Lecture-1 (A)

Introduction to Law
What is Law?
• There is no uniform and comprehensive definition of law
Nature of Law
• Law is social science
• It depends on nature of society, culture,
Nature of Law
ideology, social norms and religion etc. For instance, as Pakistan is an Islamic
Republic
Where constitution defines the Islamic
Injunctions as a source of law, therefore, Quran and Sunnah is the supreme law of
the country
The law in Pakistan will be different from the Western world e.g. United Kingdom
where
Constitutional law is the supreme law of the country
Some will look and define law on the basis of its
Purposes while others may define on the basis of
• Sources Societies grow and • If you confine the
develop with passage definition of law
• Logic of time
• It will not be in
• Advantages • New issues arose in position to solve social
• Religion the society issues that

• Ideology • Law is meant to solve

these issues
 Develop with passage of time
It is necessary to allow law and jurisprudence to
Develop with passage of time so that it may solve New problems and new issues.
Definitions of Law:-
Oxford Advanced Learner’s dictionary
– All the rules established by authority or custom for regulating the behavior of
members of a community or country.
By John William Salmond
– The body of principles recognized and applied by the State in the administration
of justice.
By John Austin
The Law is the command of the Sovereign backed by the sanctions.
Natural Law
 The body of universal Laws or un-changeable Laws
 The command of God imposed upon men
» Other names
• Divine Law, Universal or Common Law, Eternal Law or Moral Law.
Man made Laws (Positivism)
–Rules imposed upon men by sovereign authority
» Imperative Law
• John Austin’s theory of law
– The validity of rule derived from the fact of having been enacted by authority or
of deriving logically from existing decisions, rather than from any moral
considerations (e.g. that a rule is unjust).
Substantiate and Procedural Law
. The substantive Law defines the rights and Obligations whereas the procedural
Law provides the
Procedure to enforce these rights and obligations
– For Example
» The Companies Act 2017
» The Code of Civil Procedure 1908
Civil and Criminal Law
The Civil Law deals with disputes between parties regarding contracts, inheritance
and private injuries Criminal Law deals with crimes and offences In Civil matters
private persons are parties and the State Is the Judge only In Criminal matters State
is Party and Judge as well.
Statutory and Case Law
The Law in the form of statues is called the Statutory Law, for instance Acts,
Ordinances and Rules etc.
The Law consists in the form of decisions of the Superior Courts is called the Case
Law, for instance, Precedents etc.
Islamic and Secular Law
– The Law based on the injunctions of Qur’an and Sunnah is Islamic and rest of
the Law may be called the Secular Law that may be based on Constitution or
Ideology etc. It depends on Grund Norm.
International Law
– The international Law deals conventions and declaration of U.N.O, Bilateral and
Regional Agreements and Treaties
» Examples
• Indus Water Treaty, SAARC, European Union, UN Declarations, WTO, WHO,
Universal Declaration on Human Rights (UDHR) etc.
• Administrative Law
 It determines the organization, powers and duties of administrative
authorities It regulates the relations of the administrative authorities towards
the citizens
 Constitutional Law
The body of rules governing the relation between the sovereign and his
subjects and different parts of the sovereign body
Common Law (Precedents)
Common law is a body of unwritten laws based on legal precedents established by
the courts.
General and Special Laws
 – The law having general application
» For Example: The Contract Act 1872
– The Law which is meant for special purpose
» For example: The Companies Act 2017
Sources of Law
• The authorities by which the law is made
• The origin from which rules of human conduct come into existence and
derive legal force or binding characters
• The sovereign or the state from which the law
Derives its force or validity.
Legislation (Statutory Law)
– Declaration of legal rules by a competent
Authority
» Acts of Parliament
» Ordinances
» Rules, Regulations and by laws.
Precedent (Common Law)
– A judgment or decision of a court of law cited as an authority for deciding
a similar state of fact in the same manner or on the same principle or by
analogy.
Custom
– A rule which in a particular family or in a particular district or in a
particular section, classes or tribes, has from long usage obtained the force
of law
» the custom of giving three days grace period in bill of
Exchange
» Female lives with husband’s home after marriage
• Contract
– Every promise and every set of promises, forming the
Consideration for each other is called agreement
– An agreement enforceable at law
– Contract is law for contracting parties only.
Principles
– A standard that is to be observed, not because it will advance or secure an
economic, political, or social situation deemed desirable, but because it is a
requirement of justice or fairness or some other dimension of morality
» No man may profit by his own wrong
• Riggs v Palmer (1889)

• Religion
– Religion is also a source of law. For example, Jews, Christian, Hindu and
Muslim all regarded their religion as source of law.

Essential Elements of a valid Contract

PROPOSAL / OFFER
– 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.

OFFEROR & OFFEREE

– The person making offer is called offeror
– The person to whom offer is made is called offeree
PROMISE
– When the person to whom the proposal is made signifies his assent thereto,
the proposal is said to be accepted. A Proposal, when accepted, becomes a
promise.
PROMISOR AND PROMISEE
– The person making the proposal is called the promisor
– The person accepting the proposal is called the promise
COUNTER OFFER
– When one party offers to another party and such
Other party gave conditional acceptance
• Example: A offers B to sell his mobile for Rs. 30,000 and B accepts offer
by saying to purchase for Rs. 25,000.
CONSIDERATION
When, at the desire of the promisor, the promise or
any other person has
• Done or abstained from doing
• Does or abstains from doing
• Promises to do or to abstain from doing, something
– Such act or abstinence or promise is called Consideration for the promise.
RECIPROCAL PROMISES
– Promises which form the consideration or part of the consideration for
each other are called reciprocal promises.
AGREEMENT
– Every promise and every set of promises, forming the consideration for
each other, is an agreement.
CONTRACT
– An agreement enforceable by law • A sells mobile to B for Rs. 20,000.
Essential Elements of a Valid Contract
• Legality of Offer & Acceptance
– Both offer and acceptance must be lawful
• A offers B to kill C for Rs. 100,000
• A offers B to sell his mobile for Rs. 30,000
• A & B agrees that A will give Rs. 1000 to B, if B helps him in exams.
Intention to create legal obligations
– Agreements of a social, domestic, moral and religious
Nature are not presumed to create legal obligations
• An agreement to dine at friend’s home
• An agreement between husband & wife that husband will give gift on her
birthday
• A agrees with religious scholar to pray Isha prayer in mosque.
Exception
• An agreement where both parties insert a clause that this agreement is not
entered into as a formal or legal agreement and shall not be subject to legal
jurisdiction in the law courts.
• Lawful Consideration
– The consideration is lawful unless
• Forbidden by law
– A agrees with B to kill C for Rs. 1,000,000.
• Lawful Consideration
• Is of such a nature that, if permitted it would Defeat the provisions of any
law
– A’s estate is sold for arrears of revenue. B agrees with A to purchase land
and to convey the estate to A upon receiving the price which B will pay.
Under the law defaulter cannot
purchase estate sold for arrears.
Lawful Consideration
• Is fraudulent A & B agree to divide themselves gains acquired or to be
acquired by fraud
• Involves or implies injury to the person or property of
Another
– A agrees with B to set fire the car of C for Rs. 20,000
– A agrees with B to dig excavation in the path of C for Rs. 10,000 so that C
may fell in it.
Lawful Consideration
• Is immoral
– A, who is B’s Mukhtar, promises to exercise his influence, as such, with B
in favour of C, and C promises to pay Rs. 100,000 to A.
Opposed to public policy
– A promises to obtain for B an employment in public service by using his
influence and B promises to pay Rs. 100,000 to A.
Lawful Object
– The object for which the contract has been entered into
Must not be:
• Fraudulent
• Illegal
• Immoral
• Opposed to public policy
• Must not imply injury to the person or property of Another.
• Lawful Object
– Example: A, a landlord of a house, knowingly lets the house to B to carry
on gambling business. Now, a cannot recover rents from B through court of
law, as the purpose of contract was illegal.
Difference between consideration and Object
– Consideration: In above example, Rent is consideration for A, whereas
house is consideration for B Object: To carry on business of gambling is
object of the contract
– Object may be living, doing lawful business etc.
Capacity of Parties
– The Contracting parties must not be
• Minor
• Lunatic
• Idiot
• Drunk
Free Consent
– Every consent is free, unless induced by
• Coercion
– Use or show of force
• Undue influence
– Using dominant position to enter into contract such as teacher with student
or director with employee.
Free Consent
– Every consent is free, unless induced by
• Fraud
– Intentionally deceiving others
• Misrepresentation
– Unintentionally (innocently or negligently)
deceiving others.
• Mistake of Fact
– Unilateral Mistake
» A sends sample of rice to B and B
choose one of them considering them as old whereas the same were new.
Bilateral Mistake
» A having two houses one at Farid Town and other at Shadman Town, A
offers B to sell his house at Shadman and B accepts the offer considering
that he is purchasing house at Farid Town.
Mistake of Law
– Ignorance of law is no excuse.
• Writing and Registration
– As a rule, oral and verbal agreements are as valid as written
– But sometimes law requires agreements in writing and registered as well.
Examples
 An agreement to pay time barred debt must be in writing
 An agreement for making a gift for natural love and affection must in
writing and registered
 An arbitration agreement must be in writing
 An agreement to sale immoveable property must be in writing and
registered.
Certainty
– There must be certainty what one is offering and other is accepting
(Consensus ad idem)
• A agrees to sell 10 Oppo mobiles to B
• A agrees to sell 5 Honda CD-70 bike new model.
Possibility of Performance
– If the act is impossible, physically or logically, the
Agreement cannot be enforced
– A agrees with B, to sell all fishes in river Indus
– A agrees with B, to discover treasure with magic.
Not expressly declared void
– An agreement in restraint in marriage
– An agreement in restraint in trade and business
– An agreement by way of wager
Lecture-1 (C)
Nature and Kinds of Contracts
Kinds of Contracts
VOID AGREEMENT
– An agreement not enforceable by law is said to be void.
 VOID AGREEMENTS
– Void agreement does not give rise to any legal Consequences and is void
ab-initio
• Example: A agrees with B that to kill C for Rs. 100,000.
• EXAMPLES OF VOID AGREEMENTS
– An agreement by a minor or a person of unsound mind
– Agreements made under a bilateral mistake of fact material to the
agreement
Examples of Void Agreements (Cont..)
– Agreement of which the consideration or object is unlawful
– Agreement made without consideration
– Agreement of which consideration or object is
unlawful in part and the illegal part cannot be Separated from the legal part
• EXAMPLES OF separable and inseparable parts in agreements
– A, promises to work as manager for B, in a showroom of furniture shop
legally manufactured by B and smuggled mattresses, for a fixed salary
EXAMPLES OF separable and inseparable
– One part of object is legal and other illegal, and both are inseparable Void
and Illegal as both are inseparable.

A and B agree that A shall sell B a house for Rs. 10M but that, if B uses it as
a gambling house, he shall pay A Rs. 15M for it.

First set of reciprocal promises is legal and valid contract

– Whereas second set is for an unlawful object
– Both are separable and distinct.
EXAMPLES OF separable and inseparable parts (Cont..)
A and B agree that A shall pay B Rs. 100,000 for which B shall afterwards
deliver to A either rice or
smuggled opium
This is a valid contract to deliver rice and a void and unlawful agreement as
to opium. Examples of Void Agreements (Cont..)
– Expressly declared void agreements
• Agreements in restraint of marriage
• Agreements in restraint of trade
• Agreements in restraint of legal proceedings
• Agreements the meaning of which is uncertain

Agreements by way of wager

 • Agreements contingent on impossible events
• Agreements to do impossible acts
VALID CONTRACT
– An agreement enforceable by law is a contract
• Example: A agrees to sell mobile to B for Rs. 30,000
Kinds of Contracts (Cont..)
• VOIDABLE CONTRACT
– An agreement which is enforceable by law at the option of one or more of
the parties thereto, but not at the option of the other or others, is a voidable
contract.
When the consent of one of the parties is not free
– Until it is avoided or rescinded by the party entitled to do so by exercising
his option in that behalf, it is a valid contract.
• EXAMPLES OF VOIDABLE CONTRACT
– A sells mobile to B for Rs. 30,000 which A knows to be defective but tells
nothing to B
 A threatens to shoot B if he does not sell his house to A for Rs. 3M, B agrees.
The contract has been brought about by coercion and is voidable at the option
of B.
VOID CONTRACT
– A contract which ceases to be enforceable by law becomes void when it ceases to
be enforceable.
IRCUMSTANCES THAT TRANSFORM A VALID
CONTRACT INTO VOID CONTRACT
– Supervening impossibility
• A and contract to marry each other. Before the time fixed for the marriage, A goes
mad. The contract to marry becomes void.
Circumstances that transforms.. (Cont..)
– Subsequent illegality
• A agrees to sell rice to B at the end of harvesting season 2021 but before the start
of harvesting season Government bans private trading in rice.
Repudiation of a voidable contract
• A threatens to shoot B if he does not sell his house to A for Rs. 3M, B agrees.
The contract has been brought about by coercion and is voidable at the option of B.
In case B rescinds the contract, it becomes void.
Circumstances that transforms
– In the case of a contract contingent on the happening of an uncertain future
event, if that event becomes impossible
• A contracts to give Rs. 100,000 as loan to B, if B marries C. C dies without being
married to B. The contract becomes void.
• QUASI CONTRACT (CONSTRUCTIVE CONTRACT)
– Under certain special circumstances obligations resembling those created
by a contract are imposed by law although the parties have never entered
into a contract.
Quasi Contracts (Cont...)
– This rests upon equitable ‘doctrine of unjust enrichment ‘ which declares
that a person shall not be allowed to enrich himself unjustly at the expense
of another.
EXAMPLES OF QUASI CONTRACT
– Claim for necessaries supplied to a person
incapable of contracting or on his account Example: A supplies B, a lunatic,
with necessaries suitable to his condition in life. A is entitled to be
reimbursed from B’s property. Reimbursement of person paying money due
to another, in payment of which he is interested
– Example: A sub-tenant pays the arrears of rent due by the tenant to the
landlord in order to save the tenancy from forfeiture. The sub-tenant is
entitled to recover from the tenant the amount paid by him to the landlord,
although there is no contract between the two.
– Obligations of person enjoying benefit of
Non-gratuitous act
– Examples: A, a tradesman, leaves goods at B’s house by mistake. B treats
the goods as his own. He is bound to pay A for them
– A saves B’s property from fire. A is not entitled to compensation from B,
if the circumstances show that he intended to act gratuitously.
– Responsibility of finder of goods
– A person who finds goods belonging to another and takes them into his
custody is subject to the same responsibility as a bailee.
– Liability of person to whom money is paid, or
Thing delivered by mistake or under coercion
• Example: A fruit parcel is delivered under a mistake to R who consumes
the fruits thinking them as birthday present. R must return the parcel or pay
for the fruits.
• A railway company refuses to deliver up certain goods to the consignee
except upon the payment of an illegal charge for carriage. The consignee
pays the sum charged in order to obtain the goods. He is entitled to recover
so much of the charge as was illegally excessive.
CONTINGENT CONTRACTS
– A contingent contract is a contract to do or not to do something, if some
contract, collateral to such contract does or does not happen.
 – The performance of which is dependent upon, the happening or non-
happening of an uncertain event, collateral to such contract.
– A contracts to sell B, 100 bales of cotton for Rs. 50,000, if the ship by
which they are coming returns safely
– A promises to give a loan of Rs. 1M to B, if he is elected as the president
of Sahiwal Bar Council.
– A advances loan of Rs. 2M to B and C promises to A that if B does not
repay the loan, C will do so (Contract of Guarantee)
Lecture-1 (D)
Discharge of Contracts
Discharge of Contract
– When the rights and obligations arising out of a contract are extinguished, the
contract is said to be discharged or terminated.
How is a contract discharged?
– By Performance-Actual or Attempted
– By Mutual Consent or Agreement
– By Subsequent or Supervening Impossibility or
Illegality?
How is a contract discharged?
– By Lapse of Time
– By Operation of Law
– By Breach of Contract
Actual Performance
• When parties perform as agreed within time and manner prescribed
Attempted Performance (Tender)
• When the promisor offers to perform his obligation under the contract, but
is unable to do so because the promise does not accept the performance.
Examples of Valid / Invalid Tenders
• A, who is a debtor of company B, offers to pay if shares are allotted to
him at par.
Not valid as its Conditional tender
A is a tenant of B. He offers him rent at a marriage
Party
Not proper time and place
A owes Rs. 100,000 to B to be paid on 10.10.2021
But A offers him to pay installments of Rs. 5,000
Per month which B disagrees?
• Not whole obligation.
 – A, ordered mobiles of worth Rs. 100M but at the arrival of consignment
A refuses to allow the inspection and tell to accept the consignment after
signing it.
 Delivery of goods must be accompanied with Reasonable opportunity of
inspection
 – A, seller sends minor or idiot for delivery of goods to B
 Tender by incompetent person
 A, instead of delivery of goods to B, delivers to C
 Tender to a stranger
 In case of joint promises, an offer to any one of them is valid tender but actual
payment must be made to all joint promises and not to any one of them.
 Examples of Valid / Invalid Tenders (Cont..)
A, while travelling from Sahiwal to Pakpattan
tenders Rs. 5,000 note to conductor against the
fare Rs. 100
A, offers cheque in above example
– A, offers cheque to shopkeeper
– A, offers prize bond to barber
– All are invalid tenders
 – However, if promise, accepts then these will be considered as valid
Discharge by Mutual Consent or Agreement
 – A is indebted to B and B to C. By mutual agreement B’s debt to C and B’s
loan to A are cancelled and C accepts A as his debtor. (Novation)
 A gives loan to B @ of 10% per annum interest to be paid in one year. Later, A
& B agrees to interest @ 8% (Alteration of first)
 Promises to deliver certain goods to B on ascertain date. Before the date of
performance, And B mutually agrees that the contract will not be performed.
(The contract stands discharged by rescission)
 If the promise agrees to accept Rs. 20,000 in full satisfaction of claim of Rs.
50,000, the promise is enforceable and the promise cannot in future bring a suit
for the recovery of Rs. 50,000 (Remission)
 A promises to give gift to B if he will sing a song at his birthday party and
accordingly B sang the song but afterwards B forbids A to deliver gift, to which
A consent (The contract is terminated by waiver)
 Discharge by Subsequent or Supervening
 Impossibility or Illegality
 – A concert hall was booked for series of concerts, but hall was destroyed by
fire before the concert (Destruction of Subject Matter).
 Discharge by Subsequent or Supervening Impossibility or Illegality
– H hired a room in London from K with the object; as both parties well knew; of
using the room to view the intended coronation procession of King on a particular
date. By the reason of the King’s illness the procession was postponed. H
consequently could not use the room although he could go there and sit but with no
purpose as there was no procession. (Failure of ultimate purpose)
– A hires B for playing PSL but before the start of league, B dies or injured (Death
or personal Incapacity of promisor)
– There was a contract for the sale of trees of a forest owned by a private party but
before execution the forest is acquired by the Government by Act of Parliament
(Change of Law)
.If war is declared between contracting parties, and contract entered before the war
will be suspended until war is over.
Discharge by Lapse of Time
– A advanced loan to B to be paid on 01.01.2018. B did not pay, and A does not
sue for repayment for three year. The remedy for recovery of loan is time barred.
Discharge by Operation of Law
A hires B for playing PSL, B dies before start, the contract is discharged (By
Death)
– A advances loan to B. Subsequently B declared insolvent by competent court
(Insolvency)
– A entered into tenancy agreement with B, later B purchases the house. The
tenancy is merged with ownership (Merger)
Discharge by Operation of Law (Cont...)
– Where an amount on promissory note is altered or an additional signature is
forged, on a promissory note by a creditor, he cannot bring a suit on it and the
promote cannot be enforced against the debtor even in its original shape.
(Unauthorized material alteration)
Discharge by Breach of Contract
– A contracts to sell his car to B on 01.12.2021. A
Sells his car to C on 20.11.2021 (implied breach)
– A contracts to sell his bike to B on 01.11.2021 but he informs B on 28.10.2021
that he will not sell his bike (Express breach)
– A contracts to deliver goods to B on 15.12.21 but he does not deliver on that date
(Actual breach)
Breach of Contracts and its Remedies
Breach of Contracts
– Whenever there is breach of a contract, the injured party becomes entitled to one
or more of the remedies against the guilty party.
– Recession of the Contract
– Suit for damages
– Suit upon quantum merit
– Suit for Specific Performance
– Suit for an injunction.
– Recession of the Contract
• A contracts to sell 1000 kg of tea for Rs.
100,000 to B on 15.12.2021. A does not supply tea on the appointed date
 B may file suit for rescission and claim damages.
 Suit for damages
 Damages are a monetary compensation allowed to the injured party for the
loss or injury suffered by him as a result of breach of contract.
 – Example
  Contracts to sell 1000 kg of tea for Rs. 100,000 to B on 15.12.2021. A does
not supply tea on the appointed date
 B may file a suit for damages
 Kind of damages
Ordinary or General Compensatory damages (i.e. damages arising naturally
from the breach)
 Special damages (damages in contemplation of the
Parties at the time of contract)
• Exemplary, Punitive or Vindictive damages Nominal damages.
Ordinary or General Compensatory damages
• A contracts to pay a sum of money to B on a specified day. A does not pay the
money on that day. B, in consequences is unable to pay his debts and is totally
ruined. A not liable to make good to B anything except the principal sum and
interest as
Well as cost of suit.
– Special damages
• A having contracted with B to supply B 1,000 tons of iron at Rs. 5,000 a ton, to
be delivered at a stated time,
Contracts with C for the purchase of 1,000 tons of iron at
Rs. 4,500 per ton, telling C that he does so for the purpose of performing his
contract with B. C fails to perform his contract with A, and A could not procure
other iron, and B, in consequences rescinds the contract. C must pay to R, Rs.
500,000 being profit which A would have made by the performance of his
contract with B.
Exemplary or Vindictive Damages
• Dishonor of a cheque by a banker when there Are sufficient funds to the credit
of the customer
• In this case actual amount of damages will differ According to the status of party
Nominal Damages
• Where in a contract of sale of goods, if the contract price and the market price is
almost the same at the date of breach of contract, then the aggrieved party is
entitled only to nominal damages.
Suit upon Quantum Meruit
• It literally means ‘as much as earned’ or ‘in
Proportion to the work done’
• Where after part performance of the contract by one party, there is a breach of
contract, or the contract is discovered void or becomes void.
– Examples of Suit upon Quantum Meruit
– Where work has been done in pursuance of a contract, which has been
discharged by the default of the defendant
• A, engages B, a contractor, to build a three stories house. After a part is
constructed, A prevents B from working any more. B, the contractor, is entitled to
get reasonable compensation for work done under the doctrine in addition to the
damages for breach of contract.
Examples of Suit upon QM (Cont...)
– Where work has been done in pursuance of a contract,
Which is ‘discovered void’ or ‘becomes void’ provided the contract is divisible
• A contracts with B to repair his house at a piece rate.
After a part of the repairs were carried out, the house is destroyed by lightning.
Although the contract becomes void and stands discharged because of destruction
of the house. A can claim payment for the work done on ‘quantum meruit.
However, if under the contract a lump sum is to be
Paid for the repair job, as a whole, then A cannot claim quantum meruit because
no money is due till the whole job is done.
A party who is guilty of breach of contract may also
sue on a quantum meruit provided
• The contract must be divisible, and
• The other party must have enjoyed the benefit of
The part which ahs been performed, although he had an option of declining it.
Where a common carrier fails to take a complete
Consignment to the agreed destination, he may recover pro-rata freight.
• He will, of course, be liable for breach of contract.
Suit for Specific Performance
• The actual carrying out of the contract as agreed
• Where monetary compensation is not an adequate relief because the injured
party will not be able to get an exact substitute in the market
Examples
– Land, buildings, rate articles, unique goods having some special value to the
party suing
Because of family association.
Cases where specific performance is not granted (Cont..)
– Where the court cannot supervise the actual
Execution of the contract
– Examples:
» Building construction contract
» In most cases damages afford an adequate Remedy
– Where the contract is for personal services
– Examples:
» A contract to marry
» To paint a picture.
In such contracts injunction may be granted in
Place of specific performance.
Suit for Injunction
– Injunction is an order of a court restraining a person from doing a particular act
– It is a preventive relief.
Examples
• A, agreed to sing at B’s theatre for three months from 1st
April and to sing for no one else during that period. Subsequently, she contracted
to sing at C’s theatre and refused to sing at B’s theatre. On a suit by B, the court
Refused to order specific performance of her positive
Engagement to sig at the plaintiff’s theatre, but granted an injunction restraining A
from singing elsewhere and
Awarded damages to B to compensate him for the loss Caused by A’s refusal.
–Examples
• G agreed to take the whole of his supply of
Electricity from a certain company. The agreement
Was held to import a negative promise that he would take none from elsewhere.
He was, therefore, restrained by an injunction from buying electricity from any
other company.
The Nature and Kinds of Business Organizations
What is Business?
• No comprehensive definition available
• Open ended definition available in different sources.
Sources of Definition
• Legal Definition
– The Partnership Act 1932
• Business includes every trade, profession or occupation.
Deficiencies of Definition
– Open ended definition
– Job is occupation but still not business
Oxford Dictionary
• The activity of making, buying, selling, or supplying goods or services for
money
Deficiencies in Definition
 Legality of business
 Buying or selling single item
 Renting joint property
 Job provides services but still not business.
Customary Definition
• An activity recognized by the business community as business
• Subjective based judgment.
Optimum Definition
• The legal activity of making, buying, selling, or supplying goods or services for
money which is recognized by the business community as business
• Still not comprehensive
Kinds of Business Organizations
• Sole Proprietorship
• Partnership
• Limited Partnership (LP)
• Company
• Limited Liability Partnership (LLP)
Sole Proprietorship
The Nature
• Informal way of doing business
• Single person owner
• No regulating law
Advantages
• Sole Owner
• Sole Manager
• Sole beneficiary of Profit
• No accountability in management
• Sole discretion to liquidate
Disadvantages
• Sole responsible for losses in daily affairs
• Sole responsible for Unlimited Liability
• Personal Property is also under threat due to unlimited liability.

Partnership
The Nature
• Both formal & informal way of doing business
Regulator
• Registrar of Firms
Applicable Law
• The Partnership Act 1932
Limit of Persons
• 2-20 persons
Advantages
 Investment Shared
 Expansion of business is possible
 Management responsibilities shared
 Shared Losses
• Unlimited Liability Shared
• All partners are collectively responsible for unlimited Liability
Disadvantages
• Not a separate legal entity
• Decision making issues
• Problem of consensus
• Profit is shared
• Mutual Agency
• Liquidation
Not a Separate Legal Entity
• Act done by firm is considered as done by partners Themselves
• Liability created by firm is considered as personal liability of Partners.

Mutual Agency
• Relationship of agency created amongst the partners
• Every partner is agent as well as principal of other partner
• Liability created by one will be shared by all
• Unlimited Liability may be created by anyone
Liquidation
• By Default Liquidation in certain cases
– Examples
» Death of any partner
» Insolvency of any partner
Limited Partnership (LP)
The Nature
• Same characteristics as of partnership
• A kind of Partnership where some partners have limited
 liability and some unlimited liability
• All partners cannot have limited liability.
Company
The Nature
• Formal way of doing business
• Company is created by law
• Separate Legal entity
 All acts done by company are considered as acts of the Company
 Liability created by company is liability of the company itself
Applicable Law
– The Companies Act 2017
Regulator
– Securities and Exchange Commission of Pakistan
Limit of Persons
– Based on nature of company
Company (Cont..)
• Single Member Company (SMS)
– 1 only
• Multi-Member Private Company (MMC)
– 2 to 50
• Public Company
– 3 to ∞
Advantages
• Separate Legal Entity
• Limited Liability
 Liability of investors is limited up to extent of their Investment
 Personal assets of members are safe. Centralized Management
 Easy to manage with limited people selected by owners
 Managers are selected in democratic way
Disadvantages
 Costly and cumbersome procedure of incorporation
 Running of business incur cost
 Liquidation also incur cost
 Transfer of interest
 Continuity of entity is ensured
 Easy transfer of interest
 No dissolution by transfer of interest by anyone,
Limited Liability Partnership (LLP)
The Nature
• Hybrid form of Partnership and Company
• Formal way of doing business
Regulator
– Securities and Exchange Commission of Pakistan
Applicable Law
– The Limited Liability Partnership Act 2017
Characteristics of Company
• Separate Legal Entity
• Limited Liability
Characteristics of Partnership
• Easy and less costly formation
• Easy and less costly functioning
• Easy and less costly liquidation