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IMPERIAL LEARNING ACADEMY

STANDARD NOTES
Business law
B.com part 2ND

Ahmed Raza

Notes of following books are also available


1. Accounting i.com par 1st & part 2nd ( Urdu and English)
2. Statistics I.com part 2nd (Urdu)
3. Accounting B.com part 1st
4. Money Banking and finance Business law
5. Introduction to business
6. Business law

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Important questions
1. Discuss essential of valid contract
2. What are the kinds of contract explain them
3. Explain the essentials of valid offer
4. What are the essentials of a valid acceptance?
5. Discuss void agreement in detail
6. What are the rules and exceptions of consideration
7. What do you understand by capacity to contract? What are the effects of agreements
made by the person not competent to contract?
8. What do you mean by free consent discuss in detail
9. What are the ways in which a contract may be discharged
10. Give the remedies available to the aggrieved party in case of breach of contract
11. Discuss in detail the position of a quasi-contract when the obligations of contract are
imposed by the law
12. Differentiate between indemnity and guarantee
13. What are the features of bailment?
14. What are the rights and duties of bailer?
15. What are the rights and duties of Bailee?
16. What are the essential features of pledge?
17. What are the rights and duties of Pledger?
18. What are the right and duties of pledgee
19. Differentiate between the sale and agreement to sell
20. Rights and duties of unpaid seller
21. Discuss the rights of buyer in a contract of sale
22. Discus the rules relating to the delivery in a contract of sale
23. Rights duties and liabilities of common carrier
24. Rights duties and liabilities of railway as a common carrier
25. Differentiate between the common carrier and private career
26. Differentiate between the bill of lading and chartered party
27. What are the types of crossing of cheque
28. Difference between bill of exchange, cheque and promissory note
29. What are the requirements for the registration of trade union?
30. What are the powers and functions of national industrial relationship commission

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Contract
An agreement enforceable at law is called contract. Note

Agreement This page is only for clearing


concept. it is not the part of any
Every promise or set of promises forming question
consideration for each other is called agreement.

Types of agreement
i. Social agreement
ii. Legal agreement

Social agreement
Agreements which do not create legal obligation between the parties are called social
agreements. In social agreements, parties to a contract are not legally bound to
perform the contract

Legal Agreements
Agreements which create legal obligation between the parties are called legal
agreements.

In legal agreements, parties are legally bound to perform the contract.

Promise
When one person makes a proposal and other person accept it, it becomes promise

Or

An accepted offer is called promise

Enforceable
An agreement creating legal relationship between the parties is enforceable. If a
contract does not create legal obligation between the parties it is not enforceable by
law.

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Q#1 An agreement enforceable at law is contract discuss


Or
Describe the essentials / requirements of valid contract
Contract

An agreement enforceable at law is called contract.

Essentials of a valid contract

1. Offer& Acceptance

For a valid contract there must be lawful offer and lawful acceptance. Lawful means that the
offer and acceptance must fulfill the requirement of law

Example

A offers to sell her house to B for 10 lac, this is an offer. Tania agrees to buys her house,
there is an acceptance.

2. Legal Obligation

There must be legal obligation / relation between the parties to make a contract valid

If parties do not intend ( ) to create legal relationship, contract is not enforceable


at law.

Example

A agrees to sell his house to B for 20. Lac. It is a valid contract as it is creating legal
relationship between the parties

3. Lawful consideration

Consideration is the price paid by the one party for the promise of other party. Thus for a
valid contract consideration must be lawful

Example

A agrees to sell his house to H for Rs 20 lac

For A 20 lac is consideration


For B house is the consideration

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4. Competent to contract

For a valid contract parties must be of sound mind, must attain the age of majority and are not
disqualified from contracting by law

Example

A, a person of unsound mind agrees to sell his cycle to B for Rs 10. The is void as the parties
not competent to contract

5. Free consent

For a valid contract the consent of parties must be free. Consent is free when it is not
obtained by coercion,( ) undue influence ( ) misrepresentation and
fraud

Example

A compels ( ) X to enter into an agreement on gunpoint, it is a valid contract


because the consent of a party is not free

Lawful Object

The object of agreement must not be illegal, immoral ( ) opposed to public policy or
to imply injury to any person

Example

A agrees to sell his cycle to B for rs 2000 if he beats C. the agreement is void as its object is
illegal

Writing & registration

A contract may be oral ( ) or in writing but it is preferable that the contract must
be in writing because it is easy to prove in court. If required by law certain agreements must
be in writing signed and attested by witness and registered

Example

X verbally promise to sell his books to Y. it is a valid contract as it does not required in
writing

A verbally promise to sell his house to B. it is a void agreement because law requires it in
writing.

Certainty of terms

For a valid contract it si essential that the terms and conditions of contract must be definite
and clear. Agreements the meaning of which is not clear are void

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Example

A promised to sell one of his books to B. It is void agreement because it is not mentioned
which book A wants to sale

Possibility of performance

An agreement to do an impossible act is void. If the act is legally or physically impossible to


perform the agreement is not enforceable by law

Example

X promised Y, that she will discover gold by magic. It is a void agreement as it is impossible
to perform

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Q#2
What are the kinds of contract? Explain them
The contract can be classified into following four categories

1. According to enforceability
2. According to formation
3. According to performance
4. According to parties

1. According to enforceability
According to enforceability a contract has following five types
i. Valid contract
ii. Void contract
iii. Void agreement
iv. Voidable agreement
v. Unenforceable contract

i. Valid contract

A contract is valid only when it contains all essentials of a valid contract

Obligation of parties

In a valid contract all the parties are legally bound to perform their obligations. If one party
refuses to perform the other party can enforce it through court.

Example

A agrees to sale his car to B. It is a valid contract if it fulfils all the essentials of a valid
contract.

ii. Void contract

A contract is void when it is not enforceable by law

Obligation of parties

In a void contract both the parties are not legally bound to perform the obligations of
contract. If any party has received benefit from void contract is legally bound to return it to
other party.

Example
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A agrees with B to smuggle sugar. Contract between the parties is void as smuggling is
illegal.

iii. Void agreement

An agreement which does not create legal obligation between the parties is void. An
agreement with minor and agreement without consideration is void.

Obligation of parties

In a void contract both the parties are not legally bound to perform the obligations of
contract. If any party has received benefit from void contract is legally bound to return it to
other party.

Example

Ali agrees with Shahid a minor to buy his house. Contract between the parties is void as
agreement with minor is void.

iv. Voidable contract

A contract which is enforceable at the option of one party but not at the option of other party

A contract is voidable when consent of one party is not free. Voidable contract can be
avoided by the party whose consent is not free.

Example

Maria compels Nadia to sell her Bag. The consent is made with coercion. It can be avoided
when Nadia refuses to perform it.

v. Unenforceable contract

A contract is unenforceable which cannot be enforced in court of law. Because of some


technical defects, Such as absence of writing and registration

Example

Ali orally agreed to sale his house to Bilal. Contract is unenforceable because writing and
registration for this contract is required by law

2. According to formation
According to formation a contract has following three types.

a. Express contract
b. Implied contract
c. Quasi contract

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a. Express contract

When a contract is formed by the words spoken or written it is called express contract

Example

Ali tells saad on telephone that he wants to sell his car. It is an express contract.

b. Implied contract

An implied contract arises from the acts, course of dealing or circumstances. It arises when
one person without asking to do so, render services under circumstances indicating that he
expect to be paid for the services and other person accept the benefit of those services.

Example

Ali went to a hotel and had a cup of tea, it is an implied contract and Ali will pay for the cup
of tea.

c. Quasi contract

Quasi contracts are based on the principle of equity and justice. That a person shall not be
allowed for the benefit at the cost of other

Example

Shahid finds the lost goods of Majjid. Shahid is bound to return the goods to Ma jjid.

3. According to performance
Following are the types according to performance

i. Executed contract
ii. Executory contract

i. Executed contract

When all the parties to a contract have performed their obligations the contract is said to be
executed.

Example

Kaleem buys a Book from Shahzeb. Shahzeb delivered book and kaleem made the payment.
Both the parties have performed their obligations.

ii. Executory contract

When one of the parties has yet to perform his obligations, such contract is called executory
contract.

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Example

Kaleem buys a Book from Shahzeb. Shahzeb delivered book but kaleem has not yet made the
payment.

4. According to parties
According to parties the contract has following two types

a. Unilateral contract
b. Bilateral contract

a. Unilateral contract

It is a contract where only one party is bound to perform the contract and the other party
chooses to perform contract

Example

Ali promised to give 1000 Rs to the person who finds his lost bag. It is a unilateral contract it
will come into existence when the bag is found.

b. Bilateral contract

It is a contract where both the parties have yet to perform their obligations.

Example

Khalid promised to manufacture a chair for Nadeem and Nadeem promised to pay RS 4000
to Khalid

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Q#3
Define the offer / proposal. Explain the essentials of a valid offer
Offer / proposal

When one person shows his willingness to do or not to do something to obtain the
consent of other, it is known as offer

Offeror / Promisor

The person making the offer is called Offeror or Promisor.

Offeree

The person to whom offer is made is called Offeree. Or the person accepting the offer
is called Offeree.

Essentials of a valid offer


The following are the essentials of a valid offer

1. Express or implied
2. Legal relation
3. Definite & clear
4. Specific & general
5. Communication with Offeree
6. Negative condition
7. Conditions in offer
8. Cross offers

1) Express or implied

An offer may be made by words or conduct ( ). An offer which is made by


words spoken or written is called express offer.

An implied offer appears from the actions of parties, course of dealing or


circumstances of case.

Example

Ali offer to majid to sell his motorcycle for 4000 Rs. This is an express offer

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New khan run buses to carry passengers at scheduled rates, this is an implied offer

2) Legal relation

For a valid contract the offer must be made to create legal relation. If an offer does not
create legal relation it is not a valid offer.

Example

Ali invites Farrukh to dinner. It is not a valid offer because it does not create legal
relation between the parties

Maria offer to sell her watch to Anam for Rs. 200. It is a valid contract as it create
legal relation between parties

3) Definite & clear

Terms and conditions of offer must be clear and definite. If the terms and conditions
are not clear, it cannot be called valid offer.

Example

Majid has two motorcycles, he offer Khalid to sold one motorcycle for Rs. 40000. It is
a void contract as it is not clear that which motorcycle he offered to sale

4) Specific or general

When an offer is made to a specific person it is called specific offer. Such an offer can
be accepted only by the person to whom it is made.

When an offer is made to general public it is called general offer. Such an offer can
be accepted by any person who fulfils the conditions of offer

Example

Ali offered to sell his cycle to Majid. It is a specific offer and only majid can accept it

Basher announced in a newspaper a reward of Rs 500. For anyone who finds his lost
N.I card.

5) Communication with Offeree

An offer is valid only when it is communicated to the Offeree. If is not communicated


to Offeree it is not a valid offer

Example

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Sidra wants to sale her bag to Mehwish but forget to communicate her about offer.
Thus there will no acceptance as it is not communicated to Offeree.

6) Negative conditions

An offer must not include negative conditions. Such as an Offeror cannot say that if
the acceptance is not communicated within a specific period of time the offer would
be treated as accepted.

Example

Majid wrote to sajid to sell his watch adding that if he did not reply within 2 days, the
offer will be considered accepted.

7) Conditions in offer

An offer may include some comedians. For a valid contract all the conditions must be
accepted. If the Offeror prescribe a specific mode, it must be accepted in the same
manner.

Example

Shahid asks Hammad to send him reply of his offer by telegram, but hammad reply
him by letter. Shahid may reject the acceptance.

8) Cross offer

When both parties makes similar offer without having knowledge of others offer. It is
called valid offer. Acceptance of such offer does not result in complete Agreement.

Example

Wasim wrote to Karim to sell him his motorcycle. On the same day Karim wrote to
Wasim that he wants to buy his motor cycle. There is no contract.

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Q#4
Define the acceptance. Explain the essentials of a valid acceptance

Acceptance

Acceptance is the act of giving consent to the offer.

Example

Majid offer to sell his house to sajid for 20lac Rs. If sajid agrees to buy, this is an
acceptance.

Essentials of a valid offer

The following are the essentials of a valid offer

9. Acceptance by offeree
10. Definite & unconditional
11. Reasonable manner
12. Communication with Offeror
13. Express or implies
14. Acceptance after offer
15. Reasonable time

1) Acceptance by offeree

For a valid acceptance it is necessary that it must be accepted by the person to whom
it is made. If the offer is made to a group it can be accepted by any member of group.
If offer is made to general public it can be accepted by any person who has the
knowledge of it.

Example

A offer to B to sell his motorcycle for 4000 Rs. C was aware of this offer, he said that
he is ready to buy his motorcycle, there is no contract with C.
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2) Definite and unconditional

For a valid contract the acceptance must be definite and unconditional. If acceptor
attach any condition with his acceptance, it is not acceptance but a counter offer

Example

Maria offer to sell her watch to Anam for Rs. 200. Anam replies that she can buy it for
100 Rs. there is no acceptance but a counter offer

3) Reasonable manner

Acceptance must be given in a particular manner as prescribed in offer. If no


particular manner is prescribed than it must be accepted in a reasonable manner.

Example

Shazia offered to Nadia, and ask her to accept the offer by telegram. But Nadia send
her acceptance by post, Shazia may reject her acceptance

4) Communication with Offeror

An acceptance is valid only when it is communicated to the Offeror. If it is not


communicated to Offeror it is not a valid Acceptance

Example

Sidra wants to sale her bag to Mehwish, she express her intention to buy it but did not
reply. Sidra sold it to Maria. Mehwish cannot sue sidra.

5) Express or implied

Acceptance given by the word spoken or written is called express acceptance.

When acceptance is given by the action or conduct it is called implied acceptance.

Example

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Shahid wrote a letter to majid that he is agree to buy his mobile for 4500 Rs. This is an
express acceptance.

Junaid went to a tea stall and took a cup of tea. This is an implied acceptance
appearing from the action

6) Acceptance after offer

Acceptance must be given after receiving the offer. If acceptance is given without
having knowledge of offer; there is no contract because acceptance cannot be given
without offer

Example

Asad offered a reward for anyone who finds his lost mobile. Khurram in ignorance of
offer finds his bag and return it to Asad. Khurram cannot claim for the reward

7) Reasonable time

Offer must be accepted within a prescribed time. If time of acceptance is not


mentioned than it should be accepted within a reasonable time

Example

Razib Applied for admission in a college. But admission was made after 6 month of
application. Razib can refuse to take admission as it was not accepted within
reasonable time.

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Q#5
What agreements have been declared void by law?
Void agreement

An agreement not enforceable by law is called void agreement


following are the agreements that are declared void

1. Agreement in restraint of marriage


2. Agreement in restraint of trade
3. Agreement in restraint of legal proceedings
4. Uncertain agreements
5. Agreement by way of wager
6. Agreement against the public policy
7. Agreement to do an impossible act
8. Agreement under mistake
9. Agreement without consideration

Agreement in restraint of marriage

Every agreement which prevents a person other than minor from marrying is
void. A contract which interfere with the freedom of choice in marriage is also
called void

Example

Aslam agrees with Bilal that he will not marry with Fatima. It is a void
agreement

Agreement in restraint of trade

Every person has a right to carry on a lawful business, profession, or trade.


Thus, every agreement which prevent a person from doing a lawful business,
profession or trade is void

Example

Amjad agrees with Tayyab to give him 10000 Rs. If he stops doing business in
Faisalabad, such agreement is void

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Agreement in restraint of legal proceedings

An agreement which restrict a person from enforcing his right in court of law is
void.

An agreement which limits the time within which he can enforce his right is
void

Example

Fahad sells wheat to Majid. Both parties agree that if any party fails to perform
the contract, none of them would file a case, the agreement is void.

Uncertain agreements

If the meaning of an agreement is not certain or it cannot be made certain, the


agreement is void

Example
Shehroz agrees to sell his books to Ali and there is no indication which books are to
be sold, the agreement is void

Agreement by Way of Wager


Wager mean bet, a wager is an agreement to pay on the happening or non-happening
of future event, each party has equal chance to win or lose the bet and the parties are
only interested in betting amount.

Example
Wahid and Majid agree that if Pakistan won the cricket match today, Wahid will pay
Majid 100 Rs. If Pakistan loses Majid will pay 100 Rs. It is a wager agreement, so
declared void

Agreement against the public policy


Every agreements which is against the public policy or involve injury to person is
called void

Example
Umair agrees with asif that if he adds drugs in food he will pay him Rs 1000.

The agreement is void

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Agreement to do an impossible act
An agreement to do an impossible act is called void.

Example
Shazia agrees with Tania to discover Gold by magic, is void

Agreement under Mistake


Every agreement where both the parties are under the mistake and they dont have
clear information about the fact, the agreement is void

Agreement without Consideration


Every agreement which is made without consideration, is void

Example
Ahmed Agrees to give his car to Hassan without consideration is void

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Q#6 what are the essentials of consideration? Or what are the rules of consideration?
Consideration

Consideration is the price paid by one party for the promise of other.

Example

Ali sold his house to Hassan for Rs. 500,000. For Hassan house is the consideration and for
Ali Rs500, 000 is consideration.

Essentials of a consideration
1. Desire of promisor

For a valid consideration the act must be done at the desire of promisor. Any act done without
the desire of promisor cannot form a valid consideration.

Example

Razib saved Mehmoods house from fire. Mehmood did not ask for the help. Razib cannot
demand price for his service.

2. Act

A consideration may be an act or doing of some thing

Example

Sadia promised to stitch Nadias dress. And Nadia promised to pay Rs 400 to sadia as
consideration for stitching her dress.

3. Abstinence

Abstinence means promising not to do something. Consideration may be decided for


promising not to do something.

Example

Ali promised not to sue waqas, if he pays waqas Rs. 20000. The abstinence of Ali is the
consideration for Bs payment

4. Promise

For a valid contract there must be promise from both the parties.

Example

Majid agrees to cell his mobile to Bilal for Rs 4800. For Majid Rs4800 is the consideration
and for Ali mobile is the consideration
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5. Real and certain

For a valid consideration it must be real and certain. If the payment of consideration is
physically impossible it would not real. On the other hand if the payment of consideration is
uncertain it would be void.

Example

a) Ali promised to put life in shaans dead body if he pay him Rs 5000 Alis promise is
physically impossible.
b) Ali promised to sell his mobile to Nadia for some amount of money. Consideration is
not valid as the value of mobile is not decided.

6. Legally impossible

A promise to do something illegal is also void and do not form a valid consideration.

Example

Khuram promised Abid to pay Rs 4000 if he Beats Bilal. The consideration to beat Bilal is
illegal.

7. Need to be adequate

It is not necessary that the consideration must be adequate. Only Presence of consideration is
necessary.

Example

Ali promised to sell his house to waqas worth Rs 500000 for Rs 200000 only, and his consent
is free. The consideration is valid.

8. Lawful

The consideration and must be lawful and should not against the public policy.

Consideration is unlawful:

If it is forbidden by law

It is fraudulent

It involve property of other

It is opposed to the public policy

9. Past consideration

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When the act have been done before a contract is made it is called past consideration

Example

A gives some services to B at Bs desire. Later on B


compensate A for his services.

10. Present consideration Note:

If the consideration is decided at the time when Heading Number 9, 10, 11 are
contract is made it is called present consideration. the kinds of consideration
Example So it can satisfy question of
Ali sold his car to B and Ali make the payment at the what are the type of
same time it is called present consideration. consideration

11. Future consideration

When both the parties promise to do something in


future it is called consideration.

Example

Ali promised to sell his house B after 10 days. B also promised to pay the price after ten days.

Q#6(b) what are the exceptions of consideration?


According to law agreement without consideration is void. Following are the agreements that
are valid even without consideration.

1. Natural love and affection

The agreement which is expressed in writing and is made on account of natural love is valid even If
there is no consideration.

Example

Ali promises to pay Rs 2000 to his son junaid for no consideration. Ali got it in writing and registered
with law. Junaid can enforce it

2. Voluntary compensation

A promise to compensate a person wholly or partly a person who has already voluntarily do
something for the promisor is enforceable even if there is no consideration.

Example

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Ali gave medical treatment to Bilal voluntarily. Bilal after discharging from hospital promised to Pay
Rs. 4000 to Ali. Ali can enforce it.

3. Gift

Gift does not need any consideration. Any gift given or received is valid even if without
consideration. Donor cannot take back the goods which are delivered as a gift.

Example

Irum gave her watch to Misbah as gift. Irum cannot get back the watch as there was no consideration
for her.

4. Contract of agency

Consideration is not paid to the agent on his appointment. Normally an agent is paid commission
against his services.

Example

Ali appointed Razib as his agent. The agreement between Ali and Razib is valid even without
consideration.

5. Discount / remission

If a creditor agrees to receive less than what is due, it is known as remission or discount. There is no
need of consideration for the remitted amount.

EXAMPLE

Ali borrowed Rs. 6000 from Ahmed. Later Ali paid Rs. 5500 as full settlement of claim, the whole
debt is discharged

6. To extend the time for performance

Agreement to extend the time for the performance of contract needs no consideration.

Example

Zubair agreed to construct Razibs house within three month. Later zubair requested to extend the
time for the completion of contract, there is no need to of consideration for the extended time.

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Q#7
What do you understand by the capacity of parties? State the positions of a minor
under contract act

Or

What do you understand by the capacity of parties? What is the effect of agreement
made by the person not competent to contract?

Or

Explain the effect of contract made by the person not qualified to contract

Or

What do you understand by contractual capacity?

For entering in to a valid contract the parties must be competent to contract

Every person is competent to contract who is of age of majority, is of sound mind and is not
disqualified from contracting by law

Nature of minors agreement

1. Void agreement
2. Minor as a partner
3. Minor as a beneficiary
4. Minor as a agent
5. Minor and insolvency
6. Minor and ratification
7. Contract by minor and adult
8. Minor as member of company
9. Surety for a minor
10. Minors parent

1) Void Agreement

Minor is a person who has not attained the age of majority (18 years). Agreement with minor
is void from beginning because minor has no legal capacity to enter in to an agreement. He is
not liable to perform any act or promise under the agreement.

Example

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Rashid enter in to an agreement with a minor Shahid, on the date of performance Shahid
refuses to perform the contract. Rashid cannot sue Shahid because agreement with minor is
void.

2) Minor as a partner

A minor cannot become a partner in profit and losses of a firm. However a minor can be
admitted to the benefits of the firm only.

Example

Ali, and Shahid are partners in a firm they admitted a new partner sajid a minor in profits and
loss of firm. This is a void agreement as minor cannot be admitted to profits and loss.

Bashir and Nazir are partners in a firm; they admitted a minor Bilal in profits of the firm
only. This is valid agreement

3) Minor as a beneficiary

If an agreement is made for the benefit of minor then the minor can take the benefit of that
agreement. A minor can enter in to any agreement which do not required to bear any
obligation. A minor can enforce a promissory note which is prepared in his favor but he is not
liable.

Example

Sajid, a minor delivered goods to Habib under an agreement. Habib refused to make
Payment. It was held that minor can recover the price of goods

4) Minor as Agent

A minor can act as an agent. But a minor is not responsible for any negligence. If a minor
breaches any duty, he cannot be held responsible. Therefore the whole the risk goes to the
principal.

Example

Ali appoints Munir a minor as his agent to sell his house to a third party. Munir makes an
agreement to sale his house to sajid. The agreement is valid.

5) Minor and insolvency

A minor cannot be considered insolvent because he is not liable to perform any obligations.
Only his property is liable. If he has no property than the payment cannot be recovered

Example

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Shahid a minor buys medicine from Riaz under an agreement. Shahid has no property. Shahid
cannot be held responsible. He cannot be declared insolvent.

6) Minor and Ratification

A minor cannot confirm those agreements that were formed during the age of minority. It is
necessary that a fresh agreement should be made after attaining the age of majority.

7) Contract by minor and adult

If a minor and major (adult) jointly enter into an agreement with other party, only major will
be liable but a minor will not be responsible

Example

Khalid a Minor and adult jointly enter in to an agreement to purchase Alis house. In case of
breach of contract only adult is liable but not minor.

8) Minor as Member of company

A minor cannot directly buy shares of the company because he is not competent to contract.
If parents of a minor are shareholders of a company, the company can transfer shares in favor
of minor after the death of his parents.

Example

Jamaal holds share of a company. He dies and leaves Zain (His Son) a minor as his legal
representative. Company is bound to transfer shares to M.

9) Surety for Minor

When an adult gives surety in a contract of guarantee, only the adult is liable under the
contract. Minor is not responsible for any obligation.

Example

Ali a minor makes a contract with waqas. Ahmed gives surety for Ali. The contract is valid.

10) Minors parents

If an agreement is made by a minor than parents of minor are not responsible for the
payment. The parents are responsible only when minor acts as an agent of his parent.

Example

Ali sends his son to buy goods from Jamaal, his son bought goods from Jamaal. Ali is liable
to make payment.

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Q#8 What is consent and free consent? What is the effect of


consent on contract?
Or
What is consent? What is the effect of consent when it is not free?
Consent

When two or more parties agree upon the same thing in the same manner in the same sense,
when the both the parties agree upon the same thing in the different manner it is not a real
consent.

Free consent

Consent is free when it is not obtained by;

i) Coercion
ii) Undue influence
iii) Misrepresentation
iv) Fraud
v) Mistake

Effects of consent on the validity of contract


1. Coercion

Coercion means committing or threading to commit any act which is forbidden by law. In
other words coercion means obtaining the consent of other party by threatening him.

Effects on consent

i. Committing or threatening to commit

When a person commits or threatens to do a person a work which is forbidden by law. Is


called coercion

Example

Ali threats to kill Majid, if he does not gave his car to Mohsin. The agreement is void as
consent is not free

ii. Unlawfully detaining or threatening to detain property

When a person unlawfully detain the property of other person for the purpose of compelling
him to enter into an agreement, it is coercion

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Example

A driver refuses to deliver the documents of car to his employer unless he is paid Rs 1000 it
is coercion

Effect of coercion on the validity of contract

A contract formed under the coercion, the contract is voidable at the option of that party
whose consent is not free.

2. Undue influence
Undue influence is when one party uses his position or power to dominate the will or consent
of other party and uses his power to obtain unfair advantage over the other.

It is further explained as follows:

i. Dominating position

In order to prove undue influence. The relation between the parties should be such that the
one of them should be in a dominating position.

ii. Unfair advantage

In order to prove undue influence, it is necessary to prove that the person who has dominating
position has used his powers to get unfair advantage.

Effect of undue influence on the validity of contract

Contract made under the undue influence can be avoided by the party whose consent is
obtained by undue influence.

3. Fraud

All acts committed by a party with the intention to deceive the other party.

There is fraud in the following cases:

i. False statement

When a party to contract makes false statement intentionally, he is liable for fraud

Example

Khuram khurrram knows that his mobile has been made in Pakistan but tells Ahmed that the
mobile made in Japan, khurrram is liable for fraud.

ii. Object of fraud

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The object of fraud must be to deceive other party and the other party have been actually
deceived by the other party.

iii. Loss

It is also necessary that the party acting upon the misrepresentation has suffered loss

Effects of fraud on consent

The following remedies are available to the aggrieved party:

a) He can avoid the contract


b) He can sue for the damages
c) He can ask for the specific performance and restoration

4. Misrepresentation

Misrepresentation means the giving the false statement of fact about contract to obtain the
consent of consent of other party. Misrepresentation must be made with the intention to
deceive other party.

In order to prove misrepresentation the followings things are necessary:

i. It must relate to the contract


ii. It must be untrue
iii. The other party must suffer loss
iv. The other party cannot discover the truth by ordinary diligence

Effects of fraud on contract

The contract is voidable at the option of that party whose consent is affected by the
misrepresentation.

The contract may be accepted by the injured party.

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Q#9
What is discharge of contract? What are the ways in which a
contract may be discharged / terminated?
Discharge of contract
When the rights and duties created by law come to an end the contract is said to be
discharged or terminated
A contract can be discharged by the following ways
1. Discharge by Performance
2. Discharge by Agreement
3. Discharge by Subsequent impossibility
4. Discharge by Laps of time
5. Discharge by Operation of law
6. Discharge by Breach of contract

Discharge by Performance
When all the parties to a contract have performed there services required by law the
contract is discharged by performance. If only one party performs his duties he is
alone discharged. The performance may be;
i. Actual performance
ii. Attempted performance (or) tender

Actual performance
When all the parties to a contract have performed their promise the contract comes to
an end by actual performance

Example
Shazia agrees to sell her bag to Maria for 500 Rs. Shazia delivers her bag and Maria
makes payment. This is an actual performance

Attempted performance (or) Tender


When one of the parties, offered to performed contract but other party does not accept
it. This is an attempt to perform

Example
Shazia agrees to sell her bag to Maria for 500 Rs. Shazia offers to deliver her bag but
Maria does not accept it. This is an attempted performance.

Discharge by Agreement
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A contract may be discharged by the agreement between the parties in any of the
following ways
i. Novation
ii. Alteration
iii. Rescission
iv. Remission
v. Waiver

Novation
Novation means the replacement of old contract by new contract. In new contract the
parties may change or remains the same, thus an old contact is discharged with the
new contract
Example
A owed ( ) to B and B to C, As debt to b is cancelled and C accepts A
as his Debtor. It is novation
Alteration
Alteration means the changing in the terms and conditions of contract. If alteration is
made with the consent of all the parties the contract is discharged and a new contract
takes place
Example
Ali agrees to sale goods to Riaz for Rs 1000. Later, Riaz decided to purchase high
quality Goods for Rs 2000. The old contract is altered.

Rescission
Rescission means the cancellation of contract by mutual agreement. The cancellation
free the parties from obligations of contract
Example
Majid Agrees to sale goods to Sajid for Rs 2000. Later, Sajid requested Majid to
cancel the supply of Goods. This is rescission.

Waiver
When a party surrenders his right to contract, the other party is free from his part of
obligation. It is called waiver.
Example
Ali owes Majid Rs. 5000. Ali agrees to accept Rs. 4000 in full satisfaction of
claim. The whole debt is discharged.
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Discharge by Subsequent impossibility
If the performance of contract is possible at time of formation of contract but
afterwards it becomes impossible or unlawful. The contract will be discharged.

Example
a) Bilal promise to sell wheat Habib, before delivery government banned private
trading of wheat
b) Farukh and Sidra promise to marry each other, before the time fixed for
marriage Farukh dies. The contract becomes void and discharged

Discharge by Laps of time


According to the limitation act, the contract should be performed within a specified or
reasonable time. In case of breach of contract, legal action should be taken within a
specified period of time. If no legal action is taken within specified period of time the
contract is discharged.

Example
Bashir took loan form Nazir. Last date for repayment of loan has expired but no legal
action has been taken by Nazir for 3 years. Bashir is discharged from his liability.

Discharge by operation of Law


A contract may be terminated by the operation of law in the following ways
i. Insolvency
ii. Death of any party
iii. Alteration

Insolvency
A contract is discharged when court declares a person insolvent; such person is
discharged from his liabilities incurred before insolvency.

Death of any party


If any of the party before performance dies, the contract is discharged.

Alteration
Alteration means change in rights and duties of the parties. If the terms and conditions
are changed by any party without consent of other party the contract is discharged

Discharge by Breach of contract

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Breach of contract means when one or more of the parties fail to perform their
obligations. Breach of contract discharge the aggrieved party from performing his
obligation.
Breach of contract may of two types;
i. Actual breach
ii. Anticipatory breach

i) Actual Breach
When a party fails to perform his obligations when the performance is due

Example
Zeeshan agrees to sale goods to Razib on 6 th November, but he does not deliver
goods at agreed time. This is actual breach.
ii) Anticipatory Breach
An anticipatory breach occurs before the time fixed for performance. It has two types
Express breach and implied breach.
a. Express breach
When one party communicates the other party his attention not to perform the
contract. This is express breach.

Example
Mehmood agrees to sale his house to Razib. Before the date of performance
Mehmood informs Razib that he will not sale his house.
b. Implied Breach
When a party does an act which makes the contract impossible to perform. This
is called implied breach.
Example
Misbah agrees to sale her bag to Anam on 7th November but before the due date
Misbah sold her Bag to Iqra.

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Q#10
What are the remedies available to an aggrieved party for breach of
contract?

Or

Discuses the consequences of breach of contract

Or

State the principles on which court award for breach of contract

Breach of contract
Breach ( ) of contract means when one party fails or refuses to perform his
obligation

Remedies for breach of contract


Following remedies ( ) are available to aggrieved ( ) party
for breach of contract against the guilty ( ) party

1. Suit for rescission


2. Suit for damages
3. Suit upon quantum meruit
4. Suit for specific performance
5. Suit for injunction

1) Suit for rescission

Rescission means cancellation of contract. When one party breaches the contract the
other party may rescind contract and refue to perform his part of obligation. The
aggrieved party may sue the guilty for damages

Example

A agrees to sell his car to B for 6 lac Rs. But on due date A refuses to hand over his
car. B is discharged from contract and can claim damages

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2) Suit for damages

Damages are the monetary compensation allowed to aggrieved party for the lose
suffered by him as a result of breach of contract. The aggrieved party can claim the
following damages

i) General damages
ii) Specific damages
iii) Exemplary damages
iv) Liquidated damages

i) General damages

Ordinary damages are those which naturally arise as a result of breach of contract

For example in a contract of sale of goods the difference between the contract price
and market price are the damages that can be claimed

ii) Specific damages

These are the direct loses which arise due to the breach of contract. These damages
arise under some special cases

iii) Exemplary damages

These damages are awarded not to punish the guilty party and not compensate the
injured (aggrieved) party for the loss suffered.

iv) Liquidated damages

When the parties to a contract fix the amount of damages at the time of formation of
contract such damages are called liquidated or nominal damages.

3) suit for quantum meruit

Quantum meriut means payment in proportion of work done. Sometimes one of the
parties has done a part of his obligation but the other party commits the breach of
contract. In such case the party who has performed some work has right to claim for
the value of work done and damages for the remaining work.

Example

A agrees to construct a three story house for B. when only one story was constructed,
B prevented A from doing more work. So here A is entitled to get the reasonable
compensation for the work done and the damages for remaining work.

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4) Suit for specific performance

When only damages are not enough to compensate then the court may order guilty to
perform specific performance

Specific performance is granted in the following ways

a) When compensation in money is not enough


b) When compensation cannot be obtained
c) Where one of the parties is a minor
d) Where the contract involves personal skills, taste and qualification

Example

Ali agrees to sale his plot of land to Majid who agrees to purchase it to erect his mill
there. Later, Ali commits breach. It was held by court to carryout contract

5) Suit for injunction

Injection is an order from the court of law prohibiting a person from doing a specific
act. It is granted where the damages are not the adequate relief

Example

Farrah a lady singer enter into an agreement with Salman to sing at salmans theater
and nowhere else. Afterwards Farrah made a contract with Sheraz to sing at his theater
and refused to perform her contract with Salman. It was held that, Farrah could not be
compelled to sing at salmans theater she was prohibited by the court form singing for
Sheraz.

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Q#11 Discuss in detail the position of a quasi-contract when the


obligations of contract are imposed by the law
Or
What are the types of quasi contract?

Quasi / constructive / implied Contract

Quasi contracts are based on the principle of equity ( ) and Justice (


).

It means that nobody is entitled to benefit at the cost of other. Some time law requires
that a particular person must perform some obligations such obligations are called
quasi contract they are also called constructive or implied contract.

Kinds of contract

Or

Conditions under which quasi contract arise


1. Supply of necessaries
2. Payment by interested person
3. Compensation for non gratuitous acts
4. Finder of goods
5. Mistake or under coercion

1) Supply of necessaries

Where necessaries are supplied to a person who is incompetent to contract or to


someone whom he is legally bound to support, the supplier is entitled to recover the
price from the property of incompetent person.

Example

Ali supplies Hammad a minor, necessaries suitable to their conditions in life. Ali is
Entitled to reimburse ( ) form Hammads Property.

2) Payment by interested person


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A person who is interested in the payment of money which another is bound by law to
pay and who therefore pays it; it is entitled to be reimbursed by other.

Example

a) A pays arrears of rent of B to avoid dispute between B and his landlord (


)
A cannot recover from as he has no interest in payment

b) A imported Goods and stored in Bs warehouse without paying the custom


duty. The custom duty Authorities recovered custom duty from B. B can
recover from B

3) Compensation for Non- gratuitous act

When a person lawfully does anything for another person, or delivers anything to him,
not intending to give as a free gift, the other person also enjoys benefit thereof. Later
he is bound to compensate former ( ).

Example

A coolie takes the luggage of passenger at the railway station without asking.
Passenger does not object ( ) to it. Coolie can get the payment

4) Finder of goods

A person who finds the goods belonging to other and takes them into his custody, he
is entitled to recover compensation for the trouble in finding the owner of goods. If he
fails to find the true owner he can retain the ring

Example

Ali found a ring at a party he told the other guests about it but could not find the
owner. Ali can retain the ring.

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Q#12 what is the difference between indemnity and


guarantee?
Basis Indemnity Guarantee
Meaning A contract of indemnity is to In contract of gurantee one person
comansate the loss suffered by a gives the gurantee for the
person from the conduct of any performance of contract
third person
Parties In a contract of indemnity there In a contract of guarantee there are
are three parties, indemnifier and there parties, surety, debtor, creditor
indemnity holder
Liability The liability of indemnifier is The liability of surety is secondary as
primary he is liable only when the creditor fails
to pay the debt
Number of In contract of indemnity there is There are there contracts
contract only one contract between the Between surety and creditor
indemnifier and indemnity holder Between creditor and principal
Between surety and principal
Performance In contract of indemnity In contract of gurantee the
of contract performance depends upon the performance depends upon if the
possibility of loss creditor fails to make the payment.
Nature This contract is made for the This contract is made for the payment
payment of loss of debt
Request The indemnifier, promises without It is necessary that the surety must give
the request of debtor the gurantee at the request of debtor

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Q#13 WHAT IS BAILEMENT? ALSO EXPLAIN THE


ESSENTIAL FEATURES OF BAILMENT.
Contract of bailment
Bailment
Bailment is a voluntary transfer of goods by the owner to another person for specific purpose
under a condition that such other person shall return the goods after the purpose is
accomplished.

Example
Ali delivered a piece of cloth to Bashir to make a suit, there is a contract of bailment between
Ali and Bashir.

Bailor
The person who delivers the goods to the other person is called Bailor.

Bailee
The person to whom goods are delivered under the contract of bailment is called Bailee

Essential features
i. Contract
ii. Specific purpose
iii. No change of ownership
iv. Return of same goods

1. Contract
There must be a contract of bailment between the parties. If the goods are delivered by
mistake, there is no bailment

2. Specific purpose
The goods must be delivered for some specific purpose. If the goods are delivered without
any purpose there is no contract of bailment.

3. No change of ownership
In contract of bailment only the possession of goods changed but the ownership remains in
the same hands. If the ownership of goods is changed it cannot be called bailment.

4. Return of same goods


When the purpose of bailment is accomplished, same goods must be returned to the bailer.
The deposit of money in a bank is not bailment because bank cannot return the same money,
however notes and other valuable goods deposited in bank are the examples of bailment.
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Q#14 what are the rights and duties of Bailor?


Rights and duties of Bailor are given below

Rights of Bailor
Following are the rights of Bailor

1. Right to recover damages

Bailor can claim for the damages that arise due to bailees negligence. He can also claim
damages arising due to unauthorized use of goods.

Example

Ali bailed some goods to Zeeshan but due to the negligence of Zeeshan the goods were
stolen. Ali can recover the damages.

2. Right to demand return of goods

The Bailor has right to get back the goods bailed after as soon as the purpose is
accomplished. If Bailee fails to return the Bailor can claim for the compensation

Example

Sajjid give a car to majjid on hire for 5 days. Majjid fails to return on 5thd day. Sajjid can
claim damages

3. Right to claim increase

The Bailor can claim any increase or profit, which may accrued from the bailed goods.

Example

Asad bailed a cow to khurram. Cow gave birth to a calf. Asad can claim cow along with calf.

4. Right to terminate bailment

The Bailor has a right to terminate the bailment if Bailee does any act which is against the
terms and conditions of bailment.

Example

Ali gives his car on hire to Junaid for personal use but Junaid start driving it as carriage. Ali
can terminate contract.

5. Right to sue

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Bailor can sue Bailee if he fails to return goods or breaches contract.

Example

Ali gives his mobile to Zain for repairing. Zain sold it to Tania. Ali can sue zain.

6. Compensation

If the Bailee without the permission of Bailor mixes the goods of Bailor with his own goods
in such a way that it becomes impossible to separate them, the Bailor has a right to claim for
the compensation for the loss of goods.

Example

Moshsin bailed 2 bags of Basmati Rice to Hassan. Hassan mixed them with his own rice that
was of cheap quality. Moshsin can claim for the compensation

Duties of Bailor

Following are the duties of Bailor

i) Duty to disclose faults


ii) Duty to repay necessary expenses
iii) Duty to repay extra ordinary expenses
iv) Duty to indemnify for defective title
v) Duty to receive back goods

1. Duty to disclose faults


2. It is the duty of Bailor to disclose all the faults in bailed goods which are known to
him. If he does not disclose them he will be liable for the damages arising due to such
faults.

Example

Ali hires a carriage of Mehmood. The carriage was unsafe and Mehmood had not disclosed
that fact to Ali. Ali is injured. Mehmood is liable for the damages.

3. Duty to repay expense

When the goods are to be kept or carried by the Bailee. It is the duty of Bailor to bear all the
expense incurred on the bailed goods.

Example

Ali delivered a car to shahid for the safe custody. One tire of the car was burst on the way.
Shahid spent Rs.4000 to replace tire. Ali is liable to pay Rs. 4000

4. Duty to repay extra ordinary expenses

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If the extra ordinary expenses are incurred by the Bailee on the bailed goods then it is the
duty of Bailor to repay those expenses.

Example

Habib bailed his horse to Asif for journey. The expense for feeding horse is ordinary expense
and falls on Bailee but if horse becomes sick then it is the duty of Bailor to repay the
expenses incurred on the treatment of horse.

5. Duty to indemnify for the defective title

Where the title of goods to Bailor is defective and Bailee suffers loss due to such title, It is
the duty of Bailor to indemnify the Bailee for such loss.

Example

Ali gives his neighbors scooter to Bilal for use without neighbors permission. The Neighbor
files a suit on Bilal and received compensation. Ali is liable to compensate Bilal.

6. Duty to receive back goods

It is the duty of Bailor to receive back goods when the Bailee returns them after the
accomplishment of purpose

Example

Ali bailed his horse to Bilal to feed for two months. Ali does not take his horse after two
months. Bilal has to spend more to feed horse. It is the duty of Ali to compensate Bilal.

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Q#15 what are the right and duties of Bailee?


Rights of Bailee
Followings are the rights of Bailee

1. Right to recover damages

A Bailee has right to recover damages suffered due to fault in bailed goods that were
known to the Bailor

Example

Ali hires a carriage of Mehmood. The carriage was unsafe and Mehmood had not
disclosed that fact to Ali. Ali is injured. Mehmood is liable to compensate for the
damages.

2. Right to recover expense

It is the right of Bailee to recover expenses that were incurred on the bailed goods.

Example

Ali delivered a car to shahid for the safe custody. One tire of the car was burst on the
way. Shahid spent Rs.4000 to replace tire. Shahid has a right to claim for the expenses
incurred on the car.

3. Right to compensation

If Bailee suffers loss due to the defective title of goods to Bailor, The bailee has right
to claim for the compensation.

Example

Ali gives his neighbors scooter to Bilal for use without neighbors permission. The
Neighbor files a suit on Bilal and received compensation. Bilal has right to receive
compensation from Bailor.

4. Right to stop delivery

If the person other than Bailor claim bailed goods from Bailee, the Bailee may apply
to the court to stop delivery of goods to Bailor and to decide the title of goods.

Example

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Sheraz bailed goods to Faraz. Hammad claimed that he is the owner of goods and
demand goods form Faraz. Faraz can stop the delivery of goods to Sheraz and request
the court to decide the ownership of goods.

5. Right to sue

If an unauthorized person forcefully uses or take the procession of bailed goods, the
bailee has right to sue that unauthorized person. Bailor can also file a suit for those
goods.

Example

Ali gives a piece of cloth to Taylor to make a coat. Sheraz an unauthorized person
forcefully take the coat form Taylor and start using it. Ali or Taylor can file a suit
against Sheraz.

6. Right of lien

Lien means the right to retain the goods until he is not paid for the services rendered.

A bailee has a right to retain the bailed goods until he is not paid for the services
rendered.

Example

Ali gives his watch to Salman for repairing. Salman can retain the watch till he is not
paid for his services

Duties of bailee
Following are the duties of bailee

1. Duty to take reasonable care

It is the duty of bailee to take reasonable care of goods bailed. If he does not take care
of goods and the goods are damaged due to his negligence he is responsible for the
damages.

Example

Shakeel bailed his car to nazir. Nazir did not lock up the car. The car is stolen. Nazir is
liable for the damages

2. Duty not to make unauthorized use

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The bailee must use the goods according to the terms and conditions. If he makes an
unauthorized use of goods, he is liable for the damages to the goods.

Example

Ali gives his car on hire to Junaid for personal use. Junaid allows Faraz to drive but he
got accident and got injured. Junaid is liable to compensate Ali.

3. Duty not to mix the goods

If the Bailee without the permission of Bailor mixes the goods of Bailor with his own
goods in such a way that it becomes impossible to separate them, it is the duty of
bailee to compensate Bailor for the loss of goods.

4. Duty to return goods

It is the duty of bailee to return the goods to bailer as soon as the purpose of bailment
is accomplished. If he fails to return goods at specified time he is responsible to
compensate bailer for the loss.

Example

Ali bailed his horse to Bilal to feed for two months but Bilal does not return the horse
after two months. The horse dies after the period of bailment without any fault of
Bilals part. Bilal is liable for the loss.

5. Duty to return increase

It is the duty of bailee to return any increase or profit accrued from the goods bailed.

Example

Asad bailed a cow to khurram. Cow gave birth to a calf. It is the duty of Khurram to
return cow along with calf.

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Q#16 WHAT IS PLEDGE OR PAWN? WHAT ARE THE


ESSENTIAL FEATURES OF PLEDGE?
Pledge

The bailment of goods as security for the payment of debt or performance of promise is
called pledge. Or Bailment is the transfer of possession of moveable property by one person
to another person to get loan.

Example

Ali borrows 500 Rs. From saad and keeps his watch as security for the payment of loan. The
bailment of watch is called pledge.

Parties of pledge

i. Pleger/ pawner
ii. Plegee /Pawnee

Pledger / pawnor

The person delivering his goods as security is called pawner

Plegee / Pawnee

The person to whom the possession of goods is given is called Pawnee.

Features of pledge

1. Moveable property

A pledge is only valid when moveable property is pledged. It includes any kind of goods,
documents, valuables.

2. Transfer of possession

In pledge only the possession of goods is transferred by the pawnor to Pawnee

3. Not Transfer of ownership

In contract of pledge, ownership is not transferred from pawnor to Pawnee

4. Mere custody of goods

The person having only the custody of goods cannot pledge them. For example a servant
having the control of principals goods cannot make a valid pledge of them.

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Q#17EXPLAIN THE RIGHTS AND DUTIES OF PLEDGER


Rights of Pleger

1. Right to recover damages

Pledger can claim for the damages that arise due to pledgees negligence. He can also
claim damages arising due to unauthorized use of goods.

7. Right to demand return of goods

The Pledger has right to get back the goods Pledged after as soon as the payment of debt is
made. If Pledgee fails to return, the Pledger can claim for the compensation

8. Right to claim increase

The Pledger can claim any increase or profit, which may accrued from the Pledged goods.

9. Right to terminate Pledge

The Pledger has a right to terminate the Pledge if Pledgee does any act which is against the
terms and conditions of Pledge.

10. Right to sue

Pledger can sue Pledgee if he fails to return goods or breaches contract.

11. Compensation

If the Pledgee without the permission of Pledger mixes the goods of Pledger with his own
goods in such a way that it becomes impossible to separate them, the Pledger has a right to
claim for the compensation for the loss of goods.

Duties of Pledger
Following are the duties of Pledger

7. Duty to disclose faults

It is the duty of Pledger to disclose all the faults in Pledged goods which are known to him. If
he does not disclose them he will be liable for the damages arising due to such faults.

8. Duty to repay expense

When the goods are to be kept or carried by the Pledgee. It is the duty of Pledger to bear all
the expense incurred on the Pledged goods.

9. Duty to repay extra ordinary expenses

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If the extra ordinary expenses are incurred by the Pledgee on the Pledged goods then it is the
duty of Pledger to repay those expenses.

10. Duty to indemnify for the defective title

Where the title of goods to Pledger is defective and Pledgee suffers loss due to such title, it is
the duty of Pledger to indemnify the Pledgee for such loss.

11. Duty to receive back goods

It is the duty of Pledger to receive back goods when the Pledgee returns them after the
accomplishment of purpose

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Q#18 EXPLAIN THE RIGHTS AND DUTIES OF PLEDGEE


Rights of Plegee

1. Right to retain

The Plegee has right to retain the goods until his dues are paid. He can retain them for
payment of debt or performance of promise and all necessary expenses incurred by him for
the safety of goods

Example

Shahid borrowed Rs. 2 lac from Irfan and pledges his diamond ring. If shahid does not return
the loan shahid can retain the ring

2. Right to retain for the other debt

If the Pledger again takes loan after the first loan, Plegee can retain the goods over the second
loan.

Example

Ali borrowed Rs 400,000 from Sheraz and pledges his car. After 3months Ali borrowed
another sum of Rs. 300,000 and pays the first debt. Sheraz can retain the car against his
second loan.

3. Right to extraordinary expenses

The Pledgee has right to recover all those expense that are incurred on the safety of goods.
But Pledgee cannot retain goods if such expenses are not paid, he can only sue Pledger for the
recovery of extra ordinary expenses.

Example

Ali pledges his horse to Bilal. Horse falls sick and Bilal spent 400 Rs for the treatment of
horse. Bilal can sue Ali for the recovery of expenses.

4. Right to sell

If the Pledger refuses to make payment or debt or performance of promise, the Plegee has
right to sell goods after giving the notice of intention of sale to Pledger.

Following points must be considered.

i. Reasonable notice is necessary.


ii. Pledgee cannot sale goods to himself
iii. If the amount recovered from sale is less than the amount of debt, he can recover
the balance amount from Pledger.

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Example

Ali pledges his car to shahid to obtain a loan of Rs 500,000. But on the due date Ali fails to
pay the amount of loan. Shahid can sale car after giving a notice of sale.

Duties of Pledgee
Following are the duties of Pledgee

6. Duty to take reasonable care

It is the duty of Pledgee to take reasonable care of goods pledged. If he does not take care of
goods and the goods are damaged due to his negligence he is responsible for the damages.

Example

Shakeel pledged his car to nazir. Nazir did not lock up the car. The car is stolen. Nazir is
liable for the damages

7. Duty not to make unauthorized use

The Pledgee must use the goods according to the terms and conditions. If he makes an
unauthorized use of goods, he is liable for the damages to the goods.

Example

Ali pledged his car to Junaid. Junaid start using it as carrier. Ali can sue Junaid for
unauthorized use

8. Duty not to mix the goods

If the Pledgee without the permission of Pledger mixes the goods of Pledger with his own
goods in such a way that it becomes impossible to separate them, it is the duty of Pledgee to
compensate Pledger for the loss of goods.

9. Duty to return goods

It is the duty of Pledgee to return the goods to Pledger as soon as the purpose of pledge is
accomplished. If he fails to return goods at specified time he is responsible to compensate
Pledger for the loss.

Example

Ali pledged his horse to Bilal for two months but Bilal does not return the horse after two
months. The horse dies after the period of bailment without any fault of Bilals part. Bilal is
liable for the loss.

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Q#19 what is the difference between sale and


agreement to sell?
Basis Sale Agreement to sell
1. Transfer of The property of goods passes from The transfer of property of the
property the seller to the buyer immediately. goods is to take place at a future
time.
2. Transfer of Ownership of the goods is Ownership of goods does no
ownership transferred immediately after the change until the property is
sale transferred.
3. Type of goods A sale can only be in case of An agreement to sell is mostly in
existing and specific goods only. case of future and contingent
goods.

4. Risk of loss In sale the if the goods are In an agreement to sale the whole
destroyed, the entire loss is loss is suffered by the seller
suffered by the buyer
5. Right to re sell In a sale the seller cannot re sell It is merely a contract the buyer can
the goods sue the seller for damages in case of
re sale of goods
6. Nature of rights The buyer becomes the owner of The buyer does not becomes the
goods. If the seller refuses to owner of goods and he can only sue
deliver the goods the buyer can sue for the damages
for the recovery of goods
7. Breach If the buyer fails to pay the price In an agreement to sale, if buyer
the seller can sue for the recovery fails to pay the seller can sue for the
of price damages not for the recovery of
price
8. Insolvency of If the seller becomes insolvent, the if buyer has paid the price of goods
seller buyer can recover the goods from and the seller becomes insolvent, he
official receivers of seller because can recover the price of goods but
buyer is the owner of goods he cannot recover the ownership of
goods
9. Insolvency of If the buyer becomes insolvent and If the seller becomes insolvent
buyer the price of goods is paid than his before the payment of goods than
legal representative can demand the the seller can refuse to sale goods
goods from the seller. If price of until the price is paid by the legal
goods is not paid, the seller can representatives of the buyer
claim price proportionately
10. Nature of goods A sale is an executed contract An agreement to sale is an
executory contract
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Q#20
What are the rights of an unpaid seller?
Unpaid seller
An unpaid seller is a person, who has sold the goods for a price, but the price has not been
paid to him or the instrument which was given to him has dishonored.

Rights of unpaid seller


An unpaid seller has the following rights

A. Right against goods


B. Right against buyer

A. Right against goods

1. Right of lien

An unpaid seller has the right to stop the delivery of goods and to keep the goods in his
procession until the price is paid. If he has delivered a part of goods, he can stop the delivery
of remaining goods.

Seller can exercise the right of lien in the following cases;

i. When the goods are sold on cash


ii. When the goods are sold on credit and period of credit has been expired
iii. When the buyer becomes insolvent

Rules regarding lien

Following are the rules regarding the lien of goods.

i. When the goods are in the procession of seller


ii. The seller can use the right only for the price, not for the other charges
iii. If the seller has delivered a part of goods, he can retain the reminder

Example

a. A sells his car to b for Rs. 100,000 to be paid in cash. B fails to make the payment. A
can retain the procession.
b. A sold a machine to B for Rs. 2000, it was not working properly so B delivered it
back to A for repairs, it was held that A could not stop the delivery.

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2. Right of stoppage of goods in transit

When the buyer funds that the buyer became insolvent then he has the right of stopping the
goods in transit.
The seller can use this right in the following cases
a. When the goods are still in transit
b. When the property has not passed to the buyer
c. When the buyer becomes insolvent
d. When the seller has right of topping of goods in transit

3. Right of resale
A seller has the right to resale the goods if the buyer does not pay the price of goods. Seller
can use this right in following cases
a. When the goods are of perishable nature and the buyer fails to pay the rice within
reasonable time
b. When the seller has given the notice of his intention to resale
c. When he right to resale is expressed in contract between the parties.

B. Right against buyer

1. Price
If the seller has delivered goods and buyer fails to pay the price of goods. The seller has right
to sue for the price of goods.
Example
A Sold goods to B, B fails to pay the price. A can sue B for the recovery of price

2. Damages for non acceptance


When the seller has delivered the goods and the buyer refuses to accept them. The seller has
right to sue for the recovery of damages.
Example
A sold and delivered goods to B, but B refuses to accept the goods and pay the price. The
seller has right to sue for the recovery of damages

3. Special damages and interest


If the buyer fails to make the payment at agreed time but he will pay late. The seller has right
to sue for the recovery of interest at reasonable rate.
Example
A Sold goods to B, B fails to make payment and promised to pay later. A has right to sue for
the recovery of interest

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Q#21
What are the rights of buyer in a contract of sale?
Buyers right
The buyer has the following rights against the seller, if the seller breaches the contract.

1. Damages for non delivery

The buyer has right to sue the seller for damages in case the seller refuses to deliver the
goods.

Example

A sales Rice to B but does not deliver them to the buyer at agreed time, the buyer has right to
sue for the damages.

2. Damages for the breach of warranty

When the seller breaches the contract of warranty, the buyer can sue for the damages if he has
paid the price. But if he has not yet paid the price, then he can claim for the reduction in
price.

Example

A promises to sell and deliver the tables to B on 15 November, but he delivered the goods on
25 November, the buyer can recover damages from seller.

3. Breach of condition

When the seller breaches the condition of contract, the buyer can terminate contract and
claim damages.

Example

A promises to sell Nokia phone to B, but he delivered Q Mobile. The buyer can avoid
contract.

4. Recovery of price with interest

If the buyer has paid the price but seller fails to deliver the goods, the buyer has right to
recover the price with interest at reasonable rate.

Example

A promised to buy wheat from B and make the payment in advance, but B fails to deliver the
wheat; the buyer can claim price plus interest.

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Q#22 what are the rules regarding the delivery of goods?


Or what are the kinds of delivery?
Delivery
Delivery means voluntary transfer of procession of goods by one person to another person.

Modes / kinds of delivery


Followings are the kinds of delivery

1. Actual delivery

When the procession of goods is transferred from buyer to seller, it is called actual delivery.

Example

A sold his car to B. A handed over the car to B, it is actual delivery.

2. Symbolic delivery

When the goods are sold in bulk and the actual delivery is not possible, in such a case the
control over goods is transferred to the buyer, it is called symbolic delivery.

Example

A sold goods in bulk to B which are locked in godown. A handed over the key of Godown to
B, it called symbolic delivery.

3. Constructive delivery

When procession of goods changed without any change in the actual custody of the goods, it
is called constructive delivery

Example

A Sold rice to B lying in Cs godown. A orders C to transfer rice to B. C transfers the rice in
his books to B.

Rules of the delivery of goods

1. Duty of seller and buyer

It is the duty of the seller to sell the goods and buyer to accept goods and pay the price.

Example

A sold goods to B for RS 300. It is the duty of A to deliver the goods and B is responsible to
pay Rs 400 to A.

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2. Place of delivery
The goods must be delivered at a place which is stated in contract.

3. Time of delivery
It is the duty of seller to deliver the goods within the fixed time. If time is not fixed, than
delivery should be made within reasonable time.

4. Expenses of delivery
Expenses of delivery of goods must be bear by the seller or according to the agreement.

5. Installment delivery
The buyer is not bound to take the delivery of goods in installment unless it was agreed

6. Wrong delivery
When the goods delivered to the buyer are not in accordance with goods specified in contract,
the buyer can reject the goods.
7. Delivery to carrier
If the goods are delivered to carrier for transfer to buyer, it is deemed the delivery to the
buyer.

8. Procession of goods by third person


If at the time of sale the goods are in procession of third person. There is no contract until that
third person acknowledges the buyer that he holds the goods on his behalf.

9. Demand of delivery
Buyer should demand for the delivery of goods, otherwise he cannot blame seller for the
delivery of goods.

10. Effects of part delivery


When a part of goods is transferred to buyer with the intention to deliver the rest of goods
also, the ownership in the whole of the goods is deemed to pass to the buyer.

11. Mode of delivery


The delivery of goods can be made by any of the ways on which the parties agree.

12. Liability in case of refusing to take delivery of goods


If seller delivers the goods to buyer and buyer refuses to take the delivery of goods without
any reason. The buyer is liable for the damages.

13. Examining the goods


When the goods are delivered to the buyer, the buyer should be given a reasonable time for
the examination of goods.

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Q#23 what are the rights, duties and liabilities of a


common carrier?
Definition
A common carrier is an association or person (other than the government) who agrees to
carry goods on hire to transfer the goods from one place to another place.

Rights of common carrier


1. Remuneration
A common carrier has right to receive remuneration for the work performed. If the
remuneration have not been agreed than he has right to receive reasonable remuneration

2. Right of lien
A common carrier has right to retain the goods until the charges of hire are paid.

3. Right to recover expense


If the carrier has incurred some expenses for the safety of goods, The carrier has right to
recover such expenses

4. Right to recover damages


A common carrier has right to recover damages arising due to consignors negligence. For
example if the goods are not properly packed and the carrier suffer injury from them, the
carrier can recover damages

5. Right to sell goods


The carrier has right to sell goods if the consignee refuses to receive the goods and the goods
are of perishable nature.

6. Right of refusal
The common carrier has right to refuse to carry the goods under the following circumstances
i. When the goods are not properly packed
ii. When the carriage is full
iii. When the goods are of such nature which he does not carry
iv. When the consignor is not paid reasonable charges

7. Right to give concession


A common carrier has right to give concession to any person however he cannot charge an
unreasonable charges from any customer

8. Right to limit his liability


A common carrier has right to limit his liability by entering into a special agreement with the
consignor.
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9. Right of recovery of goods
A common has right to recover the price or goods from the person who has wrongfully take
the delivery of goods

Duties of a common carrier


1. Carry goods
It is the duty of common carrier to carry the goods of all persons according to his profession.
If the consignor is paying reasonable amount, he cannot refuse to carry goods.

2. Transportation of goods
It is the duty of carrier to transport goods on hire from one place to another place.

3. Delivery of goods
It is the duty of common carrier to deliver goods in time. If time of delivery is not mentioned
in the contract the carrier is bound to deliver the goods within the reasonable time.
4. Delivery to the right person
It is the duty of carrier to deliver the goods to the right person, if he wrongfully delivers
goods to the other person then it is the duty of common carrier to get back the goods and
deliver them to the right person.

5. Safety of goods
It is the duty of common carrier to deliver the goods safely, common carrier is responsible for
the loss to the goods arising due to him.

6. Obey instruction
It is the duty of common carrier to obey the instructions of consignor regarding the delivery,
when the goods are in transit.

7. Delivery at right place


It is the duty of common carrier to deliver the goods to the person specified by the consignor.

Liabilities of common carrier


1. Liability for delay
A common carrier is liable for the damages arising due to the delay in delivery of goods

2. Breach of duty
A carrier is also responsible for the loss arising due to the breach of any duty.

3. Liability of loss
A carrier is also liable for the loss caused to goods while it is in his custody

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Q#24
What is the difference between common carrier and
private carrier?
Basis Common carrier Private carrier

1. Act The common carriers act, 1865 A private carrier is governed by


governs a common carrier contract act, 1872.

2. Regular A common carrier carries the goods A private carrier carries the goods not
business as regular business to earn money as a regular business.

3. Persons A common carrier carries the goods A private carrier carries the goods of a
of all the persons. particular person

4. Rejection of A common carrier cannot reject the A private carrier can reject the offer
offer offer of goods for carriage without any reason

5. Damages If common carrier refuses to carry A private carrier cannot be sued for the
the goods without any sufficient damages on his refusal to carry goods
reason, he can be sued and made
liable for damages

6. Hire A common carrier carries the goods A private carrier may carry the goods
for hire (rent) for hire or free

7. Terms Common carrier has fixed term of A private carrier determines the terms
carriage of goods of carriage of goods.

8. Effects on A common carrier is effected by the A private carrier is not affected.


business change in rules and regulation of
government

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Q#25 what are duties and liabilities of a railway as a


carrier?
What are the duties and liabilities of a railway as a bailee
of goods?

Liabilities of railway
1. Liability due to delay
Railway is liable for the loss of goods arising due to the delay in delivery. For example if the
goods were of perishable nature and become useless due to the delay in delivery, railway is
liable for such loss

2. Liability during transit


When the goods are consigned at railways risk then it is the liability of railway to bear loss
occurring during transit
When the goods are delivered at owners risk than the railway is not responsible for such loss

3. Liability for wrong delivery


If the goods are delivered to the wrong person the railway is responsible to get back the
goods and deliver them to the right person

4. Liability as carriage of animals


In case of animals the liability of railway shall not exceeds:
Rs. 50000 per elephant
Rs. 10000 per horse
Rs. 15000 per mule or horned cattle
Rs. 1000 per dog, donkey, goat, ping or other animal.

5. Carriage of passengers luggage


Railway is not responsible for any loss to the luggage of passenger unless luggage is booked.

6. Accident of passenger
When a passenger dies or is injured due to the train accident. The railway is responsible to
pay Rs. 100,000 to the heirs of deceased person and Rs 10,000 to the injured person.

7. Accident of person other than passenger

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If the person other than passenger dies or is injured, The railway is responsible to pay Rs.
100,000 to the heirs of deceased person and Rs 10,000 to the injured person.

8. Liability for the valuable goods


The railways is not responsible for the loss of any parcel the value of which exceeds Rs.
10000 unless the person sending the goods has declared the value of goods

9. Goods falsely described


A railway is not responsible for the loss if the goods have been falsely described.

Duties of railway
8. Carry goods
It is the duty of railway carrier to carry the goods on hire from one place to another place

9. Delivery of goods
It is the duty of railway carrier to deliver goods in time. If time of delivery is not mentioned
in the contract the carrier is bound to deliver the goods within the reasonable time.

10. Delivery to the right person


It is the duty of carrier to deliver the goods to the right person, if he wrongfully delivers
goods to the other person then it is the duty of common carrier to get back the goods and
deliver them to the right person.

11. Safety of goods


It is the duty of railway carrier to deliver the goods safely, railway carrier is responsible for
the loss to the goods arising due to railways negligence.

12. Obey instruction


It is the duty of common carrier to obey the instructions of consignor regarding the delivery,
when the goods are in transit.

1. Delivery at right place


It is the duty of common carrier to deliver the goods to the person specified by the consignor.

2. Delivery at right place


It is the duty of common carrier to deliver the goods to the person specified by the consignor.

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Q#26
What is the difference between bill of lading and
chartered party?
Basis Bill of lading Chartered party
1. Nature a bill of lading is an evidence A chartered party is a
of receipt of goods on board contract relating to the hiring
the ship of the ship
2. Title A bill of lading is a A chartered part is not a
document of title of goods document of title of goods
3. Transferability A bill of lading is A chartered party is not
transferable by endorsement transferable
4. Purpose A bill of lading is always for A chartered party may be for
a particular destination particular destination or time
5. Sets A bill of lading is drawn in A chartered party is not
two or three sets drawn in sets
6. Payment Fright is generally paid in Freight is paid after the safe
advance delivery of goods
7. Stamping It may or may not be It is always stamped
stamped

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Q#27 what are the types of crossing of Cheque?


Types of crossing
Following are the types of crossing of cheque

1. General crossing
2. Special crossing
3. Accounts payee or restrictive crossing
4. Not negotiable crossing

1. General crossing
Generally a cheque can be crossed when;

i. There are two transverse parallel lines, marked across its face or
ii. The cheque bears an abbreviation &co between two lines or
iii. The cheque bears the words not negotiable between two lines
iv. The cheque bears the words A/c, payee between two parallel lines or

A crossed cheque can be made bearer cheque by cancelling the crossing and writing that the
crossing is cancelled and affixing the full signature of drawer.

2. Special crossing
When a particular bank's name is written in between the two parallel lines the cheque is said
to be specially crossed.

In addition to the word bank, the words "A/c. Payee Only", "Not Negotiable" may also be
written. The payment of such cheque is not made unless the bank named in crossing is
presenting the cheque. The effect of special crossing is that the bank makes payment only to
the banker whose name is written in the crossing. Specially crossed cheques are safer than
generally crossed cheques.

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3. Account payee or restrictive crossing


This crossing can be made in both general and special crossing by adding the words
Account payee. In this type of crossing it becomes the duty of collecting bank to credit the
amount of cheque to the account of the payee named in the cheque.

4. Not negotiable crossing


The word not negotiable can be added to the general as well as special crossing. It can be
transferred by payee. The transferee will get the same rights, as regards payment, as the
transferor had.

The object of not negotiable cheque is to provide protection to the holder or drawer of a
cheque because even if such cheque goes to the wrong hands, the true owner will not lose his
claim.

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Q#28
What is the difference between cheque, bills of exchange
and promissory note?
Basis Bills of Promissory Cheque
exchange note
1 Definition Bills of exchange is an Promissory note is an Cheque is an instrument
instrument in writing instrument in which which is used to withdraw
which contains order of debtor promises to pay a money from bank
payment by creditor to certain amount to
debtor creditor
2 parties In case of bill of In case of promissory In case of cheque there
exchange there are three note there are two parties are three parties
parties, drawer drawee maker and payee depositor, bank and payee
and payee.
3 Acceptance Acceptance by drawee is There is no need of In case of cheque there is
necessary. acceptance no need of acceptance, as
it is order by the
customer.
4 Discounting Bills of exchange can be Promissory note cannot Cheque cannot be
discounted from bank be discounted discounted
5 Grace days Three grace days are Three grace days are In case of cheque no
allowed to make payment allowed to make payment grace days are allowed
for making payment
6 Area Promissory note can be Promissory note is Cheque is drawn on only
inland or foreign generally inland depositors bank
7 stamp Pasting of Stamp on bills Pasting of Stamp on No stamp is required to
of exchange is legally promissory note is paste on cheque
required legally required
8 Nature It is an unconditional It is an unconditional Cheque is an
order for making promise for payment unconditional order for
payment making payment
9 liability In case of Bills of In case of promissory In case of cheque it is the
exchange it is the liability note it is the liability of liability of bank to make
of drawee to make the drawer to make the payment
payment payment
10 Noting Noting charges are paid Noting charges are not Noting charges are not
charges in case of dishonor of paid in case of dishonor paid in case of dishonor
bills of exchange of promissory note of cheque

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11 Printed A bills of exchange can A promissory note can be A cheque is always drawn
form be drawn on simple or drawn on simple or on printed paper that is
printed paper printed paper provided by the bank

12 Crossing Bills of exchange cannot Promissory note cannot Cheque can be crossed
be crossed be crossed
13 Payee In case of bills of In case of promissory In case of cheque the
exhnage the drawer and note the drawee and the drawer and the payee may
the payee may be same payee may be same be same person
person person

14 Default In case of bills of In case of bills of In case of cheque the


exchange the drawee is exchange the drawer is bank is responsible to
responsible to make the responsible to make the make payment than the
payment payment drawer is responsible

15 Trust In case of bills of In case of promissory In case of cheque the


exchange the people note people shows less people shows more
shows less confidence as confidence as compared confidence as compared
compared to the cheque to the cheque and bills of to the bills of exchange
exchange and promissory note

16 Stop Payment of bills of Payment of promissory Payment of cheque can be


payment exchange cannot be note cannot be stopped stopped on the orders of
stopped depositor

17 Period Period for making Payment period is written Cheque can be cashed
payment of bills of on the note within the period of six
exchange is written on it months from the date of
issue

18 Use Bills of exchange is less Promissory note is less Cheque is more popular
used than cheque and used than the bills of than the bill and note
more used than the note exchange and cheque

19 Drawer Drawer of bill is always a Drawer of the note is Drawer of the cheque is
seller always buyer always an account holder

20 drawee Drawee of bills is always Drawee of note is always Drawee of cheque is


a buyer a seller always a bank

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Q#29
What are the requirements for the registration of
trade union?
Trade union
It is a continuous association of wage earners for the purpose of maintaining or improving the
work conditions of their employment.

Requirement for the registration of trade union


1. Application

For the purpose of registration of trade union it is required to submit the application for
registration. Such application must be signed by the secretary and president of union.

The application must contain the following information:

The name, occupation and address of the members making application

The name of trade union and the address of its head office

2. Constitution

Constitution of the trade union contains information about the following matters

i. Name & address

The name and complete address of head office of trade union

ii. Object

The object for which the trade union is formed

iii. Use of funds

All purposes for which the funds of trade union will be used after its registration

iv. Executive members

The number of persons who will form the executive body of trade union must also be written
in constitution

v. Benefits to members

All those conditions according to which a member is entitled to benefit must also be written
in constitution
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vi. Fines to members

All those conditions under which a member will be fined and his membership will be
cancelled must be written in constitution.

vii. List of members

List of members of trade union must be provided with the application.

viii. Safety of funds

A constitution should provide the gurantee for the safe custody of funds.

ix. Audit

The constitution should provide the manners of audit of accounts

x. Dissolution

Circumstance under which the trade union will be dissolved must be written in constitution.

xi. Alteration

The procedure by which the alteration in constitution is made must be given.

xii. Meetings

The procedures of meetings of the executive body and general body must be given in
constitution.

xiii. Procedure of no confidence

The procedure of expressing no confidence in any officer must be given in constitution.

3. Issuance of certificate

If the registrar is satisfied with the information provided by the trade union, he issues a
certificate of registration within 15 days. Now the trade union is registered.

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Q# 29 (b) What are the circumstances under which the


registration of trade union is cancelled?
1. Act against ordinance
If the trade union does any act against the ordinance, the labor court may cancel the
registration of trade union.

2. Act against constitution


If the trade union does any act which against its own constitution, the labour court can
cancel the registration of trade union.

3. Disqualification of an officer

The registration may also be cancelled if the trade union has appointed an officer who is
disqualified to be an officer by the court.

4. Cancellation by registrar

The Registrar cancels the registration of trade union if it has been dissolved itself.

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Q#30
What are the powers and functions of national industrial relation
commission?

What are the powers and functions of registrar?


1. Registration of trade union

The main function of trade union is to register trade union and to issue the certificate of
registration.

2. Appointment of collective bargaining agent

The registrar can appoint any officer as collective bargaining agent. He himself decides
which trade union is entitled to be as collective bargaining agent.

3. Inspection of accounts

The registrar has the powers to inspect the books of accounts of trade union at any time.

He can authorize his subordinates to do this work.

4. Complaints to the labor court

Registrar can submit complaints to the labor court for the cancellation of registration. if the
trade union does any act against the ordinance and constitution.

5. Cancellation of registration

Commission has powers to cancel the registration of trade union if the trade union is
dissolved itself.

6. Dealing with the unfair practices

The commission has powers to take action against the unfair practices of labour. He can
proceed directly with the case and may refer to the court.

7. Power to punish

The commission has the powers to punish any person who have not obeyed the orders of
commission or he is going against the orders or directions of trade union.

8. Promotion of trade unions

Another major function of the commission is to promote the formation of trade union at
national level

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