Certificate in Accounting and Finance Stage Examination

BUSINESS LAW (SPRING’25)

Answer-01
1. B
2. D
3. B
4. B
5. D
6. C
7. C
8. B
9. D
10. B
11. A
12. C
13. D
14. B

Answer-02
(a) CA’s position
The marketing collaboration between CA and SM constitutes a contract that contains therein a term which is dependent
on the happening of a future uncertain event i.e., SM winning the finale of the jeep rally championship.
Mubeen’s act of incentive cancellation is not valid as delivery promise would become void only if SM does not win the
finale, scheduled on 31 March 2025 or if the act of SR winning the finale becomes impossible on or before 31 March
2025.
Furthermore, it is an absolute fact that the performance of the promise becoming commercially unviable due to
exponential increase in prices is not an acceptable excuse of supervening impossibility.
Mubeen’s act of incentive cancellation is an attempt for alteration to the original terms of the contract which requires
SM’s consent. If SM agrees to substitute a new contract, the original contract need not be performed by CA. Otherwise,
CA shall continue to be held liable under the contract.
Remedies available to SM
SM can still hold CA liable for car delivery if SM manages to win the finale. However, SM as promisee may also
dispense with or remit, wholly or in part, the performance of the promise made, or may accept instead of it any
satisfaction which it thinks fit.
If SM wins the finale, it will be eligible to claim compensation from CA for any losses it sustained due to Mubeen’s act
that naturally arose in the usual course of things from such breach which may be the car price on 31 March 2025.
Furthermore, SM may also seek compensation for special damages i.e., any loss or damage caused to it, which the
parties knew, when contract was made, to be likely to result from the breach.
(b) Ahmad would only be liable to distribute his share of profits with Almeeera and Mubeen in equal proportion if:
Ahmad had been restrained by Almeera and Mubeen from carrying on any business other than that of CA; or
it is established that Ahmad used CA’s property; or CA’s business connection; or CA’s name to earn personal profits. In
the absence of any such agreement or the conditions mentioned above, Ahmad would not be liable to pay his share of
profits from GT’s business because GT’s business is not of same nature nor does it compete with the Car and Jeeb
business in which CA is engaged.
(c) Rights of GBL in respect of CA’s business
GBL is entitled to receive Almeera’s share of profits earned from CA’s business as determined by the partners.
However, if CA is dissolved or if Almeera ceases to be CA’s partner, GBL will be entitled as against Ahmad and Mubeen
to receive the share of assets of CA’s business to which Almeera was entitled, and, for the purpose of ascertaining that
share, to receive CA’s accounts as from the date of the dissolution.
 Limitations of GBL in respect of CA’s business
GBL, during the continuance of CA’s business, is not entitled to:
• interfere in the conduct of CA’s business,
• require CA’s accounts,
• inspect CA’s books,
• enjoy the status of a partner,
• challenge the accounts of profits agreed to by CA’s partners.
(d) The cheque would remain valid as Mubeen, being holder of the cheque, has the authority to add the words ‘not
negotiable’ and such addition to the general crossing is authorized under the provisions of the Negotiable Instruments
Act, 1881.
The addition by Mubeen of the words ‘not negotiable’ does not restrict the further transferability of the cheque.
However, it takes away the main feature of negotiability, which is transferability free from defects.
The effect of the words ‘not negotiable’ on a crossed cheque is that the title of the transferee of such a cheque cannot be
better than the title of its transferor. Therefore, a holder with a defective title cannot give a good title to a subsequent
holder.
The objective of adding the words ‘not negotiable’ is to afford protection to CA (i.e., holder of the cheque) against
miscarriage or dishonesty in the course of transit by making it difficult for the cheque so crossed cashed, until it reaches
its destination.
Answer-03
(a) IP’s position
The contract between IP and QP consist of reciprocal promises. It seems that the order of performance was not fixed
by the contracting parties at the time of contract formation, therefore, reciprocal promises needed to be performed in
such order which the nature of transaction required i.e., IP first needed to provide the payment security (bank guarantee)
after which QP would deliver the books.
IP’s liability
IP is liable to compensate QP, being the aggrieved party, for loss or damage caused by IP’s breach. This compensation
should cover losses that naturally arose in the usual course of things from the breach or were known by the parties, at
the time of contract formation, to be likely results of the breach.

(b) AP was aware of IP’s plan to sell the novel in the exhibition scheduled for 3 February 2025 due to which time was the
essence of contract and non-delivery on agreed date has made the contract voidable at IP’s option.
The possible courses of action that IP is entitled to take are as follows:
(i) IP has the right to accept delayed performance from AP. In such case, IP would not be able to claim compensation
for any losses resulting from the delivery delay, unless IP notifies AP of its intention to claim such compensation
at the time of accepting the delayed delivery of books.
IP also has the right to demand delivery at an appropriate time as the offer to deliver at 10:30 p.m. when staff is
already busy with the stock count would not be considered as valid offer of performance unless IP itself is willing
to accept performance at such time and in such manner.
(ii) IP has the right to rescind the contract and declare it void, thereby refusing to take delivery. Being the aggrieved
party, PB would be entitled to be compensated by AP for any loss or damage caused by the breach that naturally
arose in the usual course of things from such breach, and the anticipated profit of Rs.2.5 million, which both
parties knew at the time of the contract formation to be a likely result of its breach.
(c) The agreement between Kashif and Amanat Babar is void because the object is unlawful as the Court may regard such
an agreement being opposed to public policy.
Therefore, Kashif cannot hold Amanat Babar liable if the suit filed against him is not withdrawn regardless of the fact
that he pays the agreed amount as consideration.
Answer-04
(a) Evaluation of Fakhar’s response and its effect(s) on the proposal
Fakhar’s concern is not valid because even though NA was formed for a fixed term expiring 31 March 2025, however,
under the provisions of the Partnership Act, 1932, NA may continue to carry on its business even after expiry of the
mutually agreed term, if all partners give their consent to continue the business.
Where the partnership business is continued after expiry of the term, NA would become ‘partnership at will’ in which
mutual rights and duties of NA’s partners would remain the same as they were before 31 March 2025, so far as they
may be consistent with the incidents of partnership at will.
However, if Fakhar remains adamant that a new partnership should be formed then it may require determination of
mutual rights and duties of partners in the new firm which may be done through a formal partnership agreement.
Fakhar’s objection in respect of development of customized mobile applications constitutes a dispute relating to
ordinary matters of the business that 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.
All the partners of NA should be informed about such dispute and should be provided with an opportunity to express
opinion before matter is decided. However, NA can still undertake the application development if Shaheen agrees.
Evaluation of Shaheen’s response and its effect(s) on the proposal
The proposal to pursue hardware business is a different venture which would constitute change in nature of NA’s
business. Such business cannot be undertaken without the consent of all the partners unless there is an express or implied
contract to the contrary among the partners.
If Shaheen remains firm on his disagreement with regards to hardware business, then:
• NA cannot pursue hardware business;
• Induction of Zakir as a partner with hardware expertise may not be required;
• Remaining partners may dissolve NA and consider to form new partnership;
• Remaining partners may form new partnership with Zakir.
(b) Haris shall be required to indemnify NA for any loss caused to it by his act of fraud or willful neglect (subject to contract
between partners) in the conduct of NA’s business.
Subject to contract between the partners, NA shall indemnify Haris in respect of payments made and liabilities incurred
by Haris in:
➢ the ordinary and proper conduct of NA’s business; doing such act, in an emergency, for the purpose of protecting NA
from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances.
Answer-05
(a) HP’s response contain the following deficiencies
➢ HP’s acceptance is not absolute:
HP has actually extended a counter offer proposing to purchase 2500 packs at the discounted offer price to which
SP’s acceptance would be required in order for a contract to be formed.
➢ Acceptance is not given in prescribed mode:
HP has not sent confirmed purchase order rather has mentioned that it would be sent after prescribed time. SP may,
within a reasonable time, insist that the offer should be accepted in prescribed manner but if SP fails to make such
demand, then it would be implied that HP’s mode of acceptance has been accepted by it.
Moreover, HP has sent an advance cheque, therefore, SP’s act/response would be critical in determining the status of
the deal. Acceptance of the advance cheque as consideration would imply SP’s acceptance of HP’s counter offer.
(b) As the supply of the medical devices for the testing of blood sugar level without pricking the body is contingent upon
YR obtaining the required regulatory approval from DRAP, the performance of the contract would not become due for
either party until the approval is obtained within the specified time frame i.e., by March 2025.
The Ministry of Health’s act of revising the guidelines and banning use of medical device for the testing of blood sugar
level for medical purposes was unforeseen and beyond YR’s control which has significantly impacted the feasibility of
fulfilling the collateral event to the contingent contract rendering the contract performance impossible.
Considering the principles of impossibility, it is apparent that with the medical device for the testing of blood sugar
level banned, the contract between MP and YR becomes void.
Accordingly, MP is entitled to recover the advance of Rs. 10 million paid to YR, whereas MP would not be liable
towards the cost incurred by YR i.e., Rs. 5 million.
Answer-06
➢ Faheem’s position
Faheem’s statement regarding the number of copies that could be printed (1,000 copies) did not cause Ujala Arifa’s
consent in the first place since the statement was made after the machine was already purchased, therefore, the contract
is valid and cannot be rendered voidable at Ujala Arifa’s option.
➢ Remedies available to Ujala Arifa
Ujala Arifa has no remedies available against Faheem because he cannot be held liable towards her unless she can prove
that any of statements made by Faheem, based on which she decided to give her consent to purchase the photocopy
machine, were made with fraudulent intent or misrepresentation.
Answer-07
(a) An agreement not enforceable by law is said to be a void agreement. Following agreements have been expressly declared
as void agreements:
(i) Agreement in restraint of marriage of any person, other than a minor.
(ii) Agreement that restrains someone from exercising a lawful profession, trade or business except selling a business’s
goodwill, where the seller agrees to refrain from carrying on a similar business, within the specified local limits.
(iii) Agreement, by which any party is restricted absolutely from enforcing contractual rights, by the usual legal
proceedings in ordinary courts, or limits the time within for enforcing these rights, except where parties agree not
to appeal in an upper court or select one court of law over another when both have equal jurisdiction.
(iv) Agreements, meaning of which is not certain, or capable of being made certain.
(v) Wagering agreements; no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted
to any person to abide the result of any game or other uncertain event on which any wager is made.
(vi) Agreements knowingly made to promote or assist the conclusion, execution or performance of, or to secure or
guarantee the performance of, any wagering agreement that is void.
(b) An ‘agent’ is a person employed to do any act for another or to represent another in dealings with third persons. An
agent’s authority may be express or implied. An express authority is given by words spoken or written whereas implied
authority is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of
dealing, may be accounted for circumstances of the case.
An agent having an authority to do an act has authority to do every lawful thing which is necessary in order to do such
act, whereas an agent having an authority to carry on a business has authority to do every lawful thing necessary for the
purpose, or usually done in the course of conducting such business.
Furthermore, an agent has authority, in an emergency, to do all such acts for the purpose of protecting his principal from
loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances.
Answer-08
(a)
In certain situations, the law of contract imposes obligations on a person in absence of any agreement. These obligations
resemble those as created by a contract. These are called quasi-contracts i.e., those contracts that should have been
formed even though in actuality they were not.
A quasi-contract may be formed, in the following circumstances:
(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 has been
delivered by mistake or under coercion, must repay or return it.
(b) In the absence of any contrary usage or custom of trade, the following are the restrictions imposed on the implied
authority of a partner:
(i) submit disputes relating to the firm’s business to arbitration;
(ii) open a bank account on behalf of the firm in his own name;
(iii) compromise or relinquish any claim or portion of a claim by the firm;
(iv) withdraw a suit or proceeding filed on behalf of the firm;
(v) admit any liability in a suit or proceeding against the firm;
(vi) acquire immovable property on behalf of the firm;
(vii) transfer immovable property belonging to the firm;
(viii) enter into partnership on behalf of the firm.
Answer-09
(a) An agreement in respect of the production, supply, distribution, acquisition or control of goods or the provision of
services which has the object or effect of preventing, restricting, or reducing competition within the relevant market
would be prohibited and hence void. Such agreements include but are not limited to:
(i) fixing the purchase or selling price or imposing any other restrictive trading conditions with regard to the sale or
distribution of any goods or the provision of any service;
(ii) dividing or sharing of markets for the goods or services, whether by territories, by volume of sales or purchases,
by type of goods or services sold or by any other means;
(iii) fixing or setting the quantity of production, distribution or sale with regard to any goods or the manner or means
of providing any services;
(iv) limiting technical development or investment with regard to the production, distribution or sale of any goods or
the provision of any service;
(v) collusive tendering or bidding for sale, purchase or procurement of any goods or service;
(vi) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a
disadvantage;
(vii) making the 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 such contracts.
(b) Under the Payment Systems and Electronic Fund Transfers Act, 2007, Electronic Fund means money transferred
through:
✓ an Electronic Terminal,
✓ ATM,
✓ telephone instrument,
✓ computer,
✓ magnetic medium,
✓ or any other electronic device,
so, as to order, instruct, or authorize:
✓ a banking company,
✓ a Financial Institution, or
✓ any other company or person,
to debit or credit an account; and includes:
✓ monetary value as represented by a claim on the issuer which is stored in an electronic device or Payment
Instrument,
✓ issued on receipt of funds of an amount not less in value than the monetary value issued, accepted as means of
payment by undertakings other than the issuer, and
✓ electronic store of monetary value on an electronic device that may be used for making payments, or as may be
prescribed by the State Bank of Pakistan.
Answer-10
Where a bill is rejected by the Senate, then such bill will not be effective unless it is, at the request of National Assembly,
considered in the joint sitting of both the Houses (i.e., National Assembly and Senate).
If in the joint sitting, such bill is passed by the votes of the majority of the members present and voting in the joint sitting,
it shall be presented to the President for assent.
The President shall within 10 days assent to the bill or return it to the Parliament for reconsideration of any provision or
any amendment therein.