1

Q. 1 In what ways an offer can be communicated, accepted and

revoked?
Definition

Section 2(h) of the Act defines the term contract as "any agreement enforceable by law". There are
two essentials of this act, agreement and enforceability.
Section 2(e) defines agreement as "every promise and every set of promises, forming the
consideration for each other."
Again Section 2(b) defines promise in these words: "when the person to whom the proposal is made
signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted becomes a
promise."
Types of Contracts

On the basis of Validity:

1. Valid contract: An agreement which has all the essential elements of a contract is called a valid
contract. A valid contract can be enforced by law.
2. Void contract [Section 2(j)]: A void contract is a contract which ceases to be enforceable by law. A
contract when originally entered into may be valid and binding on the parties. It may subsequently
become void.
3. Voidable contract [Section 2(i)]: An agreement which is enforceable by law at the option of one or more
of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential
element of free consent is missing in a contract, the law confers right on the aggrieved party either to
reject the contract or to accept it. However, the contract continues to be good and enforceable unless
it is repudiated by the aggrieved party.
4. Illegal contract: A contract is illegal if it is forbidden by law; or is of such nature that, if permitted,
would defeat the provisions of nay law or is fraudulent; or involves or implies injury to a person or
property of another, or court regards it as immoral or opposed to public policy.
These agreements are punishable by law. These are void ab-initio. “All illegal agreements are void
agreements but all void agreements are not illegal.”
5. Unenforceable contract: Where a contract is good in substance but because of some technical defect
cannot be enforced by law is called unenforceable contract. These contracts are neither void nor
voidable.
Offer

Proposal is defined under section 2(a) of the Contract Act, 1872 as "when one person signifies to
another his willingness to do or to abstain from doing anything with a view to obtaining the assent of
that other to such act or abstinence, he is said to make a proposal/offer".
Offer and acceptance
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It is an essential ingredient of a contract, that there must be an offer and its acceptance. If there is no
offer, there is no contact, because there is no meeting of minds. Again, if there is an offer by one
party, but it is not accepted by the other party or if the ostensible acceptance of the offer is defective,
then also, there is no agreement and therefore no "contract".
(a) Whether there has there been an offer at all in the particular case, or whether there is something
less than an offer;
(b) If there is an acceptance; whether it is in the proper form;
(c) Whether there has been an acceptance of the offer;
(d) Whether the acceptance has been communicated to the offeror.
Classification of Offer

1. General Offer: Which is made to public in general.

2. Special Offer: Which is made to a definite person.
3. Cross Offer: Exchange of identical offer in ignorance of each other.
4. Counter Offer: Modification and Variation of Original offer.
5. Standing, Open or Continuing Offer: Which is open for a specific period of time.
Acceptance

According to Section 2(b), "When the person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted."
Rules:

1. Acceptance must be absolute and unqualified.

2. Communicated to offeror.
3. Acceptance must be in the mode prescribed.
4. Acceptance must be given within a reasonable time before the offer lapses.
5. Acceptance by the way of conduct.
6. Mere silence is no acceptance.
Quality of acceptance

Acceptance of an offer must be absolute and must correspond with the terms of the offer. This rule a
key constituent of the basic premise, does not always accord with the realities of complex business
contract negotiations today. Such negotiations may indeed proceed through a series of proposals,
counter-proposals, withdrawals, variations and qualifications, before agreement (or otherwise) is
reached. When parties carry on lengthy negotiations, it may be hard to say exactly when an offer has
been made and acceptance.
Revocation of offer
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A proposal may be revoked at any time before the communication of its acceptance is complete as
against the proposer, but not afterwards. An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the acceptor, but not afterwards.
A proposal is revoked -

(1) by the communication of notice of revocation by the proposer to the other party;
(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so
prescribed, by the lapse of a reasonable time, without communication of the acceptance;
(3) by the failure of the acceptor to fulfill a condition precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of the death or insanity comes to the knowledge
of the acceptor before acceptance.
Unlawful agreements

An agreement, whose consideration or object is unlawful, is void.

Persons bound by the contract

Promises bind the promisors and in case of death of promisor (before performance) their legal
representatives, unless there is contract to the contrary, or the nature of the contract is such that it
depends upon the personal qualifications of any party.

Q. 2 What are the rights and obligations of partners before and after the dissolution of a
partnership firm?
(i) Right to an equitable lien – Under Section 46 every partner is entitled to have the property
of the firm applied in payment of outside debts and liabilities of the firm and to have the surplus
distributed among the partners in accordance with their rights. Such a right of a partner is called as
‘equitable lien’ of partners.
(ii) Right of partners to have the business wound up – The authority of each partner to bind
the firm and the other mutual rights and obligations of the partners continue to wind up the affairs of
the firm (Section 47).
(iii) Right to have the debts of the firm settled out of the property of the firm – When a firm
is dissolved, the debts of the firm are settled out of the property of the firm, and if there is any surplus
it is utilized towards the payment of the private debts of the partners. Similarly, the separate property
of any partner (private estate) shall be applied first in the payment of his separate debts and surplus,
if any, in the payment of debts of the firm (Section 49).
(iv) To account for personal profits after dissolution – In case of transactions by any surviving
partner or by the representatives of a deceased partner undertaken after the firm is dissolved on
account of the death of a partner and before its affairs have been completely wound up, he shall
account for the profits he derives from such transactions and pay it to the firm. However, this rule will
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not apply in cases where any partner or his representative has bought the goodwill of the firm on its
dissolution. [Section 16(a) and Section 50].
(v) Right to return of premium on premature dissolution (Section 51) – Where a partner has
paid a premium on entering into partnership for a fixed term and the firm is dissolved before the
expiration of the term, he is entitled to repayment of the whole or part of the premium. However, no
refund shall be paid to him if the dissolution –
(a) Is due to the death of a partner
(b) Is due to the misconduct of the partner who has paid the premium or
(c) Is in the pursuance of an agreement which contains no provision for the refund of the premium.
(vi) Right where partnership contract is rescinded for fraud or misrepresentation (Section
52) – Where partnership is rescinded on the ground of fraud or misrepresentation of one of the
partners, the partner entitled to rescind has the following rights –
(a) Right to lien on the surplus assets – He has a lien on the surplus assets after the debts of the firm
have been paid, for any sum paid by him for the purchase of his share in the firm and for any capital
contributed by him.
(b) Right of subrogation – If a partner pays off a creditor from his pocket, he steps into the shoes of
that creditor and can claim money from the firm as that creditor.
(c) Right to be indemnified – He also has a right to be indemnified by the partners or partner guilty of
fraud or misrepresentation against all the debts of the firm.
(vii) Right to restrain from use of firm name or firm property (Section 53) – After the firm is
dissolved, every partner may restrain any other partner from carrying on a similar business in the
firm’s name or from using any of the property of the form for his own benefit, until the affairs of the
firm have been completely wound up, unless a partner has purchased the goodwill of the firm.
The liabilities of a partner on dissolution are as under:
(i) Liability for acts of partners done after dissolution – Until public notice of dissolution of
the firm is given, partners continue to be liable to third parties for any act done by any of them.
However this liability does not apply to a partner who is dead or who is adjudged as insolvent or a
sleeping partner.
(ii) Continuing authority of partners for purpose of winding up – After dissolution of a firm,
the authority of each partner to bind the firm and the other mutual rights and obligations of the
partners continue, so far as may be necessary –
(a) to wind up the affairs of the firm and
(b) To complete transactions began but unfinished, at the time of the dissolution.
(iii) Liability to share profits earned after dissolution – If any partner earns any profit from any
transaction connected with the firm, after the dissolution, he must share it with the other partners and
the legal representative of any deceased partner.
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Q. 3 Discuss various steps involved in the registration of a company.

Company registration remains the most favoured form of business organisation in Pakistan.
Incorporation of a company helps boost business for medium as well as large-scale business
enterprises. All company registrations and regulations are controlled by the Companies Ordinance
Act of 1984.
The function of administration of all companies is governed by the Securities and Exchange
Commission of Pakistan and the Registrar of Companies appointed by the Securities and Exchange
Commission of Pakistan (for the particular province) where such company is to be registered.
Under the provisions of the Companies Ordinance, 1984 a company is a corporate body with
separate legal entity and a perpetual succession. A company may be formed by persons associating
for any lawful purpose by subscribing their names to the Memorandum and Articles of Association
and complying with other requirements for registration of a company under the provisions of the
Ordinance.
According to the Companies Ordinance, 1984 there can be three different types of companies:
A company limited by shares
A company limited by guarantee
An unlimited liability company
The following steps needs to be followed to create and register a company in Pakistan.
1. SEEK APPROVAL ON NAME OF THE COMPANY
The first step towards incorporation of a company is to seek the “availability of name” for the
proposed company from the concerned registrar of companies. Although, it sounds simple enough,
but there are certain prohibitions and restrictions, the applicants have to look into while choosing a
name for a company. This is the SECP official guideline for choosing a name.
2. PAY FEE’S ASSOCIATED WITH INCORPORATION AND REGISTRATION OF THE COMPANY
Post receiving the name availability certificate from SECP, the applicants have to file an application
for incorporation. There are two ways to go about it:
A. ONLINE INCORPORATION

For an online submission, the applicants are required to create an account (username and password)
under user registration system of eServices and generate PIN for signing the application. A video
tutorial prepared by SECP for user registration at eServices is available here.
Once you submit the process as per the guidelines suggested in the video, you can now pay the fees
associated with company registration process by credit card, debit card or online funds transfer (the
online transfer facility is available for Muslim Commercial Bank (MCB) and United Bank Limited (UBL)
account holders only.) Alternatively, the print out of the fee challan can be submitted in the
designated branch of MCB or UBL.
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B. OFFLINE INCORPORATION

The fees associated with the process can be paid by generating manual challan from this Challan link
and submitting it along with a company registration application at the designated branches of MCB or
UBL in Pakistan.
Post payment of the fee, SECP then requires the applicant to submit the following documents:
i- Declaration of compliance
ii- Identification of office’s location
iii- Copies of CNIC/NICOP of the subscribers/ directors/ chief executive officer/ nominee (for
single member company)/authorized representative or copies of Passport in case of a
foreigner
iv- NOC/Letter of Intent/ License (if any) of the relevant regulatory authority in case of a
specialized business
v- In case the subscriber is a foreign company, the profile of the company, detail of its
directors, their nationality and country of origin, certified copy of its charter, statute or
memorandum and articles etc.
vi- Copies of the Memorandum and Articles of Association with each member’s signature,
where:
Memorandum of Association explains the business sector of your company e.g. Institution, Travel
agency, Trading or manufacturing, Supply or chain of stores. To put simply, MOA tells about the
relationship of your company with the outside world.
Articles of Association lets know about the day-to-day proceedings within the company i.e. what role
CEO and directors would play, business concerned meetings and the appointments of employees, in
short- how the company will run.
At the completion of the process, the subscriber registering the company shall receive a Certificate of
Incorporation issued electronically or in physical form.
Once the certificate of incorporation is received, a private company /single member company can
start its function.
3. OBTAIN A DIGITAL SIGNATURE AND CREATE A COMPANY SEAL
The signature is granted by National Institutional Facilitation Technologies (NIFT) and can be
obtained by using the electronic services of the SECP. After the certificate of incorporation is issued,
the company representatives may be required to present a company seal, depending on the where
the business will be head quartered or started.
4. REGISTER FOR INCOME, SALES AND PROFESSIONAL TAXES
To register for Income tax, the company will have to apply for a National Tax Number (NTN) at the tax
facilitation of the Regional Tax Office (RTO) of the Federal Board of Revenue (FBR). The
requirements for this application include:
 NTN form
 Incorporation Certificate
 Memorandum and Articles of association
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 Bank account number
 Copies of National Identity Cards (NICs) of companies’ Directors
 An attestation of business address
Sales tax, like the income tax can be registered for, by applying for a Sales Tax Number (STN) at the
tax facilitation center of RTO of FBR. For the professional tax, provided it applies, the company will
have to register with Excise and Taxation (ET) Department of the District.
5. REGISTER WITH ESSI AND EOBI
Depending on the location of the business, the company will need to register with
 Punjab Employees Social Security Institutions (PESSI)
 Sindh Employees Social Security Institution (SESSI)
 Likewise (BESSI) or (KPKESSI) for Balochistan and Khyber Pakhtunkhwa respectively.
Under the Employees Old Age Benefits Institution (EOBI), insured employees are entitled to a
pension, upon retirement, invalidity in the case of disability, old-age grant and survivor’s pension.
Every industry or a commercial establishment with five or more employees has to be registered with
the Federal Employees Old age Benefits Institution (EOBI).
6. REGISTER WITH THE LABOR DEPARTMENT OF THE DISTRICT
To safeguard the labor standard of the workers, all companies are required to registration with the
District Chief Inspector of the labor department in each district. For registration, employer must submit
the application form A accompanied with the relevant bank form.
Once these requirements are met and vetted by SECP, the company is then ready to become an
independent operating body in Pakistan and will be treated as such.

Q. 4 Briefly explain the various provisions of Companies Ordinance

1984 regarding the winding up of companies.
The term ‘winding up’ of a company may be defined as the proceedings by which a company is
dissolved (i.e. the life of a company is put to an end). Thus, the winding up is the process of putting
an end to the life of the company. And during this process, the assets of the company are disposed
of, the debts of the company are paid off out of the realized assets or from the contributories and if
any surplus is left, it is distributed among the members in proportion to their shareholding in the
company. The winding up of the company is also called the ‘liquidation’ of the company. The process
of winding up begins after the Court passes the order for winding up or a resolution is passed for
voluntary winding up. The company is dissolved after completion of the winding up proceedings. On
the dissolution, the company ceases to exist. So, the legal procedure by which the existence of an
incorporated company is brought to an end is known as winding up.
1-LIQUIDATOR
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A person appointed to carry out the winding up of a company is called liquidator. If the winding up is
through Court, the term used for such person is official liquidator. The duties of liquidator include to
get in and realise the property of the company, to pay its debts, and to distribute the surplus (if any)
among the members. The official liquidator acts under the supervision of the Court, through a
recognized reporting system.
2. Consequences of winding up
Some important consequences of winding up of company are:
2.1 As regards the company itself: winding up does not mean that the company has ceased to
exist. The company exists as a corporate entity with all the rights of such entity, with only change that
its management and administration is to be carried on through liquidator / liquidators till the final
dissolution of the company.
2.2 As regards the shareholders: A new statutory liability as contributories comes into existence.
Every transfer of shares or alteration in the status of a shareholder, after the winding up has
commenced by the order of the Court , shall unless approved by the liquidator , be void.
2.3 As regards the creditors:
i. They cannot file or continue suits against the company, except with the leave of the Court.
ii. They cannot proceed with the execution, if they have obtained decrees already.
iii. They must lodge their claim and prove their debt before the liquidator.
2.4 As regards the management, on appointment of liquidator, all the powers of the directors,
chief executive and other officers, shall cease, except for the purpose of giving notice of resolution to
wind up and appointment of liquidator and filing of consent of liquidator etc.
2.5 As regards the disposition of company’s property, all such dispositions are void unless with
the leave of the Court or the liquidator.

3. Modes of winding up:

The winding up of a company may be either-
(i) By the Court; or
(ii) Voluntary; or
(iii) Subject to the supervision of the Court.
PROCEDURE FOR VOLUNTARY WINDING UP
The following steps are to be taken for Member’s voluntary winding up under the Provisions of the
Ordinance, and the Companies Rules.
Step 1. Where it is proposed to wind up a company voluntarily, its directors make a declaration of
solvency on Form 107 prescribed under Rule 269 of the Rules duly supported by an auditor’s report
and make a decision in their meeting that the proposal to this effect may be submitted to the
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shareholders. They, then, call a general meeting (Annual or Extra Ordinary) of the members (Section
362 of the Ordinance)
Step 2. The company, on the recommendations of directors, decides that the company be wound up
voluntarily and passes a Special Resolution, in general meeting (Annual or Extra Ordinary) appoints a
liquidator and fixes his remuneration. On the appointment of liquidator, the Board of directors ceases
to exist. (Sections 358 and 364 of the Ordinance)
Step 3. Notice of resolution shall be notified in official Gazette within 10 days and also published in
the newspapers simultaneously. A copy of it is to be filed with registrar also. (Section 361 of the
Ordinance)
Step 4. Notice of appointment or change of liquidator is to be given to registrar by the company along
with his consent within 10 days of the event. (Section 366 of the Ordinance)
Step 5. Every liquidator shall, within fourteen days of his appointment, publish in the official Gazette,
and deliver to the registrar for registration, a notice of his appointment under section 389 of the
Ordinance on Form 110 prescribed under Rule 271 of the Rules. Guide on Winding up / Dissolution of
Companies Page 7 of 10
Step 6. If liquidator feels that full claims of the creditors cannot be met, he must call a meeting of
creditors and place before them a statement of assets and liabilities. (Section 368 of the Ordinance)
Step 7. A return of convening the creditors meeting together with the notice of meeting etc. shall be
filed by the liquidator with the registrar, within 10 days of the date of meeting. (Section 368 of the
Ordinance)
Step 8. If the winding up continues beyond one year, the liquidator should summon a general
meeting at the end of each year and make an application to the Court seeking extension of time.
(Section 387(5) of the Ordinance)
Step 9. A return of convening of each general meeting together with a copy of the notice, accounts
statement and minutes of meeting should be filed with the registrar within 10 days of the date of
meeting. (Section 369 of the Ordinance)
Step 10. As soon as affairs of the company are fully wound up, the liquidator shall make a report and
account of winding up, call a final meeting of members, notice of convening of final meeting on Form
111 prescribed under Rule 279 of the Rules before which the report / accounts shall be placed.
(Section 370 of the Ordinance)
Step 11. A notice of such meeting shall be published in the Gazette and Newspapers at least10 days
before the date of meeting. (Section 370 of the Ordinance).
Step 12. Within a week after the meeting, the liquidator shall send to the registrar a copy of the report
and accounts on Form 112 prescribed under Rule 279 of the Rules. (Section 370 of the Ordinance)
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Q. 5 Explain the contract of sales of goods by discussing its main
features.
1. Two parties:
The first essential is that there must be two distinct parties to a contract of sale, viz., a buyer and a
seller, as a person cannot buy his own goods. However, there may be a contract of sale between one
part-owner and another, e.g., if A and B jointly own a computer, A may sell his ownership in the
computer to B, thereby making B sole owner of the goods [Sec. 4(1)]. Similarly, a partner may buy the
goods from the firm in which he is a partner and vice-versa.

2. Transfer of property:
‘Property’ here means ‘ownership’. Transfer of property in the goods is another essential of a contract
of sale of goods. A mere transfer of possession of the goods cannot be termed as sale. To constitute
a contract of sale the seller must either transfer or agree to transfer the property in the goods to the
buyer.

3. Goods:
The subject-matter of the contract of sale must be ‘goods’. According to Section 2(7), “goods means
every kind of movable property other than actionable claims and money; and includes stock and
shares, growing crops, grass, and things attached to or forming part of the land which are agreed to
be severed before sale or under the contract of sale.”

Thus every kind of movable property except actionable claim and money is regarded as ‘goods’.
Goodwill, trademarks, copyrights, patents right, water, gas, electricity, decree of a court of law, are all
regarded as goods. Shares and stock are also included in goods.

‘Actionable claims’ means claims which can be enforced by a legal action or a suit, e.g., a book debt
(i.e., a debt evidenced by an entry by the creditor in his Account Book or Bahi). A book debt is not
goods because it can only be assigned as per the Transfer of Property Act but cannot be sold.

‘Money’ means current money:

It is not regarded goods because it is the medium of exchange through which goods can be bought.
Old and rare coins, however, may be treated as goods and sold as such.

It may be mentioned that sale of immovable property is governed by the Transfer of Property Act,
1882.

4. Price:
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The consideration for a contract of sale must be money consideration called the ‘price.’ If goods are
sold or exchanged for other goods, the transaction is barter, governed by the Transfer of Property Act
and not a sale of goods under this Act. But if goods are sold partly for goods and partly for money, the
contract is one of sale (Aldridge vs Johnson).

5. Includes both a ‘sale’ and ‘an agreement to sell:

The term ‘contract of sale’ is a generic term and includes both a ‘sale’ and an ‘agreement to sell’ [as
is clear from the definition of the term as per Section 4(1) given earlier)].

Sale. Where under a contract of sale the property in the goods is immediately transferred at the time
of making the contract from the seller to the buyer, the contract is called a ‘sale’ [Sec. 4(3)]. It refers
to an ‘absolute sale’, e.g., an outright sale on a counter in a shop.

There is immediate conveyance of the ownership and mostly of the subject-matter of the sale as well
(delivery may also be given in future). It is an executed contract.

An agreement to sell:
Where under a contract of sale the transfer of property in the goods is to take place at a future time or
subject to some condition thereafter to be fulfilled, the contract is called ‘an agreement to sell’ [Sec.
4(3)]. It is an executory contract and refers to a conditional sale.

Illustrations:
(a) On 1 January, A agrees with B that he will sell B his scooter on 15 January for a sum of Rs 3,000.
It is an agreement to sell, since A agrees to transfer the ownership of the scooter to B at a future time.

A agrees to purchase B’s Car for Rs 50,000 provided B stands surety for him with C. It is an
agreement to sell for B. It becomes a sale when the condition is fulfilled by B.

B agrees to buy A’s car for Rs 30,000 and pay for it, if his solicitor approves. It is an agreement to sell
for a and an agreement to buy for B.

A buys some furniture for Rs 2,000 and agrees to pay for that in two monthly instalments, the
ownership to pass to him on the payment of second instalment. There is an agreement to sell for the
furniture dealer.

‘An agreement to sell’ becomes a ‘sale’ when the time elapses or the conditions are fulfilled subject to
which the property in the goods is to be transferred [Sec. 4 (4)].

6. No formalities to be observed (Sec. 5):

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The Sale of Goods Act does not prescribe any particular form to constitute a valid contract of sale. A
contract of sale of goods can be made by mere offer and acceptance. The offer may be made either
by the seller or the buyer and the same must be accepted by the other.

Neither payment nor delivery is necessary at the time of making the contract of sale. Further, such a
contract may be made either orally or in writing or partly orally and partly in writing or may be even
implied from the conduct of the parties.

Where articles are exhibited for sale and a customer picks up one and the sales assistant packs the
same for him, there has resulted a contract of sale of goods by the conduct of the parties.