ALLAMA IQBAL OPEN UNIVERSITY,

ISLAMABAD
(Department of Commerce)

Course: Business Law (5413) Semester: Autumn, 2023

Level: BS (A&F)
Name: Amna Maryam Student ID: 0000124880
Tutor Name: Asghar Ali Mubarak

ASSIGNMENT No. 2

Q.1 Explain in detail the metho for registration of a partnership under the
Partnership Act 1932. Also, write down the benefits of registration of
partnership deed.

➢Method for Registration of a Partnership under

the Partnership Act 1932:
The registration of a partnership under the Partnership Act of 1932 involves a
systematic process to formalize the existence and terms of the partnership. The
Act does not make registration mandatory; however, it offers several benefits,
making it an attractive option for partnerships. Here's a detailed explanation of
the registration process:

★ Drafting the Partnership Deed:

The partnership begins by drafting a partnership deed, which is a written
document outlining the terms and conditions of the partnership. The deed
typically includes details such as the name of the firm, the names and addresses
of the partners, the nature of the business, profit-sharing ratios, and the duration
of the partnership, if any.

★ Obtaining Stamp Paper:

Once the partnership deed is finalized, it needs to be written on non-judicial
stamp paper of an appropriate value. The value varies based on the capital
contribution and the agreed terms of the partnership.

★ Execution of Partnership Deed:

The partners must then sign the partnership deed in the presence of witnesses.
Each partner should have a copy of the deed for reference.

★ Application for Registration:

To register the partnership, an application must be submitted to the Registrar of
Firms. The application should include the duly filled Form 1, which provides
details such as the name of the firm, the place of business, names and
addresses of partners, and the date of commencement of the partnership.

★ Submission of Documents:

Along with the application, the partnership deed, and the prescribed fees, the
partners need to submit the following documents:
⦁ Proof of ownership or permission to use the principal place of business
.⦁ Specimen of the partners' signatures.
.⦁ Authorization for one of the partners to sign on behalf of the firm
.⦁ Verification by the Registrar:
The Registrar then verifies the documents and the information provided in the
application. If everything is in order, the Registrar records the details in the
Register of Firms and issues a Certificate of Registration.
 ★ Public Notice:
After registration, it is advisable to publish a public notice regarding the formation
of the partnership in at least one local newspaper. This notice serves to inform
the public and potential creditors about the existence of the partnership.

★ Benefits of Registration:
The registration of a partnership deed offers several benefits, making it a prudent
choice for partnerships:

★ Legal Recognition:
Registration provides legal recognition to the partnership. A registered firm is
considered a separate legal entity, distinct from its partners. This facilitates legal
proceedings in case of disputes.

★ Evidence in Court:
The registered partnership deed serves as prima facie evidence in court. In case
of disagreements among partners or with third parties, the registered document
holds substantial weight in establishing the terms of the partnership.

★ Right to Sue:
A registered firm has the right to sue third parties or other partners for the
enforcement of rights arising from the contract. Unregistered firms do not enjoy
this privilege.

★ Access to Remedies:
Partnerships can seek legal remedies, such as filing a suit for the recovery of
dues or settlement of disputes, only if they are registered. Unregistered
partnerships face limitations in accessing legal remedies.
 ★ Public Notice:
The public notice published after registration serves as a caution to others,
alerting them to the existence of the partnership. This can deter fraudulent
activities and inform potential creditors about the partnership's legal standing.

★ Credit Facility:
Registered partnerships often find it easier to obtain credit from financial
institutions. The registration acts as a form of validation, assuring lenders of the
partnership's legal status and commitment to transparency.

★ Transfer of Property:
A registered partnership can hold property in its own name, allowing for smoother
transactions and transfers of property. Unregistered partnerships may face
challenges in this regard.

★ Continuity and Succession:

Registration contributes to the perpetuity and succession of the partnership. It
ensures that the firm can continue its operations even if there are changes in the
composition of partners due to retirement, death, or the admission of new
partners.

Q.2 What is a company? Explain the types of companies. Briefly discuss

the steps for formation of a company under the Companies Ordinance
1984.

➢ What is a Company:

A company is a legal entity formed by a group of individuals to engage in a

business or commercial enterprise. It is recognized as a separate legal person
distinct from its owners, known as shareholders. The primary purpose of forming
a company is to provide a structure that allows for the pooling of resources,
sharing of responsibilities, and facilitation of business activities. In many
jurisdictions, including Pakistan, the Companies Ordinance of 1984 governs the
establishment and functioning of companies.

★ Types of Companies:
There are several types of companies, each with its own characteristics and legal
structures. The two main categories are:

★ Private Limited Company:

Characterized by limited liability for its shareholders, meaning their personal
● assets are protected from the company's debts.
● Restricted to a certain number of shareholders, usually not
exceeding fifty.
● Prohibits the public from buying and selling shares freely on the
stock
● exchange.
● Suitable for small to medium-sized enterprises (SMEs) with a more
closed
● ownership
● structure.
★ Public Limited Company:
● Allows for a larger number of shareholders, and its shares can be traded
on
● the stock exchange
● . Offers limited liability to its shareholders, safeguarding their
personal assets
● Raises capital by issuing shares to the public through an Initial Public
Offering
● (IPO).
● Subject to more stringent regulatory requirements and public scrutiny
due to its widespread ownership.

★ Steps for the Formation of a Company under the Companies

Ordinance 1984:
The Companies Ordinance of 1984 in Pakistan outlines the procedures for
forming a company. The process involves several steps:
 ★ Promotion and Incorporation:
The first step is the promotion of the company, where individuals conceive and
plan the business idea. Once the project is viable, the process of incorporation
begins.
The promoters draft the Memorandum of Association (MoA) and Articles of
Association (AoA), which are essential documents governing the company's
constitution and internal regulations.

★ Application for Availability of Name:

The promoters must propose a unique name for the company and submit an
application to the Registrar of Companies to ensure the name's availability. The
chosen name should comply with the legal requirements and should not
resemble the name of any existing company.

★ Submission of Documents to the Securities and Exchange

Commission of Pakistan (SECP):
The promoters submit the required documents, including the MoA, AoA, and
⦁ a list of directors, to the SECP for approval.
⦁ The SECP reviews the documents to ensure compliance with legal provisions
⦁ and issues a Certificate of Incorporation if everythi
⦁ ng is in order.
⦁ Payment of Fees and Stamp Duty:
The company's promoters need to pay the prescribed fees and stamp duty as per
the applicable regulations. The stamp duty varies based on the authorized share
capital of the company.

★ Memorandum of Association and Articles of Association:

The MoA and AoA are crucial documents that outline the company's objectives,
authorized share capital, details of shareholders, and internal regulations. These
documents must be prepared in accordance with the format prescribed by the
Companies Ordinance.
 ★ Declaration of Compliance:
The company's directors and the company secretary must sign a declaration of
compliance, confirming that all legal requirements for incorporation have been
met. This declaration is submitted to the SECP.

★ Issuance of Certificate of Incorporation:

Upon satisfaction of all requirements, the SECP issues a Certificate of
Incorporation, officially recognizing the company as a legal entity. This certificate
is conclusive evidence of the company's existence.

Commencement of Business:

A company has perpetual existence, unaffected by changes in ownership,

making it a stable and enduring business structure.

★ Transferability of Shares:
Shares in a company are transferable, allowing for the easy buying and selling of
ownership interests.

★ Separate Legal Entity:

A company is considered a separate legal entity from its owners, granting it
distinct legal status.

★ Enhanced Credibility:
Registered companies often enjoy greater credibility and trust among customers,
suppliers, and investors.

★ Employee Benefits:
Companies can offer various benefits, such as employee stock options, to attract
and retain talent.
Q.3 Differentiate between the general and special crossing under the
Negotiable Instruments Act 1881. Also, write down the conditions under
which a banker can reuse to honor/accept a cheque.

➢ General Crossing vs. Special Crossing under the Negotiable

Instruments Act 1881:
The Negotiable Instruments Act of 1881 in India governs the use and transfer of
negotiable instruments, such as promissory notes, bills of exchange, and
cheques. Crossing is a significant concept within this framework and can be
broadly categorized into general crossing and special crossing.

★ General Crossing:
A general crossing involves the drawing of two parallel transverse lines across
the face of a cheque, with or without additional words like "and Co." or "not
negotiable." This is a general security measure to ensure that the amount on the
cheque is deposited into a bank account rather than being encashed over the
counter. The payee can only receive the funds by depositing the cheque into
their bank account. General crossing does not specify any particular bank,
making it a more flexible option.

For example, if Mr. A issues a cheque with two parallel lines across it, the
cheque must be deposited into a bank account rather than being converted to
cash at the counter. This adds a layer of security and traceability to the
transaction.

★ Special Crossing:
On the other hand, a special crossing involves the inclusion of the name of a
specific bank between the transverse lines. This directs that the cheque must be
deposited into an account with the mentioned bank. It further restricts the
negotiation of the cheque, as the payee can only receive payment through the
designated bank.
For instance, if Mr. B issues a cheque with two parallel lines and the name of
"ABC Bank" written in between, the cheque can only be deposited into an
account held at ABC Bank. This adds an extra layer of security and ensures that
the funds are credited to the intended bank account.

★ Conditions for a Banker to Refuse Honor/Accept a Cheque:

While banks are obligated to honor valid cheques, there are specific conditions
under which a banker can refuse to accept or honor a cheque:

★ Insufficient Funds:
If the drawer's account lacks sufficient funds to cover the amount mentioned on
the cheque, the banker has the right to refuse payment. The cheque is
considered "dishonored" due to insufficient funds.

★ Irregular Signature:
A banker can refuse a cheque if the signature on it does not match the specimen
signature provided by the account holder. The aim is to prevent fraudulent
transactions and protect the account holder from unauthorized access.

★ Post-Dated Cheque:
Banks may decline to honor a post-dated cheque, which is a cheque with a date
in the future. The payment can only be made on or after the specified date.

★ Stale Cheque:
A stale cheque, i.e., a cheque presented after six months from its date, may not
be accepted by the bank. This is to ensure that cheques are presented within a
reasonable time frame and are still valid.

★ Material Alteration:
If there is any unauthorized alteration or change in the material part of the
cheque, such as the amount or payee's name, the banker may refuse to honor it.
 ★ Crossed Cheque Not Presented through a Bank:
In the case of a crossed cheque, if it is not presented through a bank, the banker
may refuse payment. Crossed cheques are meant to be deposited into the
account, and the bank ensures compliance with this rule.

★ Cheque Not Properly Drawn:

If the cheque is not properly drawn, for instance, if it lacks essential details like
date, payee's name, or amount in words and figures, the banker may refuse to
honor it.

★ Legal Orders:
Banks may refuse to honor a cheque if there is a legal order, such as a court
injunction or attachment, preventing payment.

★ Account Blocked or Frozen:

If the account of the drawer is blocked or frozen due to legal issues, the bank
may refuse payment on any cheques drawn on that account.

★ Violation of Terms and Conditions:

Banks may refuse to honor a cheque if the account holder has violated the terms
and conditions of the account agreement.
Q.4 Discuss the following concepts under the Sale of Goods Act 19340.
i. Let the buyer be aware
ii. Rights of unpaid seller
 ➢ Let the Buyer Be Aware (Caveat Emptor) under the Sale of
Goods Act 1930:
The concept of "Let the buyer be aware," known as caveat emptor, is a
fundamental principle under the Sale of Goods Act 1930. In simple terms, it
means that the buyer must exercise caution and diligence while making a
purchase. The seller is not obliged to disclose every detail about the goods being
sold, and it is the buyer's responsibility to inspect, assess, and be satisfied with
the quality and condition of the goods before entering into a transaction.

This principle emphasizes the importance of due diligence on the part of the
buyer. It implies that if a buyer discovers any defects, faults, or issues with the
goods after the purchase, the seller is not automatically held responsible. The
buyer bears the risk of the quality and suitability of the goods unless there is a
specific agreement or warranty provided by the seller.

However, it is essential to note that the principle of caveat emptor is not absolute.
There are exceptions, especially when dealing with specific types of goods or if
there is fraudulent misrepresentation by the seller. The Sale of Goods Act
provides for implied conditions and warranties, and if these are breached, the
buyer may have legal recourse.

For instance, if Mr. X purchases a used laptop from a seller, and the laptop turns
out to be faulty, the principle of caveat emptor suggests that Mr. X should have
inspected the laptop thoroughly before buying it. However, if the seller
fraudulently conceals the laptop's defects or provides false information about its
condition, Mr. X may have legal grounds to seek remedies under the Sale of
Goods Act.

★ Rights of Unpaid Seller under the Sale of Goods Act 1930:

The rights of an unpaid seller are crucial aspects of the Sale of Goods Act,
providing protection to sellers when buyers default on their payment obligations.
These rights are outlined in Sections 45 to 55 of the Act.
 ★ Right of Lien:
The seller has the right of lien over the goods, which means they can retain
possession of the goods until the buyer fulfills their payment obligations. If the
buyer fails to pay, the seller can withhold delivery until payment is received.

★ Stoppage in Transit:
If the seller learns that the buyer is insolvent and the goods are still in transit, the
seller has the right to stop the goods and resume possession. This right protects
the seller from delivering goods to a financially unstable buyer.

★ Re-sale of Goods:
In the case of default by the buyer, the unpaid seller has the right to resell the
goods. If the resale results in a profit, the seller can claim damages from the
original buyer. However, if there is a loss, the original buyer remains liable for the
shortfall.

★ Suit for Price:

The seller can sue the buyer for the price of the goods if it remains unpaid, even
if the property in the goods has not passed to the buyer. This right is subject to
certain conditions, such as the expiration of a reasonable time for the buyer to
pay.

★ Suit for Damages:

If the buyer wrongfully neglects or refuses to accept and pay for the goods, the
seller can sue for damages. The damages may include any loss or injury directly
resulting from the buyer's breach of contract.

★ Suit for Interest:

If there is a delay in payment, the seller may claim interest on the price of the
goods. The rate of interest is typically specified in the contract or can be at a
reasonable rate.
 ★ Right to Rescind the Contract:
In certain circumstances, an unpaid seller may have the right to rescind the
contract and refuse to deliver the goods. This typically occurs when the buyer
becomes insolvent or defaults on payment.

These rights collectively provide a comprehensive framework to protect the

interests of sellers in commercial transactions. They ensure that sellers have
legal remedies available when buyers fail to fulfill their contractual obligations,
maintaining fairness and balance in commercial dealings under the Sale of
Goods Act 1930.

Q.5 Explain in detail the rights and duties of workers as per the Factories
Act 1934.

➢ Rights and Duties of Workers under the Factories Act 1934:

The Factories Act of 1934 in India is a crucial piece of legislation that governs the
working conditions, rights, and duties of workers employed in factories. It aims to
ensure the safety, health, and welfare of workers, and it outlines specific
provisions regarding their rights and duties. Let's delve into the details of the
rights and duties of workers under the Factories Act 1934.

➢ Rights of Workers:
★ Working Hours and Overtime:
Workers have the right to reasonable working hours. According to the Factories
Act, the standard working hours are not to exceed 48 hours per week, and the
daily limit is 9 hours. If a worker is required to work beyond these hours, they are
entitled to overtime wages.

★ Weekly Holidays:
Every worker is entitled to at least one rest day per week. This day should ideally
be Sunday, but in certain cases, it can be any other day agreed upon by the
employer and workers.
 ★ Annual Leave with Wages:
Workers are entitled to annual leave with wages. For every 20 days of work, a
worker is entitled to one day of leave with full wages. This encourages the well-
being of workers by providing them with necessary rest.

★ Prohibition of Employment of Young Children:

The Act prohibits the employment of children below the age of 14 in factories.
This ensures that young individuals are not subjected to hazardous working
conditions and are given the opportunity to receive an education.

★ Health and Safety Measures:

Workers have the right to work in an environment that ensures their health and
safety. The Factories Act stipulates various provisions related to cleanliness,
ventilation, temperature, and safety measures, and workers have the right to
demand compliance with these standards.

★ Welfare Facilities:
Employers are required to provide certain welfare facilities such as canteens,
restrooms, and first aid facilities. Workers have the right to access these facilities
to ensure their well-being during working hours.

★ Cooperation with Health and Safety Measures:

Workers are expected to cooperate with the employer in implementing health and
safety measures. This includes participating in training programs, reporting
unsafe conditions, and following safety protocols.
 ★ Preventing Accidents:
Workers have a duty to take reasonable care to prevent accidents. This involves
being cautious while working with machinery, following safety procedures, and
reporting any potential hazards to the supervisor.