Legal System of Pakistan

1) Distinguish between Civil and Criminal

Liability
2) Sources of Law
3) Process of Legislation
4) Structure of Courts
5) Precedents

11/8/2019 1
 Civil Law Vs Criminal Law
 Private Law  Public Law
 Title of Case  Title of Case
 Civil Proceedings  Criminal Proceedings
 Framing of issues  Framing of Charge
 Burden of Proof  Burden Proof
 Admission  Confession
 Decree  Sentence
 Compensation  Punishment

11/8/2019 2
 Sources of Law

Material

Historical Legal

Common
Equity Law
Law

Legislation Precedents Customs Agreements

11/8/2019 3
 Process of Legislation

When National When National

Assembly in Assembly not in
Session Session

Money Other
Bill Bills President

Senate National
Assembly Ordinance
National
Assembly
President
President Assent Reject
Assent
Returned for
reconsideration

President

Act Act Act

11/8/2019 4
Structure of Courts
Supreme Court
of Pakistan

High Courts High Court

Provinces Federal

District Courts Session Courts

Magistrates
Civil Courts Courts

Magistrate 1st
Civil Judge 1st Class
Class

Civil Judge 2nd Magistrate 2nd

Class Class

Magistrate 3rd
Civil Judge 3rd Class
Class

11/8/2019 5
 Doctrine of Precedents

Original Declaratory

Precedents

Binding Persuasive

11/8/2019 6
 Law of Contract 1872
 Definition
 Kinds of Contracts
 Essential Elements of Contract
 Essential Elements of Offer and Acceptance
 Capacity to Parties
 Consideration
 Free Consent
 Lawful Object
 Void Agreements
11/8/2019 7
 Contingent Contracts
 Quasi Contracts
 Performance of Contracts
 Discharge of Contracts
 Remedies
 Indemnity and Guarantee
 Bailment and pledge
 Agency

11/8/2019 8
 Contract defined
Agreement
(Offer Acceptance)

Enforceability
(Legal obligation)

Contract

11/8/2019 9
 Kinds of Contract
Formation Execution Enforceability

Express Executed Valid

Implied Executory Voidable

Mixed Character Void Contracts

Quasi Contracts Void Agreements

Illegal
Agreements

Unenforceable

11/8/2019 10
Essential Elements of Contract
Offer

Not Expressly
Acceptance
Declared Void

Possibility of
Consideration
Performance

Capacity to
Certainty
Parties

Writing and Free Consent

Registration
Lawful Object

11/8/2019 11
 Rules of Valid Offer
Express
or
Implied
Invitation Legal
to Offer Obligation

Rules of 1) By Fixed and Reasonable Time

Certain
Revocation 2) By Prescribed Modes
3) By Rejection i.e. Counter and
Conditional
4) By Death and Insanity
5) By Notice of Revocation
6) By Destruction/ subsequent
illegality Specific
Cross 7) Condition Precedents
Or
Offers
General

Any
Prescribed Communicated
Modes

11/8/2019 12
 Rules for Valid Acceptance
Acceptance must
be by offeree only
Absolute
Rules of
Communication
and
Unqualified

1) Communication of Offer
2) Communication of
Rejected Acceptance A/c to
Offer Prescribed
3) Communication of Modes
Revocation
4) Communication of Delay and
Lost Letters

Follow the Mental

Offer Acceptance

Reasonable/ Communicated
Fixed Time by acceptor

11/8/2019 13
 Rules of Consideration
Rules Exception

At the Desire Natural Love

of Promisor and affection

Move from
Voluntarily
Exceptions: Promisee or
Services
3rd person
1. Trust
2. Assignment of Past, Present Time bar
and Future Debt
Rights
3. Agency
Something Completed
4. Family Settlement Valuable Gift

Agency

Remission

11/8/2019 14
Rules of Competency of Parties
Unsound Disqualifie
Minor
Mind d by Law

Minor Alien
Void ab- initio Permanent
Agent Enemy

Adult Foreign
Benefits contract Periodical
and Sovereign
Minor
Apprenticeship
Surety Lunatic Convict
for Contract
Minor
Ratification Drunk Insolvent
Parents
Mental
Estoppel Company
Share Decay
holder
Necessaries

Specific
Performance

Partner

11/8/2019 15
 Free Consent
Undue Mis-
Coercion Fraud Mistake
Influence Representation

On a Positive
Stranger to Apparent Active Mistake of
Authority Assertion Concealment Fact
contract

P.P.C Fiduciary Breach of Intention not Mistake of

Applicable Relationship Duty to Perform Law

Threat to File Mental Partial non Any act of Bilateral

Suit Distress Disclosure deceive Mistake

Threat to Ordinary Special law Unilateral

suicide Presumptions Prudence declare Mistake

Silence is
Duress Effects Effects Fraud

11/8/2019 16
 Lawful Object and Consideration

Forbidden by Defeat Provision If Involve Against Public

If Fraudulent
Law of Law Personal injury Policy

Part lawful
and
Part Unlawful

Separateable

Unseparateable

Alternative

11/8/2019 17
 Void Agreements
Agreement in Agreement in Agreement in
restraint of restraint of restraint of legal
marriage Trade proceedings

Impossible
Uncertain Wagering
Event
Agreements Agreement
Agreement

Impossible Acts
Agreements

11/8/2019 18
 Contingent Contracts
Non Fixed Time Fixed Time
Happening Happening Does not Unspecified
of Event Happening Time
of Event Happening

11/8/2019 19
 Performance of Contracts
Demand Promisee Joint Demand and
Assignment of Reciprocal Appropriation of
and Perform Performance by of
Rights Promises Payments
Promisors Joint Promisors

Promisors Mutual Express

Promisor Himself Personal Skill Instructions
perform jointly Independant

Any promisor Mutual Implied

His Agent compel to Transfer of
Ddependent Instructions
perform severely Obligations

Legal Right of Mutual Appropriation by

Representative Transfer of Concurrent Creditor
contribution Rights

Stranger Consequences to Appropriation by

Performance Sharing of loss Transfer by prevent Law
Operation of Law

Actionable Time, Place of Interest and

Effect of Release Performance Principal
Claims

11/8/2019 20
 Discharge of Contracts
By By Mutual Supervening Subsequent By Operation Breach of
Performance Consent Impossibility Illegality of Law Contract

Failure of
Commercial By laps of Express
Actual Novation Ultimate
Impossibility Time Breach
purpose

Destruction
Default of 3rd Anticipatory
Attempted Alteration of Subject Death
Party Breach
Matter

Change of Strikes and Express

Recession Insolvency
law Lockouts anticipatory

Death or Failure of Implied

Remission Merger
incapacity One Object Anticipatory

Unauthorized
Waiver War Material
Alteration

11/8/2019 21
 Quasi Contracts
Reimbursement Non Gratuitous Amount Delivered
Necessaries Finder of Lost Mistakenly/Coercion
of Payment Act

11/8/2019 22
 Remedies for Breach Of Contract
Recession of Suit for Quantum Suit for Specific Suit for
Suit for Damages
Contracts Meriut Performance Injunction

Wrongful Act
Ordinary
Divisible of Adequate Relief Mandatory
Damages
Indivisible

Void or
Special Damages Discovered to be Personal Skills Prohibitory
void if divisible

Exemplary Non Gratuitous Court cannot

Damages Act Supervise

Nominal
Damages

Liquidated
Damages

Mitigation of
Loss

11/8/2019 23
 Indemnity and Guarantee
Nature and Extent Discharge of
Indemnity Guarantee Rights of Surety
of Surety liability Surety

Right of
Specific security Notice of
Express Co-Extensive
Guarantee against Revocation
Creditor

Right to Claim
Continuing Death of
Implied Secondary Set-off against
Guarantee Surety
Creditor

Rights of Right of Variance in

Indemnity Immediately Subrogation terms of
Holder against Debtor Contract

Mis- Right to Release of

Act Prudently/
Representatio Indemnify Principal
Authority
n against Debtor Debtor

Right for
Treat Separate Arrangement
Liability of similar
without surety
Indemnifier Contracts amounts for
consent
same debts
Right for Creditor dose
different not protect
amount for the surety
same debts remedy

Invalid
Guarantee

11/8/2019 24
 Bailment and Pledge
Finder of Lost Pawnor rights Pawnee Rights Sale by Non
Bailment Duties of Bailee Duties of Bailor Rights of Bailee Rights of Bailor
Goods and duties and duties Owner

Duty to reasonable Duty to disclose Duty to find Enforcement of Right to retain

Kinds of Bailment Bailor Duties All bailee duties Mercantile Agent
care Faults Owner Pawnee Duties goods

Right to deliver Right to terminate Right to exttra

Kinds from Benefit Duty not make Duty to repay Duty to reasonable
goods severally or bailment wrongful Right to redeem ordinary expenses Voidable Contract
Point of view unauthorized use necessary expenses care
jointly use

Right to return
Kinds from Duty to repay Right to deliver Seller in
Duty not Mixed goods any time Rights to retain Right to sale
Reward Point of extraordinary goods to Bailor Possession after
Goods Gratuitous possession
view expenses without Title sale
Bailment

Right to retain for Buyer in

Duty to return the Duty to indemnify Right of Particular Rights against subsequent
Sale Vs Bailment Right of lien Possession after
goods defective title Lien wrongdoer advances agreement to sell

License Vs Duty to deliver Duty to receive Right of General

Right to sale
Bailment accretion goods back Lien

11/8/2019 25
 Contract of Agency
Creation Agency Duties of Rights of
Agency
of Agency Authority Agent Agent
Follow
Who can appoint Express agency Right to
Actual directions of
agent contract remuneration
principle

Duty to not
Who may be an Implied Agency
Apparent make secret Right to retain
agent Contract
profits

Agent Vs Duty to work Right to

Agency by
Employee Emergency with reasonable indemnify for
Estoppel
care lawful acts

Agent Vs Right to
Agency by Delegation of Duty to render
Independent compensation if
Holding out Authority accounts
Contractor injure

Agency by Duty to Right to stop

Sub-Agent
Necessity communicate good in transit

Duty not
Agency by
Substitute Agent delegate
Ratification
Authority

11/8/2019 26
 Contract of Agency
Termination by
Liabilities of Liability of Termination by Irrevocable
Operation of
Principal Agent Personally Act of Parties agency
Law

Agent work
Pretended Agent By Agreement Expiry of Time Coupled Interest
within authority

By Notification
When exceeds Expressly Death of Agent When Personal
when continuing
authority Agrees or Principal Loss of Agent
Agency

Sufficient Cause
When Fraud by
Unnamed and Notice
agent within Insanity
Principal When For Fixed
authority
Time

Liability in case
Undisclosed Destruction of
of Un named
Principal Subject Matter
principal

Liability in case Dissolution in

Foreign
of Undisclosed case of
Principal
Principal Company

Alien Enemy

11/8/2019 27
 Partnership Act
Difference
Essentials of
Firm Between Company
Partnership
and Partnerships

Contract Firm Name

Association Prohibitory
of Persons clauses

Carry on
Business

Sharing of
Profit

Agency

11/8/2019 28
 Formation of Partnership
Partnership Kinds of Registration Effects of Non
Minor Partner
Deed Partners of Firm Registeration

Kinds of Partner for profit Time of No Civil suit

Active Partner
Partnership only Registration against Firm

Sleeping/Dormant Entitle to receive Procedure of No Civil Suit

Partnership at will
Partner profit Registration against 3rd Party

Particular Not personally Change of

Silent Partner No set-off Right
Partnership liable particulars

Not participate in Penalty for false

Partner Profit only
Business documents

Sub Partner Minor on majority Property of Firm

Notice within 6
Partner by estoppel
months

11/8/2019 29
 Rights and Duties of Partners
Rights of Duties of Absolute Qualified
Partner Partner Duties Duties
Right to
Common Duty to work
participate in Absolute Duties
advantage diligently
business

Duty to work
Right to be
Qualified Duties Duty to faithful without
Consulted
remuneration

Right to access Duty to render Duty to

Books true accounts contribute losses

Right to Interest Duty to provide Duty not compete

on Capital full information business of firm

Duty to use firm

Right to interest Duty not to
property for
on advances assign interest
business affairs

11/8/2019 30
 Rights and Duties of Partners
Authority of Incoming and
Partner outgoing partner

Incoming
Implied
partner
Authority
liability

Extension and Retiring

restriction on partner
Authority liability

Rights of
Authority in
retiring
Emergency
partner

Effect of
Expulsion of
notice to
partner
Active partner

Insolvency
and death of
partner

11/8/2019 31
 Negotiable Instrument Act
Form of
Characteristics Kinds of
Drawing
of Instruments Instruments
instrument

Payable to Easily Promissory

Order Negotiable Notes

Payable to Better Title Bill of

Bearer Transfer Exchange

Notice not
required for Cheques
suit

Presumptions

11/8/2019 32
 Parties to Instruments
Promissory Bill of
Cheques
Notes Exchange

Maker Drawer Drawer

Drawee
Payee Drawee
(Bank)

Payee

11/8/2019 33
 Negotiable Instruments
Rules of Payment in
Maturity due Course

Fixed Months Apparent tenor

No
Corresponding
Proper Inquiry
Dates Fixed
Months

Certain Number Production of

of Days documents

Public Holidays Money only

Installments

11/8/2019 34
 Parties of negotiable Instruments
Privileges of Liability to
Capacity to
Holder Holder in due Negotiable
Parties
course Instruments

Holder in Due Primarily

Better Title Minor
Course Liable Parties

Inchoate Secondary
Insolvent
Instruments Liable Parties

Factious
Company
Instruments

Escrow Agent

Legal
Representative

11/8/2019 35
 Presentment

Sight Acceptance Payment

General
Acceptance

Qualified
Acceptance

11/8/2019 36
 Negotiation of Instruments
Negotiation by
Modes of Kinds of
Unauthorized
negotiation endorsements
Party

Blank Lost
Delivery
Endorsement Instruments

Endorsement Full Stolen

and Delivery endorsement Instruments

Instruments
Partial
obtained by
Endorsement
Fraud

Restrictive Unlawful
Endorsement Consideration

Sans Recourse Forged

Endorsement Instruments

Facultative Overdue
Endorsement Instruments

11/8/2019 37
 Dishonor and Discharge
Dishonor Discharge

By By
Acceptance Cancellation

By Payment By Release

Notice By Payment

Noting By taking
Protesting Qualified
Acceptance

Effect of By non
Notice Presentment

By more than
48 hours

11/8/2019 38
 Banker And Customer
When may
Kinds of When Bank Must Protection of
Refused
Cheques Refuse Payment Banks
Payments

Countermanded
Open Posted Cheques Paying Banker
Payment

Forged
Insufficient
Cross Garnishee Order Signature no
Balance
protection

Death or Specific Purpose Collecting

Insanity only Banker

Bouncing
Defective Title Stale
Cheques

Doubtful
Loss of Cheque
validity

Closing
Accounts

11/8/2019 39
Companies Ordinance 1984
Incorporation

Accounts and Audits Capital of

and Dividend company

Prospectus
Management &
Administration of
Investment and Company
Dividend Mortgages
and Charges

Meetings

11/8/2019 40
 Companies Ordinance 1984
Various forms of doing business: The important points of
distinction between the company and partnership are
given below:
 For Profit only(Sharing of
 Purpose: Profit or not for Profit is an essential)
profit
 Partnership Act 1932
 Companies Ordinance 1984
 Registration is Optional
 Registration is mandatory
 Legal Position: Not separate
 Legal Position: body legal position from partners.
corporate(Separate person)
 Life is not perpetual
 Life Perpetual: it is (aggregation of individual)
(abstraction of law)
 Unlimited Liability
 Limited Liability
 Transfer of shares only with
 Transfer of shares easily the consent of partners
 Number of members (Private  Number of members
2 – 50, Public 7 – unlimited) (Partnership 2 – 20,
11/8/2019
Banking 10 Maximum) 41
 Companies Ordinance 1984
 Audit: Certified by  Audit: governed by contract
Companies Ordinance 1984. of firm and auditor.
 Implied Agency: Shareholders  Implied Agency: Partners
are not agent of company. are agent of firm.
 Management: Elected  Management: every partner
representative not every has right to participate in
shareholder. business decisions.
 Issue of Debentures: company  Issue of Debentures: not
can issue debentures on loan. possible in partnership
 No Secrecy of business.  Secrecy may be in business.
 Dissolution: procedure  Dissolution: by consent of
prescribe in law. partners.

11/8/2019 42
 Companies Ordinance 1984
 The meaning of separate legal personality :
a) Separate from its owners
For example, suppose that Mr X sets up a limited company,
New Company with ten shares of Rs. 10 which he owns. Mr. X
the individual and New Company, for the purpose of the law,
would be two separate persons - both would have a separate
legal existence.
artificial person vs natural persons.
Contracts with individual and company
If a company incurs a debt, the company itself is liable and
its owners (the shareholders) are not.

11/8/2019 43
 Companies Ordinance 1984
 A company owns its own assets.
If a company is owed money, the debtor owes the money to
the company, and not to its owners.
A company is personally liable to pay tax on its income
(profits).
If a company breaks the law, it is usually the company itself
that is liable, although there are circumstances in which its
owners or its ‘officers’ (mainly directors) may be personally
liable.

11/8/2019 44
 Companies Ordinance 1984
The effects of separate legal personality
 The separate legal personality of companies has several
consequences:
limited liability of the owners of business
separation of ownership from control i-e members and
directors
Transfer of ownership and perpetual succession/perpetual
existence.

11/8/2019 45
 Companies Ordinance 1984
 Limited liability
i. The liability of the owners of a company for the debts of the
company is limited.
ii. If a company is unable to pay its debts, it may be forced into
liquidation.
iii. The assets of the company will then be used to pay some of its
unpaid liabilities.
iv. The shareholders will lose what they have invested, but will not
be required to pay any more.
In this respect, limited companies are very different from
partnerships. Limited liability applies to all limited companies.
This is why private limited companies in the country are required
to include the word “(Private) Limited” in their name.
It is also why public companies in the country are required to
include the words “Limited” in their name. The word ‘limited’ in the
name of the company draws the fact of limited liability to the
attention of anyone dealing with it.
11/8/2019 46
 Companies Ordinance 1984
 Separation of ownership from control i-e members and
directors
 Limited liability does not apply to the company itself.
 A company is fully liable like any other person is fully
liable for the debts that he or she incurs.
 The directors will be personally liable in case of ultra vires.

11/8/2019 47
 Companies Ordinance 1984
 Transfer of ownership and perpetual succession
i. Transfer of share (sale, inheritance, gift, or trust)
ii. Rights attached wit shares also transferred ( votes,
dividend etc.)
iii. Transfer of share does not effect the life of company
iv. Its normal in practice that ownership change many time in
company life but company still exist, this concept term as
(perpetual succession).

11/8/2019 48
 Companies Ordinance 1984
 Definition of company and body corporate
i. Definition: Company [Section 2(7)] Companies Ordinance
1984 defines a company as a Company registered under
this Ordinance or any existing company.
ii. Definition: Existing Company [Section 2(15)] An existing
company means any company registered under any act or
Ordinance governing the registration or formation of
companies prior to the promulgation of the Companies
Ordinance

11/8/2019 49
 Companies Ordinance 1984
 Definition of company and body corporate
i. Definition: Body corporate [Section 2(4)]
"Body corporate" or "corporation" includes a company
incorporated outside Pakistan, but does not include
i. A corporation sole
ii. A co-operative society registered under any law relating to
the registration of co-operative societies
iii. Any other body corporate, which the Federal Government
may specify in this behalf.
Note: Generally there would be no difference in the term
Company and Body Corporate or Corporation however
Companies Ordinance 1984 defines the body corporate or
corporation separately.
11/8/2019 50

Companies Ordinance 1984
Types of companies according to its liability
i. Company limited by shares.
ii. Company limited by guarantee. (Having Share Capital or Not)
iii. Unlimited Company
Types of companies according to its liability
i. Private company
Private company is of two types;
Single Member Company
It is a company which consists of a single member who is also the director of the company.
These companies are governed by special rules implemented by Securities & Exchange
Commission of Pakistan for such companies. In these companies (SMCPVT) Limited is
added to the name of the company.

Private Company (Other Than Single Member Company) – Such type of a company can be
registered by at least two members and it restricts:
i. The maximum number of members to fifty
ii. The right to transfer the shares by its members
iii. The invitation of subscriptions from general public for its shares or other securities.

Note: members jointly holding shares shall be counted as one member.

11/8/2019 51
 Companies Ordinance 1984
 Types of Public companies according to its Registration
Public listed company and un-listed company [Section 2(30)]
Public listed company:
Such form of public company whose securities are listed on an
exchange and they are traded as per regulations of that stock
exchange.
Public un-listed company:
i. Public unlisted companies shares are not traded on a stock
exchange.
ii. Public unlisted companies have not made an offer of their
shares to general.
iii. A public unlisted company however is entitled to make an offer
to the general public as and when it thinks fit unlike private
companies which are forbidden to invite subscriptions from
general public
11/8/2019 52
 Companies Ordinance 1984
 Types of Public companies according to its Control
Holding company and subsidiary company [Section 3]
Holding company :
It means a company or body corporate which holds (directly or
indirectly)
i. more than fifty percent (50%) in the voting securities of
any other company.
ii. has a power to elect and appoint more than 50% of the
directors of such other company
Subsidiary Company:
Any company who has a holding company
Note: Except CDC
11/8/2019 53
 Examination Techniques
Course Material:
1) Mercantile Law by Mc Kuchhal
2) Mercantile Law by P C Tulsian
3) Study Text BPP
4) Bare Acts

11/8/2019 54
INDICATIVE GRID
Syllabus of Content Area Weightage
Introduction to legal system 40
Law of Contract
Sales of Goods Acts 30
Partnership Act
Negotiable Instruments Act 30
Carriage of Goods Act
Trust Act
Total 100

11/8/2019 55
 SKILL LEVEL
KNOWLEDGE COMPREHENSION APPLICATION ANALYSIS

11/8/2019 56
Time Management
 Arrive before the time
 First 15 minutes read the paper
 Attempt Easy Questions first
 Do not stuck on a single question
 Do not take the pressure

11/8/2019 57
 Practice Questions
Question Question Important Points
Number and
Marks
Q:(3b) Marks: 4 Mash Bank granted a loan of Rs. 10 million to Tahir When the Pawnee lends money to the same debtor
Limited against the pledge of shares of a listed after the date of the pledge without any further
company. Tahir Limited defaulted on repayment of the security, it shall be presumed that the right of retainer
loan. The market value of the shares at the time of over the pledged goods extends even to subsequent
default was Rs. 9 million. advances.
What remedies are available to Mash Bank in the Mash Bank can file a suit for the recovery of the
above situation? defaulted amount and retain the pledged shares or after
giving reasonable notice to Tahir Limited may sell the
shares of the listed company to recover the defaulted
amount. and sue Tahir Ltd. for the balance amount.

Q: (4a) Marks: 5 A and B may carry on a business competing with that

A and B are partners in a barbeque business. They of Lahori Maza and they may advertise such business.
decided to sell their business alongwith its goodwill to However, it is the right of C that A and B do not:
Lahori Maza which is owned by C. Describe the rights
of above parties under the Partnership Act, 1932 if A (i) use the firm name
and B decide to carry on similar business and nothing (ii) represent themselves as carrying on the business
is of the firm, or
mentioned in this regard under the agreement. (iii)solicit the persons who were dealing with the firm
before its sale.

11/8/2019 58
Q.(8a) Marks: 5 Faiz had sold goods on credit to Gulzar for Haseeb upon payment of guaranteed amount is
Rs. 5 million on guarantee of Haseeb. invested with all rights which Faiz (the creditor) had
Gulzar has also mortgaged his shop as a against Gulzar (the principal debtor).
security against the above amount. Haseeb Haseeb the surety is entitled to the benefit of every
was unaware of this mortgage and security which Faiz (the creditor) has against Gulzar
honoured his guarantee when Gulzar (the principal debtor) at the time when the contract of
failed to make the payment. What rights suretyship is entered into whether Haseeb knows of the
are available to Haseeb under the existence of such security or not.
Contract Act, 1872? He is entitled to recover from Gulzar (the principal
debtor) whatever sum he has rightfully paid under the
guarantee, but no sums which he has paid wrongfully.

Q.(11b) Marks: 3 A draws a bill on B who accepts it without No, B’s contention is not justified against C who is a
consideration. A indorses the bill to C for holder of the bill for value, even if C knew that B is an
valuable consideration. On due date C accommodation party. Absence of consideration can be
presents the bill to B for payment but B taken as a defence to avoid liability only towards parties
contends who stand in immediate relation to each other.
absence of consideration and refuses to pay.
Is B’s contention justified?

11/8/2019 59