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SOLVED PAPERS OF CA FOUNDATION - 125400 - 02-11-2010
MERCANTILE LAW
Suggested Answers
Foundation Examinations Autumn 2009
4-Jan-10 101047 AM Page 1 of 6
Ans.1
(a)
The Federal Shariat Court
The Federal Shariat Court consists of not more than eight Muslim Judges including the Chief Justice which are appointed by the President. Out of the number of judges not more than three shall be Ulema who should be well-versed in Islamic law.
The judges hold office for a period of three years. However, the President may, extend such period.
(b)
Court of first instance
A court of first instance is the Court where the case is originally heard in full.
Areas of jurisdiction of the High Court
Following are the five areas of jurisdiction of the High Court.
(i) Original civil jurisdiction;
(ii) Appellate civil jurisdiction;
(iii) Appellate criminal jurisdiction;
(iv) Supervisory jurisdiction;
(v) Constitutional jurisdiction.
Ans.2
Validity of an agreement made without consideration
An agreement without consideration is considered valid in any of the following circumstances
(i) it is expressed in writing and registered under the law for the time being in force for the registration of documents and is made on account of natural love and affection between parties standing in a near relation to each other.
(ii) it is a promise to compensate wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do.
(iii) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt which is barred by the law for the limitation of suits.
(iv) any gift which is actually made as between the donor and the donee.
(v) no consideration is necessary to create an agency.
(vi) Remission by the promisee of the performance of the promise. A creditor can agree to give up either the whole or part of his claim or may agree to extend time for the performance of the promise and no consideration is required for such an agreement.
(vii) a promise to contribute to charity, though gratuitous, would be enforceable, provided the promisee on the faith of such promise undertakes a liability not exceeding the amount so promised.
Ans.3
(a)
Repayment by bailor of necessary expenses
(i)
No remuneration is to be paid to Farha for the safe custody of pet
Sara should reimburse Rs. 1,500 to Farha, as where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred for the purpose of the bailment.
(ii)
Farha is to be remunerated for her services
Sara should reimburse Rs. 1,000 to Farha, as where, under the terms of the bailment, the bailee is to receive remuneration for his services; it is the duty of the bailor to bear extraordinary expenses only, if any, incurred by the bailee in relation to the thing bailed.
MERCANTILE LAW
Suggested Answers
Foundation Examinations Autumn 2009
4-Jan-10 101047 AM Page 2 of 6
(b)
Bailees particular lien
Where the bailee has, in accordance with the purposes of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of such goods.
General lien of a banker
#61607; In the absence of a contract to the contrary, a general lien is a right to retain the goods of another as a security for a general balance of account.
#61607; A banker has a general lien on all goods, cash, cheques and securities deposited with him as banker by a customer, for any money due to him as a banker.
#61607; However, where the valuables and securities are deposited for a specific purpose such as safe custody, the banker has no general lien on them.
©
Stylish Suiting is not justified to refuse delivery of the coat to Majid, because a bailee who renders a service involving the exercise of labour or skill in respect of the goods bailed which improves the value of the article, is entitled to a right of particular lien, and not a general lien.
Ans.4
(a)
Ratification
Ratification means the subsequent adoption and acceptance of an act originally done without knowledge or authority.
Where acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratifies them, the same effects will follow as if they had been performed by his authority.
(b)
Essentials of a valid ratification
A valid ratification must fulfill the following conditions
(i) The agent must purport to act as agent for a principal who is in contemplation and is identifiable at the time of contract.
(ii) The principal must be in existence at the time of contract.
(iii) The principal must be competent to contract both at the time of the contract and at the time of ratification.
(iv) The act to be ratified must not be void, or illegal.
(v) Ratification must be with full knowledge of all material facts.
(vi) The principal must signify his unconditional acceptance of the act.
(vii) Ratification must be made within a reasonable time.
(viii) Ratification must be of whole transaction.
(ix) Ratification must be communicated.
(x) Ratification must not injure a third person.
©
Reimbursement of person paying money due by another, in payment of which he is interested
No, however, Baqar may recover the amount, if he has his interest in the payment.
To constitute a quasi contract and be entitled for reimbursement, following conditions must be satisfied
(i) the person who made the payment must have his own interest in the payment; and
(ii) the other person must be bound by law to pay.
MERCANTILE LAW
Suggested Answers
Foundation Examinations Autumn 2009
4-Jan-10 101047 AM Page 3 of 6
Ans.5
(a)
Rights and responsibilities of Meh****
Meh**** would not be responsible for non-performance;
he will not lose his rights under the contract, for instance he will be entitled to compensation and contract will become voidable at his option;
in case of performance by Saulat on Meh****s demand, Meh**** will be responsible to perform his promise.
Essentials of a valid offer of performance
(i) it must be unconditional;
(ii) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do;
(iii) if the offer is an offer to deliver anything to the promisee, the promisee must have reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver.
An offer to one of several joint promisees has the same legal consequences as an offer to all of them.
(b)
Contingent Contract
No, this is not a contingent contract as the condition i.e. construction of a bungalow is not collateral to the contract; but in itself forms a consideration and is thus an integral part of the contract.
Essentials of a contingent contract
The following are the essential characteristics of a contingent contract
(i) the performance of such a contract depends upon the happening or non-happening of some future event;
(ii) the event must be uncertain;
(iii) the event must be collateral i.e. incidental to the contract.
Ans.6
(a)
Partners Act not under implied authority
In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to
(a) submit a dispute relating to the business of the firm to arbitration,
(b) open a banking account on behalf of the firm in his own name,
© compromise or relinquish any claim or portion of a claim by the firm,
(d) withdraw a suit or proceeding filed on behalf of the firm,
(e) admit any liability in a suit or proceeding against the firm,
(f) acquire immovable property on behalf of the firm,
(g) transfer immovable property belonging to the firm, or
(h) enter into partnership on behalf of the firm.
(b)
Return of premium on premature dissolution
Moeen would be entitled to claim the refund of the premium or of such part thereof as may be reasonable, however, regard being had to the terms upon which he became a partner and to the length of time during which he was a partner.
Moeen would however, not be entitled for the return of premium if
(i) the dissolution is mainly due to his own misconduct, or
(ii) the dissolution is in pursuance of an agreement containing no provision for the return of the premium or any part of it, or
(iii) the dissolution is due to the death of a partner.
MERCANTILE LAW
Suggested Answers
Foundation Examinations Autumn 2009
4-Jan-10 101047 AM Page 4 of 6
©
Right of Pervez to share subsequent profits
In the absence of a contract to the contrary, Pervez has an option either
(i) to claim such share of the profits of the firm, earned after he ceased to be a partner, as may be attributable to the use of his share of the property of the firm; or
(ii) to claim interest at the rate of six percent per annum on the amount of his share in the property of the firm.
(d)
Personal profits earned by partners
No, Talha and Umair are not liable to share such profits with Sohail as this transaction was not within the scope of the partnership.
Subject to the contract between the partners, the partner shall account for that profit and pay it to the firm, which
(i) he derives for himself, from any transaction of the firm, or from the use of the property or business connection of the firm or the firms name; or
(ii) he made for himself, from carrying on any business of the same nature as and competing with that of the firm.
Ans.7
(a)
Cheque
A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.
Essential elements of a valid cheque
Following are the essential elements of a valid cheque.
(i) It must be in writing,
(ii) It must contain an unconditional order to pay,
(iii) It must contain an order to pay in terms of money,
(iv) It must contain an order to pay a definite amount of money,
(v) The parties to the cheque must be certain (real),
(vi) It must be signed by the drawer,
(vii) It must be drawn on a specified banker,
(viii) It must be payable on demand.
(b)
Who can cross the cheque after issue
Following persons can cross the cheque
(i) Holder
(ii) Banker
Crossing of cheque after issue
(i) Where a cheque is uncrossed, the holder may cross it generally or specially.
(ii) Where a cheque is crossed generally, the holder may cross it specially.
(iii) Where a cheque is crossed generally or specially, the holder may add the words not negotiable.
(iv) Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another banker, his agent, for collection.
(v) When an uncrossed cheque, or a cheque crossed generally, is sent to a banker for collection, he may cross it specially to himself.
©
Until the instrument is delivered after execution, it is incomplete and there is no cause of action on it. Therefore, Yaseen cannot recover amount on the note, as it was never delivered to him by Wali.
MERCANTILE LAW
Suggested Answers
Foundation Examinations Autumn 2009
4-Jan-10 101047 AM Page 5 of 6
Ans.8
(a)
(i)
Contract of sale
A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. The term covers sale and agreement to sell both.
(ii)
Sale
Where the property in the goods is transferred from the seller to the buyer, the contract is called a sale.
(iii)
Agreement to sell
Where the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
(b)
Ascertainment of price in case of contract of sale
The price in a contract of sale may be fixed in the following manner
(i) by the contract itself, or
(ii) may be left to be fixed in an agreed manner, or
(iii) may be determined by the course of dealing between the parties.
Where the price is not determined in accordance with the above provisions, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.
Ascertainment of price in case of an agreement to sell
In case of agreement to sell, price can be ascertained on the basis already given above. However, when it is left to be fixed by the valuation of a third party and such third party cannot or does not make such valuation, the agreement is thereby avoided.
Provided that, if the goods or any part thereof have been delivered to and appropriated by the buyer, he shall pay a reasonable price for the delivered goods.
©
Liability of buyer for neglecting or refusing delivery of goods
When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery and also for a reasonable charge for the care and custody of the goods.
Remedies available to the seller
(i) he may repudiate the contract
(ii) he may sue for the price or damages for non acceptance.
Ans.9
(a)
Implied conditions in a contract for the carriage of goods by sea
(i) The ship is seaworthy and reasonably fit to encounter the perils of the sea.
(ii) The ship shall be ready to commence the voyage and shall carry out the same with all reasonable dispatch and diligence.
(iii) The ship shall carry out the voyage in the usual and customary manner and shall not deviate from the prescribed or usual course.
(iv) The shipper shall not ship dangerous or unauthorized goods.
(b)
Exception to rule that carrier and the ship is not liable for loss due to sea un-worthiness
When loss to the cargo arising from sea un-worthiness caused by want of due diligence on the part of the carrier
(i) to make the ship seaworthy, and
(ii) to secure that the ship is properly manned, equipped and supplied, and
(iii) to make the holds, refrigerating and cool chambers and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.
MERCANTILE LAW
Suggested Answers
Foundation Examinations Autumn 2009
4-Jan-10 101047 AM Page 6 of 6
Ans.10
(a)
Circumstances under which trustee is liable to pay interest
Under the following circumstances a trustee committing a breach of trust is liable to pay interest
(i) where he has actually received interest;
(ii) where the breach results in unreasonable delay in paying trust-money to the beneficiary;
(iii) where the trustee ought to have received interest, but has not done so;
(iv) where he may be fairly presumed to have received interest;
(v) where the breach results in failure to invest trust-money and to accumulate the interest or dividends thereon;
(vi) where the breach consists of the employment of trust-property or the proceeds thereof in trade or business.
(b)
Breach of trust by co-trustee
Yes, Essa can recover the amount of sale proceed from Danish along with interest or dividends accrued thereon due to the following reasons.
(i) Danish delivered the trust property to Ghazi without seeing to its proper application.
(ii) He allowed Ghazi to receive the proceeds and then failed to make due enquiry as to his dealings therewith allowing him to retain it longer than would otherwise have been reasonable.
Since the breach has resulted in the failure to invest trust-money and to accumulate the interest or dividends thereon, Danish is also liable to account for compound interest at the rate of six percent per annum with half yearly rests.
(THE END)
- Dard - 02-11-2010
This is somewhat similar to the Uk corporate and business law
- shani420 - 02-11-2010
Law of few nations previously under Brtish empire is based on UK law.It has been modified according to local needs.
- Dard - 02-12-2010
Ahan, i see
- Mahtab - 02-15-2010
Thanks a Lot