 1881

Q1. How a negotiable instrument may be dishonored? What are the duties of a holder of dishonored
bill? M/J-13

According to section 91, a bill of exchange is said to be dishonored by non-acceptance when

a. The drawee makes default in acceptance upon being duly required to accept the bill.
b. Presentment is excused and the bill is not accepted.
c. Drawee is incompetent to contract.
d. The acceptance is qualified.

In case of dishonor of bill of exchange, the holder has the duty to inform or notice to all others parties who
will be jointly or individually liable or to someone of several parties who will be jointly liable. If the holder
fails or omit to give notice, the rights of the holder in due course subsequent to the omission to give notice
shall not be prejudiced by that omission.

Q2. Distinction between bill of exchange and Cheque. What do you understand by Holder in due
course? N/D-13, N/D-12, N/D-10, M/J-05, N/D-02, M/J-02

1. A bill of exchange can be drawn to any person including a bank. A cheque can be drawn only upon a
bank. Thus every cheque is a bill of exchange but every bill of exchange is not a cheque.

2. Except certain specified circumstances, a bill of exchange requires acceptance, A cheque does not require
any acceptance.

3. A cheque is always payable on demand. A bill of exchange is allowed a grace period of three days after
the maturity of the bill.

4. The drawer is discharged from the liability if the bill is not presented to the acceptor for payment at the
due time. But the drawer of a cheque is discharged from his liability only if he suffers damage to owing to
delay in presenting the cheque for payment.

5. if the bank fails to pay a cheque , it is not necessary to give notice of dishonorr to the drawee to make
him liable to compensate the payee. In case of bill of exchange, it is necessary to give notice of dishonor
except in certain circumstances.

6. A cheque may be crossed, but there is no provision for crossing a cheque.

7. Payment of cheque can be countermanded, but the payment of bill cannot be countermanded.

8. A cheque does not require any stamp, a bill of exchange always require stamp.

32
Holder in due course

The person legally empowered to receive the money due on the instruments is called the holder. The clerks
or servants having the instruments in their custody are not holders except as agents of the holders. The
holder of a negotiable instrument is called the holder in due course if he satisfies the following conditions.

a. He obtained the instruments for valuable consideration.

b. He became holder of the instrument before its maturity.
c. He had no reason to believe that any defect existed in the title of the person from whom he has
received his title.

Q3. Distinguish between bill of exchange and promissory note. M/J-12, M/J-05, N/D-03, M/J-09

The following are the main differences between the two:

1. The liability of the maker of a promissory is primary and absolute, but the liability of the drawer of
a bill of exchange is secondary and conditional.
2. The maker of a promissory note corresponds in general to the acceptor of a bill of exchange.
3. A note cannot be made conditionally but a bill can be accepted conditionally.
4. There is an immediate relationship between the maker of promissory note and payee, but in case of
bill of exchange immediate relationship exists between the maker and acceptor not with the payee.
5. The following provisions relating to the bill of exchange do not apply to notes.
 Presentment for acceptance.
 Acceptance.
 Acceptances supra protest.
 Bills in set.

Q4. What do you understand by noting? What is its content? M/J-12

Noting:

When a promissory note or bill of exchange has been dishonored by non-acceptance or non-payment, the
holder may cause such dishonor to be noted by a notary public upon the instrument, or upon a paper
attached thereto or partly upon each.

Contents of Noting:

1. It should include the date of dishonor.

2. The reasons of such dishonor if any assigned for such dishonor.
3. If the instrument has not been expressly dishonored, the reason why the holder treats it as
dishonored.
4. Notary charges.

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Q5. Define promissory note? What are the essentials elements? N/D-13, M/J-11, M/J-04, N/D-01,
M/J-09

Promissory Note:

According to section 4:

A promissory note is an instrument in writing containing an unconditional undertaking signed by the

maker, to pay a certain sum of money only to, or to order of a certain person, or to the bearer of the
instrument.

Essential elements:

 Writing
 Signed
 Promise to pay
 Unconditional payment
 Maker must be certain
 Stamped
 Payable to definite person
 Certain amount

Specimen Copy:
I promise to pay, after 1 year, Akbar of Dilkusha C/A, Dhaka-1000 or order Tk. 1,00,000 (Taka one lac only) with
interest @ 15% per annum, for value received in cash.
Sd/
Mr. Akbar
STAMP
8 July 201…
Kakrail, Dhaka-1000

Q6. What is crossing a cheque? What are the various types of crossing? M/J-14, M/J-11, M/J-06,
M/J-01, N/D-08, M/J-09

According to the section 6 of the negotiable instrument Act 1881, ‗ A cheque is a bill of exchange drawn
on a specified banker and not expressed to be payable otherwise than on demand. Thus cheque is a bill of
exchange with two distinctive features, namely:

1. It is always drawn on a banker.

2. It is always payable on demand.

Cheques may be of two types one is open or uncrossed cheque and another is crossed cheque.

34
Uncrossed or open cheque is payable at the counter of the drawee bank on the presentment of the cheque
and crossed cheque is payable only through a collecting banker not directly at the counter of the bank.

There are two types of crossing 1. General crossing and 2. Special crossing.

General crossing: When a cheque bears two parallel transverse lines without any words or with words and
company or not negotiable written between this two lines.

Special crossing: When the name of the drawer bank is referred between the two parallel lines on the face
of the cheque, it is called special crossing.

Q7. What is bill of exchange? What are the essentials of a bill of exchange? N/D-11

A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker,
directing a certain person to pay a certain sum of a money only to, or to the order of a certain person or to
the bearer of the instrument.

Essentials of bill of exchange:

 The bill of exchange must be in writing.

 The bill of exchange must contain an order to pay.
 Order contained in the bill should be unconditional.
 It must be signed by the maker.
 The drawer and drawee must be certain.
 The sum of money must be certain.
 The instrument must contain an order to pay money and money only.
 The payee must be certain.

Parties involved in bill of exchange:

Drawer Maker of the bill

Drawee Person directed to pay
Payee To whom or to whose order the money is directed to be paid
Holder Any person entitles in his own name to the possession thereof and to
receive or recover the amount.
Acceptor Who accept the bill i.e. the drawee
Drawee in case of need Drawer at the time making the bill inserts name (drawee in case of
need) besides the name of drawee in the event that the second person
will pay the amount of bill in case of dishonor by non-acceptance or
non-payment by the first drawee
Holder in due course Holder in due course is a particular kind of holder after satisfying
following conditions:
1. He has not obtained the instrument by Gift or for unlawful
consideration or by illegal means;

35
 2. He has not obtained the instrument after its maturity;
3. Title of the transferor is not defective.

Payment in due course Payment to the person who possesses the bill

Q8. What is presentment? When the presentment for the acceptance of a bill of exchange is excused?
N/D-11

Placing of the negotiable instruments before a drawee is called presentment. Presentment may be for any of
the following purposes:

 Presentment for acceptance.

 Presentment for payment.
 Presentment for sight.

In the following cases, presentment for a acceptance of a bill is excused:

1. When the drawee is fictitious person or one incapable of contracting.

2. When he cannot be found after reasonable search.
3. Where though presentment is irregular, acceptance has been refused on some other ground.
4. Where the drawee is dead or insolvent, the bill may not be presented for acceptance to his legal
representative or the official assignee as the case may be.

Q9. What is acceptance for honor? M/J-11, N/D-03, M/J-03, M/J-08

Generally drawer is responsible for acceptance of the bill of exchange.

When the drawee refuses to accept the bill of exchange, any person who is not liable on the bill can accept
to save the credit of some or all of the parties to the bill.

Essentials of a valid acceptance for honour:

1. Acceptance must be made after noting or protesting

2. It must be made with the consent of the holder
3. Can be made only by the person not liable on the bill
4. It must be for the honour of any party
5. Must be signed by the acceptor of honour
6. Must be made before the bill is overdue

Q10. Define negotiable instrument. What are the essential characteristics of a negotiable instrument?
N/D-06, N/D-02, M/J-01
 Written document by which a right is created in favor of some person
 Transferrable by delivery

36
 Negotiable Instruments

Definition:

A document transferrable by delivery. It is a document in which true owner could transfer the contract or
engagement contained therein by simple delivery of the instrument.

The Characteristics of Negotiable Instruments:

1). Must be written & signed by the parties.

2). Must be payable by legal tender money and the sum of money must be certain.
3). Must have negotiability, but the payee must be certain.
4). Must contain in an order to pay.
5). Should be unconditional.
6). It is not necessary to give notice of transfer of a negotiable instrument to the party liable to pay. The
transferee can sue in his own name.
7). It has the popularity in commercial transaction because of their easy negotiability and quick remedies.
8). A document, which fails to qualify as a negotiable instrument, may nevertheless be used as evidence of
the fact of indebtedness.

Kinds of Negotiable Instruments:

1. Promissory note
2. Bills of exchange
3. Cheques

Q11. Distinguish between dishonor by non-performance and dishonour by non-acceptance of a

negotiable instrument. M/J-09

NI may be dishonoured in two ways:

1. By non-acceptance [(i) not accepted by drawee; (ii) not presented; (iii) drawee incompetent; (iv)
acceptance is qualified; (v) drawee in case of need not accept]
2. By non-payment [drawee accepted but not paid in due time]

Consequence of dishonor:
1. File a suit
2. Give notice of dishonour
3. Instrument noted (authentic and official proof of presentment and dishonour of NI) and protested
(formal certificate of dishonour issued by the notary public) before a notary public

37
When notice of dishonour is not necessary?
1. When notice expressly waived by all parties
2. Ignorance of parties residence
3. Omission due to unavoidable circumstances
4. When one of drawer is also acceptor
5. When all parties entitled to notice know the fact

Consequences of dishonour of cheque:

A drawer of a dishonoured cheque shall be deemed to have committed an offence and shall, without
prejudice to any other provision of the NI Act, be punishable with imprisonment for a term which may
extend to 1 year or with a fine which may extend to thrice of the amount of cheque or both.

Q12. Classification of cheques and its implication?

There are Generally two types of cheques, Open cheques and Crossed cheques:

Types of cheque Indication Effect

Open cheques - payable in cash across the counter of the Bank
General crossed Two short parallel lines paid only to another banker through which it is
cheques marked across its face presented
Special crossed cheques ―Name of bank‖ is paid only to the banker written between the
written between the parallel line
parallel lines
Account payee only ―Account payee only‖ Collecting bank shall receive proceeds of the
written between the cheque only for the payee and shall credit only
parallel lines to his account. Theoretically it is transferable
but practically not.
Not negotiable ―Not negotiable‖ Although transferrable, the transferee cannot
written between the get a better title than the transferor and cannot
parallel lines give a better title to his transferee, although the
instrument remains transferrable.

38
 The Arbitration Act: 2001

Q1. Who can refer dispute to arbitration? What matters can and what matters cannot be referred to
arbitration? M/J-13, N/D-10, M/J-10, M/J-06, M/J-04, M/J-08, M/J-09

The person who can enter into contract can refer to arbitration. The persons who can refer to arbitration are
enumerated below:

1. Guardian of a minor or lunatic can refer disputes to arbitration.

2. A partner can refer disputes relating to the firm to arbitration provided such power is given to
him by the partnership agreement.
3. An agent cannot refer disputes to arbitration unless he is specially authorized.
4. The manager of a joint Hindu family can submit arbitration for the petition of the joint family
property.
5. A trustee may refer disputes to arbitration.
6. Solicitors or advocates have no implied authority to submit arbitration on behalf of the clients.
7. An insolvent cannot submit to arbitration but the official receiver and assignee can.

The following matters cannot be referred to arbitration:

a. Matrimonial matter like divorce or restitution of conjugal rights.

b. Testamentary matters like validity of a will.
c. Insolvency matters such as adjudication of a person as insolvent.
d. Matters relating to the guardianship of a minor or lunatic or declaring a person insane.
e. Criminal matters whether a person is guilty of an offense.

Q2. What are the modes of Arbitration? What do you mean by remitting the award? N/D-12

1. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a
separate agreement.

2. An arbitration agreement shall be in writing and an arbitration agreement shall be deemed to be in writing
if it is contained in

a. A document signed by the parties.

b. An exchange of letters, telex, telegrams, fax email or other means of telecommunication which
provide a record of an agreement.
c. An exchange of statement of claim and defense in which the existence of the agreement is alleged
by one party and not denied by the other.
39
Remitting the Award:

Award means the decision of the arbitrator or the umpire. Remitting the award means re-consideration of
the award by the court already given.

Q3. What is an arbitration agreement? What are the essential elements of an arbitration agreement?
M/J-12

Arbitration Agreement means ―a written agreement to submit present or future differences to arbitration,
whether an arbitrator is named therein or not‖.

Essentials:

1. Agreement must be writing and should fulfill all the essentials elements of a valid contract.
2. There must a proof that parties have agreed to settle the disputes by arbitration. It is not necessary
to have a separate contract but a separate clause in the contract may be enough.
3. It is not necessary that name of the arbitrators should be mentioned in the agreement.
4. The agreement may be to refer present differences or possible future differences to arbitration.
5. The construction of an arbitration agreement is not to be thwarted by narrow pedantic
interpretation.

Q4. Point out the duties of arbitrator? M/J-14, N/D-11

Duties of an arbitrator:

 The arbitrator must with all reasonable dispatch enter into reference and make an award.
 The arbitrators hold a quasi- judicial position. They must decide the dispute impartially. Arbitrators.
An arbitrator is not the agent of the party appointing them. After the appointment is made he must
not secretly communicate with him and must not accept any gift or payment from him. He must act
judicially.
 The arbitrators or umpire is not required to follow the procedures of civil courts but they must
observe the rules of natural justice.
 The Arbitrator must not misconduct himself in any way.
 The arbitrators must act within the scope of the arbitration agreement. They should sign and file the
award within due time.

Q5. What do you mean by an award? What are the grounds on which the court can modify or correct
an award? N/D-13, M/J-11

Award:

The award means the decision of arbitrator or the umpire.

40
Correction and interpretation of awards etc.-
(1) Within 14 days from the receipts of the arbitral award, unless another period of time has been
agreed upon by the parties-

(a) a party with notice to the other party—

 may request the arbitral tribunal to correct any computation errors, any clerical or typographical
errors or any other errors of a similar nature occurring in the award;
 may request the arbitral tribunal to modify divisible part of the award which has not been sent to the
tribunal or sent it does not affect the arbitral award on the matters sent to the tribunal.
(b) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it
shall make the correction, or give the interpretation as the case may be, within 14 days from
the receipt of the request or where the parties agree upon the longer period of time on the
request of the arbitral tribunal, within that agreed longer period of time.

Q6. Discuss the ground on which the court can: set aside an award and remit an award for
reconsideration under the arbitration act? M/J-01

Set aside award: The decision of arbitration may be set aside as under:
 The arbitrator umpire adopts unfair means.
 The order is made after the setting aside of the order.
 The decision is made unjustified.
Remittance of the award:
 The decision is uncertain.
 Any decision outside of the arbitration brought in the arbitration for decision.
 The decision is impossible for execution.

Q7. Composition of Arbitral Tribunal

Number of arbitrators.
(1) Subject to the provisions of sub-section (3), the parties are free to determine the number of arbitrators.
(2) Failing the determination of a number referred to in sub-section (1) the tribunal shall consist of three
arbitrators.
(3) Unless otherwise agreed by the parties, where they appoint an even number of arbitrators, the appointed
arbitrators shall jointly appoint an additional arbitrator who shall act as a chairman of the tribunal.

Termination of arbitrator‟s mandate.

(1)The mandate of an arbitrator shall terminate:

a) he withdraws himself from office:
b) he dies;

41
 c) all the parties agree on the termination of his mandate; or
d) he is unable to perform his functions of his office or for other reasons fails to act without
undue delay and withdraws from his office or the parties agree on the termination of his
mandate.

(2) If any arbitrator has incurred disqualifications referred to in clause (d) of subsection (1) fails to
withdraw himself from his office and all the parties fail to agree on his termination, then on the application
of any party within the prescribed period by rules —
a) the District Judge, in case of other arbitrations excepting international commercial
arbitration;
b) the Chief Justice or a Judge of the Supreme Court designated by the Chief Justice in case of
international commercial arbitration may terminate the said arbitrator
(3) Where the parties are agreed upon, the termination shall be enforceable by the person agreed by the
parties.

Powers of the arbitration tribunal to make interim orders:

(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party
to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the
subject matter of the dispute, and no appeal shall lie against this order.
(2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure
ordered under sub-section (1).
(3) No order under this section shall be passed without giving a notice to the other parties:
Provided that the arbitral tribunal may, where it appears that the object of taking interim measure under this
section would be defeated by the delay, dispense with such notice.
(4) An order of an arbitral tribunal requiring the taking of interim measures may be enforced by the
court, on an application made therefor, by the party requesting the taking of such interim measures.
(5) The application filed before the Court for the enforcement of the interim measures under sub-section (4)
shall be deemed not to be incompatible with section 7 or with arbitration agreement or a waiver of the
agreement.

Study Link: Here we have accumulated the most important questions. So for better study read
Manual of ICAB for better study.

42
 The Bankruptcy Act: 1997

Q1. Point out the conditions for filling plaint by creditors and debtors. M/J-13, M/J-04

Conditions for filling plaints by creditors

1. A creditor cannot present a bankruptcy petition against a debtor unless

a. Amount owning by the debtor to the creditor or if two or more creditors join in the petition, the
aggregate amount of debts owing to such creditors amount to tk.500000.
b. Debt is liquidated to the sum payable either immediately or at some future date.
c. The act of bankruptcy on which the petition is grounded has occurred within one year before the
presentation of the petition.

2. A secured creditor shall either state his willingness to relinquish his security for the benefit of the
creditors or given an estimate of the value of the security.

Conditions for filling plaints by debtors

1. A debtors shall not present a bankruptcy petition unless he is unable to pay his debts and

a. His debts amount to tk.20000.

b. He is under arrest or imprisonment in execution of the decree of any court for the payment of
money.
c. An order of attachment in execution of such a decree has been made and in subsisting against his
property.

Q2. Explain the object of law of bankruptcy? M/J-12, N/D-06, M/J-09

Insolvency legislation has two fold objectives one is protection of debtors and another is safeguarding the
interest of creditors as far as possible. These objectives are said to be achieved in the following ways.

1. To ensure fair distribution of insolvent‘s property.

2. Cancellation of debt and removal of disqualification of debtors.
3. Benefits to creditors.
4. Fresh start in life by debtors.
5. To prevent abuse of the process.

43
Q3. Point out the disqualifications of an undercharged bankrupt? M/J-11, N/D-10

According to the section 94 of the Bankruptcy Act 1997 disqualification of a bankrupt are the followings

 He cannot elect as a member of the parliament or of a legal authority or other statutory body or
sitting or voting in the proceesings thereof.
 He cannot be appointed as judge, Magistrate, justice of the peace or any other office in the service
of the republic or acting as such.
 Cannot be appointed as Receiver or acting as such.
 Cannot obtain any loan from bank or financial institution.

The disqualifications will cease when the order of adjudication is annulled and the court makes an order of
discharged

Q4. Which acts are considered as act of bankruptcy? Against whom bankruptcy proceeding be
initiated? N/D-13, N/D-12, M/J-12, N/D-11, N/D-02, M/J-02

A debtor commits an act of bankruptcy in each of the following cases:

1. Transfers all or substantially all of his property for the benefit of creditors.
2. Transfer of all property to defeat or delay creditors.
3. Transfer of property which would be void as fraudulent preference.
4. If with the intent to defeat or delay creditors a. he departs or remains out of Bangladesh. b. departs
from the dwelling house. C. secludes himself so as to deprive his creditors.
5. If any of the property has been sold in execution of the decree for money.
6. If the petition to be adjudged as bankrupt.
7. If he notifies his creditors that he has suspended or is about to suspend payment of debts.
8. If he is imprisoned in execution of decree for money.

Against whom Bankruptcy petition can be initiated:

 Any Govt. organization or judicial body.

 Any charitable or religious body.
 Such statutory bodies whose principle objective is not financial gain.
 Any autonomous body.

Q5. What is order of adjudication? What are the effects of adjudication under the Bankruptcy act
1997? M/J-11, N/D-05

Order of adjudication: The order of the court by which a person is declared to be insolvent is called order of
adjudication.

44
Effects of order of adjudication:

 All the properties of the debtors except exempted properties such as properties held by trust for
others and tools of trade, wearing apparel and similar items should be vested with the official
assignee or receivers appointed by the court.
 All the properties will be possessed by the receivers and will be sold and distributed among the
creditors according to the insolvency act.
 After the order the adjudication, no creditors can commence any suit or legal proceedings against
the insolvent debtors.
 Upon adjudication as an insolvent, the debtor losses certain civil rights such as he cannot hold the
post a magistrate, or any other local authority.
 An order of adjudication shall be deemed to have taken effect from the date on which the plaint was
presented.
 A suit or proceedings already filed may be stayed but may be continued with the leave of the
insolvency court.
 After the order the adjudication is passes, insolvent debtor is prohibited from voluntary transfer
except transfer made to his wife on occasion of his marriage.
 Fraudulent transfer is void and inoperative.
 All the unsecured creditors have the rights to prove their claims before the receiver to get share of
remaining assets.

Q6. Which properties are „Exempted property‟ under the Bankruptcy Act 1997. M/J-14, N/D-10,
N/D-05, N/D-01

Exempted property: According to section 32 of the Bankruptcy act 1997, the following property of an
individual debtor shall be liable to be taken over or vested under section 23 or 31 respectively and such
property shall be known as exempted property namely

 The tools that is used by the debtor himself.

 Wearing apparel, housing furniture and other accessories of himself, his wife and children.
 Debtors un-mortgaged dwelling place or homestead , the areas of which is not exceeding 2500
square feet of land or plinth in one or more than one storied building in the urban area or 5000
square feet of land or plinth in one or more than one storied building in any other area.

Provided that the value of the articles specified in first and second clauses shall not exceed
Tk 300,000.

Q7. What do you understand by protected transaction? N/D-13, N/D-02

The protected transaction means those transactions by a bankrupt with third party which cannot be
impeached by an official assignee or receiver after the order of adjudication. Some transactions are:

1. Transaction before the commencement of the bankruptcy except those that are without
consideration or are by way of fraudulent preference.

45
 2. Transaction between the commencement of the bankruptcy and the date of the order of adjudication
if they are bonafide and if person who deals with the bankrupt has no notice at that time of any
bankruptcy petition by or against the debtor.

Q8. Who may or may not be adjudged/declared bankrupt? M/J-06, N/D-08

Any person may declare bankruptcy, who-

 Is domiciled or maintains his principal business office in Bangladesh.
 At any time within a year immediately before filing of the plaint, ordinarily resided in,
or had a dwelling house or a place of business in Bangladesh.
 Generally carries on business in Bangladesh.

The following persons may not declare bankruptcy

 Any Govt. organization or judicial body.
 Any charitable or religious body.
 Such statutory bodies whose principle objective is not financial gain.
 Any autonomous body.

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