Lecture One

First Week

EMERGENCE OF PAKISTAN CORPORATE LAWS

LAW AND SOCIETY

1. Some knowledge of law is necessary to a greater or lesser extent for all persons. This
statement is obvious, because life of each member of society must proceed to a larger extent in
conformity with recognized rules and principles of social conduct. An individual is confronted
almost daily with situation that demand legal information for correct action. Just as a game of
football or hockey could not be played satisfactorily without rules to govern the players, so life
in general and the business world in particular could not continue without law to regulate the
conduct of people and to protect their property and contract rights. Without law life and business
would soon become a matter of the survival lot only of the fittest but also of the most ruthless.
Without law, our right would not be secure because we would not know whether rights existing
today would be respected tomorrow.

SOURCES OF MERCANTILE LAW

2. Pakistan Corporate Law is an adaption of the English law, it is incorporated in number of

Acts, which follow to a considerable extent the English Corporate Law with some reservation
and modifications necessitated by the peculiar conditions in Pakistan. To ascertain the sources of
Pakistan Corporate Law, we have to trace the sources of the English Corporate Law. The sources
of English Corporate /Mercantile Law are:
(1) The Common Law; (2) Equity; (3) The Law Merchant and (4) The Statute Law.

THE COMMON LAW

3. The first law is customary of community life. Group life creates customs, and when these
customs become stabilized to the extent that each member of the society is justified in assuming
that every other member of society will respect them and will act in conformity with them. It can
be said that rules of conduct have been formulated. When these rules of conduct have received
the recognition of the community in general and have become formally expressed in judicial
decisions, the ‘Law is made. The court, by its decision, lays down a principle, based upon a
custom or controversies. Thus the Common Law consist of Principles based on immemorial
custom and enforced by the courts.

EQUITY

4. Equity is developed by remedies. The common law courts only awarded damages, and
were without the remedy of injunction to prevent the commission of a tort and had not machinery
to compel the specific performance of contract. The power of the courts of equity to compel
personal obedience enabled them to invent these and other useful remedies. After a time, the
principles and procedure of equity became virtually as fixed as those of common law.

THE LAW MERCHANT

5. The Law Merchant was an independent body of customs and usages governing
commercial transactions of the merchants and traders of the Middle Ages, which have been
ratified by the decisions of the Courts of Law. The Common Law of England became fixed at a
time when little or no attention was paid to trading. Hence, among traders there sprang up a
number of customs and usages which were necessary for the conduct of business. In this period
the body of commercial usages was practically uniform throughout Europe, therefore, the Law
Merchant was kind of private international law administered by tribunals consisting of the
merchants themselves.

THE STATUTE LAW

6. The Statute Law Means Acts of Parliament. These are the most efficient and the most
usual way of bringing about changes in the law today. The authority of the parliament is
supreme, and subject to natural limitations and those laid down by the Constitution, it can pass
any law it pleases, and is not bound by its previous Acts. It is also within the power of
Parliament to nullify the decisions of the Courts of Law. The Statute Law, therefore, ranks in
priority to Common Law and Equity. But while Parliament is supreme in legislation, the Courts
of Law are the interprets of the meaning of Acts of parliament. Acts of the Pakistan Legislation
based mainly on the English Corporate Law. Where there are no Acts relating to certain matters
or where Acts are ambiguous, the Common Law of England has been adopted and applied.
 Lecture Two
First Week

INTRODUCTION TO CONTRACT ACT

1. The Law of Contract may be described as the endeavor of the State to establish a positive
sanction for the mutual dealings of the average right- minded men. Accordingly, the most
popular description of a contract that can be given is that it is promise or set of promises which
the law will enforce. The specific mark of contract is the creation of a right, not to a thing, but to
another man’s a conduct in the future.

2. The law of contract is the most important branch of Corporate/Mercantile law. Without a
law governing the performance of contracts, trade and commerce would be impossible. It should
be noted that it’s not only merchants or traders who are concerned with the law of contract but it
affects every person for, every one often enters into contracts day after day. In every purchase
that a person makes, in making a loan of an article, ingoing for a ride in a bus, in going to
restaurant for a cup of tea, in going to hair-cutting saloon for a hair-cut and entering into a legal
relation created through, a layman hardly takes notice of legal implication of the transaction.

Undertaking Enforceable by Law

3. The Law of Contract is concerned with those undertaking between man and man which
the law will, if necessary enforce in case either of the parties fails to carry out his bargain in
order that the legitimate expectation of the law of contracts, parties themselves make their own
rules as to what shall or shall not bind them, but in other branches of law such as criminal law,
persons concerned have no such power. Law of contract does not lay down a number of rights
and which the law will protect or enforce. It consists of a number of limiting principles subject to
which the parties may create rights and duties for themselves which the law will uphold.

Purpose and Evolution of the Law of Contract

4. The object of the Law of Contract is to facilitate the working of the social forces of the
nation in respect of that made by co-operative action. The wills of two or more persons are
economically disposed towards certain harmonious courses of action. Where the persons
interested have, by some unmistakable act, signified the desire of controlling their own, future
actions severally, the State stands by or on behalf of each as against the other and threatens to
punish the one who disappoints the expectations that have been formed. Evolution of the law of
Contract is a history of the effort of organized society to ensure that promises intended to be
binding shall be kept so that, when a bargain has been struck, every party to it shall have an
assurance that it will be fulfilled.

Function of the Law of Contract

5. The function of law of Contract is to see that expectations created by promises of the
parties are fulfilled and obligations created by the agreement of the parties are enforced. The
function of the Contract Law is also involved when the parties have failed to provide in their
agreement for some contingency or event or have done so in uncertain and equivocal terms.
There are certain contracts which the law forbids altogether and there are some to which the law
attaches certain formal requirements in the absence of the law attaches certain formal
requirements in the absence of which the law declines to enforce it. Both these categories are
relatively, small, and the function of the Courts in contract is concerned to construe the contract
to determine what the parties meant by the terms they used, to decide what the parties must be
taken to mean and terms.

Law of Contracts before the Contract Act

6. Before passing of Contract Act, 1872, there was no uniform law of contract applicable to
the whole of Indian Sub-continent by Royal Charter, Mayor’s Court were established in the three
Presidency towns of Calcutta, Madras and Bombay, which were to administer the English
common law and statute law so far as they were applicable to Indian circumstances. But the
Judges of the Mofussil Courts were without the guidance of any law. There were guided mainly
by the principles of justice, equity and good conscience. Passing of the Statutes in 1781 and 1797
empowered the Supreme Court of Calcutta and the Record’s Courts of Madras and Bombay
respectively to administer the personal laws, i.e., to apply Hindu law of Contract where both the
parties were Muslims. But in case where one party was Hindu and other Muslims. But in case
where one party was Hindu and other Muslim, the Judges applied the law of the defendant. That
was the position insofar as contract law was concerned until the passing of the Contract Act of
1872.