Mercantile Law CSS Paper 2007




NOTE: (i) Attempt FIVE questions in all including question No. 8 which is compulsory. All questions carry EQUAL marks. In each of the following cases given your decision and state the legal principal that applies. Please refrain from: (1) Reproducing the facts of the cases; (2) Unnecessary and irrelevant details; (3) Unreadable handwriting.
(ii) Extra attempt of any question or any part of the attempted question will not be considered
(iii) Candidate must draw two straight lines (==================) at the end to separate each question attempted in Answer Books.

1. Aftab, Bashir and Chinar are partners in computer business. The terms of the partnership agreement provided that the business of the firm is to buy and sell used computers. At the beginning of December 2006, Chinar retired from the firm. Notice was placed in the newspapers and existing clients were informed of the retirement. In the middle of December 2006 Dilawar joined the firm. In early January 2007 the partners were surprised to receive delivery of an on invoice for some very expensive computers, which had been purchased in the firm’s name by Chinar, shortly before his retirement. At the end of January 2007 Aftab departed from the firm without notice, taking with him Rs. 4000,000 which had been left with the firm by a client who wished the partnership to obtain some computers for him. How far can the firm and/or the individual partners be made liable for:
(a) Payment for the computers
(b) The missing Rs. 4000,000

2. Adnan has entered into a partnership with Basharat and Chohan to operate a motor parts manufacturing company. While Basharat and Chohan are out of town, Adnan signs the following contracts, on behalf of the partnership:
(a) Contract for a Rs. 1000,000 loan from Bank of the West
(b) A contract to purchase an adjoining piece of real estate to build a new parking lot for the company employees.
Furhermore, Adnan opens a new bank account for the business at the Utility Bank Limited.
Assuming that Adnan and the partnership breach their obligations under the two contracts and Adnan makes some unauthorized withdrawals from the new bank account, please discuss whether or not the partners (BAsharat and Chohan) and the partnership are likely to be liable to the third party and the bank.

3. Hashim is a promoter in the process of forming a private limited company. He seeks your advice on the following matters.
(a) Hashim has bought a piece of land which he wishes to sell to the company once it is formed. He paid Rs. 4000,000 for the land but expects the company to pay him Rs. 5000,000 for it. He wishes to know if he can do this and what, if any, duties he owes to the company in respect of the sale.
(b) Before he registers the company, Hashim wishes to know what restrictions there might be on freedom to choose the company’s name.

4. Aslam’s mate from the housing scheme he lives in, Bilal, has told Aslam that he should never do business as a company, because “in this country if you form a company, you gain no advantages and spend the rest of your life dealing with red tape, worthless meetings, and the like”. Would you share Delawar’s sentiments? Discuss.

5. On January 10, 2007, A, a manufacturer of plastic products, sent a purchase order to B, A’s regular supplier of raw plastic. The purchase order included a provision requiring that B shall deliver the plastic on February 15, 2007. The B’s acknowledgment provided that delivery would occur on March 1. 2007. When does the contract require seller to deliver the goods? Discuss.

6. Javed advertises a kitchen table and chairs for sake in the newspaper classified. Aslam answers the ad, and comes over to pick up the furniture and pay for it. After Aslam has paid Javed, he realizes that none of the furniture will fit in the back of his car. So Aslam leaves the furniture inplace and decides to quickly go borrow a truck from a friend and return. However, during the interim, the furniture is destroyed when Javed’s house burns down. Aslam demands a refund of his payment which Javed straight away refuses. What would you advise Aslam to file a suit in a court or a reference with an arbitrator? Which of these two modes would be suitable i.e. swifter and less expensive for Aslam to adopt in this situation?

7. One day this spring A awoke in the morning and looked out his window while B, his neighbor who was a painter, painting outer walls of the A’s house. “Isn’t that nice”, A thought as he rolled over and went back to sleep, “B want to make a good impression as a helpful neighbor.”
Later that day, B knocked at A’s door and asked for Rs. 2000 for the painting work. A told him, “Go away. I always myself paint my house. I never asked you to paint for me.” The going rate for the painting done by B is Rs. 1500. Is there any contract between A and B? If so is A contractually obligated to pay B Rs. 2000 or Rs. 1500? Discuss.


8. Write only correct answer in the Answer Book. Do not reproduce the question.

(1) Which of the following is a bilateral contract?
(a) A tells B that he will pay him Rs. 200 if B will wash his car which B does.
(b) A writes B a letter in which he promises that if B will wash his car, he will pay him Rs. 200 which B does.
(c) A and B both sign a piece of paper which says “A agrees to pay B Rs. 200 if B agrees to wash A’s car in exchange for Rs. 200.
(d) None of these

(2) A called his friend B and offered to give him two tickets of a cricket match taking place next month. B said “okay! I love to watch cricket matches”. A few days later A called B and told him that he couldn’t give B the tickets. Assuming B sued A:
(a) He would probably win as a contract was formed
(b) He would probably lose because the contract was not in writing
(c) He would probably lose as the court would hold no contract was formed
(d) None of these

(3) Under the doctrine of quasi contract, a plaintiff may recover in “quantum merit”, a Latin phrase that means:
(a) “As much as he deserves”
(b) “Treble damages”
(c) “Only a token sum”
(d) None of these

(4) Which of the following writings are negotiable instrument?
(a) A promise to pay Rs. 2000 for the services rendered if the services are renders as soon as possible.
(b) An unconditional promise to pay a reasonable sum for the services rendered
(c) An unconditional promise to pay Rs. 3000 sometime next month.
(d) None of these

(5) A has a bill of exchange that does not indicate when it is to be paid as the language of the bill only says “Pay”. When it is payable to A?
(a) In 30 days
(b) Never as the instrument is void if it does not have a payment date.
(c) In a reasonable time
(d) None of these

(6) A writes a check on his Habib Bank account to pay for groceries at Utility Stores. Who is the drawee?
(a) Utility Stores
(b) Both Habib Bank and Utility Stores
(c) Habib bank
(d) None of these

(7) Which of the following may count as the signature of a drawer?
(a) An “X” made by the drawer
(b) The signature of the drawer’s agent
(c) Both of the above
(d) None of these

(8) Which of the following language on an order will create a bill of exchange?
(a) Pay X if you can
(b) I wish you would pay X
(c) Pleas pay X
(d) None of these

(9) Which of the following is payable at a definite time?
(a) “Payable when “Z” wins the presidential election”
(b) “Payable on or before May 30
(c) Both (a) & (b)
(d) None of these

(10) Which of the following phrases makes an order bill of exchange?
(a) “Pay to the order of A”
(b) “Pay to the order of my brother”
(c) Both (a) and (b)
(d) None of these

(11) A writes a postdated cheque. Is it negotiable?
(a) Yes
(b) No, because it does not specify a definite date of payment
(c) No, because postdated checks are void
(d) None of these

(12) You write a cheque to pay for your haircut. In this transaction, who is the drawee?
(a) You because you drew up the cheque
(b) Your bank because it may pay the cheque
(c) The person who cuts your hair because the cheque is payable to him.
(d) None of these

(13) The best, simple definition of a contract is:
(a) An objective “meeting of minds”
(b) A negotiated two-party agreement upon which party will act or refrain from acting.
(c) A document reflecting a “meeting of the minds” between two or more competent parties.
(d) None of these

(14) If A is hit by a car, and B, a doctor sees the incident and performs emergency first aid upon A which results in A recovery:
(a) A unilateral contract is created whereby A is obligated to pay Dr. B for services rendered.
(b) A bilateral contract is created and both parties must perform their duties
(c) A quasi contract is created between the parties
(d) None of these

(15) A offers to sell to B a mobile phone for Rs. 5500. B tells A that he will take the phone for Rs. 4500. Nothing further is said and the next day, A demands Rs. 5400 from B in exchange for the phone. Choose the true statement.
(a) B is not obligated to pay Rs. 4500 to A
(b) B is obligated to pay Rs. 4500 to A
(c) B is obligated to pay Rs. 5500 to A
(d) None of these

(16) The most common form of agency is:
(a) Implied
(b) Express
(c) Injunctive
(d) None of these

(17) Assume that a new partner enters an ongoing partnership. The new partner’s liability to preexisting creditors is best described by which of the following?
(a) The new partner is not liable to preexisting creditors of the firm.
(b) The new partner must negotiate his or her liability with the preexisting creditors.
(c) The new partner is only liable to the preexisting creditors to the extent of his capital contribution
(d) None of these

(18) What is not a correct statement concerning promoters?
(a) They are agents of the company.
(b) They generally are active before the company is formed.
(c) They owe fiduciary duties to the company.
(d) None of these

(19) The phrase “piercing the corporate veil” refers to:
(a) Inspecting the books of the company.
(b) The ignoring by courts of the corporate entity in order to do justice
(c) Learning the identity of the shareholders of the company .
(d) None of these

(20) When someone gives to another person a power of attorney, this means that:
(a) Such person is an undisclosed principal
(b) Such person is a disclosed principal
(c) Such person given the power has authority to act as an agent
(d) None of these

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