Q.

1 Discuss various provisions of a valid contract keeping in view the offer,

acceptance and its revocation.

Answer:

Communication of Offer and Acceptance and Revocation of Offer

We know that two very important aspects of a contract are the offer and the
acceptance of the offer. However, in the practical world of business
and economics, the communication of the offer and the acceptance and the
timings of these are also very important factors. Let us look at this communication
timeline and also learn about the revocation of an offer.

Communication of Offer and Acceptance

Now we have seen previously that an offer cannot be revoked after the offeror has
communicated it to the offeree. Then the offer becomes binding, it
creates legal relations between the two parties.

So when is the communication complete? Effective communication of the offer

and a clear understanding of it is important to avoid misunderstanding between all
the parties.

If the parties are talking face-to-face this is not a problem. The communication
happens in real time and the offer and acceptance will be communicated on the
spot, creating no confusion.
But often times in business the communication occurs via letters and emails etc.
So, in this case, the timeline of communication is important.

Communication of Offer
Communication of the offer is complete when it comes to the knowledge of the
person it has been made to. So when the offeree (in case of a specific offer) or any
member of the public (in case of a general offer) becomes aware of the offer, the
communication of the offer is said to be complete.

So when two people are talking, face-to-face or via telephone, etc the
communication will be complete as soon as the offer is made.
Example if A tells B he will fix his roof for five thousand rupees, the
communication is complete as soon as the words are spoken.

Communication of Acceptance
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 Mode of AcceptanceIn this case of communication of acceptance, there are
two factors to consider, the mode of acceptance and then the timing of it. Let us
first talk about the mode of acceptance. Acceptance can be done in two ways,
namely.

a) Communication of Acceptance by an Act: This would include

communication via words, whether oral or written. So this will
include communication via telephone calls, letters, e-mails,
telegraphs, etc.

b) Communication of Acceptance by Conduct: The offeree can also

convey his acceptance of the offer through some action of his, or by
his conduct. So say when you board a bus, you are accepting to pay
the bus fare via your conduct.

Revocation of Offer
Offer may be revoked anytime before the communication of the acceptance is
complete against the proposer/offeror. Once the acceptance is communicated to
the proposer, revocation of the offer is now not possible.

Essential elements of a Valid Contract

1. Offers and Acceptance

2. Legal Relationship
3. Lawful Consideration
4. Capacity of Parties
5. Free Consent
6. Lawful Objects
7. Writing and Registration
8. Certainty
9. Possibility of Performance
10. Not Expressly Declared Void

1. Offers and Acceptance

It is one of the essentials of valid contract. There must an offer and
acceptance of the same.

2. Legal Relationship

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 The parties to an agreement must create legal relationship. Agreements of
a social or domestic nature do not create legal relations and as such cannot
give rise to a contract Example, X invited Y to a dinner Y accepted the
invitation. It is a social agreement. If X fails to serve dinner to Y, Y cannot
go to the courts of law for enforcing the agreement.

3. Lawful Consideration
Consideration is “something in return.” Consideration has been defined as
the price paid by one party for the promise of the other. Example,: X
agrees to sell his motor bike to Y for Rs. 1,00,000. Here Y’s promise to
pay Rs. 1, 00,000 is the consideration for X’s promise to sell the motor
bike and X’s promise to sell the motor bike is the consideration for Y’s
promise to pay 1, 00,000.

4. Capacity of Parties
It means that the parities to an agreement must be competent to contract. A
contract by a person of unsound mind is void ab-initio. Thus, a contract
entered into by a minor or by a lunatic is void. Example: X a minor
borrowed Rs 8,000 from Y and executed mortgage of his property in
favour of the lender. This was not a valid contract because X is not
competent to contract.

5. Free Consent
For a valid contract it is necessary that the consent of parties to the contact
must be free. Example: X threatens to kill Y if he does not sell his car to
X. Y agrees to sell his car to X. In this case, Y’s consent has been obtained
by coercion and therefore, it cannot be regarded as free.

6. Lawful Objects
It is also necessary that agreement should be made for a lawful object.
Every agreement of which the object or consideration is unlawful is illegal
and the therefore void.

7. Writing and Registration

According to Contract Act, a contract may be oral or in writing. Although
in practice, it is always in the interest of the parties that the contract should
be made in writing so that it may be convenient to prove in the court.

8. Certainty

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 For a valid contract, the terms and conditions of an agreement must be
clear and certain.

9. Possibility of Performance
If the act is legally or physically impossible to perform, the agreement
cannot be enforced at law.

10. Not Expressly Declared Void

An agreement must not be one of those, which have been expressly
declared to be void by the Act.

Q. 2 Highlight main features of a partnership business. How this type of

organization is different from other forms of organizations?

Answer:

Partnership Firm
When the business grows and prospers, one person is not enough to procure
capital and look after its day-to-day affairs. In such a scenario, more persons join
hands and contribute their funds as well as other skills to run the business. Thus,
partnership is said to be an extension of sole proprietorship.

Definition:
“Partnership is an association of two or more persons who have mutually
decided to carry out business activities jointly and share its profits as well
as losses. The partnership agreement may be written or oral”.

Features of partnership are:-

1. Two or More Persons

At least two persons must pool resources to start a partnership firm. The
Partnership Act, 1932 does not specify any maximum limit on the number of
partners. However, the Companies Act, 1956 lays down that any partnership or
association of more than 10 persons in case of banking business and 20 persons in
other types of business is illegal unless registered as a joint stock company.
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2. Agreement
A partnership comes into being through an agreement between persons who are
competent to enter into a contract (e.g. Minors, lunatics, insolvents etc. not
eligible). The agreement may be oral, written or implied. It is, however, to put
everything in black and white and clear the fog surrounding all knotty issues.

3. Lawful Business
The partners can take up only legally blessed activities. Any illegal activity
carried out by partners does not enjoy the legal sanction.

4. Registration
Under the Act, registration of a firm is not compulsory. (In most states in India,
registration is voluntary). However, if the firm is not registered, certain legal
benefits cannot be obtained. The effects of non-registration are-
(i) the firm cannot take any action in a court of law against any other
parties for settlement of claims and
(ii) in case of a dispute among partners; it is not possible to settle the
disputes through a court of law.

5. Profit Sharing
The partnership agreement must specify the manner of sharing profits and losses
among partners. A charitable hospital, educational institution run jointly by like-
minded persons is not to be viewed as partnership since there is no sharing of
profits or losses. However, mere sharing of profits is not a conclusive proof of
partnership. In this sense, employees or creditors who share profits cannot be
called partners unless there is an agreement between the partners.

6. Agency Relationship
Generally speaking, every partner is considered to be an agent of the firm as well
as other partners. Partners have an agency relationship among themselves. The
business can be carried out jointly run by one nominated partner on behalf of all.
Any acts done by a nominated partner in good faith and on behalf of the firm are
binding on other partners as well as the firm.

7. Agreement:
The partnership is a result of a contract or an agreement that is entered into
between or among the partners. It does not arise from birth, status or inheritance
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or succession. The contract or agreement between the persons may be oral or
written. But usually, the contract is in writing.

8. Share of ownership –
All individuals share the ownership of the assets of the business, although they
may have agreed that the firm will use an asset which belongs to one of the
partners individually.

9. Membership Changes
No need for cumbersome arrangements for shares to change hands without
unavoidable tax consequences whenever there is a change in membership.

10.Share of risk and rewards –

All individuals share the risks and rewards of the business.

Difference between Partnership and Company

PARTNERSHIP
Partnership Frim is created by agreement between two or more people by
registering the partnership firm with Registrar of Firms.

COMPANY
A company is defined easily as an association of two or more persons which is
formed for doing business collectively and registered with Registrar of
Companies.

There are different types of companies like One Person Company, Private
company and Public Company, etc.
.

COMPARISON TABLE

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 PARTNERSHIP COMPANY

The members of the Partnership firm The members of the company are calle
are called as Partners. shareholders of a company.

Enacted by

Partnership Form of business is

Company Form of business is governed b
governed by "The Indian Partnership
Indian Companies Act, 2013”.
Act, 1932."

Number of Members

A Company must have Minimum of 2 and m

Partnership firm must have Minimum
of 200 in the case of private company. Min
of 2 partners and maximum of 20
and maximum is unlimited number of mem
partners.
case of public company

Created by

Partnership Firm is Created by Company Firm is Created by Law i.e crea

Contract between two or more people. incorporation of a company under compa

Regulation Authority

It is regulated by the Registrar of

It is regulated by the Registrar of Compani
Firms which comes under State
comes under Central Government.
Government.

Registration procedure

The registration of a Partnership firm The registration of Company with Regist

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 PARTNERSHIP COMPANY

is Not Mandatory. Companies is Mandatory.

Documents Required

Partnership Deed(Agreement
Memorandum of Association(MoA) and Ar
Document) is the mandatory
Association(AoA) are the main documents
document for creation of a Partnership
incorporation of the company.
Firm.

Separate Legal Entity

Partnership firm is not a separate

legal entity from partners. The A company is a separate legal entity, It is a
Partners of the firm are collectively entity from its members, directors, promot
referred as a Partnership firm.

Liability of Members

The partners have Unlimited Liability

The Shareholders and promoters have L
in all the matters relating to
liability to Capital of the company.
Partnership Firm.

Accounts and Audit

Partnership Firm has to maintain A Company should maintain accounts and

accounts as per the conditions stated of accounts by certified Chartered Accoun
in partnership deed. Compulsory.

Common Seal

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 PARTNERSHIP COMPANY

A Common Seal is not required for A Common Seal in the form of a stamp is re
Partnership Firm. the company for legal and functional pur

Management

Management of the activities of a

Management of the activities of a Company
Partnership Firm is usually done by
by Board of Directors.
the working partners.

Change of Name

The name of the Partnership Firm can The name of the company cannot be chang
be changed easily by having a and a prior approval of Central Governm
discussion between partners. required to change the name.

Conclusion
Due to various drawbacks in the partnership firm, the concept of the company
came into being. This is the reason; now a very little number of partnership firms
can be seen, these days. It has also evolved a new concept of Limited Liability
Partnership .

Q. 3 Explain various contents of Prospectus of a Public Limited Company.

Answer:

What is a Prospectus?
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Section 2(70) of the Companies Act, 2013 defines a prospectus as

“A prospectus means Any documents described or issued as a prospectus and

includes any notices, circular, advertisement, or other documents inviting deposit
for the public or documents inviting offer from the public for the subscription of
shares or debentures in a company.”

A prospectus also includes shelf prospectus and red herring prospectus. A

prospectus is not merely an advertisement.

A document shall be called a prospectus if it satisfy two things:

1. It invites subscription to shares or debentures or invites deposits.

2. The aforesaid invitation is made to the public.

Requirements of a Correct Prospectus:

The correct prospectus must have the following:

1. It must not be exaggerated

2. It must contain full and honest disclosures
3. Material facts must be disclosed and should not to be concealed.
4. There must not be false details and untrue statements.

Contents of Prospectus
The contents of the prospectus have been specified in Schedule II of the
Companies Act. The important contents in the prospectus include the following:

1. The contents of the Memorandum

It expresses the name of the company, objects, nature of business, share
capital and its division, liability of members, names and addresses of the
signatories and the number of shares subscribed by them.
2. The qualification shares of the Directors
If the Articles of the company provides that certain minimum number of
shares to be possessed by the directors as qualification, in that case, a
person shall not be qualified to act as a director unless he holds such
number of shares.
3. (No. of redeemable preference shares:
Particulars regarding debentures and redeemable preference shares with
their date of redemption must be stated.
4. Remuneration of the Directors and Promoters

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 The prospectus must contain the rate of remuneration for attending
meetings and for other services of the Directors and Promoters.
5. The names, descriptions and addresses of the Directors and Managing
Directors
The names, addresses, descriptions, occupations of the Directors,
Managing Directors, Managers and the provisions regarding their
appointment must be stated.
6. The Minimum Subscription
The minimum subscription on which the directors may proceed to
allotment and the amount payable on application, allotment etc. on each
share should also be stated in the prospectus.

7. Time of opening
The time of the opening of subscription list should also be stated.
8. Names and Addresses
The names and addresses of vendors, if any, and the mode of payment of
purchase price and goodwill should also be contained in the prospectus.
9. Underwriting Commission, Brokerage etc
The names of underwriters and the opinion of the directors regarding their
financial position and business integrity should also be stated clearly.
10. Names of the auditors with their addresses
The reputation of the auditors is also an important factor necessary for
public patronage.
11. Particular of Contracts
The dates of and parties to every material contract, and reasonable time
and place of its inspection are also significant.
12. Preliminary Expenses:
The estimated amount of preliminary expenses to be incurred should also
be furnished.
13. Particulars of Directors
Full particulars of the nature and interest of every director or promoter in
the promotion of or in the property proposed to be acquired by the
company within two years with statement of all sums paid or agreed to be
paid to him in cash or shares for service rendered.
14. Disclosure:
Full disclosure on these matters should also be made in the prospectus.
15. Expected rate of dividend and voting rights:
The rights of shareholders relating to voting, meeting and dividends along
with the nature and extent of restrictions to be imposed by Articles on their
right to transfer shares should also be stated in clear and convincing terms.
16. Capitalization of Profits and Surplus from revaluation of assets
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 Capitalization of profits/reserves of a company or if any of its subsidiaries
have been capitalized (i.e. issuing bonus shares)— particular of such
capitalization and also surplus, if any, assets from the revaluation of assets
should also be stated.

Q. 4 Highlight various penalties in case of breach of contract as discussed in

Law of Sales of Goods

Answer:

What is a Contract and How Can It Be Breached?

A contract is an agreement between two parties in which a legal obligation is
created for each of them to perform specific acts. These specific duties could
include rendering a payment, or delivering goods. In order for a contract to be
legally enforceable, each party must exchange something of value. This is legally
referred to as consideration. Contracts may be oral or written; however, courts
prefer that agreements be put into writing, and there are some contracts that are
only legally enforceable if they are in writing.

Breach of contract occurs when one or both of the parties involved fails to uphold
their agreed upon duties. Duty can refer to just about anything, but it typically
refers to a payment, good, or service, as mentioned above. Some common
breaches include failure to perform duties or impossibility (one party makes the
other party’s duties impossible to perform). A breach could be either partial or
impartial, and the legal consequences for each of these types of breach differ.

What is a Remedy in Contract Law?

In contract law, a “remedy” is a court-ordered resolution to one party’s breach of
contract. A breach of contract occurs when one party to a contract has not fulfilled
his or her obligation under the agreement. The non-breaching party is also known
as the “injured” party, and the purpose of remedies is to place the injured party in
the position they would have otherwise been in had the contract been performed
as it was agreed upon.

What Damages Can Be Awarded?

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There are two general categories of damages that may be awarded if a breach of
contract claim is proved. They are:
1. Compensatory Damages
2. Punitive Damages

Compensatory Damages
Compensatory damages (also called “actual damages”) cover the loss the no
breaching party incurred as a result of the breach of contract. The amount
awarded is intended to make good or replace the loss caused by the breach.
There are two kinds of compensatory damages that the no breaching party may be
entitled to recover:
a) General Damages.
b) Special Damages.
c) Punitive Damages.

a. General damages cover the loss directly and necessarily incurred by the
breach of contract. General damages are the most common type of
damages awarded for breaches of contract.

b. Special damages (also called “consequential damages”) cover any loss

incurred by the breach of contract because of special circumstances or
conditions that are not ordinarily predictable. These are actual losses
caused by the breach, but not in a direct and immediate way. To obtain
damages for this type of loss, the no breaching party must prove that the
breaching party knew of the special circumstances or requirements at the
time the contract was made.

c. Punitive damages (also called “exemplary damages”) are awarded to

punish or make an example of a wrongdoer who has acted willfully,
maliciously or fraudulently. Unlike compensatory damages that are
intended to cover actual loss, punitive damages are intended to punish the
wrongdoer for egregious behavior and to deter others from acting in a
similar manner. Punitive damages are awarded in addition to
compensatory damages.

Remedies for Breach under Sale of Goods Act

In this Act, unless there is anything repugnant in the subject or context,
(1) "buyer" means a person who buys or agrees to buy goods;
(2) "delivery" means voluntary transfer of possession from one person to
another;
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(3) goods are said to be in a "deliverable state" when they are in such state that
the buyer would under the contract be bound to take delivery of them;

Seller’s remedies against buyer

The suits that may be instituted by the seller against the buyer under the Act can
be roughly divided into two types:
1. Suit for Price
2. Damages for non-acceptance
SUIT FOR PRICE

 Where under a contract of sale the property in the goods has passed to the
buyer and the buyer wrongfully neglects or refuses to pay for the goods
according to the terms of the contract, the seller may sue him for the price
of the goods.

 Where under a contract of sale the price is payable on a day certain

irrespective of delivery and the buyer wrongfully neglects or refuses to
pay such price, the seller may sue him for the price although the property
in the goods has not passed and the goods have not been appropriated to
the contract.

From the above section, it can be seen that except as provided by sub-section (2),
the seller can only sue for the payment when the property has passed to the buyer.
The passing of the property depends upon certain conditions, and if these
conditions are not fulfilled, he cannot sue for the payment under this section.

Where goods are sold for a particular amount and the payment has to be made
partly in cash and partly in kind, the default if made in kind entitles the seller to
sue for the remainder of the price.

DAMAGES FOR NON-ACCEPTANCE

 Where the buyer wrongfully neglects or refuses to accept and pay for the
goods, the seller may sue him for damages for non-acceptance.

when a contract has been broken, the party who suffers by the breach is entitled to
receive, from the party who has broken the contract, compensation for any loss
caused to him thereby, which naturally arose, in the usual course of things from
such a breach, or which the parties knew when they entered into the contract, to
be likely to result from the breach of it.

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Furthermore, in estimating the loss or damage caused by a breach of contract, the
means which existed of remedying the inconvenience caused by the non-
performance of the contract must be taken into account.

The date at which the market price is to be ascertained is the day on which the
contract ought to have been performed by delivery and acceptance as fixed by the
contract or, where no time is fixed, at the time of the refusal to perform.

Buyers remedies against the seller

The suits that may be instituted by the buyer against the seller can be roughly
divided into three types:
1. Damages for non-delivery
2. Remedy for breach of warranty
3. Specific Performance
Damages for Non- Delivery

 Where the seller wrongfully neglects or refuses to deliver the goods to the
buyer, the buyer may sue the seller for damages for non-delivery.

When the property in the goods has passed, the buyer, provided that he is entitled
to the immediate possession, has all the remedies of an owner against those that
deal with the goods in a manner inconsistent with his rights. If, therefore, the
seller wrongfully re-sells them, he may sue the seller in trover, and also against
the second buyer, though as against him the rights may be cut down by the
provisions.

In the case of non-delivery, the true measure of damages will be the difference
between the contract price and the market price at the time of the breach. The
market value of the goods means “the value in the market, independently of any
circumstances peculiar to the plaintiff .

Remedy for Breach of Warranty

 Where there is a breach of warranty by the seller, or where the buyer

elects or is compelled to treat any breach of a condition on the part of the
seller as a breach of warranty, the buyer is not by reason only of such
breach of warranty entitled to reject the goods; but he may-
 (a) Set up against the seller the Brach of warranty in
diminution or extinction of the price; or
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  (b) Sue the seller for damages for breach of warranty.

 (2) The fact that a buyer has set up a breach of warranty in

diminution or extinction of the price does not prevent him
from suing for the same breach of warranty if he has
suffered further damage.

A breach of warranty does not entitle the buyer to reject the goods and his only
remedy would be those provided namely, to set up against the seller the breach of
warranty in diminution or extinction of the price or to sue the seller for damages
for breach of warranty. From the definition of warranty. it is clear that a breach of
it gives rise to a claim for damages only on the part of the buyer. It is also laid
down by s. 13 that, even in the case of a breach of condition, if the buyer has
accepted the goods, or, in the case of entire contracts, part of them, either
voluntarily, or by acting in such a way as to preclude himself from exercising his
right to reject them, he must fall back upon his claim for damages as if the breach
of the condition was a breach of warranty.

Q. 5 How securities and exchange commission of Pakistan (SECP) can

improve its performance to make the capital market more attractive for
potential investors?

Answer:

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