CSS Past Paper 2023 Mercantile Law Descriptive (Part 2)
CSS | Past Paper | Group 6 | 2023 | Part 2 | Descriptive
Below is the solution to PART-II (COMPULSORY) of the CSS Past Paper 2023 Mercantile Law Descriptive (Part 2).
Question 2
Who is an Unpaid Seller? What are his rights against the Goods, as provided by the Sale of Goods act 1930?
Introduction
In business, when goods are sold, the seller expects to get paid. But sometimes, the buyer does not pay. In that case, the seller becomes an “unpaid seller”. The Sale of Goods Act, 1930 gives him certain rights so he can protect himself from loss.
Who is an Unpaid Seller?
According to Section 45(1) of the Sale of Goods Act, 1930:
“A seller is called an unpaid seller when—
a) the whole price has not been paid or tendered, or
b) a bill of exchange or other negotiable instrument was received as conditional payment, but it has been dishonoured”.
So basically, if the seller has not got full payment in cash or any promised payment failed (like cheque bounced), he is unpaid.
Rights of an Unpaid Seller
The Act divides the rights of an unpaid seller into two main types:
A. Rights Against the Goods
These rights are about controlling or protecting the goods.
1. Right of Lien (Section 47–49)
When the seller still has the goods and the buyer has not paid, he can keep the goods until full payment is made. This is called lien.
Example: If a shopkeeper sells a fridge but the buyer doesn’t pay, he can refuse to hand over the fridge.
Conditions for Lien:
- Goods are in seller’s possession.
- No credit given or credit period expired.
- Buyer becomes insolvent.
2. Right of Stoppage in Transit (Section 50–52)
If goods are with a delivery company (like cargo) and seller finds out buyer has become insolvent, he can stop the goods before they reach the buyer.
This right helps the seller to stop goods from going to someone who can’t pay.
Conditions:
- Buyer is insolvent.
- Goods are in transit.
- Seller must take action to stop the delivery.
3. Right of Resale (Section 54)
If the buyer still doesn’t pay, the seller has the right to sell the goods again to someone else.
Conditions:
- Goods are perishable.
- Seller gave notice to buyer and still no payment.
- Seller had right of lien or stoppage.
Note: If he sells again properly, the first buyer can’t claim anything.
B. Rights Against the Buyer Personally
These rights are about legal action.
1. Suit for Price (Section 55)
If the ownership has passed to buyer but he didn’t pay, the seller can file a case for recovery of price.
2. Suit for Damages (Section 56)
If the buyer wrongfully refuses to accept the goods, the seller can claim damages.
3. Suit for Interest (Section 61)
The seller can also claim interest on the delayed payment amount.
Conclusion
An unpaid seller is not helpless. The Sale of Goods Act, 1930 gives him strong rights to protect his goods and money. Whether the goods are still with him, in transit, or already delivered, he can take actions to recover his loss. These rights are important to make trade fair and secure.
Question 3
What ideology lays behind the registration of ‘Memorandum of Association’ and ‘Articles of Association’ as distinctive documents? How they differ from each other?
Introduction
In company law, two very important documents are Memorandum of Association (MOA) and Articles of Association (AOA). These documents are required when a company is being formed. They are registered under the Companies Act. Both documents are different in their purpose, but both are necessary. Their registration is done to protect legal interests of the company, shareholders, and public.
Ideology Behind Registration of MOA and AOA
The main idea behind registering these documents is to bring transparency, legality, and certainty in company matters.
1. Public Notice
Once these documents are registered, they are available for the public to see. So, any outsider dealing with the company knows its powers and limits. This avoids confusion and fraud.
2. Legal Identity
These documents give legal birth to the company. Without them, the company cannot exist in the eyes of law.
3. Protection of Shareholders and Creditors
MOA shows the company’s purpose and limits. AOA shows internal rules. This protects the rights of people involved with the company.
4. Defines Powers and Limitations
These documents help to fix the objectives, responsibilities, and working rules of the company. If a company acts outside the MOA, such acts are considered ultra vires (beyond power), and they are not allowed by law.
5. Prevention of Mismanagement
AOA defines how the company will be managed. It includes rules about meetings, voting, directors, etc. This helps avoid misuse of power by directors.
Difference Between MOA and AOA
| Point of Difference | Memorandum of Association (MOA) | Articles of Association (AOA) |
| 1. Meaning | It is the company’s charter. It defines its scope and powers. | It contains internal rules for management of the company. |
| 2. Purpose | To define the objectives and external boundaries of the company. | To manage internal affairs and functioning. |
| 3. Legal Effect | Acts beyond MOA are void and cannot be ratified. | Acts beyond AOA can be ratified by members. |
| 4. Position | It is a primary document. | It is a secondary document, formed under MOA. |
| 5. Contents | Name clause, registered office, objectives, liability, etc. | Rules about meetings, directors, voting, accounts, etc. |
| 6. Alteration | Very difficult. Needs court and special resolution. | Easier. Needs just special resolution. |
| 7. Compulsory or Not | Mandatory for all companies. | Not compulsory for all (can adopt model AOA). |
| 8. Binding Nature | Binds company with outsiders. | Binds company with members and between members. |
Conclusion
MOA and AOA are like the backbone of a company. MOA sets the goals, and AOA shows how to achieve them. Their registration is necessary to make company operations transparent, legal, and organized. Without them, a company cannot function properly. They protect both internal and external stakeholders.
Question 4
Discuss the powers of Court, as far as they are related to the modification and rescission of award granted by the arbitrator, under The Arbitration Act, 1940.
Introduction
Arbitration is a way to solve disputes without going to regular court. It is faster and less expensive. When parties choose arbitration, an arbitrator gives a decision called an “award”. But sometimes, the award may have mistakes or problems. The Arbitration Act, 1940 gives powers to the court to fix or cancel (rescind) such awards under certain conditions.
Powers of Court Related to Modification and Rescission of Award
The court has powers under Section 15 and Section 16 of the Arbitration Act, 1940.
1. Section 15 – Power to Modify or Correct the Award
The court can modify or correct an award in the following cases:
a) When there is a clerical mistake or error
If the arbitrator made a mistake in writing, like spelling, numbers, or any typing mistake, the court can fix it.
b) When the award doesn’t follow the arbitration agreement
If the award goes beyond the terms of agreement or does not cover all matters mentioned in the arbitration agreement, the court can make changes.
c) When the award is imperfect in form
If the award is not clear, or missing some small details, the court can correct it to make it complete and understandable.
Example: If two parties had a contract about delivery of goods, and the arbitrator forgot to mention the date of delivery in the award, the court can add that.
2. Section 16 – Power to Set Aside (Rescind) the Award
The court can cancel (rescind) the award completely under these reasons:
a) Misconduct of the arbitrator
If the arbitrator was biased, accepted bribes, or did not act fairly, the court can reject the award.
b) Award made after arbitrator’s authority expired
If the arbitrator gave the decision after his time period ended, the court can cancel it.
c) Award was not properly made
If the award goes against public policy, or it is illegal or unfair, the court can set it aside.
Example: If an arbitrator decides something that harms the law or is based on personal interest, the court can reject that award.
Important Notes
- The court will not change the award just because one party is unhappy.
- The court only interferes if there is a legal mistake or serious misconduct.
- The main goal of the court is to protect justice and fairness in arbitration.
Conclusion
The Arbitration Act, 1940 gives limited powers to the court to protect the fairness of arbitration. These powers help the court to correct simple mistakes or cancel unfair awards. But still, arbitration is meant to be independent. So, the court only steps in when it’s really necessary. This balance keeps the process fast, fair, and trustworthy.
Question 5
What considerations have been provided by the Electronic Transactions Ordinance, for the purpose of recognition and appraisal of electronic document?
Introduction
In today’s world, most work is done through computers and the internet. People use emails, websites, and online forms instead of paper. So, it became important for law to accept electronic documents. For this purpose, the Electronic Transactions Ordinance (ETO), 2002 was introduced in Pakistan. This law gives legal status to digital records, electronic communication, and online contracts.
Recognition and Appraisal of Electronic Documents under ETO 2002
The ETO gives several key considerations to make sure electronic documents are accepted just like paper documents.
1. Legal Recognition of Electronic Documents (Section 3)
ETO clearly says that electronic records have the same legal value as written paper documents.
Example: If you sign a contract by email, it is as valid as signing it on paper.
2. Legal Recognition of Electronic Signatures (Section 7)
Digital or electronic signatures are allowed. If a person signs electronically (like typing name, using a signature image, or digital certificate), it is considered valid if:
- It is reliable.
- It can identify the signer.
- It shows the intent to sign.
3. No Denial of Validity (Section 4 & 6)
No one can refuse a document just because it is in electronic form.
Example: If someone sends an invoice by email, the other person can’t say “it’s not valid because it’s not on paper”.
4. Electronic Communication is Equal to Physical Communication (Section 5)
ETO supports that sending and receiving through electronic means (email, websites, etc.) is legally acceptable.
Example: Sending a job offer through email is legally fine under ETO.
5. Retention of Records in Electronic Form (Section 6)
If a law asks for a document to be kept for a certain time, it can be kept in electronic form. It should:
- Be accessible when needed.
- Be in the same format as the original.
- Have details of who sent and received it.
6. Equal Treatment for E-Government Documents (Section 8)
Government departments can issue notices, approvals, applications, or records electronically. This helps promote e-governance.
7. Certification Authorities (Section 18)
ETO also talks about Certification Authorities, who issue digital certificates. These help to confirm identity and improve security of electronic signatures.
8. Security and Reliability
The law focuses on making sure that electronic records are:
- Authentic (not fake),
- Unchanged (no one edited it),
- Secure (protected from hacking).
Conclusion
The Electronic Transactions Ordinance, 2002 was a major step towards digital progress in Pakistan. It gives legal recognition to electronic documents, signatures, and online communication. It also makes sure that electronic records are safe and trustworthy. This law supports businesses, banks, and government to work faster and easier in the digital world.
Question 6
What is Competition Law? Why it is needed? Describe the composition, powers and functions of Competition Commission of Pakistan.
Introduction
Competition Law is a type of law that stops businesses from doing unfair practices like creating monopolies, price fixing, or limiting supply to increase prices. In Pakistan, this law is known as the Competition Act, 2010, and it is enforced by the Competition Commission of Pakistan (CCP). The goal is to make sure businesses compete fairly, and consumers get better quality and price.
What is Competition Law?
Competition Law is a legal framework that:
- Promotes fair competition in the market.
- Stops anti-competitive behaviour like cartels, abuse of dominant position, etc.
- Encourages innovation, growth, and better options for consumers.
Why is Competition Law Needed?
- To Stop Monopolies
If one company controls the whole market, it can charge high prices and reduce quality. Competition law prevents this. - To Protect Consumers
When businesses compete, consumers get better products, more choices, and fair prices. - To Support New Businesses
Small businesses can grow only when big businesses don’t misuse their power. - To Keep the Economy Healthy
A fair market brings investment, jobs, and innovation.
Competition Commission of Pakistan (CCP)
CCP is the body that enforces Competition Law in Pakistan. It is an independent and autonomous organization.
Composition of CCP
According to the Competition Act, 2010, CCP consists of:
- Chairperson
- Members (minimum 2, maximum 6)
All are appointed by the Federal Government. Members must be qualified in fields like law, business, economics, finance, etc.
Powers of CCP
- Investigate Anti-Competitive Practices
CCP can start an inquiry or investigation if any company is involved in price-fixing, abuse of dominance, or deceptive marketing. - Issue Orders and Directions
If a company is guilty, CCP can pass orders to stop it and may give directions for corrective steps. - Impose Penalties
CCP can impose heavy fines (up to 75 million rupees or more) on companies who break the law. - Grant Leniency
If a member of a cartel gives information first, CCP can give them relief in punishment. - Conduct Hearings
CCP has legal powers to call companies, record statements, and hold proper hearings like a court. - Make Regulations
It can create rules and guidelines for smooth functioning of the market.
Functions of CCP
- Ensure Fair Competition
Its main duty is to make sure all businesses get equal chance and no one misuses power. - Raise Awareness
It runs seminars, workshops, and campaigns to educate businesses and public about competition law. - Monitor Mergers and Acquisitions
CCP checks if two companies joining together will create monopoly or not. If yes, it can stop the merger. - Research and Policy Advice
CCP gives suggestions to the government on how to improve competition policy.
Conclusion
Competition Law is important for building a fair economy where all businesses, big or small, can grow. The Competition Commission of Pakistan plays a key role in enforcing this law. By stopping unfair practices and promoting transparency, CCP helps consumers, investors, and the whole economy of Pakistan.
Question 7
In case of unauthorized electronic fund transfer by the consumer, how his liability would be determined?
Introduction
In modern banking, most money transfers happen electronically using ATMs, online banking, and mobile apps. But sometimes, unauthorized electronic fund transfers (EFTs) take place, meaning money is transferred from someone’s account without their permission. This could be due to hacking, fraud, stolen cards, or technical errors.
To protect the consumer, the law—especially under the Electronic Fund Transfer guidelines and laws of Pakistan, including SBP regulations and consumer protection rules—clearly defines how the liability (responsibility) is decided.
What is Unauthorized Electronic Fund Transfer?
An unauthorized EFT happens when:
- Money is withdrawn or transferred without the account holder’s approval.
- The account holder didn’t make the transaction, and it wasn’t done by someone with authority.
Example: If someone steals your debit card and uses it to shop online, that’s unauthorized.
How Consumer’s Liability is Determined?
The liability depends on how quickly the consumer reports the problem and whether they were careless or not. Below are the main considerations:
1. Prompt Reporting by the Consumer
If the consumer reports the unauthorized transaction immediately or within a reasonable time, his liability is reduced or zero.
- Zero Liability: If the consumer didn’t act carelessly and reported quickly, he is not responsible at all.
- Limited Liability: If the delay is not intentional but caused some loss, the consumer may bear part of the loss.
2. Consumer Negligence or Carelessness
If the unauthorized transfer happened due to consumer’s negligence, like:
- Sharing PIN or password,
- Leaving card or device unattended,
- Not reporting lost card on time,
Then the consumer may be held fully or partially liable.
Example: If you wrote your ATM PIN on the back of your card and someone misused it, it’s your fault.
3. Bank’s Responsibility
The bank must provide secure systems. If the unauthorized transaction happened due to the bank’s system failure (like poor security), then the bank is fully responsible, not the consumer.
Also, the bank should:
- Provide 24/7 helpline to report such incidents.
- Refund the amount quickly after verification.
- Educate customers about secure usage.
4. Investigation by the Bank
Once the issue is reported:
- Bank has to investigate the transaction.
- If fraud is proved, bank must refund within 10 working days (as per SBP guidelines).
- If the consumer delayed the report, the bank may reduce the refund.
5. Use of Technology for Liability Assessment
Banks also use:
- Login history
- IP address
- Device tracking
- Transaction behaviour
To check if the transaction was truly unauthorized.
Conclusion
The law protects consumers from unauthorized electronic fund transfers, but they must act quickly and carefully. If the consumer is responsible, his liability increases. If the fault is from the bank or a hacker, the consumer gets full protection. This balance helps in building trust in digital banking.
Question 8
Write short notes on following concepts of Contract Act 1872.
a. Contract of Indemnity
b. Contract of Guarantee
c. Contract of Bailment
d. Contract of Agency
a. Contract of Indemnity
A contract of indemnity means one party promises to save the other from loss caused by his actions or by someone else’s actions.
Definition (Section 124, Contract Act 1872)
“A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person”.
Example
A insurance company promises to pay for damages if your car gets in an accident. That’s indemnity.
Key Points
- There are two parties: Indemnifier (who gives protection) and Indemnified (who is protected).
- Loss must be caused by some event or action.
- It must be a legal contract with clear terms.
b. Contract of Guarantee
A contract of guarantee is when a third person promises to pay the debt or perform the duty if the original person fails to do so.
Definition (Section 126)
“A contract to perform the promise, or discharge the liability, of a third person in case of his default”.
Example
If Ali borrows money from a bank and Ahmed promises to pay if Ali fails, that’s a contract of guarantee.
Key Points
- There are 3 parties: Principal Debtor, Creditor, and Guarantor (Surety).
- The guarantor’s liability begins only when the debtor defaults.
- It can be oral or written.
c. Contract of Bailment
In a contract of bailment, goods are delivered by one person to another for some purpose, and they will be returned after the job is done.
Definition (Section 148)
“The delivery of goods by one person to another for some purpose, upon a contract that they shall be returned”.
Example
Giving your clothes to a dry cleaner. You are the bailor, and the shop is the bailee.
Key Points
- Two parties: Bailor (owner of goods) and Bailee (who receives goods).
- The goods must be returned or disposed of as per instructions.
- There must be delivery of movable goods only.
d. Contract of Agency
A contract of agency is when one person (agent) is authorized to act on behalf of another (principal) to create legal relations with third parties.
Definition (Section 182)
“An agent is a person employed to do any act for another or to represent another in dealings with third persons”.
Example
A lawyer acting on behalf of a client in court.
Key Points
- Agent acts for the benefit of the principal.
- Agent can bind the principal legally.
- Agency can be express (in words) or implied (from conduct).
Conclusion
These four contracts are important in business and daily life. They define responsibilities and protect legal rights between parties. The Contract Act 1872 provides clear rules for each, making sure transactions are fair and lawful.
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