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B.law for b.com part II for punjab university and sargodha university
 

B.law for b.com part II for punjab university and sargodha university

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complete notes of business law for the students of punjab universty and sargodha university..

complete notes of business law for the students of punjab universty and sargodha university..

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    B.law for b.com part II for punjab university and sargodha university B.law for b.com part II for punjab university and sargodha university Document Transcript

    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road IMPERIAL LEARNING ACADEMY STANDARD NOTES Business law B.com part 2ND Ahmed Raza Notes of following books are also available 1. 2. 3. 4. 5. 6. Accounting i.com par 1st & part 2nd ( Urdu and English) Statistics I.com part 2nd (Urdu) Accounting B.com part 1st Money Banking and finance Introduction to business Business law Business law Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 1
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road Important questions 1. 2. 3. 4. 5. 6. 7. Discuss essential of valid contract What are the kinds of contract explain them Explain the essentials of valid offer What are the essentials of a valid acceptance? Discuss void agreement in detail What are the rules and exceptions of consideration 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 2
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 question… Every promise or set of promises forming consideration for each other is called agreement. Types of agreement i. ii. Social agreement 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 3
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 ( at law. ) to create legal relationship, contract is not enforceable 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 4
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 ( to imply injury to any person ) opposed to public policy or 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 5
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 6
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road Q#2 What are the kinds of contract? Explain them The contract can be classified into following four categories 1. 2. 3. 4. According to enforceability According to formation According to performance According to parties 1. According to enforceability i. ii. iii. iv. v. i. According to enforceability a contract has following five types Valid contract Void contract Void agreement Voidable agreement Unenforceable contract 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 7
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 8
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. ii. Executed contract 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 9
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 10
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. 2. 3. 4. 5. 6. 7. 8. Express or implied Legal relation Definite & clear Specific & general Communication with Offeree Negative condition Conditions in offer Cross offers 1) Express or implied An offer may be made by words or conduct ( words spoken or written is called express offer. ). An offer which is made by 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 11
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 12
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 other’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 13
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 14
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 15
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 16
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. 2. 3. 4. 5. 6. 7. 8. 9. Agreement in restraint of marriage Agreement in restraint of trade Agreement in restraint of legal proceedings Uncertain agreements Agreement by way of wager Agreement against the public policy Agreement to do an impossible act Agreement under mistake 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 17
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 18
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 don’t 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 19
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Mehmood’s 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 Nadia’s 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 B’s 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 20
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 shaan’s dead body if he pay him Rs 5000 Ali’s 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 21
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road When the act have been done before a contract is made it is called past consideration Example A gives some services to B at B’s desire. Later on B compensate A for his services. 10. Present consideration Note: If the consideration is decided at the time when contract is made it is called present consideration. Heading Number 9, 10, 11 are the kinds of consideration Example So it can satisfy question of what are the type of consideration Ali sold his car to B and Ali make the payment at the same time it is called present 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 22
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Razib’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 23
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 minor’s 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. Minor’s 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 24
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 25
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Ali’s 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) Minor’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 26
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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) ii) iii) iv) v) Coercion Undue influence Misrepresentation Fraud 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 27
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 28
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. ii. iii. iv. It must relate to the contract It must be untrue The other party must suffer loss 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 29
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. 2. 3. 4. 5. 6. Discharge by Performance Discharge by Agreement Discharge by Subsequent impossibility Discharge by Laps of time Discharge by Operation of law 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. ii. Actual performance 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 30
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road A contract may be discharged by the agreement between the parties in any of the following ways i. ii. iii. iv. v. Novation Alteration Rescission Remission 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, A’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 31
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. ii. iii. Insolvency Death of any party 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 32
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. ii. Actual breach 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 33
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 ( obligation ) of contract means when one party fails or refuses to perform his Remedies for breach of contract Following remedies ( ) are available to aggrieved ( for breach of contract against the guilty ( ) party 1. 2. 3. 4. 5. ) party Suit for rescission Suit for damages Suit upon quantum meruit Suit for specific performance 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 34
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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) ii) iii) iv) General damages Specific damages Exemplary damages 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 35
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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) b) c) d) When compensation in money is not enough When compensation cannot be obtained Where one of the parties is a minor 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 salman’s 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 salman’s theater she was prohibited by the court form singing for Sheraz. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 36
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. 2. 3. 4. 5. Supply of necessaries Payment by interested person Compensation for non gratuitous acts Finder of goods 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 Hammad’s Property. 2) Payment by interested person Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 37
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 B’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 38
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road Q#12 what is the difference between indemnity and guarantee? Basis Meaning Indemnity A contract of indemnity is to comansate the loss suffered by a person from the conduct of any third person In a contract of indemnity there are three parties, indemnifier and indemnity holder The liability of indemnifier is primary Parties Liability Number of contract In contract of indemnity there is only one contract between the indemnifier and indemnity holder Performance of contract In contract of indemnity performance depends upon the possibility of loss This contract is made for the payment of loss The indemnifier, promises without the request of debtor Nature Request Written by; Ahmed BANKING Guarantee In contract of gurantee one person gives the gurantee for the performance of contract In a contract of guarantee there are there parties, surety, debtor, creditor The liability of surety is secondary as he is liable only when the creditor fails to pay the debt There are there contracts Between surety and creditor Between creditor and principal Between surety and principal In contract of gurantee the performance depends upon if the creditor fails to make the payment. This contract is made for the payment of debt It is necessary that the surety must give the gurantee at the request of debtor Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 39
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. ii. iii. iv. Contract Specific purpose No change of ownership 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 40
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 bailee’s 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 41
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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) ii) iii) iv) v) Duty to disclose faults Duty to repay necessary expenses Duty to repay extra ordinary expenses Duty to indemnify for defective title 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 42
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 neighbor’s scooter to Bilal for use without neighbor’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 43
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 neighbor’s scooter to Bilal for use without neighbor’s 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 44
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 45
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Bilal’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 46
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. ii. Pleger/ pawner 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 principal’s goods cannot make a valid pledge of them. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 47
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 pledgee’s 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 48
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 49
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. ii. iii. Reasonable notice is necessary. Pledgee cannot sale goods to himself If the amount recovered from sale is less than the amount of debt, he can recover the balance amount from Pledger. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 50
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Bilal’s part. Bilal is liable for the loss. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 51
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road Q#19 what is the difference between sale and agreement to sell? Basis Sale Agreement to sell 1. Transfer of property The property of goods passes from the seller to the buyer immediately. 2. Transfer of ownership Ownership of the goods is transferred immediately after the sale A sale can only be in case of existing and specific goods only. The transfer of property of the goods is to take place at a future time. Ownership of goods does no change until the property is transferred. An agreement to sell is mostly in case of future and contingent goods. 3. Type of goods 4. Risk of loss 5. Right to re – sell 6. Nature of rights 7. Breach 8. Insolvency of seller 9. Insolvency of buyer 10. Nature of goods Written by; Ahmed BANKING In sale the if the goods are destroyed, the entire loss is suffered by the buyer In a sale the seller cannot re – sell the goods The buyer becomes the owner of goods. If the seller refuses to deliver the goods the buyer can sue for the recovery of goods If the buyer fails to pay the price the seller can sue for the recovery of price In an agreement to sale the whole loss is suffered by the seller It is merely a contract the buyer can sue the seller for damages in case of re – sale of goods The buyer does not becomes the owner of goods and he can only sue for the damages In an agreement to sale, if buyer fails to pay the seller can sue for the damages not for the recovery of price If the seller becomes insolvent, the if buyer has paid the price of goods 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 If the buyer becomes insolvent and If the seller becomes insolvent 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 A sale is an executed contract An agreement to sale is an executory contract Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 52
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. ii. iii. When the goods are sold on cash When the goods are sold on credit and period of credit has been expired When the buyer becomes insolvent Rules regarding lien Following are the rules regarding the lien of goods. i. ii. iii. When the goods are in the procession of seller The seller can use the right only for the price, not for the other charges 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 53
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. b. c. d. When the goods are still in transit When the property has not passed to the buyer When the buyer becomes insolvent 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 54
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road Q#21 What are the rights of buyer in a contract of sale? Buyer’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 55
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 C’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 56
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 57
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 consignor’s 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. ii. iii. iv. When the goods are not properly packed When the carriage is full When the goods are of such nature which he does not carry 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 58
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 59
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road Q#24 What is the difference between common carrier and private carrier? Basis Common carrier Private carrier The common carriers act, 1865 4. Rejection of offer 5. Damages A private carrier carries the goods not as regular business to earn money as a regular business. A common carrier carries the goods A private carrier carries the goods of a particular person A common carrier cannot reject the A private carrier can reject the offer without any reason If common carrier refuses to carry A private carrier cannot be sued for the the goods without any sufficient 3. Persons A common carrier carries the goods offer of goods for carriage business contract act, 1872. of all the persons. 2. Regular A private carrier is governed by governs a common carrier 1. Act damages on his refusal to carry goods reason, he can be sued and made liable for damages A common carrier carries the goods 8. Effects on business for hire or free Common carrier has fixed term of A private carrier determines the terms carriage of goods 7. Terms A private carrier may carry the goods for hire (rent) 6. Hire of carriage of goods. A common carrier is effected by the A private carrier is not affected. change in rules and regulation of government Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 60
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 railway’s risk then it is the liability of railway to bear loss occurring during transit When the goods are delivered at owner’s 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 61
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 railway’s 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 62
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road Q#26 What is the difference between bill of lading and chartered party? Basis Bill of lading a bill of lading is an evidence A chartered party is not transferable A bill of lading is always for A chartered party may be for particular destination or time A bill of lading is drawn in A chartered party is not two or three sets drawn in sets Fright is generally paid in Freight is paid after the safe advance 7. Stamping A bill of lading is a particular destination 6. Payment document of title of goods transferable by endorsement 5. Sets A chartered part is not a document of title of goods 4. Purpose of the ship A bill of lading is a delivery of goods It may or may not be 3. Transferability contract relating to the hiring the ship 2. Title A chartered party is a of receipt of goods on board 1. Nature Chartered party It is always stamped stamped Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 63
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road Q#27 what are the types of crossing of Cheque? Types of crossing Following are the types of crossing of cheque 1. 2. 3. 4. General crossing Special crossing Accounts payee or restrictive crossing Not negotiable crossing 1. General crossing Generally a cheque can be crossed when; i. ii. iii. iv. There are two transverse parallel lines, marked across its face or The cheque bears an abbreviation “&co” between two lines or The cheque bears the words “not negotiable” between two lines 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 64
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 65
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road Q#28 What is the difference between cheque, bills of exchange and promissory note? Basis Bills of exchange 1 Definition 2 parties 3 Acceptance 4 Discounting 5 Grace days 6 Area 7 stamp 8 Nature 9 liability 10 Noting charges Promissory note Bills of exchange is an instrument in writing which contains order of payment by creditor to debtor In case of bill of exchange there are three parties, drawer drawee and payee. Acceptance by drawee is necessary. Promissory note is an instrument in which debtor promises to pay a certain amount to creditor In case of promissory note there are two parties maker and payee Cheque Cheque is an instrument which is used to withdraw money from bank In case of cheque there are three parties depositor, bank and payee In case of cheque there is no need of acceptance, as it is order by the customer. Bills of exchange can be Promissory note cannot Cheque cannot be discounted from bank be discounted discounted 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 Promissory note can be Promissory note is Cheque is drawn on only inland or foreign generally inland depositor’s bank 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 It is an unconditional It is an unconditional Cheque is an order for making promise for payment unconditional order for payment making payment 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 Noting charges are paid Noting charges are not Noting charges are not in case of dishonor of paid in case of dishonor paid in case of dishonor bills of exchange of promissory note of cheque Written by; Ahmed BANKING There is no need of acceptance Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 66
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 11 Printed form A bills of exchange can be drawn on simple or printed paper A promissory note can be A cheque is always drawn drawn on simple or on printed paper that is printed paper provided by the bank 12 Crossing Bills of exchange cannot be crossed Promissory note cannot be crossed Cheque can be crossed 13 Payee In case of bills of exhnage the drawer and the payee may be same person In case of promissory note the drawee and the payee may be same person In case of cheque the drawer and the payee may be same person 14 Default In case of bills of exchange the drawee is responsible to make the payment In case of bills of exchange the drawer is responsible to make the payment In case of cheque the bank is responsible to make payment than the drawer is responsible 15 Trust In case of bills of exchange the people shows less confidence as compared to the cheque In case of promissory note people shows less confidence as compared to the cheque and bills of exchange In case of cheque the people shows more confidence as compared to the bills of exchange and promissory note 16 Stop payment Payment of bills of exchange cannot be stopped Payment of promissory note cannot be stopped Payment of cheque can be stopped on the orders of depositor 17 Period Period for making payment of bills of exchange is written on it Payment period is written Cheque can be cashed on the note within the period of six months from the date of issue 18 Use Bills of exchange is less used than cheque and more used than the note Promissory note is less used than the bills of exchange and cheque 19 Drawer Drawer of bill is always a Drawer of the note is seller always buyer Drawer of the cheque is always an account holder 20 drawee Drawee of bills is always a buyer Drawee of cheque is always a bank Written by; Ahmed BANKING Drawee of note is always a seller Cheque is more popular than the bill and note Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 67
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 68
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 69
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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. Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 70
    • Imperial learning academy Near madina college of commerce (boys) millat chowk sheikhupura road 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 Written by; Ahmed BANKING Raza (MBA, ACMA) providing quality education OF ACCOUNTING, MBF, ITB B.LAW, AUDITING AND 0334 – 5040190, 0313 – 5040191 Page 71