Business Law

BUSINESS LAW
WHAT IS LAW? MEANING ? DEFINITION?
WHAT DO YOU SAY?
VARIOUS MEANINGS AND DEFINITIONS

One view is that it is not capable of definition But this cannot be the answer nor solve the problem The confusion in defining law arises out of the different purposes to be achieved e.g: Law has been defined by various individuals from different points of view Various schools of law define it from different angles: -basis of nature -on source -terms of effect on society -end or purpose of law
MEANINGS AND DEFINITIONS: Contd.

Generally and the most commonly accepted definition is A rule of action to which men are obliged to make their conduct comfortable Law is the command of the sovereign. It imposes a duty and is backed by a sanction. Command, duty and sanction are three elements of law
LAW MAKING:PROCESS
Difference between Law and Ordinance Bill----Proposal Committees of the House Approval by the Legislature Assent by the President.
WHY STUDY LAW?

Obvious! Course Requirement Study of law improves powers of reasoning, clarity of thought and the ability to analyze and express complicated ideas A greater appreciation of the workings of the system and the parts that ensure its functioning. Law forms the foundation on which any civilized society is based. Nature has its own laws. So does society. Law effects all aspects of life and society and is the mechanism for change employed by governments across the globe.From the protection of life and liberty, through corporate law to international relations, the law is the central stage.
PURPOSE OF LAW
Object of law is to maintain law and order in the country i.e. police functions Another view limit natural liberty; Man is born free but is in chains everywhere. Hindu view , purpose of law is the welfare of the people in the world and also salvation after death. Muslim: the end of the law is to promote the welfare of man both individually and socially, not merely in respect of life on this earth but also life hereafter.
KINDS OF LAW
1.
2. 3.
4.
5.
6. 7. 8.
IMPERATIVE LAW. Imposed upon on men by some authority. Emphasis on the will and physical force of the organized political community. PHYSICAL OR SCIENTIFIC LAW . Laws of science e.g. law of gravity NATURAL or MORAL LAW. Universal rules of governance. Principles of natural justice. Divine Law. CONVENTIONAL LAW. Rules or regulations of voluntary organizations e.g. associations, clubs etc. CUSTOMARY LAW. Customs, practices, traditions with historical sanction and support e.g. jirga TECHNICAL LAW. For efficient conduct of business e.g building laws, laws of health INTERNATIONAL LAW. Sum of laws and rules recognized by civilized in their dealings with each other CIVIL LAW. Municipal Law.
ADVANTAGES AND DISADANTAGES.

Uniformity and certainty to the administration of justice. Avoids the dangers of arbitrary, biased and dishonest decisions. Fixed principles protect the administration of justice from the errors of individual judgment More reliable than whims, wishes and desires. 1. 2. 3. 4. Rigidity. Conservative Formalism Complex.
STARTING BUSINESS BUSINESS LAW IN PAKISTAN

Legal form under which operating Main forms of business organizations by PRIVATE sector in Pakistan: Sole Proprietorship Partnership Limited Liability Company Joint venture PUBLIC SECTOR. Where the Government undertakes an enterprise either a statutory corporation or limited company. For medium and large scale business in Pakistan limited company is the preferred form
Law divided into PARTS and each deals with a particular subject e.g. Part II Jurisdiction og Courts, Part III SECP, Part IV Incorporation of Companies Sections Sub Sections DEFINITIONS: The word or a term specifically defined has a special meaning assigned to it and replaces its ordinary meeting. Otherwise have their ordinary dictionary meaning e.g. Proceed in alphabetical order Section 7 Company means a company formed and registered under this Ordinance or an existing Company
CONTD.
COMPANIES ORDINANCE, 1984

COMPANIES ORDINANCE. Legal regime for establishment and regulation of companies in Pakistan SECP. Securities and Exchange Commission of Pakistan for administration of companies and Registrar of Companies appointed by SECP. COMPANY LAW IN PAKISTAN: 1. 2. 3. 4. Companies Act 1913 was adopted in Pakistan in Pakistan after 1947 Administered by Provinces till 1973 (new Constitution) and then taken over by Federal Government. New law promulgated on October 8, 1984 . Previous law repealed. To cater for needs of expanding sectors the law amended in 1991, 1999 and 2002
CONTD:
OBJECTIVES of COMPANIES ORDINANCE: Healthy growth of the corporate enterprises Protection of investors and creditors Promotion of investment Development of economy.
CONTD:
A company is an artificial person created by law, endowed with a perpetual succession and an entity apart from its members. It signifies assent by means of common seal. It is capable of holding property, incurring debts, and suing and being sued in the same manner as an individual Under the law three different types of companies: Limited by shares Limited by Guarantee
Unlimited liability
Two types of limited companies: A Private Limited
A Public Limited (Listed and Unlisted)
COMPANY: CHARACTERISTICS
Five core characteristics: 1. Legal personality/entity 2. Limited Liability 3. Transferable Shares 4. Centralized management under a board structure 5. Shared ownership by contributors of capital
CONTD:
Granted a charter/permission (incorporated) by the competent authority (SECP/Registrar of Companies) A separate legal entity distinct from its members is created with its own privileges and liabilities It can sue and can be sued Creation of a specific law safeguarding the interests of the stakeholders. Not to put their interest at risk by interim arrangement Management operate the company As they are born when issued a certificate of incorporation they also die when they go bankrupt
LIMITED LIABILITY
If the company fails shareholders normally only stand to lose their investment and the employees their jobs but neither will be further liable for debts that are outstanding against the companys creditors. Can be convicted of criminal offence like fraud, misstatements etc.
KINDS OF COMPANIES
THREE: 1. Company Limited by Shares. Each person becoming a member (shareholder) of the company acquires one or more shares in which the Companys capital is divided. His liability is limited to his share holding. 2. Company Limited by Guarantee. Liability limited by Memorandum of Association to such amount as members may respectively undertake to contribute to the assets on being wound up . 3. Unlimited Company. More akin to a partnership where each member liable to all the debts of the company. He is free from his liability at the end of the year from his ceasing to be a member.
CONTINUED
May be registered under the Law as: Private: restricts number of members to 50, invitation to public to subscribe and right to transfer its shares Public: Three or more persons associate to form. Not Private deemed to be public Listed/Quoted Unlisted/Unquoted. A company limited by shares, whether private or public, is the most common vehicle for carrying out business in Pakistan. Single Member: Only one subscriber to the Memorandum of Association. A private limited company for all intents and purposes of the Company Ordinance
PRIVATE vs PUBLIC
Difference 1. Subscription 2. Transfer of shares 3. Members 4. Upper Limit of Members 5. Certificate of Commencement 6. Min. subscription 7. Prospectus or statement in lieu of 8. Filing of Accounts 9. Qualification of Auditors 10. Investment in associate company
PRIVATE vs. PUBLIC -Contd:

11. Restriction on CEO 12.Statutory Meeting and Report
ADVANTAGES OF PRIVATE COMPANY
DEFINITIONS.
MEMORANDUM OF ASSOCIATION . Sets out the constitution of the Company. The foundation on which the Companys structure is based. Defines scope of activities. Tells what it does spelling out its objectives 1. Name 2. Province of registration. 3. Objects 4. Limited by shares or guarantee
A STATEMENT OF THE OBJECTS OF THE COMPANY, ITS POSITION AND ITS RELATION TO THE WORLD WITHOUT
DEFINITIONS Contd:
ARTICLES OF ASSOCIATION A document regulating the rights of the member of company among themselves. The manner in in which the business of the company shall be conducted. Dealing with the whole internal arrangement of the Company. Originally framed when the Company incorporated. Subsequent changes by special resolution RULES AND REGULATIONS PRESCRIBED FOR THE INTERNAL MANAGEMENT OF A COMPANY.
PROSPECTUS
A document which invites persons to take shares in a company and set forth the advantages of the company. Contains the information for invitation of subscription from the public Any notice, circular, advertisement or other intimation, offering to the public for subscription, or purchase of any shares or debentures of a company 1. Discussed and approved by the Board of Directors 2. Public companies issuing prospectus required to file application to SECP for approval of prospectus for publication. 3. Date of application to SECP and no publication unless prospectus registered with SECP
PROSPECTUSContd.
Prospectus to include: Memorandum Number of shares fixed Particulars of directors and managers Minimum subscription before allotment Number and amount of shares and debentures Particulars of vendors Auditors Interest of every director LIABILITY OF PERSON ISSUING PROSPECTUS IF IT IS NOT ACCORDING TO PROVISIONS OF LAW.
SHARES
Prospectus: Invitation to the public to make offers to the company Application: from the public is an offer to take them Allotment; acceptance of the offer by the company creating a contract between the parties Allotment complete when notice of allotment issued. Registered: Name of share allottee is entered in the Register and becomes a member of the company Shareholder : The person who holds a share by having his name on the register. Distinctive number for each share
SHARES: TRANSFER
Transfer: The making over to another the document(shares in public companies) by one to another. An act of a member. Transmission: By devolution of law e.g. by death, bankruptcy etc. PROCEDURE: Apply: Transferor or transferee to the Company Checking and Verification: By the Company Notice: Maybe issued by Company Processed Approval: BOD or Committee of BOD Register of Members: Entry and Delivery Normally transfer of shares is not refused by Company (defective/invalid)
MANAGEMENT
Articles of Association: Rules and Regulations drawn up for the conduct of a Company. DIRECTORS 1. First Directors determined in writing by majority of subscribers of the memorandum 2. Hold office till first AGM 3. One who directs a business 4. Persons of the select body of shareholders of a Company 5. Delegated duty to manage affairs of the Company 6. Trustees of Companys assets 7. Not trustees of individual shareholders 8. Enters into contract on behalf of Company
DIRECTORS----Contd.
9. Number of Directors: SMC: At least one Private: Not less than two Unlisted Public: Not less than three Listed Public: Not less than seven DIRECTORS REPORT. Attach with every Balance Sheet: 1. State of Companys affairs 2. Recommendation for dividend 3. Re-appropriation of profits 4. Disclose material changes 5. Explanation on any adverse remarks of auditors.
MANANGEMENT: Contd.
CHIEF EXECUTIVE An individual entrusted with powers to manage to affairs of the Company Subject to control and direction of directors Includes a director or any other person First appointment within 15 days of commencing business by Directors. Hold office till first AGM Subsequent by the BOD within 14 days of vacancy Till successor appointed continues to work Conflict of Interest; directly or indirectly engage in any business which directly competes with the business of the Company.
MANAGEMENT: Contd.

SECRETARY: An officer of the Company Responsible for the compliance by the Company of its statutory duties Listed company shall have whole time Secretary Prescribed qualifications under the Law
MANAGEMENT: Contd.
AUDITORS: To carry out audit an examination of accounts which may be detailed or administrative. Comply with directions Appointed at each AGM Hold office till conclusion of next AGM Removal through Special Resolution.
COMPANY MEETINGS
STATUTORY MEETING Limited Company (share capital and guarantee) not less than three months or more than 6 months of entitled to commence business hold general meeting Held once in a lifetime Purpose to put before shareholders all important facts shares taken up, monies received, contracts entered, preliminary expenses Furnish particulars for shareholders to discuss Management, method and prospects STATUTORY REPORT: Report submitted by the directors 21 days before the Statutory Meeting to every member
MEETINGS: Contd.
ANNUAL GENERAL MEETING: First meeting within eighteen months of its incorporation Subsequent once at least in one year, within four months close of financial year At it consider accounts ,B.S. Profit and Loss Account, Auditors and Directors Reports. Declaration of dividend Appointment /remuneration of auditors Election/appointment of directors.
MEETINGS: Contd.
EXTRA ORDINARY GENERAL MEETING All general meetings other than Statutory or AGM Conduct special business Called in three ways: 1. Directors on their own initiative 2. By the directors on requisition by shareholders 3. By those requisitioning it MEETING OF BOARD OF DIRECTORS: Quorum Minimum number of meetings
RESOLUTIONS
Any proposal at a Company Meeting and put to the vote Ordinary: decided by a bare majority Extraordinary or Special: requires a majority of three-fourths to carry it Resolution by Circulation: Urgent, cannot wait for next BOD
AUDIT AND ACCOUNTS

It is mandatory for every company to maintain proper books of account. Maintained for: 1. Cash receipts and payments i.e. Cash Book 2. Revenue and expenditures 3. Assets 4. Liabilities 5. Cost accounting records Books to be kept at Companys registered office Can be inspected by Directors during business hours in office If members wish to inspect then the place, time, conditions etc. are determined by directors
AUDIT and ACCOUNTS---Contd.

Company auditors has right of access to books of accounts Auditors duty to make a report to the members of the company on the books of account Registrar of Companies can inspect books for reasons recorded in writing Authenticated: B.S. P/L Ac approved by Directors INTERNAL AUDIT: Listed Company to have internal audit function Audit Committee of the BOD
WINDING UP
Artificial Person. Born has to die Winding up is the closing up of a companys concern, which may be by reason of insolvency, or otherwise Winding up is a proceeding by means of which the dissolution of a company is brought about and its assets realised and applied in payment of its debts, and after satisfaction of the debts, the balance, if any, remaining is paid back to the members in proportion to the contribution made by them to the capital of the company
WINDING UP----Contd.
Modes of winding up: 1. Compulsory winding up by the Court e.g. special resolution by the Company, defaults (statutory reports etc.), unable to pay debts, violation of Companys Ordinance, Memorandum of Association etc. 2. Voluntary winding up by: a) Members b) Creditors 3. Voluntary winding up under the supervision of the court
WINDING UP---Contd.
BANKRUPTCY: In it the whole estate, both legal and equitable, is taken out of the bankrupt and is vested in the trustee WINDING UP : The estate, legal or equitable, still remains in the company until its dissolution DISSOLUTION: Puts an end to the existence of a company i.e. completely wound up or court feels that official liquidator cannot proceed with the winding up LIQUIDATION: Process of distributing a bankrupts estate i.e. realising the assets and paying the money over to the creditors.
LAW RELATING TO PARTNERSHIP

PARTNER: One who partakes or shares with another An associate One who has a share with another or others in some commercial, manufacturing or other undertaking One who dances with another. An associate in a firm. A member of a firm or partnership.
PARTNERSHIP
PARTNERSHIP: The state or condition of being a partner The association of two or more persons for the purpose of undertaking and prosecuting conjointly any business, occupation, or calling The which subsists between persons who have agreed to combine their property, labour skill in some business and to share the profits thereof between them A type of business entity in which partners share with each the profits or losses of the business. FIRM: Persons who enter into partnership are collectively called a firm
PARTNERSHIP--Contd
In Pakistan for small to medium size business set ups the common mode of business. Advantage of structural flexibility and formality of relationship between partners. Maybe registered or not. Not compulsory Registered firms have the advantage of tax and consequences of litigation. Favoured over corporate structure (companies) as no dividend is levied. But partners exposed to greater personal liability than the shareholders of a company.
PARTNERSHIP LAW IN PAKISTAN

PARTNERSHIP ACT 1932 Is the law governing regulation of partnerships in Pakistan. Law passed by the Indian Legislature in 1932. The Governor General of India gave assent on April 8, 1932. No.IX of 1932 Adopted and followed by the Government of Pakistan
PARTENERSHIP ACTContd.
SCHEME OF LAW: Divided into 8 Chapters Sections 74 Schedule 1 CHAPTERS: 1. Preliminary 2. The Nature of Partnership 3. Relations of Partners to One Another 4. Relations of Partners to Third Parties
PARTNERSHIP ACTContd.
5. Incoming and Outgoing Partners 6. Dissolution of a Firm 7. Registration of Firms 8.Supplemental SCHEDULE: Fees Prescribed
DEFINITIONS
Intention to economise words Does not lay down general principles With reference to the whole Act and with reference to the content ACT OF A FIRM Binds every one of the partners An act in which every one of them had actually participated Gives rise to a right enforceable by or against the firm
DEFINITIONSContd.
BUSINESS: Includes every trade, occupation and profession. Includes and not Means. An Inclusive and not Exhaustive definition General and vague Broadly, any activity which, if successful, would result in profit Must be in existence May be temporary or permanent (indefinite)
DEFINITIONSContd.
PARTNERSHIP: The relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all Persons who have entered into partnership with one another are individually called partners and collectively a firm and the name under which their business is carried on is called the firm name A voluntary act between two or more persons.
PARTNERSHIP---Contd.
Placing their money, effects, labour and skill, or some or all of them In lawful commerce or business Understanding that there shall be communion of profits or thereof between them. Contains the following elements/essentials
PARTNERSHIP---Contd.
ESSENTIALS: Association of two or more persons to carry on a business An agreement entered into by all concerned Agreement must share the profits Business must be carried on. Carried on by all or any of the persons concerned acting for all.
PARTNERSHIP--- Contd.
All elements must be present before a group of persons can be called partners Elements may appear to overlap but are distinct Existence of partnership is a question of fact. Association of two or more persons: A group of persons with no legal relations (no mutual rights and liabilities) not a partnership No existence or responsibility separately from its partners.
ESSENTIALS OF PARTNERSHIPContd.
An Agreement: Agreement arises only as a result of an agreement, express or implied Created by a contract, it does not arise by operation of law e.g. joint operation (heirs on death ) Voluntary contractual Lawful agreement; founded on good faith, for lawful object between competent persons Can even come into being upon an oral agreement
ESSENTIALS OF PARTNERSHIPContd.
Sharing Profits: An essential element of partnership agreement Different from clubs, societies, charitable associations etc. How to be shared left to the parties themselves Sharing of losses not essential. Profits refer to net profits.
ESSENTIALS OF PARTNERSHIP---Contd.
Carrying of Business: Must be carried on by all or by any concerned acting for all Business must be lawful Mutual agency True test of partnership.
PARTNERS
Can be entered into by every competent person Attained age of majority Of sound mind Disqualified from any law to which he is subject Unsound mind Married woman is competent Minor cannot become a partner but can be admitted to benefits of partnership.
PARTNERS--- Contd.
WORKING PARTNER: Not necessarily a partner in business Maybe only an employee Gets a share in the net profits Remuneration for services rendered.
FIRM
Firm: Persons who have collectively entered into partnership with one another is collectively called a firm Name under which business is carried is Firm Name. Business under any name or style Taking care of rules like trade name, goodwill etc.
ILLEGAL PARTNERSHIP
Object of partnership is unlawful. Section 23 of Contract Act Number of persons entering into partnership exceed the permitted. Section 4 of Companies Act.1913: 1. Business of bankingmore than 10 2. Any other businessmore than 20 With an alien enemy (alien friend); enjoys civil and personal rights as a citizen Against international comity.
PARTNERSHIP---DISTINGUISHED
CO-OWNERSHIP Akin but different Partnership result of an agreement Mutual rights and obligations different Consent of all trade/business: Examples Transfer of interests
PARTNERSHIP---DISTINGUISHED
COMPANY: 1. Person---Legal 2. Creation Legal formalities/agreement 3. Transfer of interest 4. Agents of others 5. Liability to debts 6. Contract 7. Private arrangements 8. Number
PARTNERSHIP DISTINGUISHED--Contd.
9.DeathDissolution 10. Property 11. Restrictions 12. Sue and be sued 13. Decree 14.Registration 15. Shareholder
PARTNERSHIP/DISTINGUISHED--Contd.
CLUB: Entirely different Club members not liable for acts of other members Not liable to be creditor of club Liabilityextent of Clubs regulations No implied authority i.e. bind other members of the club.
PARTNERSHIP DISTINGUISHEDContd.
TRADE ASSOCIATION: Mutual agency does not exist
PARTNERSHIP---EXISTENCE
HOW TO DETERMINE: Real relation between the partners Mainly a question of fact Onus to prove on the appellant
PARTNERSRELATIONS TO ONE ANOTHER

Relations between partners defined Freedom to arrange their own affairs among themselves Mutual rights and duties regulated by contract Duties and liabilities on a partner: 1. Duty of good faith and common advantage Carry on business to the greatest common advantage Just and faithful to each other
PARTNERSRELATIONS TO ONE ANOTHERContd.

Use knowledge and skill for benefit of firm Not personal advantage In case of loss to firm by fraud of a partner--indemnify firm (make good the loss) 2. Duty to render true accounts and full information: Not to mix with personal business Disclose full facts.
PARTNERS---RELATIONS TO ONE ANOTHERContd.

Rights and duties of partners determined by contract between them. Contract varied only by consent of all partners In conduct of business every partner has right to: 1. Take part in conduct of business 2. Access, inspect and copy books of account 3. Express opinion. Majority opinion

Mutual rights and liabilities. Subject to contract: 1. Not entitled to any remuneration 2. Entitled to share equally 3. Advance by partner to firm (over and above capital) entitled to profit (interest)

PROPERTY OF FIRM: Inclusive definition 1. All property and rights originally brought to the stock of the firm 2. Acquired by purchase or otherwise during the course of the business 3. Goodwill of the business 4. Rights and interests acquired with money belonging to the firm. Deemed.
PARTNERSRELATIONS TO ONE ANOTHER---Contd.

GOODWILL: Not defined The whole advantage, whatever it may be, of the reputation and connection of the firm Intangible Easy to describe, difficult to define It is benefit and advantage of the good name, reputation and coonection of a business
GOODWILL---Contd.
No independent existence Cannot subsist by itself Attached to business Attribute of a business, trade or profession.

APPLICATION OF PROPERTY: Shall be held Shall be used By the partners Used by the partners Exclusively for purposes of business Common benefit of all partners One partner cannot use assets for personal benefits

PERSONAL PROFITS OF PARTNERS Subject to contract If a partner derives personal profits ---transaction, use of property or connection--of the firm. Shall account for and pay to the firm Carries on any business----same structure and competing with the firm. Shall account for and pay profits made in that business.

Cannot carry on competing business during subsistence of partnership In that case pay to firm all profits.

RIGHTS AND DUTIES AFTER CHANGE IN FIRM General rules laid down for determination of rights and duties of partners. No effect on registration. Three situations. In case of: Change in constitution: Rights and duties remain the same as immediately before change After expiry of term of firm, remain the same Additional undertakings are carried out

1. CHANGE IN CONSTITUTION Partnership not dissolved Mutual rights and duties of partners Remain same in reconstituted firm Same as immediately before reconstitution

2. AFTER EXPIRY OF TERM OF OFFICE: In spite of being constituted for fixed term carries on business Term expired Mutual rights and duties remain the same Same as before expiry.

3. ADDITIONAL UNDERTAKINGS ARE CARRIED OUT: Originally constituted to carry out one or more undertakings Carries out other undertakings Mutual rights and duties in the new undertaking same as in old
PARTNERSRELATIONS TO THIRD PARTIES.

Rights and duties of partners as regards to third parties PRINCIPAL AND AGENT. Agency is the essence of partnership Partner is both an agent and principal Relation between partners of principals To third parties agents of the firm Acting on behalf of firm can bind co-partners Acting in personal capacitypersonal liability
PARTNERSRELATIONS TO THIRD PARTIES

IMPLIED AUTHORITY: Important The act of a partner which binds the firm This authority of the partner which binds the firm is his implied authority To exercise implied authority necessary that: 1. Act must be done in the conduct of business of the kind carried on by the firm
PARNERSRELATIONS TO THIRD PARTIESContd.

2.Must be done in the way which is usual in such business 3. Must be done in the firm name or in any other manner expressing or implying an intention to bind the firms Relevant factors: Nature of business Practice of persons engaged in it.
PARTNERSRELATIONS TO THIRD PARTIESContd.

FRAUDULENT ACT----IMPLIED AUTHORITY? Liability of firm on fraudulent act of partner Partners implied authority Factorprincipal answerable for acts of agent Firm liable Firm not liable if collusion between partner and third party If third party bona fide then firm liable

IMPLIED AUTHORITY ACTS OF THE PARTNER WHICH DO NOT BIND THE FIRM: 1. Submit dispute relating to firms business for ARBITRATION. 2. Open on behalf of firm BANK ACCOUNt 3. Compromise/relinquish CLAIM (part) of firm 4. WITHDRAW suit/proceeding filed on behalf of firm

5. ADMIT liability in suit/proceeding against firm 6. ACQUIRE immovable property on behalf of firm 7. TRANSFER immovable property belonging to firm 8. ENTER into PARTNERSHIP on behalf of firm May also include: Bind the firm by giving GUARANTEE in respect of debts of third parties. SET off PERSONAL DEBTS against debts due to firm.

SET OFF DECREE obtained by firm for less than the decreed amount ACCEPT FULLY PAID SHARES in satisfaction of debts due to firm. LIABILITY OF PARTNER 1. RIGHTFUL ACT: Every partner jointly and severally responsible 2.WRONGFUL ACT: Wrongful act/omission during ordinary course of Business loss to third party then firm responsible
PARTNERS---RELATIONS TO THIRD PARTIES.

4. MISAPPLICATION: Partner or firm misapplies money or property Received from third party firm is liable 5.HOLDING OUT: Where a person by word or conduct induces another to believe him and acts accordingly he cannot subsequently deny the existence of such facts Becomes personally responsible Does not become member in the firm Not entitled to any rights as against those in the firm Does not become agent of the firm

MINORS (according to law) Cannot be a partner May be admitted to benefits of partnership Cannot declare as partners but only that entitled to benefits. No partnership wholly of minors.
RIGHTS: 1. Admitted to benefit 2. May inspect/access accounts

3. 4. 5. 6. 7. Share property and profits Sue for accounts on severing ties with firm On attaining majority option of becoming member On attaining majority option to leave Not personally responsible for acts of firm

LIABILITIES: 1. Share liable for acts of firm. Within 6 months of majority can sever connection 2. On majority if a member then personally responsible to third parties 3. Fails to give public notice he becomes a member after 6 months.
PARTNERS---INCOMING AND OUTGOING

Partnership a contract based on good faith implies that no new partner can be introduced without the consent of all the partners INCOMING PARTNER: Subject to contract between partners Introduction subject to consent of all existing partners Not liable to any acts of firm before coming a partner Liability after becoming a partner
PARTNERSINCOMING AND OUTGOING

A new partner usually has no personal liability. Unless he expressly agrees Liability of a minor on becoming a member from the time he was admitted to benefits of partnership

OUTGOING PARTNER: Leaves the firm. No longer a partner in the partnership. Subject to contract not entitled to benefits. Becomes outgoing by: 1. Retirement 2. Expulsion 3. Insolvency 4. Death.
PARTNERSINCOMING AND OUTGOINGContd.

RETIREMENT: Three rules how a partner can retire: With the consent of all partners In accordance with an express agreement by all partners Giving written notice to all to all partners Liability on Retirement To third party for acts before retirement; discharged by an agreement with third party and reconstituted firm Otherwise liability continues until public notice given

EXPULSION: Governed by contract Majority cannot expel except in good faith Conferred by express agreement If conferred powers then exercised by majority Liability on Expulsion: Same as in case of retirement.

INSOLVENCY: The condition which marks a persons liability to meet full monetary obligations. Ceases to pay debts in the ordinary course of business or cannot pay as they become due On being declared an insolvent ceases to be a partner on the date of order Firm not necessarily dissolved depending on the contract Firm automatically dissolved if all partners (but one)declared insolvent

Liability: After insolvency estate not liable to any act of firm Firm not bound by acts of partner DEATH: If by agreement firm not dissolved on death estate of deceased not liable to any act of firm If by agreement firm dissolved surviving members responsible till public notice given
DISSOLUTION OF FIRM
So far: 1. Formation of partnership 2. Nature of partnership 3. Rights and liabilities of partners 4. Partners inter se third persons. 5. Changes in a firm without dissolution i.e reconstitution where business continues as before.
DISSOLUTIONContd.
Literal Meaning: Breaking Up. Of partnership: The discontinuance of a partnership from any legal cause. Breaking up or the extinction which subsisted between all the partners of the firm. There are various ways of dissolution of firm. It may take place:
DISSOLUTION---Contd
1. AGREEMENT: By agreement (consent) between all the partners or according to the contract amongst themselves 2.COMPULSORY: Occurrence of events making dissolution unavoidable e.g. Insolvency of all partners or all except one (when only one remains then no longer a partnership) Unlawful business. When object of partnership is illegal and carrying on of business becomes unlawful 3. CONTINGENCIES: Activities for which firm constituted coming to an end, it cannot function and stands dissolved on its own death
DISSOLUTIONContd.
Expiry of the fixed term for which the firm was constituted The undertaking or particular adventure for which constitutes firm has been completed Death of partner as partnership based on personal relations A partner declared insolvent
DISSOLUTIONContd.
4. AT WILL: Any partner can give notice in writing to all partners of his intention to dissolve. Definite term not specified exists only during pleasure of all partners. Dissolution from date mentioned in notice if not then from date of communication of notice
DISSOLUTION---Contd.
5. BY COURT Seven grounds in which the Court on any can order dissolution on a suit filed by a partner Unsound mind: As it is necessary to protect the interest of the insane and other partners Permanent Incapacity: Due to illness, mental or physical but should be of permanent nature, incapable of performing duties Conduct: Guilty of conduct to effect carrying of business; moral turpitude, professional misconduct. Connected with business and damage it.
DISSOLUTIONCONTD.
Conduct: Willful and persistent breach of agreements relating to firm or conduct e.g. destroying old account books, false in books of account etc. Mutual confidence does not exist and continuance not practical. Transfer of share: by a partner of his whole share to a third party. Motive: Business cannot be continued only at a loss as motive of every partnership is profit Any other ground: just and equitable to dissolve. Judicial discretion with regard to circumstances and exigencies.
DISSOLUTION AND AFTER.

Liability for acts of partners: Liable to third parties until public notice is given. Not to prejudice and protect rights of third parties Right of business: Apply property of firm in payment of debts and liabilities of firm. Surplus to be distributes amongst partners. Authority: of partners binding each other continue in order to finish unfinished business and complete dissolution. Authority to wind up
DISSOLUTION AND AFTERContd.

Settlement of accounts: Losses first paid out of profits, then capital and lastly partners individually on basis of sharing profit ratio Assets of firm first debts of third parties, then partners ratably for advances (distinguish from capital), followed by capital and balance if any divided ratably Debts: Joint debts paid from property of firm and separate from separate property of firm Goodwill: It can be included in assets and can be sold separately or along with property of firm
REGISTRATION OF FIRMS
Law provides for registration of firms but has not imposed any penalties for non registration Non registration does not partnership agreement void Optional for a firm to get itself registered or not Prudence dictates registration is implications of non registration are serious Non registration imposes certain disabilities for enforcing claims in courts
REGISTRATION OF FIRMS.
Each Province has its own Rules Registrars of firms appointed by the Provincial Government and defines areas of jurisdiction. PROCRDURE: 1. Application by firm to Registrar of Firms on prescribed form: Name of firm Place or principal place of business Names of any other place where business is carried on
REGISTRATION OF FIRMSContd.
Date on which each partner joined the firm Names and permanent address Duration of firm Signed and verified by all partners. Restriction on use of names like Government, Jinnah etc. Sending/submitting the application to the Registrar of Firms in the area of jurisdiction. Registration is only of a firm which is in existence and not which has been dissolved.
Registration takes place after receipt of statement (application) by Registrar and after verifying all particulars filed and compliance made makes an entry in the Register of Firms Once a firm has been registered further and subsequent changes like: Name and place of business Opening and closing of branches Name and addresses of partners Changes in and dissolution of a firm Can be made by intimating the Registrar who shall make an entry in the Register of Firms
In case of a court order regarding a registered firm the Registrar shall make consequential entries in the Register The Register of Firms is open to inspection by any person on payment of prescribed fees The entries and any subsequent changes in Register of Firms is conclusive proof of facts. Original documents filed with the Registrar shall be the conclusive proof.
NON REGISTRATION: Mentioned earlier is not mandatory and does not make a partnership illegal but its effects: 1. If firm not registered and person suing not registered as a partner cannot bring a suit to enforce a right arising from a contract Against the firm Against any past or present partner of firm
2. No suit to enforce a right arising from a contract shall be instituted by or on behalf of firm against any third party But this does not effect the right of a third party to proceed against an unregistered firm and its partners. 3. Claim to set off and other proceedings to enforce any right arising from a contract.
BUT Non Registration does NOT effect: 1. Right of third party to sue firm or any partner 2. Right of partner to sue for dissolution 3. Receiver to realise property of an insolvent partner 4. Firm or its partners having no place of business in Pakistan
PUBLIC NOTICE
By intimation to Registrar of Firms By publication in official Gazette In at least one vernacular newspaper circulating in the district.
LAW GOVERNING CONTRACTS

Keeping promises is important to a stable society. Contract law deals with, among other things, the formation and keeping of promises. Like other types of law, contract law reflects social values, interests, and expectations at a given point in time e.g. what kind of promises should be legally binding, what excuses are accepted for breaking promises, legally void or invalid. Resolving
LAW GOVERNING CONTRACTS-Contd.

such questions is the essence of contract law. In business law and the legal environment of business, questions and disputes concerning contracts arise daily. The law which governs contracts is THE CONTRACT ACT of 1872. Promulgated on 25th. April,1872 Technically Act IX Chapters 10 Sections 237
CONTRACT ACT,1872
CHAPTER I Of the Communication Acceptance and Revocation of Proposals. CHAPTER II Of Contracts, Voidable Contracts and Void Agreements CHAPTER III Of Contingent Contracts.
CONTRACT ACT, 1872

CHAPTER IV Of the Performance of Contracts CHAPTER V Of Certain Relations Resembling Those Created By Contract. CHAPTER VI Of The Consequences of Breach of Conract CHAPTER VII Repealed
CONTRACT ACT, 1872

CHAPTER VIII Of Indemnity and Guarantee CHAPTER IX Of Bailment CHAPTER X Agency. The first 6 chapters lay down the general principles on which all contracts are based, while the rest deal with the important classes of commercial contracts viz. indemnity and guarantee, bailment, agency ,
CONTRACT ACT
Extends to whole of Pakistan Main source of law regulating contracts in Pakistan law Determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. Contract creates right and duties upon contracting parties The Act deals with the enforcement of these rights and duties upon the parties.
FUNCTION OF CONTRACTS
No aspect of life is entirely free of contractual relationships Contract law is designed to provide stability for both buyers and sellers Followed in business agreements to avoid potential problems Necessary to ensure compliance
WHAT ARE CONTRACTS

An agreement or mutual promise upon lawful consideration or cause which binds the parties to a performance; a bargain; a compact. PROMISE: An undertaking by one man with another for the performance or the non-performance of some particular thing. A verbal covenant PROPOSAL: When one person signifies to another his
WHAT ARE CONTRACTSContd.

Willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise. The person making the proposal is called the promisor. The person accepting the proposal is called the promisee.
WHAT ARE CONTRACTS

The first step towards a contract is for the parties to get into communication with each other. This is done by one of them making a proposal. An offer to do or not do something, and that offer must be made for the purpose of being agreed to The next step is that the person, with a view to whose assent the proposal is made, should express his concurrence in the act or abstinence. The proposal now becomes a promise.
CONTRACT--DEFINITION
A contract is an agreement that can be enforced in court. It is formed by two or more parties who agree to perform or to refrain from performing some act now or in the future, Is an agreement enforceable at law. It is bilateral document meant to create legal relationship
INTERPRETATION CLAUSE DEFINITIONS

INTERPRETATION OF CLAUSE is a section of a statute which defines the meaning of certain words occurring in other sections. Aims to introduce some of the words and expressions as are used in Contracts Act with their peculiar meanings and connotations. Words used to be understood in specific sense In this Act the following words and expressions are used in the following senses, unless, a contrary intention appears from the context:
INTERPRETTION CLAUSE
PROPOSAL: Is declaration by the proposer of his intention to be bound by an obligation if the offeree fulfills or undertakes to fulfill certain conditions A proposal is made when one person signifies to another his willingness to do or abstain from doing anything, with view to obtaining the assent of that other to such act or abstinence The starting point for a contract
INTERPRETATION CLAUSE
PROMISE: The technical use is narrower than the popular use. The proposal when accepted becomes a promise. There must only be a proposal but there must be an acceptance of the proposal by the other side Every promise is an accepted proposal
PROMISOR: Person making the proposal PROMISEE: Person accepting the proposal The promisor and the promisee must be two different persons The two must exist to constitute a contract
CONSIDERATION: Act, done or promised to be done, at the desire of the promisor. At the desire of the promisor The promisee or any other person Must have done or abstained from doing, or Must do or abstain from doing or Must promise to do or abstain from doing something
AGREEMENT: Every promise and every set of promises, forming consideration for each other. An accepted proposal. Result of a proposal from one side and its acceptance by the other. Regarded as a contract when it is enforceable by law. An agreement that the law will enforce is a contract.
VOID AGREEMENT: Not enforceable at law Lawful having a lawful consideration. Entered into with a lawful object Every contract is an agreement but every agreement is not a contract. Agreement enforceable at law when it is not against public policy, immoral, without consideration, having not been hatched through fraud or deceit.
CONTRACT: An agreement Agreement enforceable by law Succession of definitions of the elements: 1. Proposal 2. Acceptance 3. Promise 4. Promisor 5. Promisee
6. Consideration 7.Agreement A bilateral document meant to create legal relationship. It is conceived by valid acceptance of a valid offer at the desire of the promisor.
VOIDABLE CONTRACT: Enforceable at the option of one party to the contract but the party can exercise this option once. One of the parties may affirm or reject at its option Different from void contract which is abinitio void. Has no legal value. Cannot be enforced at law. Voidable contract enforceable at law at the option of the parties.
VOID CONTRACT: Difference between void agreement and void contract Ceases to be enforceable by law e.g. impossible unlawful.
PROPOSALSCOMMUNICATION,ACCEPTANCE AND REVOCATION

Before a proposal is accepted there is: COMMUNIUCATION: Communicate: Imparting of news or information on one side and reception and understanding on the other Rule when communication of proposal is considered complete. Not a mere mental assent to the terms of an offer. Some act done with the intention of communicating the resolution to the other party Mere intention not communicated by words or conduct cannot give rise to a contract
COMMUNICATION
Communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. Communication of an acceptance is complete, as against the proposer, when it is put in course of transmission to him. Acceptance Agreeing to a previous act or promise to do by another. The acquiescence to an offer of a party makes the agreement enforceable in law. Signifying ones assent to the proposal made by another.
REVOCATION.
REVOCATION: The calling back of a thing done. The making void of a deed that was in force, the cancelling of an authority once given. The communication of a revocation is complete, as against the person who makes it, when it is put it is put into course of transmission to the person who made it
REVOCATION
A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete against the acceptor but not afterwards
REVOCATION
A proposal can be revoked, obviously before it becomes a contract, by: 1. Communication of notice of revocation 2. Lapse of stipulated time in the proposal 3. If the proposal is conditional or qualified by the failure of the acceptor to fulfill the condition precedent 4. By the death or insanity of the proposer, if the fact comes to the knowledge of the acceptor before acceptance
CONTRACTSVALID?
A valid contract has the elements necessary for contract formation; An agreement (proposal and acceptance. Supported by legally sufficient consideration For legal purpose Made by parties who have the legal capacity to enter into the contract i.e. contractual capacity:
CONTRACTS---VALID?
1. Age of majority: when supplies made to minor binding on him and his estate responsible for payment 2. Sound mind: at the time making contract is capable of understanding it, and of forming a rational judgment as to its effect upon his interest 3. No other disqualification like foreign enemy 4. Free Consent i.e. when not caused by:
CONTRACTS---VALID?
Coercion. It becomes voidable at the option of the person whose consent was obtained by coercion. Undue influence. Domination of a weak mind by a strong mind. Fraud: False representation of fact made with a knowledge of it Misrepresentation. causing a party to make a mistake.
CONTRACTPERFORMANCE.
Deals with time, mode, and order of performance as also who is bound to perform and who can demand performance Parties to contract must perform or offer to perform their respective performances unless dispensed by law. In case of death binding on legal heirs unless contrary to it from the contract. TIME AND PLACE OF PERFORMANCE: When promisor to perform without demand from the promisee and no time fixed then promisor must perform within reasonable time ( reference to nature of character of goods dealt, surrounding circumstances, facts of case)
CONTRACT---PERFORMANCE
To be performed when promisee applies then it his (promisee) responsibility to apply---proper place and within usual business hours If no application from promisee then duty of promisor to apply to promisee When parties agree on the time of performance of any obligation under the contract and is made a condition of the contract then time is the essence of the contract. Breach entitles the party to repudiate the contract
CONTRACT--PERFORMANCE
Avoiding the contract. Circumstances: Parties agree to substitute a new contract, rescind or alter original. Every promisee may dispense with or remit wholly or in part the performance of the promise. Contract is ab initio void
CONTRACT--ASSIGNMENT
ASSIGN is to transfer, make over or set over to another. ASSIGNMENT is the act of transferring to another all or part of ones property, interest or rights----Assignment of contract: transfer of rights or liabilities under a contract. Maybe: 1. Operation by law: in cases of bankruptcy or purchase or loss of interest of law 2. Assignment by act of parties: cannot be
CONTRACT--ASSIGNMENT
assigned (liability passed on) without the consent of other party. Where personal considerations are involved contracts cannot be assigned. Benefit can be assigned over to other party provided the benefit does not entail any liability.
CONTRACTTERMINATION &DISCHARGE
The contractual ties may be loosened and the parties wholly freed from the rights and liabilities under the contract by: 1. By Agreement. Contract discharged by the same process which created it by mutual agreement: Waiver: Parties agree to demand performance. Waive rights and by waiver other party discharged.
CONTRACT--TERMINATION&DISCHARGE.
Novation or Substituted Agreement: Mutual desire of the parties to substitute a new contract in place of old. Old contract need not be performed. 2. By Performance: Duties undertaken by either party fulfilled. 3. By Breach: A contract may be broken. Will discharge either party from performance. It maybe:
CONTRACTTERMINATION & DISCHARGE.

By Renunciation: before performance is due By impossibility created by other party before performance is due. Impossibility e.g. change in law Frustration e.g. One of the parties contracted to marriage goes mad. 4. By operation of Law: Merger Bankruptcy.
CONTRACT---BREACH
In case of breach of contract three remedies are available to the other party: 1. Damages: The amount is to the extent of damages. For loss which is direct result of breach. Cannot claim for indirect loss 2. Specific Performance of the Contracts: Actual carrying out of contract by a party. Court orders one party, at the suit of the other, to carry out the agreement. Usually not granted where damages sufficient compensation to the party.
CONTRACT---BREACH
3. Injunction. An order or judgment of a court restraining some person or persons from doing certain things which are detrimental to the interests of another or others. It is considered to be a negative remedy
CONTRACTSSPECIAL TYPES.
CONTINGENT CONTRACT: A contract to do or not do something unless such event takes place e.g. life insurance where contract is complete only when the insurer passes away. The uncertainty and futurity of the event to which the contract is related. Liability of performance is not absolute but depends upon the happening or not happening of certain event
CONTRACTS---SPECIAL TYPES
The event being collateral to the event.. Contingency should relate to a matter collateral to the main purpose of the agreement The contingency should not depend on the mere will and pleasure of a party, but must depend on the act of a party.
CONTRACTSSPECIAL TYPES
INDEMNITY: An undertaking to make good monetary or other loss or damage CONTRACT OF INDEMNITY: By which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person e.g. A contracts to indemnify B against the consequences of any proceeding which C may take against B in respect of a certain amount.
INDEMNITY
The person (A) who gives the indemnity is called the indemnifier and the person (B) for whose protection it is given called the indemnity-holder or indemnified. Scope of indemnity is restricted to those cases where there is a promise to indemnify against loss, caused by the (a) promisor himself or (b) by any other person. Excludes loss from accidents like fire etc. Promise of indemnity may be expressed or implied.
INDEMNITY
INDEMNITY HOLDER: The person to whom the indemnity is given i.e. the promisee acting within the scope of his authority.. His rights: Entitled to claim all damages which he may have been compelled to pay. Recover all cost reasonably covered in resisting, reducing or ascertaining the claim Can compromise a claim on best term he can and then bring an action on the contract of indemnity
GUARANTEE
Guarantee is a promise to be answerable for the debt, default or miscarriage of another. Contract of Guarantee: to perform the promise, or discharge the liability of a third person in case of his default. When a third person promises to pay debt owed by another in the event the debtor does not pay a guarantee relationship is created. Surety: Person who gives the guarantee. Principal Debtor: Person in respect of whose default the guarantee is given. Creditor: Person to whom the guarantee is given.
GUARANTEE
A takes a loan from B when C guaranteed repayment of the loan. A is the principal debtor, B the creditor and C the surety. The function of a contract of guarantee is to enable a person to get a loan, or goods on credit or an employment Mutual assent is an essential element of a contract of guarantee. It is not a unilateral contract. There must be an offer and acceptance.
GUARANTEE
ESSENTIALS: It is a contract To perform the promise or To discharge the liability Of a third person In case of his default The contract may either be written or oral.
GUARANTEE
Differences between Contracts of Guarantee and Indemnity: 1. In case of Guarantee there are 3 parties. In case of Indemnity 2 parties 2. In case of Guarantee there is a Principal debtor. In Indemnity an original and direct engagement; independent of the existence of the third party 3. Guarantee exists for the security of the creditor. Indemnity is for reimbursement of loss
BAILMENT
Bailment from bailler (French) meaning to deliver. Signifying a contract resulting from delivery. Bailment implies a sort of relationship in which the personal property of one person temporarily goes into the possession of another. The ownership of the articles or goods is in one person and the possession in another e.g. leaving a car for repair, cloth to a tailor, parcel to TCS, goods in a cold store.
BAILMENTContd.
The delivery of goods by one person the bailor to another the bailee for some purpose, upon a contract that they shall, when purpose is accomplished, be returned or otherwise disposed of according to the direction of the person delivering it. Formed by the delivery of personal property , without transfer of title by bailor to a bailee usually under an agreement. Obligations and duties arise from the bailment relationship.
BAILMENTContd.
CHARACTERISTICS: 1. Delivery of goods. Delivery of possession is essential. Not transfer of ownership; that would be sale or exchange 2. Delivery of possession is temporary but it is for some purpose.Bailor reserves right to claim redelivery of goods deposited. 3. Delivered goods to be returned according to directions of bailor when purpose accomplished. 4. Only movable properties can be bailed.
BAILMENTContd.
RIGHTS AND DUTIES OF BAILEE and BAILOR. DUTIES of BAILEE: Take care of the goods entrusted to him reasonable. Not to make unauthorized use of goods entrusted to him. Becomes responsible for any loss. Not to mix goods with his own goods Not to set an adverse title to the goods Return the goods after purpose or period of bailment is over.
BAILMENTContd.
DUTIES of BAILOR: To disclose defects of goods bailed To bear extraordinary expenses Compensate or indemnify for reasons not entitled to make bailment AGAINST THIRD PARTIES: If use or possession wrongfully deprived by third party bailee can claim damages. Option also with bailor.
BAILMENTContd.
TERMINATION: Bailee wrongfully uses or disposes goods. Period or purpose of bailment over Gratuitous bailment terminated any time by bailor On death of bailor or bailee gratuious bailment.
AGENCY.
Since it is not possible for every person to do everything by self, the allows the person to be represented in the performance of persons legal acts by another and gives acts done by such representative the same effect as they would have done it by self. One of the most common, important and pervasive legal relationship is that of the agency; relationship between (agent) who agrees to represent or act for the other (principal). The principal has the right to control the agents conduct in matters entrusted to the agent, and the agent must exercise its powers for the benefit of
AGENCYContd.
the principal only. The principal, by using agents, can conduct multiple business operations simultaneously in various locations e.g. corporate officer. AGENCY: A legal relationship between a person and another called the principal for whom he acts. There must be an authority from the principal, express or implied.
AGENCYContd.
Is founded upon a contract, either express or implies, by which one of the parties confides to the other the management of some business to be transacted in his name and on his account and by the other assumes to do business and to render an account of it. Agent a person employed to do any act for another or so represent the other in dealings with the third person. Principal the person for whom such act is done or who is so represented.
AGENCYContd.
In every transaction of agency three persons, agent, principal and third party to whom such representation is made, are involved. Sub Agent a person employed and acting under the control of the original agent. He is not responsible for his acts to the principal. He is only responsible to the agent. DUTIES OF PRINCIPAL TO AGENT:
AGENCYContd.
1. Indemnify him against all lawful acts done in exercise of conferred authority 2. Indemnify for acts done in good faith. 3. Compensate for injury caused by principals neglect RIGHTS OF AGENTS: 1. Right of retainer out of sums received on principals account 2. Entitled to commission (subject to contract) 3. Entitled to retain property, documents etc. until commission due received 4. Indemnified by principal for lawful acts 5. Indemnified by principal for acts done in good faith.
AGENCYContd.
RIGHTS OF PRINCIPAL: 1. Agent to carry out business according to principals directions as a prudent man. 2. Entitled to examine accounts. 3. Agent to obtain instructions from principal 4. Can repudiate transaction if agent carries out business in his own account. 5. Agent cannot delegate authority without consent.
AGENCYContd.
CREATION : 1. By Direct Appointment when agents authority is expressly given 2. By Implication when agency is inferred from dealings between two persons. 3. By Necessity when an emergency acts without authority 4. By Estoppel (a plea in bar, grounded on ones own act). Principal induces third person that the acts done by his agent are by his authority. 5. By Ratification when a previous unauthorised act is approved and made valid.
AGENCYContd.
TERMINATION: BY ACT OF PARTIES: Lapse of Time: Period for agency relationship expires. Purpose Achieved Occurrence of Specific Event Mutual Agreement BY OPERATION OF LAW: Death or mental incompetence. Automatic and immediate. Knowledge of death not required.
SALE OF GOODS ACT,1930

Initially the Sale of Goods Act , 1930 was part of the Contract Act 1872 (Chapter VII Sections 76 to 123).This Chapter VII was repealed and a new law Sale of Goods Act 1930 promulgated. Pakistan adopted the in August 1947. The Sale of Goods Act has; Chapters 7 Sections 66
SALE OF GOODS ACT

Chapter I : Preliminary (Sections 1-3) Chapter II Formation of the Contract (Sections 4-17) Chapter III Effects of the Contract (Sections 18-30) Chapter IV Performance of the Contract (Sections 31-44) Chapter V Rights of Unpaid Seller Against the Goods (Sections 45to 55)
SALE OF GOODS ACT

Chapter VI: Suits for breach of the Contract (Sections 55-61) Chapter VII: Miscellaneous (Sections 62-66) A contract of sales of goods is a contract in accordance to which the seller either transfers or agrees to transfer the property in goods to the buyer for a price. The payment of price is very important. Maybe absolute or conditional. Maybe between one part owner and other
SALE OF GOODS ACT

Sale of Goods consists of a number of essential ingredients and if one of them is missing there is no sale. Briefly these are: Existence of goods, which form the subject matter of the sale. The contract (bargain), when executed, will result in the passing of the property in the goods for a price The payment or promise of a price The passing of the title.
SALE OF GOODS ACTContd.

The expression Sale of Goods is a composite expression consisting of various elements Sale is said to be the passing of title from the seller to the buyer. Title is the formal right of ownership of property. The price may be payable in money or in other goods, services. Good, the item of property must be tangible, and it must be moveable. Tangible property has physical existence.

Goods mean every kind of moveable property other than actionable claims and money and includes stock and shares, growing crops etc. Actionable claims and money cannot be bought and sold. Money is recognised currency in circulation but not foreign. Actionable claims is a thing which a person cannot make use or enjoy e.g. a debt; which can only be recovered through a suit.

Goods: Kinds. 1 Existing: either owned or possessed by the seller at the time of contract (e.g. agent). Subject goods must be in actual or possible existence Specific: identified and agreed upon at the time of contract. Actually identified, Ascertained: Wider import than specific. Become ascertained subsequent to the contract Unascertained: Not specifically defined but defined only by description.

2. FUTURE: Seller does not own or possess at time of contract but he will manufacture, acquire, or produce after making the contract. Actually an agreement to sell . Sale only of goods where ownership. 3. CONTINGENT: Sale dependent upon a contingency which may or may not happen. This may be absolute or conditional.

SALE: When under a contract the goods is transferred from the seller to the buyer. VALID SALE: ESSENTIALS Parties competent to contract Mutual assent Transfer of property A price may be paid or promised.
SALE OF GOODS ACT---Contd.

SALE : AGREEMENT and CONTRACT. AGREEMENT: Transfer of property to take place at a future time or subject to fulfillment of some conditions. It becomes a sale when time elapses or conditions fulfilled. DIFFERENCES. DISTINGUISHED 1. Executed, Executory. Sale is an executed contract i.e. sale plus conveyance 2. General and Particular property. In sale transfer of property with rights. In agreement a remedy only

3. Damages: In agreement right of damages only while in sale when ownership passed seller can sue. 4. Right to resell: Seller at liberty to sell in agreement 5. Risk of loss: In agreement of seller and in sale of buyer. 6. Remedy: In agreement buyer only personal remedy i.e. damages. In sale buyer has personal remedy and to the goods which seller has.

7.Insolvency: Seller becomes insolvent buyer can claim rate able dividend. If permanently insolvent entitled to recover goods from official receiver. IN SALE OWNERSHIP OF GOODS HAS PASSED TO THE BUYER. IN AGREEMENT OWNERSHIP HAS NOT PASSED TO THE BUYER.s

PRICE: No sale can take place without a price. If no valuable consideration for voluntary surrender of goods then it is a Gift. Means money and nothing else. Money actually paid or promised to be paid Cash or credit sale If consideration other money then no sale.

FIXING PRICE: Either be certain and definite or determinable by some method of calculation or prescribed criterion. MODES: Expressly stated in the contract. Parties free to fix any price. Manner provided in the contract Determined in the course of dealings between the parties

When nothing then when contract executed then reasonable price To be fixed by the valuation of third party provided the third party accepts. Payment, subject to contract, in currency of the country. EARNEST MONEY. Part payment in advance for due performance of contract. If contract honoured then adjusted against price otherwise forfeited by seller.
MY CONCEPT OF HAPPINESS
MUNNA BHAI MBBS TENSION NAA LO ABSENCE OF WORRY THE CONQUEST OF HAPPINESS BERTRAND RUSSEL
I think I could turn and live with animals, they are so placid and self-contained, I stand and look at them long and long They do not sweat and whine about their condition, They do not lie awake in the dark and weep for their sins, They do not make me sick discussing their duty to God,
Not one is dissatisfied, not one is demented with the mania of owning things, Not one kneels to another, nor to his kind that lived thousands of years ago, Not one is respectable or unhappy over the whole earth. WALT WHITMAN

CONDITIONS AND WARRANTIES: Various statements, commitments and performance make up a contract. Some are vital to the contract and others subsidiary. If the parties to a contract regard the term as essential it is a condition and if not then it is a warranty. CONDITION: A qualification, provision, or clause in a contract, the occurrence of which creates, suspends, or terminates the obligations of the contracting parties. It is essential to the main purpose of the contract. Breach of which gives right to treat the contract as repudiated. Has option to treat condition as warranty and claim damages.

WARRANTY: A stipulation collateral to the main purpose of the contract, the breach of it gives rise to claim for damages but not to reject goods and repudiate the contract. Conditions and Warranties are either expressed or implied. IMPLIED CONDITIONS: In case of sale seller has a right to sell goods. When agreement to sell right when the property is to pass

When sale of goods by description then the goods should correspond with the description and of merchantable quality When description accompanied by sample then the goods should correspond accordingly. When particular purpose expressed by buyer then goods should be fit for such purpose When sold by sample then bulk should correspond with sample

IMPLIED WARRANTIES: Buyer has right of possession and free from any encumbrance. Quality for particular fitness annexed. CAVEAT EMPTOR BuyerBeware. Sale of goods open to inspection. The seller need not point out any defect in them, but if he is asked about any defect he must truthfully give out. Based on the general rule

that there is no implied condition or warranty as to the quality or fitness for any particular purpose of goods supplied under a contract of sale'. The buyer relies on his own skill and judgment when he makes a purchase. It is for him to satisfy about the purchase; exceptions: When particular purpose intimated by the buyer to the seller then seller to supply accordingly. When bought by description goods should be of merchantable quality.

TITLE and OWNERSHIP---TRANSFER Between seller and buyer If ownership passed on to buyer then loss is buyers risk even if goods in sellers possession. Creditor of seller of goods has no claim once the title has passed on to the buyer. Buyer cannot acquire a better title to the goods than the seller

If stolen goods bought buyer acquires no title Seller should be owner of goods or selling under authority of owner. AUCTION SALES: Each lot is a separate contract. Sale complete with fall of hammer Seller cannot bid Pretended biddings render sales voidable at the option of buyer

AUCTIONIMPLIED WARRANTIES: Authority to sell. No defects in knowledge Undertakes to give possession against price paid Possession will not be disturbed.
NEGOTIABLE INSTRUMENTS ACT,1881

The vast number of commercial transactions that take place daily in the modern business world would be inconceivable without negotiable instruments. INSTRUMENT: A formal legal writing. A written document of formal legal kind. NEGOTIABLE INSTRUMENT: A signed writing that contains an unconditional promise or order to pay an exact sum of money on demand or at an exact future time to specific

person or order, or to bearer e.g. a cheque. A negotiable instrument can function in two ways--as a substitute for money (cheque) or as an extension of credit (promissory note). For a negotiable instrument to operate practically as either a substitute for money or a credit device, or both, it is essential that the instrument be easily transferable without danger of being uncollectable. This is an essential function of negotiable instruments.

The law relating to negotiable instrument in Pakistan is contained in the Negotiable Instruments Act, 1881. The law regulates the issue and negotiations of notes, bills and cheques.. The Act was promulgated on 19th. December 1881(XXVI of 1881) and was adopted by Pakistan on August 14, 1947. It has 17 Chapters and 139 Sections.

CHAPTER I --PRELIMINARY Sections 1-3 CHAPTER II OF NOTES BILLS AND CHEQUES Sections 4-25 CHAPTER IIIPARTIES TO NOTES,BILLS AND CHEQUES Sections 26-45. CHAPTER IVOF NEGOTIATION Sections 46-60

CHAPTER VOF PRESENTMENT Sections 61-77. CHAPTER VIOF PAYMENT AND INTEREST Sections 62-81. CHAPTER VIIOF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES Sections 82-90 CHAPTER VIIIOF NOTICE AND DISHONOUR Sections 91-98

CHAPTER IXOF NOTING AND PROTEST Sections 99-104 CHAPTER XOF REASONABLE TIME Sections 105-107 CHAPTER XIOF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED. Sections 108-116

CHAPTER XII-- OF COMPENSATION Section 117 CHAPTER XIII SPECIAL RULES OF EVIDENCE Sections 118-122. CHAPTER XIVSPECIAL PROVISIONS RELATING TO CHEQUES Sections 122-A-131-C CHAPTER XV SPECIAL PROVISIONS RELATING TO BILLS OF EXCHANGE Sections 131-D -133.

CHAPTER XVIOF INTERNATIONAL LAW Sections 134-137 CHAPTER XVIINOTARIES PUBLIC Sections 138-139.
NEGOTIABLE INSTRUMENTS ACT, 1881

ESSENTIAL FEATURES: An instrument in writing Transferable by delivery with or without endorsement Confers upon the transferee a title unaffected by equities Gives the holder a right to sue in his own name Sue without giving notice of assignment to any previous party liable in respect of it.

It is thus a property which may be acquired by any person who takes it bonafide and for value, not withstanding any defect in the title of the person from whom he took it of which he (transferee) was unaware. The aspect of negotiability differentiates a negotiable instrument from ordinary goods. MEANS; 1. Promissory Note 2. Cheque or Bill of Exchange.

PROMISSORY NOTES. The law defines it as an instrument in writing (not being a bank or currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money, only to or to the order of a certain person, or to the bearer of the instrument. A written promise made by one person (the maker of the promise) to pay to another (the payee; the one to whom the promise is made) e.g.:

I promise to S or order Rs. 5,000 Mr. S. I, owe you Rs. 5,000 The first is a promissory note while the latter is not. ESSENTIALS: 1. Must be in writing. Oral excluded. Writing includes printing, engraving, typewriting etc. 2. Must contain promise to pay. An express promise to pay and not an acknowledgement of debt.

3.Promise to pay must be unconditional. Not dependant on contingency. 4.Must be signed by the maker. Without it incomplete. It authenticates the document. 5.Maker must be a certain person; entering the contract and undertaking to pay. 6.Sum payable must be certain. Definite and incapable of variation.

7. Sum payable in money only. Anything in addition then not a promissory note. 8.Sum payable on demand or at a fixed determinable future and the payee must be certain. Maker cannot be the payee.

Business Law

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Business Law

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BUSINESS LAW

WHAT IS LAW? MEANING ? DEFINITION?

WHAT DO YOU SAY?

VARIOUS MEANINGS AND DEFINITIONS

MEANINGS AND DEFINITIONS: Contd.

WHY STUDY LAW?

ADVANTAGES AND DISADANTAGES.

STARTING BUSINESS BUSINESS LAW IN PAKISTAN

COMPANIES ORDINANCE, 1984

A Public Limited (Listed and Unlisted)

PRIVATE vs. PUBLIC -Contd:

ADVANTAGES OF PRIVATE COMPANY

AUDIT AND ACCOUNTS

AUDIT and ACCOUNTS---Contd.

LAW RELATING TO PARTNERSHIP

PARTNERSHIP LAW IN PAKISTAN

PARTNERSRELATIONS TO ONE ANOTHER

PARTNERSRELATIONS TO ONE ANOTHERContd.

PARTNERS---RELATIONS TO ONE ANOTHERContd.

PARTNERSRELATIONS TO ONE ANOTHERContd.

PARTNERSRELATIONS TO ONE ANOTHERContd.

PARTNERSRELATIONS TO ONE ANOTHER---Contd.

PARTNERSRELATIONS TO ONE ANOTHERContd.

PARTNERSRELATIONS TO ONE ANOTHER---Contd.

PARTNERSRELATIONS TO ONE ANOTHER---Contd.

PARTNERSRELATIONS TO ONE ANOTHER---Contd.

PARTNERSRELATIONS TO ONE ANOTHERContd.

PARTNERSRELATIONS TO ONE ANOTHERContd.

PARTNERSRELATIONS TO ONE ANOTHERContd.

PARTNERSRELATIONS TO THIRD PARTIES.

PARTNERSRELATIONS TO THIRD PARTIES

PARNERSRELATIONS TO THIRD PARTIESContd.

PARTNERSRELATIONS TO THIRD PARTIESContd.

PARTNERSRELATIONS TO THIRD PARTIESContd.

PARTNERSRELATIONS TO ONE ANOTHERContd.

PARTNERSRELATIONS TO THIRD PARTIESContd.

PARTNERS---RELATIONS TO THIRD PARTIES.

PARTNERSRELATIONS TO THIRD PARTIESContd.

RIGHTS: 1. Admitted to benefit 2. May inspect/access accounts

PARTNERSRELATIONS TO THIRD PARTIESContd.

PARTNERS---INCOMING AND OUTGOING

PARTNERSINCOMING AND OUTGOING

PARTNERSINCOMING AND OUTGOING

PARTNERSINCOMING AND OUTGOINGContd.

PARTNERSINCOMING AND OUTGOING

PARTNERSINCOMING AND OUTGOING

PARTNERSINCOMING AND OUTGOING

DISSOLUTION AND AFTER.

DISSOLUTION AND AFTERContd.

LAW GOVERNING CONTRACTS

LAW GOVERNING CONTRACTS-Contd.

CONTRACT ACT, 1872

CONTRACT ACT, 1872

WHAT ARE CONTRACTS

WHAT ARE CONTRACTSContd.

WHAT ARE CONTRACTS

INTERPRETATION CLAUSE DEFINITIONS

PROPOSALSCOMMUNICATION,ACCEPTANCE AND REVOCATION

CONTRACTTERMINATION & DISCHARGE.

SALE OF GOODS ACT,1930

SALE OF GOODS ACT

SALE OF GOODS ACT

SALE OF GOODS ACT