CSS Past Paper 2022 Mercantile Law Descriptive

CSS | Past Paper | Group 6 | 2022 | Part 2 | Descriptive

Below is the solution to PART-II (COMPULSORY) of the CSS Past Paper 2022 Mercantile Law Descriptive (Part 2).

Question 2

Classify and discuss contracts into the following four categories: According to Enforceability, According to Formation, According to Performance, According to Parties. Explain with examples.

Introduction

In mercantile law, contracts can be classified into different types based on different factors. These classifications help us to understand the nature and legal status of contracts in business. The four main categories of contract classification are:

1. According to Enforceability

This classification is based on whether the contract can be enforced in a court of law or not.

a) Valid Contract

A valid contract is one that is legally enforceable. It includes all the essential elements like offer, acceptance, consideration, capacity, free consent, and lawful object.

Example: A agrees to sell his bike to B for Rs. 50,000 and B agrees. This is a valid contract.

b) Void Contract

This type of contract is not enforceable by law. It was a contract at some time but becomes void due to some reason like illegal object or impossibility.

Example: A contracts to marry B, but B dies. Now the contract is void.

c) Voidable Contract

This contract is enforceable by law at the option of one party only. It usually happens when there is coercion, misrepresentation or undue influence.

Example: A forces B to sign a contract. B can cancel it, so it’s voidable.

d) Illegal Contract

This type of contract is not only void but also involves an illegal act. It cannot be enforced at all.

Example: A agrees to sell drugs to B. This is illegal and void.

e) Unenforceable Contract

These contracts cannot be enforced due to some technical reason like absence of writing or stamp.

Example: A makes an oral agreement to sell land to B. This is unenforceable as per law.

2. According to Formation

This classification depends on how the contract is made.

a) Express Contract

When the terms are clearly stated in words, either spoken or written.

Example: A written agreement to sell a car.

b) Implied Contract

When the terms are not stated clearly but understood by actions or conduct.

Example: A takes tea in a hotel. It is implied he will pay for it.

c) Quasi Contract

This is not an actual contract but law treats it as one to avoid unjust benefits.

Example: A finds B’s lost phone and returns it. B is legally bound to pay some reward or expense.

3. According to Performance

This is based on whether the contract is performed or not.

a) Executed Contract

When both parties have performed their duties.

Example: A buys a book from a shop and pays cash instantly.

b) Executory Contract

When both parties are yet to perform their duties.

Example: A agrees to deliver goods next week, and B will pay then.

c) Unilateral Contract

Only one party has to perform the duty.

Example: A offers reward for returning lost wallet. Whoever returns it performs the act.

d) Bilateral Contract

Both parties have duties to perform.

Example: A agrees to sell a car and B agrees to pay.

4. According to Parties

This is based on how many parties are involved.

a) Unilateral Contract

Only one party is obligated to perform.

Example: Advertisement of reward for finding lost pet.

b) Bilateral Contract

Two parties promise to perform their obligations.

Example: A agrees to deliver goods, B agrees to pay.

Conclusion

Contracts are an important part of business life. By classifying contracts, it becomes easy to understand their nature and enforceability. This helps to protect the rights of all the parties and maintain fair dealings in business.

Question 3

Who is an unpaid seller? What are the rights of an unpaid seller against the goods?

Introduction

In business law, especially under the Sale of Goods Act, the concept of an unpaid seller is very important. It protects the seller if the buyer doesn’t pay the full price.

Who is an Unpaid Seller?

An unpaid seller is a person (or company) who sold goods but has not received full payment. It doesn’t matter if the payment is delayed or if a cheque bounced, the seller will be called unpaid.

A seller is called unpaid in two cases:

The whole price is not paid.
A bill of exchange or cheque is given but dishonoured.

Rights of Unpaid Seller Against the Goods

If the seller is unpaid, the law gives him some rights against the goods. These are:

1. Right of Lien

It means the seller can keep the goods in his possession until he gets the full payment. This is possible only when the seller still has the goods.

Conditions to use Lien:

Goods are unpaid.
Seller has possession.
There is no promise for future credit.

Example: A sold 10 bags of rice to B. B didn’t pay. A can keep the bags until B pays.

2. Right of Stoppage in Transit

If the goods have already been sent but the buyer becomes insolvent (bankrupt), the seller can stop the goods while they are in transit.

Conditions:

Buyer must be insolvent.
Goods are in transit (not yet delivered).
Seller must inform the carrier or transporter to stop delivery.

Example: A sent goods by truck. Before they reach B, A finds out that B is bankrupt. A can stop the truck and take the goods back.

3. Right of Resale

If the buyer does not pay, the seller can resell the goods. But this must be done with care.

Conditions:

Goods are perishable (like fruits), or
Seller gave notice to buyer, but buyer didn’t pay.

Example: A sold tomatoes to B. B didn’t pay. Since tomatoes are perishable, A can sell them to someone else.

Other Rights (Linked to Contract)

Apart from goods, the unpaid seller also has rights against the buyer personally. These include:

Suit for Price:
The seller can file a case in court to recover the price.
Damages for Non-Acceptance:
If buyer refuses to take goods, seller can claim compensation.

Conclusion

An unpaid seller is protected by law through different rights like lien, stoppage in transit, and resale. These rights help the seller avoid financial loss when the buyer fails to pay. These rules build trust and fairness in trade.

Question 4

Discuss different types of partnership? What are the different modes of determining the existence of a partnership?

Introduction

A partnership is a type of business where two or more people join together to run a business and share profit or loss. It is based on mutual trust and agreement between the partners.

In Pakistan, it is governed under the Partnership Act, 1932.

Types of Partnership

Partnerships are divided into different types depending on the duration, nature, and registration status.

1. Partnership at Will

This type of partnership has no fixed time. It can continue as long as the partners want.

It can be ended by giving notice.
Very flexible.

Example: A and B start a shop without any time limit. This is a partnership at will.

2. Particular Partnership

Formed for a specific project or business. It ends when the project is complete.

Example: A and B form a partnership to build a road. After the road is built, the partnership ends.

3. General Partnership

All partners are involved in managing the business and are responsible for debts. Every partner can act on behalf of others.

4. Limited Partnership

In this, there are two types of partners:

General Partner – has unlimited liability.
Limited Partner – his liability is only up to his investment.

This type is not common in Pakistan but used in some other countries.

5. Registered and Unregistered Partnership

Registered – It is officially registered with the Registrar of Firms. It can sue and be sued in court.
Unregistered – It is valid but has limited legal rights.

Modes of Determining the Existence of a Partnership

It is not always written in paper that a partnership exists. Sometimes we have to judge it based on facts. The following points help to know if a partnership exists:

1. Agreement Between Parties

There must be an agreement between people to start a business together. It can be written or oral.

2. Sharing of Profit

If two or more people are sharing profits, it’s a strong sign of partnership. But just sharing profits is not always final proof.

Note: Sharing loss is not compulsory, but it shows intention of true partnership.

3. Mutual Agency

This is the most important point. If each partner is acting on behalf of others, it proves partnership.

Example: A signs a contract and B is also bound by it. This shows mutual agency.

4. Conduct of Parties

Even if there is no written agreement, the behaviour and actions of people can show if they are partners.

5. Capital Contribution

If all parties are giving money or resources to run the business, it shows joint interest.

Conclusion

Partnership is a common way to do business in Pakistan. It has many types like general, particular, and at will. To decide if a partnership exists, we look at profit sharing, agreement, and mutual agency. The law protects partners and guides their duties and rights.

Question 5

Critically analyze the Competition Commission of Pakistan as an institution. Discuss in detail the establishment, functions, and powers of the Competition Commission of Pakistan?

Introduction

The Competition Commission of Pakistan (CCP) is a government organization made to keep businesses fair and competitive. It stops big companies from using unfair ways to crush small businesses and protects consumer rights.

Establishment of CCP

The CCP was established under the Competition Ordinance, 2007, which later became the Competition Act, 2010. This Act replaced the older Monopolies and Restrictive Trade Practices Ordinance, 1970, which was weak and outdated.

The CCP is an independent and quasi-judicial body. It works under the Government of Pakistan but takes its own decisions to promote competition in the market.

Objectives of CCP

Promote healthy competition in markets.
Protect consumers from unfair prices.
Stop monopolies and cartels.
Encourage innovation and better products.

Functions of the Competition Commission

The main functions of CCP are mentioned in Section 28 of the Competition Act, 2010.

1. Prevent Abuse of Dominant Position

If one company becomes too big and uses its power to destroy others (like fixing high prices or limiting supply), CCP takes action.

2. Control Anti-Competitive Agreements

CCP stops companies from making secret deals (called cartels) to fix prices or divide markets. These things are illegal.

Example: If all cement companies agree to sell at the same price, CCP can fine them.

3. Merger Control

CCP checks if two companies merging will harm competition. If a merger creates a monopoly, CCP can block it.

4. Protect Consumers

It takes action against false advertising, fake products, or unfair marketing.

5. Promote Awareness

CCP also teaches businesses and the public about competition rules through seminars and workshops.

Powers of the Competition Commission

The law gives strong powers to CCP to perform its job.

a) Investigation Power

CCP can investigate any business or person if it suspects anti-competitive behaviour. It can raid offices, check documents, and ask questions.

b) Issue Orders and Guidelines

CCP can pass orders to stop illegal practices. It also gives guidelines to help businesses follow the law.

c) Impose Penalties

If a company breaks the law, CCP can fine them heavily. Fines can be millions of rupees.

d) Conduct Hearings

CCP works like a court in some cases. It gives both sides a chance to speak and then gives a decision.

Critical Analysis of CCP

Positive Side

It has taken actions against big industries like cement, sugar, banking, telecom, etc.
It helps small businesses to survive.
Promotes transparency and fair competition.
Encourages foreign investors by making market rules clear.

Challenges Faced

Limited resources and staff, which affects its working.
Political pressure can sometimes affect its independence.
Many people and businesses don’t understand competition laws.
Enforcement of decisions is sometimes slow.

Conclusion

The Competition Commission of Pakistan is a very important institution. It protects the market from unfair control and keeps things fair for everyone — businesses and consumers. Even though it faces problems, with more support and awareness, CCP can play a bigger role in building a strong and fair economy in Pakistan.

Question 6

What are the functions of the Certification Council under the Electronic Transaction Ordinance, 2002?

Introduction

In today’s digital world, business is done through emails, online banking, websites, and other electronic ways. So, to make sure electronic records and digital signatures are safe and legal, the Electronic Transaction Ordinance (ETO), 2002 was introduced in Pakistan.

Under this law, the Certification Council was made to regulate and control digital signatures and certificates.

What is the Certification Council?

The Certification Council is a body made by the government under Section 18 of the ETO 2002. It controls the system of certification authorities (CAs) — these are companies or bodies that issue digital certificates to verify people or businesses online.

Main Functions of the Certification Council

The duties of the Certification Council are written in Section 19 of ETO 2002. Its main job is to make electronic transactions secure and trusted in Pakistan.

Here are the key functions:

1. Granting Licenses to Certification Authorities

The Council gives licenses to trusted bodies (called CAs) who want to issue digital certificates. Without a license, no company can work as a CA.

2. Monitoring Certification Authorities

After giving the license, the Council keeps checking and monitoring the work of CAs. It makes sure they follow all the rules and maintain security and privacy.

3. Setting Standards and Guidelines

The Council decides the technical standards, rules, and procedures for digital signatures and certificates. This helps in keeping frauds and hacking away.

4. Promoting Electronic Commerce

The Council helps to build trust in electronic transactions. When people know their data is safe, more businesses will shift to e-commerce and online services.

5. Investigation and Complaints

If there is any complaint or misuse by a Certification Authority, the Council can investigate the matter. It also has the power to cancel the license of a CA if it breaks the law.

6. Encouraging Public Awareness

The Council works to educate people and businesses about digital security, electronic records, and how to use digital signatures safely.

7. Advising the Government

The Council also advises the Federal Government on matters related to electronic transactions and how to improve the system.

Why is the Certification Council Important?

In online transactions, we cannot see the person on the other side. So digital certificates and signatures help to confirm identity. The Council makes sure that only trusted organizations issue these certificates, and people are protected from fake identities or cyber fraud.

Conclusion

The Certification Council plays a very important role under the Electronic Transaction Ordinance, 2002. It builds trust in digital systems by regulating Certification Authorities, ensuring safe e-commerce, and protecting digital identities. With more digital growth in Pakistan, the work of this Council is becoming more important every day.

Question 7

Discuss unfair practices according to the Consumer Protection Act, 2006, and the role of the Consumer Protection Council.

Introduction

In any country, consumers must be protected from fraud and poor-quality products. In Pakistan, this is done through the Consumer Protection Act, 2006. This law gives rights to consumers and protects them from unfair trade practices.

What are Unfair Practices?

Unfair practices are the wrong or dishonest acts done by sellers, manufacturers, or service providers to cheat or mislead customers.

Under the Consumer Protection Act, 2006, many types of unfair practices are strictly prohibited.

Types of Unfair Practices

Here are the major unfair practices mentioned in the law:

1. False Advertising

When a company lies or hides facts about their product in ads.

Example: Saying a cream gives fair skin in 3 days, when it doesn’t.

2. Selling Defective Goods

Selling products that are damaged, expired, or not safe to use is unfair.

Example: Selling medicine that is already expired.

3. Overcharging

Charging a price more than the printed price (MRP) or agreed amount.

Example: Taking Rs. 200 for a product marked Rs. 150.

4. Fake Claims of Warranty or Guarantee

Telling customers that products have a warranty, but later refusing to fix or replace them.

5. Offering Gifts or Prizes with No Intention to Give

Promising a lucky draw or free gift just to sell more products, but never actually giving anything.

6. Deceptive Packaging

Using packaging that hides the real quality or quantity of the product.

7. Non-Delivery of Goods or Services

Taking payment but not delivering the product or service on time, or at all.

8. Refusal to Return or Exchange

If a product is faulty or not as shown, the seller must return or replace it. Refusing this is unfair.

Role of the Consumer Protection Council (CPC)

The Consumer Protection Council is made to safeguard consumer rights and ensure companies follow the law.

1. Awareness and Education

The Council runs campaigns to educate consumers about their rights and how to file complaints.

2. Advising the Government

It gives suggestions and reports to the government to improve consumer laws.

3. Policy Making

It helps in making better policies and rules for consumer protection.

4. Support in Complaints

The Council supports people in filing complaints and guides them on how to approach the Consumer Court.

5. Monitoring Business Practices

It keeps an eye on market trends, advertisements, and company policies to detect fraud or cheating.

Conclusion

Unfair practices harm not just the consumer, but also the whole economy by reducing trust. The Consumer Protection Act, 2006, and the Consumer Protection Council work together to protect buyers from fraud and ensure fair trade. Every citizen should know their rights and take a stand against unfair business.

Question 8

Discuss different types of companies? How a company is wound-up?

Introduction

In business law, a company is an artificial person created by law. It has its own legal identity, separate from its owners. Companies are registered under the Companies Act, 2017 in Pakistan.

Companies help in growing businesses by allowing people to invest, share profits, and limit their risks.

Types of Companies

Companies can be classified into different types based on ownership, liability, and public dealing.

1. Private Limited Company

Has minimum 2 and maximum 50 members.
Cannot sell shares to the public.
Restricts transfer of shares.
Does not need to publish financial statements publicly.

Example: A family business registered as a private limited company.

2. Public Limited Company

Minimum 3 members, no maximum limit.
Can sell shares to the public through the stock market.
Must follow strict rules and publish accounts.
Requires a higher level of transparency.

Example: Big companies like banks or telecoms.

3. Single Member Company (SMC)

Owned by only one person.
Useful for small businesses or startups.
Registered as a private company with special rules.

Example: A freelancer or entrepreneur registering a business in their own name.

4. Company Limited by Shares

Members’ liability is limited to the amount unpaid on their shares.
Most common type in Pakistan.

5. Company Limited by Guarantee

Members promise to pay a fixed amount if the company fails.
Usually for non-profit organizations like charities, schools, etc.

6. Unlimited Company

Members have unlimited liability.
Not common because it carries more risk.

7. Foreign Company

A company registered outside Pakistan but doing business in Pakistan.
Must register with SECP before starting business here.

Winding Up of a Company

Winding up means closing a company and distributing its assets to pay debts and return money to shareholders. After winding up, the company ceases to exist.

There are three main types of winding up:

1. Voluntary Winding Up

The members (shareholders) decide to close the company by passing a special resolution.

Reasons:

Business is no longer profitable.
Project is completed.
Time mentioned in the company’s constitution has ended.

There are two types:

Members’ voluntary winding up – when company is solvent.
Creditors’ voluntary winding up – when company is not solvent.

2. Winding Up by Court (Compulsory Winding Up)

The court orders winding up of a company based on a petition.

Reasons:

Company is unable to pay debts.
Company acts against law or national interest.
Number of members falls below legal minimum.
Company fails to start business within 1 year.

The court appoints an official liquidator to sell assets and pay debts.

3. Winding Up under Supervision of Court

This happens when the company starts voluntary winding up, but the court decides to supervise the process to protect creditors or shareholders.

Steps in Winding Up

Passing resolution (for voluntary winding up).
Appointment of liquidator.
Liquidator sells assets of the company.
Debts are paid.
Remaining money is given to shareholders.
Company is removed from the company register.

Conclusion

Companies play a major role in business development. They can be private, public, or single-member types. But when a company is no longer working or is in loss, it must be wound up properly to protect the interests of creditors and the public. The Companies Act, 2017, provides full legal process for it.

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