Certificate in Accounting and Finance Stage Examination

Date: 10 June 2024 Additional reading time – 10 Minutes

Test 4 Marks: 40 marks
Chapter 4 Time: 1 Hour

Business Law
Instructions to examinees:
Answer all questions.
Answer in black pen only.
Start new question on new page
Write page number on top of your answer scripts.

Q.1 Select the most appropriate answer from the options available for each of the following
Multiple-Choice Questions (MCQs).

i. AK told RYK that he wants to spend his retired life in a peaceful area with green
surroundings. RYK offered to sell his ancestral home to AK located in an area known for
abundant parks and peaceful atmosphere. On AK’s query, RYK told him that he is not
aware of any planned commercial developments in the area despite the fact that he
knew from a reliable source that construction of a large inter-city bus terminal was
about to commence on the land opposite his ancestral home. Can RYK be held liable if AK
purchases his ancestral home? (1.5)

(a) No, RYK is not required to disclose such information to AK

(b) AK Yes, RYK has committed a fraud against
(c) Yes, there is fiduciary relationship between the contracting parties
(d) No, RYK has not forced AK to buy his house

ii. Fozia was operating a home-based salon in her flat. The salon was well-known and famous for
modern hairstyling trends. Arooj, a certified hairdresser, opened her own salon in the same
building and offered to give Rs. 700,000 to Fozia if she stops providing salon services in the same
building. Fozia accepted the offer and Arooj paid the amount. Subsequently, Arooj discovered that
Fozia never stopped providing salon services as agreed.
(01)
Which of the following statements is correct?
OTES SPOTLIGHT AT A GLANCE
(a) Arooj can sue Fozia for fraud and force her to stop providing salon services
(b) Arooj can claim damages from Fozia due to non-performance
(c) Arooj cannot demand performance from Fozia as the agreement was void
(d) Arooj cannot claim damages as there was no penalty clause in the agreement
(i)
iii. In order to store valuables, Maria agreed to purchase a safety cabinet from her friend Nosheen for
Rs. 800,000. Maria was of the impression that it was manufactured in Japan and is fireproof.
However, she did not confirm her understanding from Nosheen. On delivery day, Maria expressed
her excitement about owning a Japanese-origin fireproof safety cabinet. Nosheen corrected her
and mentioned that the only safety cabinet she owned and agreed to sell was purchased from
Japan but it was neither fireproof nor manufactured in Japan. Maria got upset and refused to
make the payment. The contract between Maria and Nosheen: (1.5)

(a) is valid on account of unilateral mistake regarding quality of subject matter

(b) is voidable on account of unilateral mistake regarding quality of subject matter
(c) is void on account of unilateral mistake regarding quality of subject matter
 (d) is void on account of bilateral mistake regarding quality of subject matter
(ii)
iv. A person threatens to commit a suicide, if his wife and son did not contract with his brother to
release certain disputed property in his favour. What is the legal status of this agreement? (01)

(a) The contract was caused by coercion

(b) The contract was caused by undue influence
(c) The contract was caused by moral pressure
(d) None of the above
(iii)
v. C stayed in a room in a hotel. The hotel-keeper knew that the room was in an insecure
condition. While C was dining in the dining room, some articles were stolen from his
room. State whether hotel-keeper was liable for the loss? (01)

(a) Yes. Hotel-keeper is liable for the loss as he should have taken reasonable steps
to rectify the unsecured condition of the rooms
(b) No. Hotel-keeper is not liable for the loss even he has not taken reasonable steps
to rectify the unsecured of the rooms.
(c) Partly yes
(d) None of above

vi. A, in Bahawalpur, bets with B and loses. A asks C for a loan to pay B. A informs C that
he needs the loan to settle a personal debt without revealing it was due to a bet. C,
unaware of the true purpose, lends the money to A. In this case, can C recover the loan? (01)

(a) recover the loan from A

(b) not recover the loan from A
(c) recover the loan from B
(d) recover the loan from either B or A

vii. Which one of the following is not a restraint to trade (01)

(a) Agreement to sell all produce to a certain party with a stipulation that buyer is
bound to accept
whole quantity
(b) Agreement to stop rival shop-keeper in particular locality from doing business in
consideration of money
(c) Agreement to sell all produce to a certain party and the buyer is free to rejects
the goods
(d) Partial restraint in trade

Q.2 a) Nabeel, an antique watch collector, offers to sell one of his prized watches to Imran, a novice
collector, claiming it to be a rare limited edition with a significant historical value, and thus,
priced at a premium. Imran, impressed by Nabeel's expertise and the allure of owning such
a valuable timepiece, agrees to purchase it at the stated price, which is substantially higher
than market value.
Later, Imran discovers through his own research that the watch is not as rare as claimed by
Nabeel and its actual market value is far less than what he paid. Feeling deceived and
misled, Imran seeks advice on whether he can return the watch and recover the amount he
overpaid.
In light of the Contract Act, 1872, discuss the legal options and remedies available to Imran (04)
 b) Amir agreed to supply electronic components to Bilal for the entire year, whenever
requisitioned, at prevailing wholesale prices. The contract also stipulated that in case of
dispute, Amir and Bilal would not seek settlement through the Court.
Under the provisions of the Contract Act, 1872 discuss the validity of the contract and
determine any remedy available to Bilal, in case of dispute with Amir. (03)

Q.3 In light of contract act 1872 identify following contracts and comment on validity of given
scenarios. (15)

a) Fahad sold his motorcycle to Nida for Rs. 50,000 under threat of physical harm. Nida filed a
suit against Fahad for the recovery of the money paid. After successfully winning the case,
Nida decided to keep the motorcycle, citing its sentimental value to her. Fahad filed a suit to
reclaim his motorcycle based on the court's decision.

b) Saad convinced Zara to sell her antique jewelry collection to him at a significantly lower
price by falsely claiming that the jewelry was fake. After purchasing the jewelry, Saad
admitted to Zara that he had lied about the authenticity of the jewelry. Zara wants to cancel
the sale and recover her jewelry from Saad.

c) Ali agreed to sell his painting to Bilal for Rs. 10,000, believing it to be a replica. Bilal,
however, knew that the painting was an original masterpiece worth Rs. 1,00,000. After the
sale, Ali discovered the true value of the painting and wants to cancel the agreement and
reclaim the painting from Bilal.

d) Saima, a renowned art dealer, tells Khalid that a painting he owns is a rare masterpiece and
offers to buy it for a low price. Relying on Saima's expertise, Khalid agrees to sell the
painting. Later, Khalid discovers that the painting is not as valuable as Saima claimed. Khalid
wants to cancel the sale and recover his painting from Saima.

e) Aisha, a wealthy businesswoman, exerts pressure on her elderly neighbor, Ali, to sell his
vintage car to her for a fraction of its value. Due to Aisha's dominant position and influence
over Ali, he agrees to sell the car. Later, Ali realizes the unfairness of the deal and wants to
cancel the sale and retain ownership of his car.

Q.4 a) Under the provisions of the Contract Act, 1872: (08)

I. identify any two differences between fraud and misrepresentation.
II. identify any five differences between coercion and undue influence.

b) In view of the provisions of Contract Act, 1872 explain the general rule “Agreement in
restraint of legal proceedings is void”. State the exceptions to the above rule. (04)

The End