51654340-business-law.pptx

7/28/2019 51654340-BUSINESS-LAW.pptx

1/218

BUSINESS LAW

WHAT IS LAW?

MEANING ?DEFINITION?


2/218

WHAT DO YOU SAY?


3/218

VARIOUS MEANINGS AND

DEFINITIONS

One view is that it is not capable of definition

But this cannot be the answer nor solve the problem

The confusion in defining law arises out of the differentpurposes to be achieved e.g:

Law has been defined by various individuals fromdifferent points of view

Various schools of law define it from different angles:

-basis of nature

-on source-terms of effect on society

-end or purpose of law


4/218

MEANINGS AND DEFINITIONS: Contd.

Generally and the most commonly accepted

definition is A rule of action to which men

are obliged to make their conduct

comfortable

Law is the command of the sovereign. It

imposes a duty and is backed by a sanction.

Command, duty and sanction are threeelements of law


5/218

LAW MAKING:PROCESS

Difference between Law and Ordinance

Bill----Proposal

Committees of the House

Approval by the Legislature

Assent by the President.


6/218

WHY STUDY LAW?

Obvious! Course Requirement

Study of law improves powers of reasoning, clarity ofthought and the ability to analyze and express complicatedideas

A greater appreciation of the workings of the system andthe parts that ensure its functioning.

Law forms the foundation on which any civilized society isbased. Nature has its own laws. So does society.

Law effects all aspects of life and society and is the

mechanism for change employed by governments acrossthe globe.From the protection of life and liberty, throughcorporate law to international relations, the law is thecentral stage.


7/218

PURPOSE OF LAW

Object of law is to maintain law and order in thecountry i.e. police functions

Another view limit natural liberty; Man is bornfree but is in chains everywhere.

Hindu view , purpose of law is the welfare of thepeople in the world and also salvation afterdeath.

Muslim: the end of the law is to promote thewelfare of man both individually and socially, notmerely in respect of life on this earth but also lifehereafter.


8/218

KINDS OF LAW

1. IMPERATIVE LAW. Imposed upon on men by some authority. Emphasison the will and physical force of the organized political community.

2. PHYSICAL OR SCIENTIFIC LAW . Laws of science e.g. law of gravity

3. NATURAL or MORAL LAW. Universal rules of governance. Principles ofnatural justice. Divine Law.

4. CONVENTIONAL LAW. Rules or regulations of voluntary organizations e.g.associations, clubs etc.

5. CUSTOMARY LAW. Customs, practices, traditions with historical sanctionand support e.g. jirga

6. TECHNICAL LAW. For efficient conduct of business e.g building laws, lawsof health

7. INTERNATIONAL LAW. Sum of laws and rules recognized by civilized intheir dealings with each other

8. CIVIL LAW. Municipal Law.


9/218

ADVANTAGES AND DISADANTAGES.

Uniformity and certainty to the administration of justice.

Avoids the dangers of arbitrary, biased and dishonestdecisions.

Fixed principles protect the administration of justice from

the errors of individual judgment More reliable than whims, wishes and desires.

1. Rigidity.

2. Conservative

3. Formalism

4. Complex.


10/218

STARTING BUSINESS

BUSINESS LAW IN PAKISTAN Legal form under which operating

Main forms of business organizations by PRIVATE sector inPakistan:

Sole Proprietorship

Partnership Limited Liability Company

Joint venture

PUBLIC SECTOR. Where the Government undertakes anenterprise either a statutory corporation or limitedcompany.

For medium and large scale business in Pakistan limitedcompany is the preferred form


11/218

CONTD. Law divided into PARTS and each deals with a

particular subject e.g. Part II Jurisdiction og Courts, PartIII SECP, Part IV Incorporation of Companies

Sections

Sub Sections

DEFINITIONS: The word or a term specifically definedhas a special meaning assigned to it and replaces itsordinary meeting. Otherwise have their ordinarydictionary meaning e.g.

Proceed in alphabetical order

Section 7 Company means a company formed andregistered under this Ordinance or an existingCompany


12/218

COMPANIES ORDINANCE, 1984

COMPANIES ORDINANCE. Legal regime for establishment and regulation ofcompanies in Pakistan

SECP. Securities and Exchange Commission of Pakistan for administrationof companies and Registrar of Companies appointed by SECP.

COMPANY LAW IN PAKISTAN:

1. Companies Act 1913 was adopted in Pakistan in Pakistan after 1947

2. Administered by Provinces till 1973 (new Constitution) and then takenover by Federal Government.

3. New law promulgated on October 8, 1984 . Previous law repealed.

4. To cater for needs of expanding sectors the law amended in 1991, 1999

and 2002


13/218

CONTD:

OBJECTIVES of COMPANIES

ORDINANCE:

Healthy growth of the corporate

enterprises

Protection of investors and

creditors

Promotion of investment

Development of economy.


14/218

CONTD:

A company is an artificial person created by law, endowed with a perpetual succession and an entityapart from its members. It signifies assent by means of common seal. It is capable of holdingproperty, incurring debts, and suing and being sued in the same manner as an individual

Under the law three different types of companies:

Limited by shares

Limited by Guarantee

Unlimited liability

Two types of limited companies:

A Private Limited

A Public Limited (Listed and Unlisted)


15/218

COMPANY: CHARACTERISTICS

Five core characteristics:

1. Legal personality/entity

2. Limited Liability3. Transferable Shares

4. Centralized management under a board

structure5. Shared ownership by contributors of capital


16/218

CONTD:

Granted a charter/permission (incorporated) by thecompetent authority (SECP/Registrar of Companies)

A separate legal entity distinct from its members iscreated with its own privileges and liabilities

It can sue and can be sued Creation of a specific law safeguarding the interests of

the stakeholders. Not to put their interest at risk byinterim arrangement

Management operate the company As they are born when issued a certificate of

incorporation they also die when they go bankrupt


17/218

LIMITED LIABILITY

If the company fails shareholders normally

only stand to lose their investment and the

employees their jobs but neither will be

further liable for debts that are outstandingagainst the companys creditors.

Can be convicted of criminal offence like

fraud, misstatements etc.


18/218

KINDS OF COMPANIES

THREE:

1. Company Limited by Shares. Each person becoming amember (shareholder) of the company acquires one ormore shares in which the Companys capital is divided. Hisliability is limited to his share holding.

2. Company Limited by Guarantee. Liability limited byMemorandum of Association to such amount as membersmay respectively undertake to contribute to the assets onbeing wound up .

3. Unlimited Company. More akin to a partnership whereeach member liable to all the debts of the company. He isfree from his liability at the end of the year from hisceasing to be a member.


19/218

CONTINUED

May be registered under the Law as:

Private: restricts number of members to 50, invitation topublic to subscribe and right to transfer its shares

Public: Three or more persons associate to form. Not

Private deemed to be publicListed/Quoted

Unlisted/Unquoted.

A company limited by shares, whether private or public, is themost common vehicle for carrying out business in Pakistan.

Single Member: Only one subscriber to the Memorandum ofAssociation. A private limited company for all intents andpurposes of the Company Ordinance


20/218

PRIVATE vs PUBLIC

Difference

1. Subscription

2. Transfer of shares

3. Members

4. Upper Limit of Members5. Certificate of Commencement

6. Min. subscription

7. Prospectus or statement in lieu of

8. Filing of Accounts9. Qualification of Auditors

10. Investment in associate company


21/218

PRIVATE vs. PUBLIC -Contd:

11. Restriction on CEO

12.Statutory Meeting and Report

ADVANTAGES OF PRIVATE COMPANY


22/218

DEFINITIONS.

MEMORANDUM OF ASSOCIATION .

Sets out the constitution of the Company. The foundation onwhich the Companys structure is based. Defines scope ofactivities. Tells what it does spelling out its objectives

1. Name2. Province of registration.

3. Objects

4. Limited by shares or guarantee

A STATEMENT OF THE OBJECTS OF THE COMPANY, ITSPOSITION AND ITS RELATION TO THE WORLD WITHOUT


23/218

DEFINITIONS Contd:

ARTICLES OF ASSOCIATION

A document regulating the rights of the member ofcompany among themselves. The manner in in whichthe business of the company shall be conducted.

Dealing with the whole internal arrangement of theCompany.

Originally framed when the Company incorporated.Subsequent changes by special resolution

RULES AND REGULATIONS PRESCRIBED FOR THEINTERNAL MANAGEMENT OF A COMPANY.


24/218

PROSPECTUS

A document which invites persons to take shares in acompany and set forth the advantages of the company.Contains the information for invitation of subscription fromthe public

Any notice, circular, advertisement or other intimation,offering to the public for subscription, or purchase of anyshares or debentures of a company

1. Discussed and approved by the Board of Directors

2. Public companies issuing prospectus required to file

application to SECP for approval of prospectus forpublication.

3. Date of application to SECP and no publication unlessprospectus registered with SECP


25/218

PROSPECTUSContd.

Prospectus to include:

Memorandum

Number of shares fixed

Particulars of directors and managers

Minimum subscription before allotment Number and amount of shares and debentures

Particulars of vendors

Auditors

Interest of every director

LIABILITY OF PERSON ISSUING PROSPECTUS IF IT IS NOTACCORDING TO PROVISIONS OF LAW.


26/218

SHARES

Prospectus: Invitation to the public to make offers tothe company

Application: from the public is an offer to take them

Allotment; acceptance of the offer by the company

creating a contract between the parties Allotment complete when notice of allotment issued.

Registered: Name of share allottee is entered in theRegister and becomes a member of the company

Shareholder : The person who holds a share by havinghis name on the register.

Distinctive number for each share


27/218

SHARES: TRANSFER

Transfer: The making over to another the document(shares in publiccompanies) by one to another. An act of a member.

Transmission: By devolution of law e.g. by death, bankruptcy etc.

PROCEDURE:

Apply: Transferor or transferee to the Company Checking and Verification: By the Company

Notice: Maybe issued by Company

Processed

Approval: BOD or Committee of BOD

Register of Members: Entry and DeliveryNormally transfer of shares is not refused by Company

(defective/invalid)


28/218

MANAGEMENT

Articles of Association: Rules and Regulations drawn up forthe conduct of a Company.

DIRECTORS

1. First Directors determined in writing by majority of

subscribers of the memorandum2. Hold office till first AGM

3. One who directs a business

4. Persons of the select body of shareholders of a Company

5. Delegated duty to manage affairs of the Company

6. Trustees of Companys assets

7. Not trustees of individual shareholders

8. Enters into contract on behalf of Company


29/218

DIRECTORS----Contd.

9. Number of Directors:

SMC: At least one

Private: Not less than two

Unlisted Public: Not less than three

Listed Public: Not less than seven

DIRECTORS REPORT.

Attach with every Balance Sheet:

1. State of Companys affairs

2. Recommendation for dividend3. Re-appropriation of profits

4. Disclose material changes

5. Explanation on any adverse remarks of auditors.


30/218

MANANGEMENT: Contd.

CHIEF EXECUTIVE

An individual entrusted with powers to manage to affairs ofthe Company

Subject to control and direction of directors

Includes a director or any other person

First appointment within 15 days of commencing businessby Directors. Hold office till first AGM

Subsequent by the BOD within 14 days of vacancy

Till successor appointed continues to work

Conflict of Interest; directly or indirectly engage in anybusiness which directly competes with the business of theCompany.


31/218

MANAGEMENT: Contd.

SECRETARY:

An officer of the Company

Responsible for the compliance by theCompany of its statutory duties

Listed company shall have whole time

Secretary

Prescribed qualifications under the Law


32/218

MANAGEMENT: Contd.

AUDITORS:

To carry out audit an examination of

accounts which may be detailed or

administrative.

Comply with directions

Appointed at each AGM

Hold office till conclusion of next AGM

Removal through Special Resolution.


33/218

COMPANY MEETINGS

STATUTORY MEETING

Limited Company (share capital and guarantee) not less than threemonths or more than 6 months of entitled to commence businesshold general meeting

Held once in a lifetime

Purpose to put before shareholders all important factssharestaken up, monies received, contracts entered, preliminary expenses

Furnish particulars for shareholders to discuss

Management, method and prospects

STATUTORY REPORT: Report submitted by the directors 21 daysbefore the Statutory Meeting to every member


34/218

MEETINGS: Contd.

ANNUAL GENERAL MEETING:

First meeting within eighteen months of itsincorporation

Subsequent once at least in one year, within fourmonths close of financial year

At it consider accounts ,B.S. Profit and LossAccount, Auditors and Directors Reports.

Declaration of dividend Appointment /remuneration of auditors

Election/appointment of directors.


35/218

MEETINGS: Contd.

EXTRA ORDINARY GENERAL MEETING All general meetings other than Statutory or AGM

Conduct special business

Called in three ways:

1. Directors on their own initiative2. By the directors on requisition by shareholders

3. By those requisitioning it

MEETING OF BOARD OF DIRECTORS: Quorum

Minimum number of meetings


36/218

RESOLUTIONS

Any proposal at a Company Meeting and put to

the vote

Ordinary: decided by a bare majority

Extraordinary or Special: requires a majority of

three-fourths to carry it

Resolution by Circulation: Urgent, cannot wait

for next BOD


37/218

AUDIT AND ACCOUNTS

It is mandatory for every company to maintain proper booksof account. Maintained for:

1. Cash receipts and payments i.e. Cash Book

2. Revenue and expenditures

3. Assets4. Liabilities

5. Cost accounting records

Books to be kept at Companys registered office

Can be inspected by Directors during business hours inoffice

If members wish to inspect then the place, time,conditions etc. are determined by directors


38/218

AUDIT and ACCOUNTS---Contd.

Company auditors has right of access to books ofaccounts

Auditors duty to make a report to the members of thecompany on the books of account

Registrar of Companies can inspect books for reasonsrecorded in writing

Authenticated: B.S. P/L Ac approved by Directors

INTERNAL AUDIT: Listed Company to have internal audit function

Audit Committee of the BOD


39/218

WINDING UP

Artificial Person. Born has to die Winding up is the closing up of a companys

concern, which may be by reason of insolvency,or otherwise

Winding up is a proceeding by means of whichthe dissolution of a company is brought aboutand its assets realised and applied in payment ofits debts, and after satisfaction of the debts, the

balance, if any, remaining is paid back to themembers in proportion to the contribution madeby them to the capital of the company


40/218

WINDING UP----Contd.

Modes of winding up:1. Compulsory winding up by the Court e.g. special

resolution by the Company, defaults (statutoryreports etc.), unable to pay debts, violation of

Companys Ordinance, Memorandum of Associationetc.

2. Voluntary winding up by:

a) Members

b) Creditors3. Voluntary winding up under the supervision of thecourt


41/218

WINDING UP---Contd.

BANKRUPTCY: In it the whole estate, both legal andequitable, is taken out of the bankrupt and is vested inthe trustee

WINDING UP : The estate, legal or equitable, still

remains in the company until its dissolution

DISSOLUTION: Puts an end to the existence of acompany i.e. completely wound up or court feels thatofficial liquidator cannot proceed with the winding up

LIQUIDATION: Process of distributing a bankruptsestate i.e. realising the assets and paying the moneyover to the creditors.


42/218

LAW RELATING TO PARTNERSHIP

PARTNER:

One who partakes or shares with another

An associate

One who has a share with another or others insome commercial, manufacturing or otherundertaking

One who dances with another.

An associate in a firm. A member of a firm orpartnership.


43/218

PARTNERSHIP

PARTNERSHIP: The state or condition of being a partner

The association of two or more persons for the purpose ofundertaking and prosecuting conjointly any business,

occupation, or calling The which subsists between persons who have agreed to

combine their property, labour skill in some business and toshare the profits thereof between them

A type of business entity in which partners share with each

the profits or losses of the business.FIRM:

Persons who enter into partnership are collectively called afirm


44/218

PARTNERSHIP--Contd

In Pakistan for small to medium size business set upsthe common mode of business.

Advantage of structural flexibility and formality ofrelationship between partners.

Maybe registered or not. Not compulsory Registered firms have the advantage of tax and

consequences of litigation.

Favoured over corporate structure (companies) as no

dividend is levied. But partners exposed to greater personal liability than

the shareholders of a company.


45/218

PARTNERSHIP LAW IN PAKISTAN

PARTNERSHIP ACT 1932

Is the law governing regulation of partnerships inPakistan.

Law passed by the Indian Legislature in 1932.

The Governor General of India gave assent on

April 8, 1932.

No.IX of 1932 Adopted and followed by the Government of

Pakistan


46/218

PARTENERSHIP ACTContd.

SCHEME OF LAW: Divided into 8 Chapters

Sections 74

Schedule 1CHAPTERS:

1. Preliminary

2. The Nature of Partnership

3. Relations of Partners to One Another4. Relations of Partners to Third Parties


47/218

PARTNERSHIP ACTContd.

5. Incoming and Outgoing Partners

6. Dissolution of a Firm

7. Registration of Firms

8.Supplemental

SCHEDULE:

Fees Prescribed


48/218

DEFINITIONS

Intention to economise words

Does not lay down general principles

With reference to the whole Act and with reference tothe content

ACT OF A FIRM

Binds every one of the partners

An act in which every one of them had actuallyparticipated

Gives rise to a right enforceable by or against the firm


49/218

DEFINITIONSContd.

BUSINESS:

Includes every trade, occupation and profession.

Includes and not Means.

An Inclusive and not Exhaustive definition General and vague

Broadly, any activity which, if successful, would

result in profit Must be in existence

May be temporary or permanent (indefinite)


50/218

DEFINITIONSContd.

PARTNERSHIP:

The relation between persons who have agreed toshare the profits of a business carried on by all or

any of them acting for all Persons who have entered into partnership with

one another are individually called partners andcollectively a firm and the name under which

their business is carried on is called the firmname

A voluntary act between two or more persons.


51/218

PARTNERSHIP---Contd.

Placing their money, effects, labour and skill,

or some or all of them

In lawful commerce or business

Understanding that there shall be communion

of profits or thereof between them.

Contains the following elements/essentials


52/218

PARTNERSHIP---Contd.

ESSENTIALS:

Association of two or more persons to carry

on a business

An agreement entered into by all concerned

Agreement must share the profits

Business must be carried on. Carried on by all or any of the persons

concerned acting for all.


53/218

PARTNERSHIP--- Contd.

All elements must be present before a group ofpersons can be called partners

Elements may appear to overlap but are distinct

Existence of partnership is a question of fact.

Association of two or more persons:

A group of persons with no legal relations (nomutual rights and liabilities) not a partnership

No existence or responsibility separately from itspartners.


54/218

ESSENTIALS OF PARTNERSHIPContd.

An Agreement:

Agreement arises only as a result of an agreement,express or implied

Created by a contract, it does not arise by operation oflaw e.g. joint operation (heirs on death )

Voluntary contractual

Lawful agreement; founded on good faith, for lawfulobject between competent persons

Can even come into being upon an oral agreement


55/218

ESSENTIALS OF PARTNERSHIPContd.

Sharing Profits:

An essential element of partnership agreement

Different from clubs, societies, charitable

associations etc.

How to be shared left to the parties themselves

Sharing of losses not essential.

Profits refer to net profits.


56/218

ESSENTIALS OF PARTNERSHIP---Contd.

Carrying of Business:

Must be carried on by all or by any concerned

acting for all

Business must be lawful

Mutual agency

True test of partnership.


57/218

PARTNERS

Can be entered into by every competent person

Attained age of majority

Of sound mind

Disqualified from any law to which he is subject

Unsound mind

Married woman is competent

Minor cannot become a partner but can be

admitted to benefits of partnership.


58/218

PARTNERS--- Contd.

WORKING PARTNER:

Not necessarily a partner in business

Maybe only an employee

Gets a share in the net profits

Remuneration for services rendered.


59/218

FIRM

Firm:

Persons who have collectively entered intopartnership with one another is collectively

called a firm Name under which business is carried is Firm

Name.

Business under any name or style Taking care of rules like trade name, goodwill

etc.


60/218

ILLEGAL PARTNERSHIP

Object of partnership is unlawful. Section 23 ofContract Act

Number of persons entering into partnershipexceed the permitted. Section 4 of Companies

Act.1913:1. Business of bankingmore than 10

2. Any other businessmore than 20

With an alien enemy (alien friend); enjoys civiland personal rights as a citizen

Against international comity.


61/218

PARTNERSHIP---DISTINGUISHED

CO-OWNERSHIP

Akin but different

Partnership result of an agreement

Mutual rights and obligations different

Consent of all trade/business: Examples

Transfer of interests


62/218

PARTNERSHIP---DISTINGUISHED

COMPANY:1. Person---Legal

2. Creation Legal formalities/agreement

3. Transfer of interest4. Agents of others

5. Liability to debts

6. Contract

7. Private arrangements8. Number


63/218

PARTNERSHIP DISTINGUISHED--Contd.

9.DeathDissolution

10. Property

11. Restrictions

12. Sue and be sued

13. Decree

14.Registration15. Shareholder

PARTNERSHIP/DISTINGUISHED


64/218

PARTNERSHIP/DISTINGUISHED---

Contd.

CLUB:

Entirely different

Club members not liable for acts of other

members

Not liable to be creditor of club

Liabilityextent of Clubs regulations

No implied authority i.e. bind other members

of the club.


65/218

PARTNERSHIP DISTINGUISHEDContd.

TRADE ASSOCIATION:

Mutual agency does not exist


66/218

PARTNERSHIP---EXISTENCE

HOW TO DETERMINE:

Real relation between the partners

Mainly a question of fact

Onus to prove on the appellant

PARTNERSRELATIONS TO ONE


67/218


ANOTHER

Relations between partners defined Freedom to arrange their own affairs among

themselves

Mutual rights and duties regulated by contract

Duties and liabilities on a partner:

1. Duty of good faith and common advantage

Carry on business to the greatest commonadvantage

Just and faithful to each other



68/218


ANOTHERContd.

Use knowledge and skill for benefit of firm

Not personal advantage

In case of loss to firm by fraud of a partner---

indemnify firm (make good the loss)

2. Duty to render true accounts and fullinformation:

Not to mix with personal business

Disclose full facts.

PARTNERS---RELATIONS TO ONE


69/218

PARTNERS---RELATIONS TO ONE

ANOTHERContd.

Rights and duties of partners determined by

contract between them.

Contract varied only by consent of all partners

In conduct of business every partner has right

to:

1. Take part in conduct of business

2. Access, inspect and copy books of account

3. Express opinion. Majority opinion



70/218


ANOTHERContd.

Mutual rights and liabilities. Subject to

contract:

1. Not entitled to any remuneration

2. Entitled to share equally

3. Advance by partner to firm (over and above

capital) entitled to profit (interest)



71/218

PARTNERS RELATIONS TO ONE

ANOTHERContd.

PROPERTY OF FIRM:

Inclusive definition

1. All property and rights originallybrought to the

stock of the firm2. Acquired by purchase or otherwise during the

course of the business

3. Goodwillof the business

4. Rights and interests acquired with moneybelonging to the firm. Deemed.



72/218


ANOTHER---Contd.

GOODWILL:

Not defined

The whole advantage, whatever it may be, of

the reputation and connection of the firm

Intangible

Easy to describe, difficult to define

It is benefit and advantage of the good name,

reputation and coonection of a business


73/218

GOODWILL---Contd.

No independent existence

Cannot subsist by itself

Attached to business

Attribute of a business, trade or profession.



74/218


ANOTHERContd.

APPLICATION OF PROPERTY:

Shall be held

Shall be used

By the partners Used by the partners

Exclusively for purposes of business

Common benefit of all partners One partner cannot use assets for personal

benefits



75/218


ANOTHER---Contd.

PERSONAL PROFITS OF PARTNERS

Subject to contract

If a partner derives personal profits ----

transaction, use of property or connection---

of the firm. Shall account for and pay to the firm

Carries on any business----same structure andcompeting with the firm. Shall account for and

pay profits made in that business.



76/218


ANOTHER---Contd.

Cannot carry on competing business during

subsistence of partnership

In that case pay to firm all profits.



77/218


ANOTHER---Contd.

RIGHTS AND DUTIES AFTER CHANGE IN FIRM

General rules laid down for determination ofrights and duties of partners. No effect on

registration. Three situations. In case of: Change in constitution: Rights and duties

remain the same as immediately beforechange

After expiry of term of firm, remain the same

Additional undertakings are carried out



78/218


ANOTHERContd.

1. CHANGE IN CONSTITUTION

Partnership not dissolved

Mutual rights and duties of partners

Remain same in reconstituted firm

Same as immediately before reconstitution



79/218


ANOTHERContd.

2. AFTER EXPIRY OF TERM OF OFFICE:

In spite of being constituted for fixed term

carries on business

Term expired

Mutual rights and duties remain the same

Same as before expiry.



80/218


ANOTHERContd.

3. ADDITIONAL UNDERTAKINGS ARE CARRIED

OUT:

Originally constituted to carry out one or

more undertakings

Carries out other undertakings

Mutual rights and duties in the new

undertaking same as in old

PARTNERSRELATIONS TO THIRD


81/218

PARTNERS RELATIONS TO THIRD

PARTIES.

Rights and duties of partners as regards to thirdparties

PRINCIPAL AND AGENT.

Agency is the essence of partnership Partner is both an agent and principal

Relation between partners of principals

To third parties agents of the firm

Acting on behalf of firm can bind co-partners

Acting in personal capacitypersonal liability



82/218


PARTIES

IMPLIED AUTHORITY:

Important

The act of a partner which binds the firm

This authority of the partner which binds the

firm is his implied authority

To exercise implied authority necessary that:

1. Act must be done in the conduct of business

of the kind carried on by the firm

PARNERSRELATIONS TO THIRD


83/218

PARNERS RELATIONS TO THIRD

PARTIESContd.

2.Must be done in the way which is usual in suchbusiness

3. Must be done in the firm name or in any

other manner expressing or implying anintention to bind the firms

Relevant factors:

Nature of business

Practice of persons engaged in it.



84/218


PARTIESContd.

FRAUDULENT ACT----IMPLIED AUTHORITY? Liability of firm on fraudulent act of partner

Partners implied authority

Factorprincipal answerable for acts of agent

Firm liable

Firm not liable if collusion between partner

and third party If third party bona fide then firm liable



85/218

PARTN RS R ATIONS TO THIR

PARTIESContd.

IMPLIED AUTHORITYACTS OF THE PARTNER WHICH DO NOT BIND

THE FIRM:

1. Submit dispute relating to firms business forARBITRATION.

2. Open on behalf of firm BANK ACCOUNt

3. Compromise/relinquish CLAIM (part) of firm

4. WITHDRAW suit/proceeding filed on behalf offirm



86/218

ANOTHERContd.

5. ADMIT liability in suit/proceeding against firm6. ACQUIRE immovable property on behalf of firm

7. TRANSFER immovable property belonging to firm

8. ENTER into PARTNERSHIP on behalf of firmMay also include:

Bind the firm by giving GUARANTEE in respect ofdebts of third parties.

SET off PERSONAL DEBTS against debts due tofirm.



87/218

PARTIESContd.

SET OFF DECREE obtained by firm for less thanthe decreed amount

ACCEPT FULLY PAID SHARES in satisfaction ofdebts due to firm.

LIABILITY OF PARTNER1. RIGHTFUL ACT:

Every partner jointly and severally responsible

2.WRONGFUL ACT:Wrongful act/omission during ordinary course of

Business loss to third party then firm responsible

PARTNERS---RELATIONS TO THIRD


88/218

PARTIES.

4. MISAPPLICATION:Partner or firm misapplies money or property

Received from third party firm is liable

5.HOLDING OUT:

Where a person by word or conduct induces another tobelieve him and acts accordingly he cannotsubsequently deny the existence of such facts

Becomes personally responsible

Does not become member in the firm Not entitled to any rights as against those in the firm

Does not become agent of the firm



89/218

PARTIESContd.

MINORS (according to law)Cannot be a partner

May be admitted to benefits of partnership

Cannot declare as partners but only that entitled

to benefits.

No partnership wholly of minors.

RIGHTS:

1. Admitted to benefit

2. May inspect/access accounts3. Share property and profits

4. Sue for accounts on severing ties with firm

5. On attaining majority option of becoming member6. On attaining majority option to leave

7. Not personally responsible for acts of firm



90/218

PARTIESContd.

LIABILITIES:

1. Share liable for acts of firm. Within 6 months

of majority can sever connection

2. On majority if a member then personally

responsible to third parties

3. Fails to give public notice he becomes a

member after 6 months.

PARTNERS---INCOMING AND


91/218

OUTGOING

Partnership a contract based on good faith impliesthat no new partner can be introduced withoutthe consent of all the partners

INCOMING PARTNER:

Subject to contract between partners Introduction subject to consent of all existing

partners

Not liable to any acts of firm before coming apartner

Liability after becoming a partner

PARTNERSINCOMING AND


92/218

OUTGOING

A new partner usually has no personal liability.

Unless he expressly agrees

Liability of a minor on becoming a member

from the time he was admitted to benefits of

partnership



93/218

OUTGOING

OUTGOING PARTNER:

Leaves the firm. No longer a partner in the

partnership. Subject to contract not entitled

to benefits. Becomes outgoing by:

1. Retirement

2. Expulsion

3. Insolvency

4. Death.



94/218

OUTGOINGContd.

RETIREMENT:Three rules how a partner can retire:

With the consent of all partners

In accordance with an express agreement by allpartners

Giving written notice to all to all partners

Liability on Retirement

To third party for acts before retirement; discharged byan agreement with third party and reconstituted firm

Otherwise liability continues until public notice given



95/218

OUTGOING

EXPULSION:

Governed by contract

Majority cannot expel except in good faith

Conferred by express agreement

If conferred powers then exercised by majority

Liability on Expulsion:Same as in case of retirement.



96/218

OUTGOING

INSOLVENCY:The condition which marks a persons liability to

meet full monetary obligations. Ceases to paydebts in the ordinary course of business or

cannot pay as they become due On being declared an insolvent ceases to be a

partner on the date of order

Firm not necessarily dissolved depending on the

contract Firm automatically dissolved if all partners (but

one)declared insolvent



97/218

OUTGOING

Liability:

After insolvency estate not liable to any act offirm

Firm not bound by acts of partner

DEATH:

If by agreement firm not dissolved on deathestate of deceased not liable to any act of firm

If by agreement firm dissolved surviving membersresponsible till public notice given

DISSOLUTION OF FIRM


98/218

DISSOLUTION OF FIRM

So far:

1. Formation of partnership

2. Nature of partnership3. Rights and liabilities of partners

4. Partners inter se third persons.

5. Changes in a firm without dissolution i.ereconstitution where business continues as

before.

DISSOLUTION Contd


99/218

DISSOLUTIONContd.

Literal Meaning:

Breaking Up.

Of partnership:

The discontinuance of a partnership from any

legal cause. Breaking up or the extinction

which subsisted between all the partners of

the firm. There are various ways of dissolutionof firm. It may take place:

DISSOLUTION Contd


100/218

DISSOLUTION---Contd

1. AGREEMENT:By agreement (consent) between all the partners or according

to the contract amongst themselves

2.COMPULSORY:

Occurrence of events making dissolution unavoidable e.g.

Insolvency of all partners or all except one (when only oneremains then no longer a partnership)

Unlawful business. When object of partnership is illegaland carrying on of business becomes unlawful

3. CONTINGENCIES:Activities for which firm constituted coming to an end, it

cannot function and stands dissolved on its own death

DISSOLUTION Contd


101/218

DISSOLUTIONContd.

Expiry of the fixed term for which the firm wasconstituted

The undertaking or particular adventure for

which constitutes firm has been completed

Death of partner as partnership based on

personal relations

A partner declared insolvent

DISSOLUTIONContd


102/218

DISSOLUTIONContd.

4. AT WILL:

Any partner can give notice in writing to all

partners of his intention to dissolve. Definite

term not specified exists only during pleasureof all partners.

Dissolution from date mentioned in notice if not

then from date of communication of notice

DISSOLUTION Contd


103/218

DISSOLUTION---Contd.

5. BY COURTSeven grounds in which the Court on any can order

dissolution on a suit filed by a partner

Unsound mind: As it is necessary to protect the interest

of the insane and other partners Permanent Incapacity: Due to illness, mental or

physical but should be of permanent nature, incapableof performing duties

Conduct: Guilty of conduct to effect carrying ofbusiness; moral turpitude, professional misconduct.Connected with business and damage it.

DISSOLUTIONCONTD


104/218

DISSOLUTIONCONTD.

Conduct: Willful and persistent breach of agreementsrelating to firm or conduct e.g. destroying old accountbooks, false in books of account etc. Mutual confidencedoes not exist and continuance not practical.

Transfer of share: by a partner of his whole share to athird party.

Motive: Business cannot be continued only at a loss asmotive of every partnership is profit

Any other ground: just and equitable to dissolve.Judicial discretion with regard to circumstances andexigencies.

DISSOLUTION AND AFTER


105/218

DISSOLUTION AND AFTER.

Liability for acts of partners: Liable to third parties until public notice is given.

Not to prejudice and protect rights of thirdparties

Right of business: Apply property of firm inpayment of debts and liabilities of firm. Surplusto be distributes amongst partners.

Authority: of partners binding each othercontinue in order to finish unfinished business andcomplete dissolution. Authority to wind up

DISSOLUTION AND AFTERContd


106/218

DISSOLUTION AND AFTERContd.

Settlement of accounts: Losses first paid out ofprofits, then capital and lastly partnersindividually on basis of sharing profit ratio

Assets of firm first debts of third parties, then

partners ratably for advances (distinguish fromcapital), followed by capital and balance if anydivided ratably

Debts: Joint debts paid from property of firm and

separate from separate property of firm Goodwill: It can be included in assets and can be

sold separately or along with property of firm

REGISTRATION OF FIRMS


107/218


Law provides for registration of firms but has notimposed any penalties for non registration

Non registration does not partnership agreementvoid

Optional for a firm to get itself registered or not

Prudence dictates registration is implications ofnon registration are serious

Non registration imposes certain disabilities forenforcing claims in courts



108/218

REGISTRATION OF FIRMS.

Each Province has its own Rules Registrars of firms appointed by the Provincial

Government and defines areas of jurisdiction.

PROCRDURE:

1. Application by firm to Registrar of Firms onprescribed form:

Name of firm

Place or principal place of business

Names of any other place where business iscarried on

REGISTRATION OF FIRMSContd


109/218

REGISTRATION OF FIRMS Contd.

Date on which each partner joined the firm

Names and permanent address

Duration of firmSigned and verified by all partners. Restrictionon use of names like Government, Jinnah etc.

Sending/submitting the application to the

Registrar of Firms in the area of jurisdiction.Registration is only of a firm which is inexistence and not which has been dissolved.



110/218


Registration takes place after receipt of statement(application) by Registrar and after verifying all particularsfiled and compliance made makes an entry in the Registerof Firms

Once a firm has been registered further and subsequent

changes like: Name and place of business

Opening and closing of branches

Name and addresses of partners

Changes in and dissolution of a firmCan be made by intimating the Registrar who shall make anentry in the Register of Firms



111/218


In case of a court order regarding a registeredfirm the Registrar shall make consequentialentries in the Register

The Register of Firms is open to inspection byany person on payment of prescribed fees

The entries and any subsequent changes inRegister of Firms is conclusive proof of facts.

Original documents filed with the Registrarshall be the conclusive proof.



112/218


NON REGISTRATION:

Mentioned earlier is not mandatory and does

not make a partnership illegal but its effects:

1. If firm not registered and person suing notregistered as a partner cannot bring a suit to

enforce a right arising from a contract

Against the firm

Against any past or present partner of firm



113/218


2. No suit to enforce a right arising from acontract shall be instituted by or on behalf of

firm against any third party

But this does not effect the right of a third partyto proceed against an unregistered firm and

its partners.

3. Claim to set off and other proceedings toenforce any right arising from a contract.



114/218


BUT Non Registration does NOT effect:

1. Right of third party to sue firm or any partner

2. Right of partner to sue for dissolution

3. Receiver to realise property of an insolvent

partner

4. Firm or its partners having no place of

business in Pakistan

PUBLIC NOTICE


115/218

PUBLIC NOTICE

By intimation to Registrar of Firms

By publication in official Gazette

In at least one vernacular newspaper

circulating in the district.

LAW GOVERNING CONTRACTS


116/218

LAW GOVERNING CONTRACTS

Keeping promises is important to a stablesociety. Contract law deals with, among other

things, the formation and keeping of

promises. Like other types of law, contract lawreflects social values, interests, and

expectations at a given point in time e.g. what

kind of promises should be legally binding,

what excuses are accepted for breaking

promises, legally void or invalid. Resolving

LAW GOVERNING CONTRACTS-Contd.


117/218

LAW GOVERNING CONTRACTS Contd.

such questions is the essence of contract law. Inbusiness law and the legal environment ofbusiness, questions and disputes concerningcontracts arise daily.

The law which governs contracts is THE CONTRACTACT of 1872.

Promulgated on 25th. April,1872

Technically Act IX

Chapters 10 Sections 237

CONTRACT ACT,1872


118/218

CONTRACT ACT,1872

CHAPTER I

Of the Communication Acceptance and

Revocation of Proposals.

CHAPTER II

Of Contracts, Voidable Contracts and Void

Agreements

CHAPTER III

Of Contingent Contracts.

CONTRACT ACT, 1872


119/218

CONTRACT ACT, 1872

CHAPTER IVOf the Performance of Contracts

CHAPTER V

Of Certain Relations Resembling Those Created ByContract.

CHAPTER VI

Of The Consequences of Breach of Conract

CHAPTER VII

Repealed

CONTRACT ACT, 1872


120/218

CONTRACT ACT, 1872

CHAPTER VIIIOf Indemnity and Guarantee

CHAPTER IX

Of Bailment

CHAPTER XAgency.

The first 6 chapters lay down the general principles on whichall contracts are based, while the rest deal with the

important classes of commercial contracts viz. indemnityand guarantee, bailment, agency

,

CONTRACT ACT


121/218

CONTRACT ACT

Extends to whole of Pakistan

Main source of law regulating contracts inPakistan law

Determines the circumstances in which promises

made by the parties to a contract shall be legallybinding on them.

Contract creates right and duties uponcontracting parties

The Act deals with the enforcement of theserights and duties upon the parties.

FUNCTION OF CONTRACTS


122/218

FUNCTION OF CONTRACTS

No aspect of life is entirely free of contractualrelationships

Contract law is designed to provide stability

for both buyers and sellers Followed in business agreements to avoid

potential problems

Necessary to ensure compliance

WHAT ARE CONTRACTS


123/218

An agreement or mutual promise upon lawfulconsideration or cause which binds the partiesto a performance; a bargain; a compact.

PROMISE:An undertaking by one man with another for the

performance or the non-performance of someparticular thing. A verbal covenant

PROPOSAL:

When one person signifies to another his

WHAT ARE CONTRACTSContd.


124/218

Willingness to do or to abstain from doinganything with a view to obtaining the assentof that other to such act or abstinence, he issaid to make aproposal. When the person towhom the proposal is made signifies hisassent thereto, the proposal is said to beaccepted. A proposal when accepted becomes

apromise. The person making the proposal iscalled thepromisor. The person accepting theproposal is called thepromisee.

WHAT ARE CONTRACTS


125/218

The first step towards a contract is for the parties toget into communication with each other. This is

done by one of them making aproposal. An offer

to do or not do something, and that offer must

be made for the purpose of being agreed to

The next step is that the person, with a view to

whose assent the proposal is made, should

express his concurrence in the act or abstinence.The proposal now becomes apromise.

CONTRACT--DEFINITION


126/218

A contract is an agreement that can beenforced in court. It is formed by two or more

parties who agree to perform or to refrain

from performing some act now or in thefuture,

Is an agreement enforceable at law. It is

bilateral document meant to create legalrelationship

INTERPRETATION CLAUSEDEFINITIONS


127/218

INTERPRETATION OF CLAUSEis a section of a statutewhich defines the meaning of certain wordsoccurring in other sections.

Aims to introduce some of the words and

expressions as are used in Contracts Act withtheir peculiar meanings and connotations.Words used to be understood in specific sense

In this Act the following words and expressions areused in the following senses, unless, a contraryintention appears from the context:

INTERPRETTION CLAUSE


128/218

PROPOSAL:Is declaration by the proposer of his intention to be

bound by an obligation if the offeree fulfills or

undertakes to fulfill certain conditionsA proposal is made when one person signifies to

another his willingness to do or abstain from

doing anything, with view to obtaining the

assent of that other to such act or abstinence

The starting point for a contract

INTERPRETATION CLAUSE


129/218

PROMISE:

The technical use is narrower than the popular

use.

The proposal when accepted becomes apromise. There must only be a proposal but

there must be an acceptance of the proposal

by the other sideEvery promise is an accepted proposal



130/218

PROMISOR:

Person making the proposal

PROMISEE:

Person accepting the proposal

The promisor and the promisee must be two

different persons

The two must exist to constitute a contract



131/218

CONSIDERATION:Act, done or promised to be done, at the desire of

the promisor.

At the desire of the promisor

The promisee or any other person

Must have done or abstained from doing, or

Must do or abstain from doing or

Must promise to do or abstain from doingsomething



132/218

AGREEMENT: Every promise and every set of promises,

forming consideration for each other.

An accepted proposal. Result of a proposalfrom one side and its acceptance by the other.

Regarded as a contract when it is enforceableby law.

An agreement that the law will enforce is acontract.



133/218

VOID AGREEMENT: Not enforceable at law

Lawful having a lawful consideration. Entered intowith a lawful object

Every contract is an agreement but everyagreement is not a contract.

Agreement enforceable at law when it is notagainst public policy, immoral, without

consideration, having not been hatched throughfraud or deceit.



134/218

CONTRACT: An agreement

Agreement enforceable by law

Succession of definitions of the elements:

1. Proposal

2. Acceptance

3. Promise

4. Promisor5. Promisee



135/218

6. Consideration7.Agreement

A bilateral document meant to create legal

relationship. It is conceived by validacceptance of a valid offer at the desire of

the promisor.



136/218

VOIDABLE CONTRACT: Enforceable at the option of one party to the

contract but the party can exercise this optiononce.

One of the parties may affirm or reject at itsoption

Different from void contract which is abinitio

void. Has no legal value. Cannot be enforced atlaw. Voidable contract enforceable at law at theoption of the parties.



137/218

VOID CONTRACT: Difference between void agreement and void

contract

Ceases to be enforceable by law e.g.impossible unlawful.

PROPOSALSCOMMUNICATION,ACCEPTANCE

AND REVOCATION


138/218

AND REVOCATION

Before a proposal is accepted there is:COMMUNIUCATION:

Communicate: Imparting of news or information on oneside and reception and understanding on the other

Rule when communication of proposal is consideredcomplete.

Not a mere mental assent to the terms of an offer.

Some act done with the intention of communicatingthe resolution to the other party

Mere intention not communicated by words orconduct cannot give rise to a contract

COMMUNICATION


139/218

Communication of a proposalis complete when itcomes to the knowledge of the person to whom it ismade.

Communication of an acceptance is complete, as

against the proposer, when it is put in course oftransmission to him.

Acceptance

Agreeing to a previous act or promise to do by another.

The acquiescence to an offer of a party makes theagreement enforceable in law. Signifying ones assentto the proposal made by another.

REVOCATION.


140/218

REVOCATION:The calling back of a thing done. The making

void of a deed that was in force, the cancelling

of an authority once given.The communication of a revocation is complete,

as against the person who makes it, when it is

put it is put into course of transmission to theperson who made it

REVOCATION


141/218

Aproposalmay be revokedat any time beforethe communication of its acceptance is

complete as against the proposer but not

afterwards.An acceptance may be revokedat any time

before the communication of the acceptance

is complete against the acceptor but notafterwards

REVOCATION


142/218

A proposal can be revoked, obviously before itbecomes a contract, by:

1. Communication of notice of revocation

2. Lapse of stipulated time in the proposal

3. If the proposal is conditional or qualified by thefailure of the acceptor to fulfill the conditionprecedent

4. By the death or insanity of the proposer, if the

fact comes to the knowledge of the acceptorbefore acceptance

CONTRACTSVALID?


143/218

A valid contract has the elements necessary forcontract formation;

An agreement (proposal and acceptance.

Supported by legally sufficient consideration

For legal purpose

Made by parties who have the legal capacity

to enter into the contract i.e. contractualcapacity:

CONTRACTS---VALID?


144/218

1. Age of majority: when supplies made tominor binding on him and his estateresponsible for payment

2. Sound mind: at the time making contract iscapable of understanding it, and of forming arational judgment as to its effect upon hisinterest

3. No other disqualification like foreign enemy4. Free Consent i.e. when not caused by:

CONTRACTS---VALID?


145/218

Coercion. It becomes voidable at the option

of the person whose consent was obtained bycoercion.

Undue influence. Domination of a weak mindby a strong mind.

Fraud: False representation of fact made witha knowledge of it

Misrepresentation. causing a party to make amistake.

CONTRACTPERFORMANCE.


146/218

Deals with time, mode, and order of performance as also whois bound to perform and who can demand performance

Parties to contract must perform or offer to perform theirrespective performances unless dispensed by law.

In case of death binding on legal heirs unless contrary to itfrom the contract.

TIME AND PLACE OF PERFORMANCE:

When promisor to perform without demand from thepromisee and no time fixed then promisor must performwithin reasonable time ( reference to nature of character ofgoods dealt, surrounding circumstances, facts of case)

CONTRACT---PERFORMANCE


147/218

To be performed when promisee applies then it his(promisee) responsibility to apply---proper placeand within usual business hours

If no application from promisee then duty of

promisor to apply to promiseeWhen parties agree on the time of performance of

any obligation under the contract and is made acondition of the contract then time is the essenceof the contract. Breach entitles the party torepudiate the contract

CONTRACT--PERFORMANCE


148/218

Avoiding the contract. Circumstances: Parties agree to substitute a new contract,

rescind or alter original.

Every promisee may dispense with or remitwholly or in part the performance of the

promise.

Contract is ab initio void

CONTRACT--ASSIGNMENT


149/218

ASSIGN is to transfer, make over or set over toanother. ASSIGNMENT is the act oftransferring to another all or part of onesproperty, interest or rights-----

Assignment of contract: transfer of rights orliabilities under a contract. Maybe:

1. Operation by law: in cases of bankruptcy or

purchase or loss of interest of law2. Assignment by act of parties: cannot be

CONTRACT--ASSIGNMENT


150/218

assigned (liability passed on) without theconsent of other party. Where personal

considerations are involved contracts cannot

be assigned. Benefit can be assigned over toother party provided the benefit does not

entail any liability.

CONTRACTTERMINATION

&DISCHARGE


151/218

&DISCHARGE

The contractual ties may be loosened and theparties wholly freed from the rights andliabilities under the contract by:

1. By Agreement. Contract discharged by thesame process which created it by mutualagreement:

Waiver: Parties agree to demand

performance. Waive rights and by waiverother party discharged.

CONTRACT---

TERMINATION&DISCHARGE.


152/218

TERMINATION&DISCHARGE.

Novation or Substituted Agreement: Mutualdesire of the parties to substitute a newcontract in place of old. Old contract need notbe performed.

2. By Performance: Duties undertaken by eitherparty fulfilled.

3. By Breach: A contract may be broken. Will

discharge either party from performance. Itmaybe:

CONTRACTTERMINATION &

DISCHARGE.


153/218

DISCHARGE.

By Renunciation: before performance is due

By impossibility created by other party beforeperformance is due.

Impossibility e.g. change in law

Frustration e.g. One of the parties contracted tomarriage goes mad.

4. By operation of Law:

Merger Bankruptcy.


154/218

CONTRACT---BREACH


155/218

3. Injunction. An order or judgment of a courtrestraining some person or persons from

doing certain things which are detrimental to

the interests of another or others. It isconsidered to be a negative remedy


156/218

CONTRACTS---SPECIAL TYPES


157/218

The event being collateral to the event..Contingency should relate to a matter

collateral to the main purpose of the

agreement The contingency should not depend on the

mere will and pleasure of a party, but must

depend on the act of a party.

CONTRACTSSPECIAL TYPES


158/218

INDEMNITY:An undertaking to make good monetary or other

loss or damage

CONTRACT OF INDEMNITY:

By which one party promises to save the other fromloss caused to him by the conduct of thepromisor himself, or by the conduct of any other

person e.g. A contracts to indemnify B againstthe consequences of any proceeding which C maytake against B in respect of a certain amount.

INDEMNITY


159/218

The person (A) who gives the indemnity is calledthe indemnifierand the person (B) for whoseprotection it is given called the indemnity-holderor indemnified.

Scope of indemnity is restricted to those caseswhere there is a promise to indemnify againstloss, caused by the (a) promisor himself or (b) byany other person. Excludes loss from accidents

like fire etc.

Promise of indemnity may be expressed or implied.

INDEMNITY


160/218

INDEMNITY HOLDER:The person to whom the indemnity is given i.e. the

promisee acting within the scope of hisauthority.. His rights:

Entitled to claim all damages which he may havebeen compelled to pay.

Recover all cost reasonably covered in resisting,reducing or ascertaining the claim

Can compromise a claim on best term he can andthen bring an action on the contract of indemnity

GUARANTEE


161/218

Guarantee is a promise to be answerable for thedebt, default or miscarriage of another.

Contract of Guarantee: to perform the promise, ordischarge the liability of a third person in case of

his default. When a third person promises to paydebt owed by another in the event the debtordoes not pay a guarantee relationship is created.

Surety: Person who gives the guarantee.

Principal Debtor: Person in respect of whose defaultthe guarantee is given.

Creditor: Person to whom the guarantee is given.

GUARANTEE


162/218

A takes a loan from B when C guaranteedrepayment of the loan. A is theprincipal debtor, B

the creditorand C the surety.

The function of a contract of guarantee is to enable

a person to get a loan, or goods on credit or an

employment

Mutual assent is an essential element of a contract

of guarantee. It is not a unilateral contract. There

must be an offer and acceptance.

GUARANTEE


163/218

ESSENTIALS: It is a contract

To perform the promise or

To discharge the liability

Of a third person

In case of his default

The contract may either be written or oral.

GUARANTEE


164/218

Differences between Contracts of Guarantee and

Indemnity:

1. In case of Guarantee there are 3 parties. In case

of Indemnity 2 parties

2. In case of Guarantee there is a Principal debtor.

In Indemnity an original and direct engagement;

independent of the existence of the third party

3. Guarantee exists for the security of the creditor.Indemnity is for reimbursement of loss

BAILMENT


165/218

Bailment from bailler(French) meaning to deliver.Signifying a contract resulting from delivery.

Bailment implies a sort of relationship in which the

personal property of one person temporarilygoes into the possession of another. The

ownership of the articles or goods is in one

person and the possession in another e.g.

leaving a car for repair, cloth to a tailor, parcel to

TCS, goods in a cold store.

BAILMENTContd.


166/218

The delivery of goods by one person the bailortoanother the bailee for some purpose, upon acontract that they shall, when purpose isaccomplished, be returned or otherwise disposed

of according to the direction of the persondelivering it.

Formed by the delivery of personal property ,without transfer of title by bailor to a bailee

usually under an agreement. Obligations andduties arise from the bailment relationship.

BAILMENTContd.


167/218

CHARACTERISTICS:1. Delivery of goods. Delivery of possession isessential. Not transfer of ownership; that wouldbe sale or exchange

2. Delivery of possession is temporary but it is forsome purpose.Bailor reserves right to claimredelivery of goods deposited.

3. Delivered goods to be returned according to

directions of bailor when purpose accomplished.4. Only movable properties can be bailed.

BAILMENTContd.


168/218

RIGHTS AND DUTIES OF BAILEEand BAILOR.DUTIES ofBAILEE:

Take care of the goods entrusted to himreasonable.

Not to make unauthorized use of goods entrustedto him. Becomes responsible for any loss.

Not to mix goods with his own goods

Not to set an adverse title to the goods

Return the goods after purpose or period ofbailment is over.

BAILMENTContd.


169/218

DUTIES ofBAILOR: To disclose defects of goods bailed

To bear extraordinary expenses

Compensate or indemnify for reasons notentitled to make bailment

AGAINST THIRD PARTIES:

If use or possession wrongfully deprived by third

party bailee can claim damages. Option also withbailor.

BAILMENTContd.


170/218

TERMINATION: Bailee wrongfully uses or disposes goods.

Period or purpose of bailment over

Gratuitous bailment terminated any time bybailor

On death of bailor or bailee gratuious

bailment.

AGENCY.


171/218

Since it is not possible for every person to do everythingby self, the allows the person to be represented in theperformance of persons legal acts by another andgives acts done by such representative the same effectas they would have done it by self.

One of the most common, important and pervasive legalrelationship is that of the agency; relationship between(agent) who agrees to represent or act for the other(principal). The principal has the right to control the

agents conduct in matters entrusted to the agent, and

the agent must exercise its powers for the benefit of

AGENCYContd.


172/218

the principal only.The principal, by using agents, can conduct

multiple business operations simultaneouslyin various locations e.g. corporate officer.

AGENCY:

A legal relationship between a person andanother called the principal for whom he acts.

There must be an authority from the principal,express or implied.

AGENCYContd.


173/218

Is founded upon a contract, either express orimplies, by which one of the parties confides tothe other the management of some business tobe transacted in his name and on his accountandby the other assumes to do business and to

render an account of it.Agenta person employed to do any act for another

or so represent the other in dealings with thethird person.

Principalthe person for whom such act is done orwho is so represented.

AGENCYContd.


174/218

In every transaction of agency three persons,agent, principal and third party to whom such

representation is made, are involved.

Sub Agenta person employed and acting underthe control of the original agent. He is not

responsible for his acts to the principal. He is

only responsible to the agent.

DUTIES OF PRINCIPAL TO AGENT:

AGENCYContd.


175/218

1. Indemnify him against all lawful acts done in exercise ofconferred authority

2. Indemnify for acts done in good faith.

3. Compensate for injury caused by principals neglect

RIGHTS OF AGENTS:

1. Right of retainer out of sums received on principalsaccount

2. Entitled to commission (subject to contract)

3. Entitled to retain property, documents etc. untilcommission due received

4. Indemnified by principal for lawful acts

5. Indemnified by principal for acts done in good faith.


176/218

AGENCYContd.


177/218

CREATION :

1. By Direct Appointment when agents authority isexpressly given

2. By Implication when agency is inferred from dealingsbetween two persons.

3. By Necessity when an emergency acts withoutauthority

4. By Estoppel (a plea in bar, grounded on ones ownact). Principal induces third person that the acts done

by his agent are by his authority.5. By Ratification when a previous unauthorised act is

approved and made valid.


178/218

SALE OF GOODS ACT,1930


179/218

Initially the Sale of Goods Act , 1930 was part ofthe Contract Act 1872 (Chapter VII Sections76 to 123).This Chapter VII was repealed anda new law Sale of Goods Act 1930

promulgated. Pakistan adopted the in August1947.The Sale of Goods Act has;

Chapters 7Sections 66

SALE OF GOODS ACT


180/218

Chapter I :

Preliminary (Sections 1-3)

Chapter II

Formation of the Contract (Sections 4-17)

Chapter IIIEffects of the Contract (Sections 18-30)

Chapter IV

Performance of the Contract (Sections 31-44)

Chapter VRights of Unpaid Seller Against the Goods (Sections 45to

55)

SALE OF GOODS ACT


181/218

Chapter VI:Suits for breach of the Contract (Sections 55-61)

Chapter VII:

Miscellaneous (Sections 62-66)

A contract of sales of goods is a contract inaccordance to which the seller either transfers oragrees to transfer the property in goods to thebuyer for a price. The payment of price is very

important. Maybe absolute or conditional. Maybebetween one part owner and other

SALE OF GOODS ACT


182/218

Sale of Goods consists of a number of essentialingredients and if one of them is missing there isno sale. Briefly these are:

Existence of goods, which form the subjectmatter of the sale.

The contract (bargain), when executed, will resultin the passing of the property in the goods for aprice

The payment or promise of a price The passing of the title.

SALE OF GOODS ACTContd.


183/218

The expression Sale of Goods is a compositeexpression consisting of various elements

Sale is said to be the passing of title from theseller to the buyer. Title is the formal right of

ownership of property. The price may bepayable in money or in other goods, services.

Good, the item of property must be tangible,

and it must be moveable. Tangible propertyhas physical existence.



184/218

Goods mean every kind of moveable propertyother than actionable claims and money and

includes stock and shares, growing crops etc.

Actionable claims and money cannot be

bought and sold. Money is recognised

currency in circulation but not foreign.

Actionable claims is a thing which a person

cannot make use or enjoy e.g. a debt; whichcan only be recovered through a suit.



185/218

Goods: Kinds.1 Existing: either owned or possessed by the sellerat the time of contract (e.g. agent). Subject goodsmust be in actual or possible existence

Specific: identified and agreed upon at the timeof contract. Actually identified,

Ascertained: Wider import than specific. Becomeascertained subsequent to the contract

Unascertained: Not specifically defined butdefined only by description.



186/218

2. FUTURE: Seller does not own or possess attime of contract but he will manufacture,

acquire, or produce after making the

contract. Actually an agreement to sell . Sale

only of goods where ownership.

3. CONTINGENT: Sale dependent upon a

contingency which may or may not happen.

This may be absolute or conditional.



187/218

SALE:When under a contract the goods is transferred

from the seller to the buyer.

VALID SALE: ESSENTIALS

Parties competent to contract

Mutual assent

Transfer of property

A price may be paid or promised.

SALE OF GOODS ACT---Contd.


188/218

SALE : AGREEMENT and CONTRACT.AGREEMENT: Transfer of property to take place at afuture time or subject to fulfillment of someconditions. It becomes a sale when time elapsesor conditions fulfilled.

DIFFERENCES. DISTINGUISHED

1. Executed, Executory. Sale is an executedcontract i.e. sale plus conveyance

2. General and Particular property. In sale transferof property with rights. In agreement a remedyonly



189/218

3. Damages: In agreement right of damages onlywhile in sale when ownership passed seller cansue.

4. Right to resell: Seller at liberty to sell in

agreement5. Risk of loss: In agreement of seller and in sale of

buyer.

6. Remedy: In agreement buyer only personalremedy i.e. damages. In sale buyer has personalremedy and to the goods which seller has.



190/218

7.Insolvency: Seller becomes insolvent buyercan claim rate able dividend. If permanently

insolvent entitled to recover goods from

official receiver.

IN SALE OWNERSHIP OF GOODS HAS PASSED TO

THE BUYER. IN AGREEMENT OWNERSHIP HASNOT PASSED TO THE BUYER.s


191/218



192/218

FIXING PRICE: Either be certain and definite ordeterminable by some method of calculationor prescribed criterion.

MODES:

Expressly stated in the contract. Parties free tofix any price.

Manner provided in the contract

Determined in the course of dealings betweenthe parties



193/218

When nothing then when contract executed thenreasonable price

To be fixed by the valuation of third partyprovided the third party accepts.

Payment, subject to contract, in currency of thecountry.

EARNEST MONEY. Part payment in advance for dueperformance of contract. If contract honouredthen adjusted against price otherwise forfeited byseller.


194/218

MY CONCEPT OF HAPPINESS


195/218

I think I could turn and live with animals, theyare so placid and self-contained,

I stand and look at them long and long

They do not sweat and whine about theircondition,

They do not lie awake in the dark and weep fortheir sins,

They do not make me sick discussing their dutyto God,

MY CONCEPT OF HAPPINESS


196/218

Not one is dissatisfied, not one is dementedwith the mania of owning things,

Not one kneels to another, nor to his kind that

lived thousands of years ago,Not one is respectable or unhappy over the

whole earth.

WALT WHITMAN


CONDITIONS AND WARRANTIES


197/218

CONDITIONS AND WARRANTIES:

Various statements, commitments and performance make upa contract. Some are vital to the contract and otherssubsidiary. If the parties to a contract regard the term asessential it is a condition and if not then it is a warranty.

CONDITION:A qualification, provision, or clause in a contract, theoccurrence of which creates, suspends, or terminates theobligations of the contracting parties.

It is essential to the main purpose of the contract. Breach of

which gives right to treat the contract as repudiated. Hasoption to treat condition as warranty and claim damages.


WARRANTY


198/218

WARRANTY:

A stipulation collateral to the main purpose of thecontract, the breach of it gives rise to claim fordamages but not to reject goods and repudiatethe contract.

Conditions and Warranties are either expressed orimplied.

IMPLIED CONDITIONS:

In case of sale seller has a right to sell goods.When agreement to sell right when the propertyis to pass



199/218

When sale of goods by description then thegoods should correspond with the description

and of merchantable quality

When description accompanied by sample then

the goods should correspond accordingly.

When particular purpose expressed by buyer

then goods should be fit for such purpose

When sold by sample then bulk should

correspond with sample



200/218

IMPLIED WARRANTIES: Buyer has right of possession and free

from any encumbrance.

Quality for particular fitness annexed.

CAVEAT EMPTOR

BuyerBeware. Sale of goods open to inspection.The seller need not point out any defect in them,

but if he is asked about any defect he musttruthfully give out. Based on the general rule



201/218

that there is no implied condition or warranty as tothe quality or fitness for any particular purpose ofgoods supplied under a contract of sale'. Thebuyer relies on his own skill and judgment when

he makes a purchase. It is for him to satisfy aboutthe purchase; exceptions:

When particular purpose intimated by the buyerto the seller then seller to supply accordingly.

When bought by description goods should be ofmerchantable quality.



202/218

TITLE and OWNERSHIP---TRANSFER Between seller and buyer

If ownership passed on to buyer then loss isbuyers risk even if goods in sellersposse

51654340-business-law.pptx

Documents