CSS Past Paper 2020 Mercantile Law Descriptive

CSS | Past Paper | Group 6 | 2020 | Part 2 | Descriptive

Below is the solution to PART-II (COMPULSORY) of the CSS Past Paper 2020 Mercantile Law Descriptive (Part 2).

Question 2

Plaintiff offered to purchase a lodge owned by defendants for Rs. 60,000/- He wrote the defendant’s agent asking whether his offer had been accepted and saying that he was prepared to accept any higher price if found reasonable. The Agent replied, ‘Won’t accept less than rupees one hundred thousand’. The Plaintiff accepted this and subsequently brought a suit for specific performance. Was a Contract concluded between the parties? Give reasons.

Introduction

To decide whether a contract was concluded or not, we have to understand the basic elements of a valid contract under the Contract Act, 1872.

Essentials of a Valid Contract

A contract is formed when there is:

Offer
Acceptance
Consideration
Intention to create legal relation

Now let’s apply these to the case.

Facts Recap

Plaintiff offered Rs. 60,000 for a lodge.
He asked if the offer was accepted and added he was ready to pay more if reasonable.
Defendant’s agent replied: “Won’t accept less than Rs. 100,000”.
Plaintiff accepted this Rs. 100,000 and filed suit for specific performance.

Legal Position

A. Counter Offer

In contract law, if one party gives an offer and the other party replies with different terms, then it is a counter-offer, not an acceptance.

So, when the agent said “Won’t accept less than Rs. 100,000”, this was a counter-offer. It means the original offer of Rs. 60,000 was rejected.

As per case law (Hyde v. Wrench, 1840), once an offer is rejected, it cannot be revived again unless a fresh offer is made and accepted.

B. No Acceptance from Defendant

The Plaintiff accepted the new price (Rs. 100,000), but the Defendant or his agent never expressly accepted the Plaintiff’s acceptance. Without clear acceptance from the Defendant, no contract is concluded.

Contract can only be made when both parties agree to the same thing in the same sense (Section 2(h), Contract Act).

Specific Performance Not Maintainable

Specific performance is only available when there is a valid and concluded contract. Since no final agreement was reached here, the suit for specific performance is not maintainable.

Conclusion

No contract was concluded between the Plaintiff and the Defendant. The communication was only negotiation, not mutual agreement. There were an offer and a counter-offer, but no final acceptance from both sides.

Key Case Reference

Hyde v. Wrench (1840)
Harvey v. Facey (1893)

These cases explain the difference between offer, counter-offer and acceptance clearly.

Question 3

How will one differentiate between a void agreement and an unlawful agreement? Explain the agreements which have been expressly declared as void.

Introduction

To understand this question, we need to first know the meaning of void agreement and unlawful agreement under the Contract Act, 1872. Many people think both are same, but actually, they are not. They have different meanings and legal impacts.

Void Agreement

A void agreement is something which is not enforceable by law. It is treated as if it never existed. Even if parties agreed on something, the law does not recognize it.

Definition (Section 2(g) of Contract Act):
“An agreement not enforceable by law is said to be void.”

Example:
If a minor signs a contract, that contract is void because minor is not capable to make a legal contract.

Unlawful Agreement

An unlawful agreement is not only void, but it is also illegal. It involves things that are against law or public policy.

Example:
An agreement to commit a crime like smuggling or murder is unlawful. It is punishable and both parties can face legal consequences.

Difference Between Void and Unlawful Agreement

Point	Void Agreement	Unlawful Agreement
Enforceability	Not enforceable by law	Also not enforceable by law
Nature	Not illegal but has no legal effect	Illegal and against public interest
Effect on collateral transactions	Collateral transactions are valid	Collateral transactions are also invalid
Punishment	No punishment	May involve punishment

Agreements Expressly Declared as Void (Under Contract Act, 1872)

The law has clearly listed some agreements which are always void. These are:

i. Agreement by a minor (Section 11)

A person below 18 years is not competent to contract. So any agreement by a minor is void.

ii. Agreement without consideration (Section 25)

Normally, an agreement without consideration is void, unless it falls in some exception.

iii. Agreement in restraint of marriage (Section 26)

Any agreement that stops someone from marrying is void.

iv. Agreement in restraint of trade (Section 27)

If someone is forced not to do business or profession, such agreement is void.

v. Agreement in restraint of legal proceedings (Section 28)

Agreement that stops someone from going to court is void.

vi. Agreement having uncertain meaning (Section 29)

If the terms are vague and not clear, such agreement is void.

vii. Agreement to do impossible acts (Section 56)

Agreement to do something which is impossible is void from beginning.

Conclusion

So, we can say that all unlawful agreements are void, but not all void agreements are unlawful. Void agreements just lack legal force, while unlawful ones involve criminal or unethical things. Understanding this difference is very important in contract law to judge the legal impact of different agreements.

Question 4

What are ‘Conditions and Warranties’? Differentiate between the two and explain the ‘Implied Conditions’ in a Contract of Sale.

Introduction

In a contract of sale under the Sale of Goods Act, 1930, the terms of the contract can be classified as either conditions or warranties. These are very important because they decide what rights the buyer has if the goods are not as promised.

Meaning of Condition

A condition is a main term of the contract. It goes to the root of the agreement. If a condition is broken, the buyer has a right to reject the goods and end the contract.

Example:
If A buys a new phone from B and it turns out to be a used phone, A can cancel the whole contract. This is breach of condition.

Meaning of Warranty

A warranty is a less important term. It is a collateral promise. If it is broken, the buyer can only claim damages, but cannot reject the goods.

Example:
If A buys a new phone and it comes with a free handsfree, but the handsfree is missing, this is breach of warranty. A can ask for compensation but cannot cancel the whole sale.

Difference Between Condition and Warranty

Basis	Condition	Warranty
Importance	Main term	Side term
Breach effect	Buyer can reject goods and end contract	Buyer can only claim compensation
Right to sue	Both for damage and contract cancellation	Only for damage
Example	Wrong model of a car delivered	Scratch on the car body

Implied Conditions in Contract of Sale

Some conditions are not written in the contract, but the law assumes them. These are called implied conditions. They are given in Sections 14 to 17 of the Sale of Goods Act, 1930.

i. Condition as to Title (Section 14(a))

The seller must have the right to sell the goods. If not, buyer can reject.

ii. Condition as to Description (Section 15)

If goods are sold by description, they must match that description.

iii. Condition as to Sample (Section 17)

If goods are sold by sample, bulk must match sample in quality.

iv. Condition as to Fitness (Section 16(1))

If buyer tells the purpose and depends on seller’s skill, goods must be fit for that purpose.

v. Condition as to Merchantable Quality (Section 16(2))

Goods must be of such quality that a normal buyer would accept them.

vi. Condition as to Wholesomeness

This is specially for food items. They must not harm health.

Conclusion

Conditions and warranties help in protecting buyer’s rights. Understanding the difference is important. Also, even if not written, some conditions are automatically part of contract and seller must follow them.

Question 5

Companies hold various kinds of meetings to regulate their business. Explain those meetings with special reference to the ‘Statutory Meeting’ and the ‘Statutory Report’.

Introduction

In a company, meetings are very important to make decisions, inform members, and manage the affairs properly. Under the Companies Act, 2017 (Pakistan), different types of meetings are held for different purposes. These meetings help the company to run in a legal and organized way.

Types of Company Meetings

Here are the common types of meetings held by companies:

i. Statutory Meeting

This is the first meeting of the members (shareholders) of a public company. It is held only once in the lifetime of a company.

Must be held within 3 to 6 months from the date the company is allowed to start business.
Private companies are not required to hold this meeting.

ii. Annual General Meeting (AGM)

Every company must hold this meeting once in a year.
The purpose is to discuss financial statements, declare dividends, appoint auditors, and other regular matters.
First AGM must be held within 18 months of incorporation.

iii. Extraordinary General Meeting (EGM)

Any meeting that is not an AGM or statutory meeting is called EGM.
It is called when urgent or special business needs to be discussed, like change in capital or removal of directors.

iv. Board Meetings

These are meetings of directors of the company.
They make decisions related to policy, management, and daily operations.
First board meeting should be held within 30 days of incorporation.

Statutory Meeting – Detailed Explanation

This is a special meeting and only public limited companies are required to hold it.

Purpose

To inform shareholders about the company’s position.
To give details about shares, directors, contracts, and money spent.

Time

Must be held between 3 to 6 months from the date company can start business.

Who Calls It

Board of Directors are responsible to call this meeting.

Statutory Report

This is a written report that is sent to members before the statutory meeting.

Contents of Statutory Report

Total number of shares allotted.
Amount of money received.
Names and addresses of directors, auditors, etc.
Preliminary expenses.
Any contract that needs member approval.
Underwriting contracts and changes in management.

Filing Requirement

A copy of the report must be sent to SECP (Securities and Exchange Commission of Pakistan).
Must be sent to members at least 21 days before the meeting.

Importance of Statutory Meeting & Report

Gives transparency to members.
Builds trust by informing shareholders.
Helps members ask questions and give suggestions.
Ensures compliance with company law.

Conclusion

Meetings are the backbone of good company governance. Especially, the statutory meeting plays a key role at the start of a company’s life. It gives members all important information and helps build the company on strong legal foundations.

Question 6

Partnership is a relation between the persons who have agreed to share the profits of a business carried on by all or someone acting on behalf of others. In view of this statement explain as to what are the ingredients of a partnership? What is the test required to determine the existence of a partnership?

Introduction

Partnership is one of the most common forms of business in Pakistan. It is defined in Section 4 of the Partnership Act, 1932 as:

“Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all”.

It is based on mutual trust, profit-sharing, and joint responsibility.

Ingredients (Essential Elements) of Partnership

To form a partnership, certain key ingredients must be present:

i. Agreement Between Two or More Persons

There must be an agreement (oral or written) between two or more persons. Without agreement, there is no partnership.

ii. Business Must Be Carried On

The purpose of the agreement must be to run a legal business. If the purpose is something illegal or temporary like sharing rent, it won’t be called partnership.

iii. Sharing of Profits

The partners must agree to share the profits. Losses may or may not be shared, but profit sharing is a must.

iv. Mutual Agency

This is the most important point. Any partner can act on behalf of others, and the others will be bound by his acts. This is called the principle of mutual agency.

v. Number of Partners

Minimum number is 2, and maximum for banking is 10, for other businesses 20 (as per Companies Act).

Test to Determine Existence of Partnership

To check if a partnership exists or not, courts usually apply the following test:

i. Real Intention of the Parties

Courts will check what the parties intended. Just writing “partnership” in agreement is not enough if intention is not clear.

ii. Existence of Mutual Agency

This is the final and real test. If one person can bind the other by his actions done in business, then partnership exists. If this is missing, even if profit is shared, it’s not a partnership.

Case Reference:
Cox v. Hickman (1860) – Sharing profit is not enough; mutual agency is the deciding factor.

iii. Contribution to Business

If all parties contribute money, skill or assets and are involved in decision-making, it supports the existence of partnership.

iv. Registration (Optional)

Partnership registration is not compulsory in Pakistan, but an unregistered partnership cannot sue others.

Conclusion

So, partnership is not just about profit sharing. It also needs mutual agency and a joint business purpose. The courts will always look at the real nature of the relationship, not just what the agreement says. Understanding these ingredients and applying the test of mutual agency is very important to know if a valid partnership exists.

Question 7

What is an ‘Award’? Describe fully the grounds for setting aside an award. Does a court have the power to set aside an award suo motu?

Introduction

In legal terms, an ‘Award’ is the decision given by an arbitrator in an arbitration proceeding. Arbitration is an alternative dispute resolution (ADR) method where parties solve disputes outside the court.

An award is binding on both parties and is enforceable like a decree of court.

Definition of Award

An Award is the final decision made by an arbitrator regarding a dispute submitted to arbitration.

It is given in writing, signed by the arbitrator, and must be clear and detailed.

As per Arbitration Act, 1940, once an award is made, it can be enforced unless a party challenges it.

Types of Awards

Interim Award: Temporary or partial decision.
Final Award: Concludes the whole dispute.
Speaking Award: Contains reasons for the decision.
Non-speaking Award: Just gives decision without explanation.

Grounds for Setting Aside an Award

A court can set aside an award if it is illegal or unfair. Under Section 30 of Arbitration Act, 1940, following are the legal grounds:

i. Misconduct of Arbitrator

If the arbitrator is biased, accepts bribes, or does not act fairly, the award can be cancelled.

ii. Award Made After Time Limit

If the arbitrator gives award after the time fixed in agreement or by court, and parties didn’t agree to extend time.

iii. Improper Procurement

If the award is made by fraud, corruption, or undue influence.

iv. Error on Face of Record

If there is a clear mistake in law or facts, visible on the face of the award, it can be set aside.

v. Violation of Principles of Natural Justice

If parties are not given a chance to present their case, the award becomes invalid.

Can a Court Set Aside an Award Suo Motu?

Suo motu means on its own, without any application by a party.

Generally, courts do not set aside awards suo motu. A party must apply and show valid grounds under Section 30. The court will then examine and may set aside the award.

However, in rare cases where the award is completely illegal or against public policy, the court may interfere, but such situations are very limited.

Case Law Example

Union of India v. Bungo Steel Furniture Pvt. Ltd.
It was held that error of law apparent on face of award is a valid reason to set it aside.

Conclusion

An award is a powerful tool in resolving disputes without lengthy court cases. But if the arbitrator acts unfairly or legally wrong, the award can be challenged. Still, courts respect arbitration decisions and do not interfere unless clear misuse happens.

Question 8

What is meant by ‘Merger’ under the law relating to competition in Pakistan? What is the procedure for the approval of merger? Discuss the powers of the Competition Commission for second phase review.

Introduction

In today’s business world, mergers are very common. When two companies combine to become one, it is called a merger. But to protect market competition and consumer interest, the law does not allow harmful mergers.

In Pakistan, mergers are regulated by the Competition Act, 2010, and the authority responsible is the Competition Commission of Pakistan (CCP).

Meaning of Merger

A merger is a combination of two or more businesses into one, where one company may absorb the other, or both may form a new company.

As per the Competition Act, 2010, a merger is defined as:

“An acquisition of shares, voting rights, assets or control, by one entity over another which may affect competition in the market”.

Purpose of Merger Control

To avoid monopolies
To protect small businesses
To make sure consumers are not harmed by price fixing or limited choices
To ensure fair competition in the market

Procedure for Merger Approval

The Competition Commission of Pakistan (CCP) checks all mergers before they are finalized. The procedure is as follows:

i. Pre-merger Notification (Section 11)

Parties must inform CCP before completing the merger if certain thresholds are crossed (like asset value or turnover).
This is called Phase I review.

ii. Phase I Review

CCP has 30 days to review the merger.
If there is no serious harm to competition, the merger is approved.

iii. Phase II Review (Second Phase Review)

If CCP thinks the merger may harm competition, it goes into second phase review.

Powers of CCP in Second Phase Review

In Phase II, CCP has more powers to deeply analyze the merger.

Powers include:

Request further documents and information from the parties
Hold hearings with parties involved
Call experts and economic analysts
Propose changes to the merger (called structural or behavioral remedies)
Block the merger completely if it harms competition

CCP has to make a decision within 90 days in Phase II.

Example

If two telecom companies in Pakistan want to merge, and the merger will reduce market competition, CCP may not allow it, or allow it only with some conditions.

Conclusion

Mergers are important for business growth but they must be fair. CCP plays a very important role in making sure that no merger affects the market in a negative way. The two-phase review system helps in detailed examination, and Phase II gives CCP power to stop anti-competitive mergers.

📘 Benefits of Practicing This Descriptive Paper

✅ These CSS Past Paper 2020 Mercantile Law Descriptive questions are compiled from authentic FPSC CSS past papers, following the real written exam format.
💬 Attempting this CSS Past Paper 2020 Mercantile Law Descriptive helps students master structured writing and analytical skills for CSS exams.
🧾 Every question in this CSS Past Paper 2020 Mercantile Law Descriptive strictly follows the official CSS exam syllabus approved by FPSC.
📊 Students preparing for CSS 2020 can rely on this CSS Past Paper 2020 Mercantile Law Descriptive to practice time management and topic selection.
🔍 The solved CSS Past Paper 2020 Mercantile Law Descriptive contains concise explanations to improve conceptual understanding and writing clarity.
🎯 Regular revision of this CSS Past Paper 2020 Mercantile Law Descriptive builds confidence and strengthens your preparation for the CSS written paper.
🏆 This CSS Past Paper 2020 Mercantile Law Descriptive is essential for mastering exam techniques and achieving success in the FPSC CSS examination.

Download CSS Past Paper 2020 – Mercantile Law

🏁 Final Note

Keep revising these CSS Past Paper 2020 Mercantile Law Descriptive to strengthen your grip on important concepts and improve accuracy in upcoming CSS exams. Regular practice with these CSS Past Paper 2020 Mercantile Law Descriptive will help you score higher and build full command over the CSS exam syllabus.

📰 Check out other years’ past papers of Mercantile Law.

🔗 Check FPSC past papers directly from the official FPSC website.

Post Views: 123