CAF 04: Business Laws

Suggested Solution – Test # 2

A. 1
Shafiq cannot rescind the contract under following circumstnaces:
1. If aggrieved party had the means of discovering the truth with ordinary diligence;
2. If aggrieved party’s consent was not on the basis of misrepresentation;
3. If aggrieved party takes a benefit under the contract after becoming aware of the misrepresentation,
4. If an innocent third party acquires some interest in the property passing under the contract in good faith and for
consideration;
5. If the parties cannot be restored to their original position.

A. 2
(i) There is no free consent in case of fraud and contract becomes voidable at the option of aggrieved party. Therefore, B can
avoid the contract on account of fraud.

(ii) In case of voidable contract on account of fraud, right of recission ends if a party has means of discovering the truth with
ordinary diligence. Therefore, in this case B cannot rescind the contract now as he had discovered the truth before purchase.

A. 3
Relevant Legal Provision:
If consent of a party is not free, the contract becomes voidable at the option of aggrieved party.
Further, in case of spiritual adviser and his student/patient, law assumes the existence of undue influence.

Decision and Basis of Decision:

In this case, assumption of undue influence applies, particularly when price is also not adequate. Therefore, Jannat Bib can
avoid the contract on account of consent not being free (due to undue influence).

A. 4
(a)
Relevant Legal Provision:
If a person remains silent about something and does not disclose material facts which may affect decision of other party, it is
not a fraud.

Decision and Basis of Decision:

A has not committed any fraud in this case.

(b)
Relevant Legal Provision:
If silence is equivalent to speech, then keeping silent about material defects is considered fraud.

Decision and Basis of Decision:

In this situation, silence of A is equivalent to speech that car did not have major repair. Therefore, there is a fraud by A.

A. 5
(a)
Relevant Legal Provision:
An agreement not to file an appeal in upper court of law is not in restraint of legal proceedings.

Decision and Basis of Decision:

This agreement is valid.

(b)
Relevant Legal Provision:
An agreement must have certain terms and condition.

Decision and Basis of Decision:

As being lucky, does not have certain meanings. Therefore, this agreement is void.

Page 1 of 2
 CAF 04: Business Laws
Suggested Solution – Test # 2

(c)
Relevant Legal Provision:
An agreement in restraint of marriage is void.

Decision and Basis of Decision:

As agreement between co-widows is prohibiting re-marriage, therefore, it is void.

A. 6
Relevant legal Provision:
On sale of the goodwill and business, partners may agree that they will not carry similar business for specified period or for
specified local limits.
Specified period and local limits must be reasonable (having regard to the nature of the business).

Decision and Basis of Decision:

Qadeer is not justified in his contention because:
 Qadeer and Javed have sold goodwill.
 Restriction of three years is reasonable.
Therefore, Asad Sweets may stop Qadeer from carrying on similar business.

A. 7
Relevant legal Provision:
In case of misrepresentation/fraud, aggrieved party loses right of rescission if he takes a benefit under the contract after
becoming aware of the misrepresentation.

Decision and Basis of Decision:

Shahid cannot rescind the contract now because after becoming aware of misrepresentation, he did not rescind the contract.
Rather he obtained benefit by sharing the repair charges with Amir.

A. 8

MCQ # Correct Option

(i) C
(ii) D
(iii) B
(iv) D
(v) C

(THE END)

Page 2 of 2