Business Law

Suggested Answers
Certificate in Accounting and Finance – Spring 2022

A.1 (i) (b) (vi) (a) (xi) (c)

(ii) (b) (vii) (d) (xii) (b)
(iii) (b) (viii) (d) (xiii) (a)
(iv) (c) (ix) (c) (xiv) (a)
(v) (c) (x) (b) (xv) (b)

A.2 Differences between civil and criminal laws are as follows:

S.no. Civil Law Criminal Law

(i) Civil law sets out the rights and duties Criminal law is concerned with the
of persons as between themselves, any conduct that is considered so
violation of which is a tort/wrongdoing. undesirable that the State punishes
persons who transgress as violation of
the criminal law is a crime.
(ii) Purpose of civil law is to provide a Purpose of criminal law is to regulate
means whereby an injured party can the society by the threat of punishment.
obtain compensation.
(iii) The person whose rights (private Legal action may be brought by the
individuals) have been affected can State against individuals who are
claim a remedy from the wrongdoer. accused of being in breach of the
criminal law. It is the responsibility of
the State to bring these legal actions, in
criminal trials.
(iv) The claimant sues the defendant for The State (Government) prosecutes the
harm caused. accused (the defendant) whether or not
the harm was caused.

The criminal laws in force in Pakistan include Pakistan Penal Code, Anti-Money
Laundering Act etc.

A.3 (a) Following are the possibilities of execution of the proposals presented by Salman:

 If Akmal agrees with proposal no. (i) only

The dispute relating to ordinary matters of the business i.e. reducing material
cost by using low-quality leather in production may be decided by a majority of
the partners (i.e. at least 3 partners) unless there is an express or implied
contract to the contrary among the partners.

If Akmal agrees to reduce material cost by using low-quality leather in

production, all the partners of KTC should be informed about the dispute and
provided with opportunity to express opinion before matter is decided.

Hence, proposal no. (i) can be executed if one more partner agrees to it besides
Akmal and Salman.

 If Akmal agrees with proposal no. (ii) only

The proposal to discontinue production activities and invest KTC’s capital in
real estate will be considered as change in nature of the firm’s business which
cannot be made without the consent of all the partners unless there is an
express or implied contract to the contrary among the partners.

Since Nadir has already disagreed with the proposal no. (ii), it cannot be

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Certificate in Accounting and Finance – Spring 2022

executed even if Akmal agrees to the same.

Akmal’s agreement to proposal no. (ii) only, means that he is not in agreement
with proposal no. (i). Despite of Akmal’s and Nadir’s disagreement, proposal
no. (i) can still be executed if the other two partners of KTC agree to execute it.

(b)  Zara may form a particular partnership for 5 years with Zaheer in respect of
Zareer Bridals (ZB). In this way, she will be able to take decision of extending
or ending the partnership after 5 years because partnership contract can only be
varied by consent of all the partners.

 The statutory rights and duties of Zara and Zaheer which can be restricted or
extended in Zara’s favour by way of a partnership contract are as follows:

Restrict/extinguish following of Zaheer’s rights:

(i) To take part in the conduct of the business of ZB;
(ii) To access/inspect/copy books of ZB;
(iii) To be involved in decision making in respect of ZB’s operations;
(iv) To object to change in the nature of ZB’s business;
(v) To receive remuneration for taking part in conduct of ZB’s business;
(vi) To receive equal share of ZB’s profit;
(vii) To receive 6% interest p.a. if he makes payment beyond agreed capital;
(viii) To exercise his implied authorities in respect of ZB;
(ix) To carry out any other business besides ZB.

Extend/establish following of Zara’s own rights:

(i) To receive more than 6% interest p.a. on payments made beyond agreed
capital;
(ii) To exercise her implied authorities in respect of ZB;
(iii) To use property of ZB for purposes other than ZB’s business.

Restrict/extinguish following of Zara’s own duties:

(i) To indemnify ZB or Zaheer for willful neglect on her part;
(ii) To account for personal profits derived by herself from ZB’s
connections;
(iii) To contribute equally to ZB’s losses;
(iv) To account for personal profits derived by herself from competing
business;
(v) To attend diligently to her duties in respect of ZB.

Zara may exclude the shop, if purchased for ZB, from being considered as ZB’s
property.

A.4 (a) If XBL cleared the cheque and funds were transferred to RDBL i.e. otherwise than
to the banker to whom it was specially crossed (RNBL), in that case, XBL shall be
liable to Ghalib Mehmood i.e. true owner of the cheque, for any loss he may sustain
owing to the wrong clearance of cheque because it will be considered to have been
paid out of due course.

However, XBL will not be liable to Ghalib Mehmood, if the cheque presented for
payment:
(i) did not at the time of presentment appear to be crossed; or
(ii) had a crossing which was altered otherwise than as authorized by the
Negotiable Instruments Act, 1881;
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Certificate in Accounting and Finance – Spring 2022

and XBL cleared the cheque and transferred the funds in good faith and without
negligence.

(b) If RNBL received funds from XBL against the crossed cheque in good faith and
without negligence, then RNBL shall not incur any liability by reason only of
having received such payment even if the customer had no title or defective title
thereto.

(c) Following are the circumstances in which a banker must refuse payment of a
cheque:
(i) where bank has received countermand of payment;
(ii) where bank has received notice of customer’s death;
(iii) where bank has received notice of adjudication of the customer as insolvent;
(iv) where cheque presented for payment has been crossed specially more than
once.

A.5 (i) BT will be held liable towards IL and will have to pay the damages because default
by AB being third party to the contract, on whose work the promisor was relying
does not render the contract void on account of supervening impossibility.

However, BT can recover ordinary damages from AB which occurred due to breach
of contract. BT can also recover special damages if it was known to AB at the time
of making the contract that ovens were to be delivered onwards to IL.

Amount of damages in both cases i.e. those claimable from AB and those payable
to IL would depend as to whether or not the ovens manufactured by AB could be
readily purchased from the market.

(ii) The contract between BT and FC is partly valid because in case of alternative
promises if one branch of contract is legal i.e. imported goods and the other branch
is illegal i.e. smuggled goods, then, only legal branch can be enforced as illegal
branch is void.

(iii) BT’s excuse is not valid as political unrest/civil disturbances do not render a
contract void on account of supervening impossibility. BT will be held liable to pay
damages suffered by OL due to breach of contract.

OL is not bound to accept the machines imported from Taiwan as it will result in
alteration of original contract.

(iv) Contract between BT and the customer was established under coercion as the
customer threatened to damage BT’s property. Here, manager’s consent to deliver
the latest model of air conditioner in replacement of earlier model was not obtained
freely due to which the contract is voidable at the option of BT.

(v) HL cannot hold BT liable for breach of contract because the agreement entered into
between them was void for uncertainty as the price of the television sets is not
capable of being made certain.

A.6 (a) Contingent contract may be described as a contract to do or not to do something, if

some event, collateral to such contract, does or does not happen.

In following circumstances, a contingent contract cannot be enforced:

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Certificate in Accounting and Finance – Spring 2022

(i) Contingent contracts to do or not to do anything if an uncertain future event

happens cannot be enforced by law if the event does not happen or contract
becomes void due to the event becoming impossible.
(ii) Contingent contracts to do or not to do anything if a specified uncertain event
happens within a fixed time cannot be enforced if such event does not happen
within fixed time or becomes impossible before time expires.
(iii) Contingent contracts to do or not to do anything if an uncertain future event
does not happen cannot be enforced if the event happens.
(iv) Contingent contracts to do or not to do anything if a specified uncertain event
does not happen within a fixed time cannot be enforced by law when the
event happens within the fixed time.
(v) If the future event on which a contract is contingent is the way in which a
person will act at an unspecified time, then such contract cannot be enforced
when such person does anything which renders it impossible that he should so
act within definite time or otherwise than under further contingencies.

(b) A person may be restricted from carrying on a business if the:

 person being restricted is seller of a goodwill;
 restriction relates to similar business;
 restriction is within specified local limits;
 restriction is for the time so long as the buyer or any person deriving title to
goodwill from him, carries on a like business in specified local limits.
Provided that such limits are reasonable having regard to the nature of the
business.

A.7 (a) In following situations, a person may be held accountable for a money laundering
offence if he:
(i) acquires, converts, possesses, uses or transfers property, knowing or having
reason to believe that such property is proceeds of crime;
(ii) conceals or disguises true nature, origin, location, disposition, movement or
ownership of property, knowing or having reason to believe that such
property is proceeds of crime;
(iii) holds or possesses on behalf of any other person any property knowing or
having reason to believe that such property is proceeds of crime;
(iv) participates in, associates, conspires to commit, attempts to commit, aids,
abets, facilitates, or counsels the commission of the acts specified above.

Possible consequences of a money laundering offence

If a person is proven guilty for money laundering offence, he shall be punished with
rigorous imprisonment for a term of one to ten years, liable to fine up to Rs. 25
million and also liable to forfeiture of property involved in money laundering or
property of corresponding value.

(b) "Critical infrastructure" means critical elements of infrastructure namely assets,

facilities, systems, networks or processes the loss or compromise of which could
result in:
(i) major detrimental impact on the availability, integrity or delivery of essential
services including those services, whose integrity, if compromised, could
result in significant loss of life or casualties, taking into account significant
economic or social impacts; or

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Suggested Answers
Certificate in Accounting and Finance – Spring 2022

(ii) significant impact on national security, national defense, or the functioning of

the state.

The Government may also designate any private or Government infrastructure in

accordance with the above objectives, as critical infrastructure.

(c) Following are the practices that prevent, restrict, reduce, or distort competition in
the relevant market through abuse of dominant position:

(i) Unfair trading conditions: i.e. limiting production, sales and unreasonable
increases in price etc.;
(ii) Price discrimination: by charging different prices for same goods or services
from different customers in the absence of objective justifications that may
justify different prices;
(iii) Tie-ins: where the sale of goods or service is made conditional on the
purchase of other goods or services;
(iv) Making conclusion of contracts subject to acceptance by the other parties
of supplementary obligations which by their nature or according to
commercial usage, have no connection with the subject of the contracts;
(v) Applying dissimilar conditions to equivalent transactions on other parties,
placing them at a competitive disadvantage;
(vi) Predatory pricing: driving competitors out of a market, prevent new entry,
and monopolize the market;
(vii) Boycotting or excluding any other undertaking from the production,
distribution or sale of any goods or the provision of any service; or
(viii) Refusing to deal.

A.8 (a) Since Noman is one of the joint promisors, Danish can recover the loan of Rs.
600,000 from Noman only unless there exists between them an express agreement
restricting his right to do so.

(b) Since all joint promisors have died, Danish can recover the loan from the legal
representatives of Farhan, Noman and Salman jointly, who must fulfil the promise
and repay the loan unless a contrary intention appears by the contract.

(c) Release of Farhan will discharge him from his liability towards Danish and
subsequently Danish will not be able to hold Farhan liable against the loan.
However, he will still remain liable towards the other joint promisors i.e. Noman
and Salman.

A.9 (a) Under the given situation, since time was essence of the contract between PF and
NIL, where PF failed to deliver the strawberries to NIL, following remedies are
available to NIL:
 Contract becomes voidable at the option of NIL.
 NIL may insist that PF should deliver the strawberries and claim
compensation on account of the delayed supply if, at the time of acceptance,
NIL gives notice to PF of its intention to claim damages.
 NIL may decide not to accept performance beyond the stipulated time and
claim compensation for any damages which it may have sustained due to
non-fulfillment of the contract by PF.

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(b) If PF offers to deliver only 300 kg of strawberries on 15 February 2022, it will not
constitute a valid offer of performance. NIL will have all the remedies available in
(a) above.

However, NIL has the right to accept part performance of the promise made to him
by PF. In that case, if NIL accepts delivery of 300 kg on 15 February 2022 then it
cannot sue PF later as it will be considered as remission of the contract.

A.10 (a) Constructive contract may be described as a contract that should have been formed
even though in actuality it was not.
In the following circumstances, a constructive contract may be formed:
(i) Supply of necessaries: If a person, incapable of entering into a contract, or
any one whom he is legally bound to support, is supplied by another person
with necessaries suited to his condition in life, the person who has furnished
such supplies is entitled to be reimbursed from the property of such incapable
person.
(ii) Reimbursement of payment by interested person: A person who is interested
in the payment of money which another is bound by law to pay, and who
therefore pays it, is entitled to be reimbursed by the other.
(iii) Person enjoying benefit of non-gratuitous act: Where a person lawfully does
anything for another person, or delivers anything to him, not intending to do
so gratuitously, and such other person enjoys the benefit thereof, the latter is
bound to make compensation to the former in respect of, or to restore, the
thing so done or delivered.
(iv) Finder of goods: A person who finds goods belonging to another and takes
them into his custody, is subject to the same responsibilities as a bailee.

(v) Payment or delivery by mistake or under coercion: A person to whom

money has been paid or anything delivered by mistake or under coercion,
must repay or return it.

(b) An agreement without consideration is considered to be a valid contract:

(i) if it is expressed in writing and registered under the law for the time being in
force for the registration of documents, and is made on account of natural
love and affection between parties standing in a near relation to each other;
or
(ii) if it is a promise to compensate, wholly or in part, a person who has already
voluntarily done something for the promisor, or something which the
promisor was legally compellable to do; or
(iii) if it is a promise, made in writing and signed by the person to be charged
therewith, or by his agent generally or specially authorized in that behalf, to
pay wholly or in part a debt of which the creditor might have enforced
payment but for the law for the limitation of suits; or
(iv) if it is a gift already made by the donor to the donee.

(THE END)

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