AIOU SOLVED ASSIGNMENT 2 CODE 460 MERCANTILE LAW
Dear students find here you aiou solved assignment 2 code 460 for the semester autumn 2015 for the subject mercantile law which is normally known as M Law
Q 1: What are negotiable instruments? Discuss characteristics of negotiable instruments and competencies of parties to negotiable instruments.
Answer: A negotiable instrument the business now-a-days is so developed and complex that it is very difficult to carry cash everywhere. Therefore most of the present day business transactions are conducted on credit basis. This credit may be granted on opening account or on the basis of a formal instrument of credit, i.e. a negotiable instrument.
i) A negotiable instrument therefore means an instrument, which represents money or money’s worth and
ii) (ii) The title of which can be transferred from one person to another by endorsement and delivery.
iii) (iii) The legal provision relating got negotiable instruments are governed by the Negotiable Instruments An, 1881.
NEGOTIABLE INSTRUMENTS- DEFINITION:
Negotiable Instrument is a transferable, signed document that promises to pay the bearer a sum of money at a future date or on demand. Examples include checks, bills of exchange, and promissory notes. A written promise or order signed by the maker to transfer a specified sum of money on demand or at a fixed future time to the person named on the instrument or to the bearer. A negotiable instrument is usually in the form of a check draft, bill of exchange, promissory note or acceptance.
A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Section 13 of the Negotiable Instruments Act, a negotiable instrument means a promissory note, bill of exchange or Cheque payable either to order or to bearer. So. There are just three types of negotiable instruments such as promissory note, bill of exchange and Cheque. Cheque also includes Demand Draft (Section 854 More specifically, it is a document contemplated by a contract, which
1) Warrants the payment of money, the promise of or order for conveyance of which is unconditional;
2) (2) Specifies or describes the payee, who is designated on and memorialized by the instrument: and
3) (3) Is capable of change, through transfer by valid negotiation of the instrument
CHARACTERISTICS OF NEGOTIABLE INSTRUMENTS
A negotiable instrument has following special characteristics as compared to any other document evidencing a contractual debt. A negotiable instrument may he transferred by mere delivery without the necessity for a formal assignment. The only exception to this rule is represented by bills of exchange payable to order which in addition to delivery also require an endorsement. Where a negotiable instrument is properly transferred or negotiable the transferee, provided that he has given valuable consideration for it acquires a good title irrespective of the quality of the contractual right is “subject to equities” a negotiable instrument is transferred ‘free from equities’ in that the title of the holder for value does not depend on the title of his predecessor.
TYPES OF NEGOTIABLE INSTRUMENTS
Under section 13 of the negotiable instruments Act. 1881, a negotiable instrument includes. (i) A bill of exchange (ii) A promissory note or (iii) A Cheque Payable either to order or bearer. Although under this section only above three types of negotiable instruments are mentioned but it has been ascertained from the cases of law that if an instrument satisfies the following two conditions, it can be treated as a negotiable instruments. (i) If it is such a form whit it entitles the holder to sue in his own name and (ii) if it is transferable.
THE PARTIES TO NEGOTIABLE INSTRUMENT
The parties to a negotiable instrument (bill of exchange, promissory note and a Cheque) are discussed in detail: Parties to a bill of exchange
1. The Drawer: The person who draws a bill of exchange is called the drawer.
2. The Drawee: The party on whom such bill of exchange is drawn and who is directed to pay is called the drawee.
3. The Acceptor The person who accepts the bill is known as the acceptor. Normally the drawee is the acceptor. But a stranger can also accept a bill on behalf of the drawee.
4. The Payee: The person to whom the amount of the bill is payable is called the payee.
5. The Endorser: When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.
6. The Endorsee: The person to whom the hill is endorsed is called the endorsee.
7. The Holder: Holder of bill of exchange means any person who is legally entitled to the possession of it and to receive or recover the amount due thereon form the parties. Ile is either the payee or the endorsee. The finder of a lost bill payable to bearer or a person in wrongful possession of such instrument is not a holder.
8. Drawee in case of need: The drawer of a bill or even an endorser may write in the instrument the name of a person directing the holder to resort to such person in case of need. Such a person is called a drawee in case of need. He is merely in the position of a drawee who has not accepted the bill. The bill cannot be presented to him for acceptance but only for payment. Where a drawee in case of need is mentioned in the bill such a bill is not dishonored until it has been dishonored by such a drawee in case of need. The effect of this provision is to make the presentment to the drawee in case of need obligatory on the part of the holder.
9. Acceptor for Honour: Any person may voluntarily become a party to a bill as an acceptor by accepting it for the honour of the drawer or of any person. When the original drawee refuses to accept or refuses to furnish better security when demanded by a notary, any person may step in to safeguard the honor of the drawer or any endorser and bind himself by an acceptance. The effect of such acceptance is that the bill is treated as alive and is not considered to be dishonored till it is dishonored by the acceptor for honor.
PARTIES TO A PROMISSORY NOTE
1. The Maker: He is the person who promises to pay the amount stated in the promissory note.
2. The Payee: The person named in the promissory note to whom the money is payable.
3. The Holder: Ile may be either the payee or someone else to whom the promissory note has been endorsed.
4. The Endorser: When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.
5. The Endorsee: The person to whom the bill is endorsed is called the endorsee.
PARTIES TO A CHEQUE
1. The Drawee: He is the person who draws the cheque.
2. The Drawee: The banker on whom the cheque is drawn.
3. The Payee: The person to whom the amount of the bill is payable is called the payee.
4. The Holder: Holder of bill of exchange means any person who is legally entitled to the receive or recover the amount due thereon form the parties. lie is either the payee or the endorsee. payable to bearer or a person in wrongful possession of such instrument is not a holder.
5. The Endorser: When the holder transfers or endorses the Instrument to any other person Endorser.
6. The Endorsee: The person to whom the bill is endorsed is called the endorsee.
The Competency of Parties to Negotiable Instruments
SECTION 1-LEGAL COMPETENCE:
1. A person shall become legally competent when attaining the age of 18 years. A legally competent person shall be competent to manage his or her personal and financial affairs.
2. A person not legally competent by reason of minor age who enters marriage shall be legally competent as from when the marriage takes place. Section
2- PERSONAL COMPETENCE:
Subject to other provisions of law. a person possessing personal legal competence shall be competent to manage any of his or her personal affairs other than financial affairs.
SECTION 3-FINANCIAL COMPETENCE:
Subject to other provisions of law, a person possessing financial legal competence shall he competent to manage any of hi, or her financial affairs.
Q 2: DISCUSS IN DETAIL THE PARTNERSHIP FORM OF BUSINESS.
Answer: PARTNERSHIP FORM OF BUSINESS DEFINITION:
A partnership Is a voluntary association of two or more persons. who contribute. Money, property, time, care. or skill, to carry on, as co-owners, a lawful business for profit and so share the profits and losses of the business.
PARTNERSHIP: The law of partnership is contained in the Partnership Act. 1932 which came into force on First October 1932. It extends to the whole of Pakistan. (Section)
In a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners. The Partners should have a legal agreement that sets forth how decisions will be made, profits will be shared. Disputes will be resolved. How future partners will be admitted to the partnership. how partners can be bought out, or what steps will be taken to dissolve the partnership when needed; Yes, it’s hard to think about a “break-up” when the business is just getting started, but many partnerships split up at crisis times and unless there is a defined process, there will be even greater problems. They also must decide up front how much time and capital each will contribute. Etc.
The following are the characteristics or futures of partnership:
1. Legal Entity:- A partnership has not separate legal entity apart from its members. It means the form and the partner are not separate form one another. The rights and liabilities of the partners. Actually, a firm is the collective name of the individual partners. The life of partnership depends upon the partners. If any of the partners dies, retires or becomes insane, the partnership conies to an end.
2. Agreement:- A partnership is the result of an agreement between persons. An agreement may be written or oral. Only the persons who are competent to contract and form a partnership. Thus. at the death of father. Who was a partner in a firm, the son can claim share in the partnership property but cannot become a partner unless he enters into an agreement with the other persons.
3. Number of Partners:- There must be at least two persons to tore’ a partnership. ‘rhe Partnership Act does not mention the maximum limit of persons who can be partners in a partnership lion. But according to Section 14 of Companies Ordinance, 1984 a partnership consisting of more than 20 persons for carrying on any business is illegal. Hence. it should be regarded as the maximum limit to the number of partners in a partnership firm.
4. Existence of Business:- The partners must agree to carry on business. If the purpose is to carry on some charitable work it will not be a partnership. Similarly, if a number of persons agree to share the income of a certain property among them, there is no partnership. These persons cannot be called partners because they are not doing business. It means that where there is no business, there is no partnership.
5. Sharing of Profits:- The agreement between the parties must be to share the profits of a business. The profit will be distributed among the partners according to their agreement. If there is no agreement about the distribution of profit it will be distributed among the partners equally. The partners will share the loss according to the agreed ratio. However, to form a partnership, it is not necessary that partners must agree to share the losses: some partners may agree to bear all the losses of business.
6. Mutual Agency:- According to definition the business must be carried on by all the partners or any of them acting for all the partners. Each partner acts as an agent or the other partners of the firm. Again, each partner acts as a principal also because lie binds himself by the activities of other partners. It means that the contract of agency exists among partners. The element of mutual agency enables every partner to carry on the business on behalf of others.
7. Unlimited Liability:- The liability of all the partners is unlimited in case of firm’s debts. All the partners are individually and collectively responsible for the debts of the firm. It means that if there is any loss and business sources are insufficient to meet the claims of the creditors, the private properties of the partners can be sold to meet the claims of creditors.
8. Capital:- Generally, the capital of the firm is supplied by all the partners. It is not necessary to contribute equal capital. Capital is contributed according to the agreement. A person without contributing any capital may become a partner on the basis of his ability, energy, education and experience. In such a case, these, qualities are regarded his capital and he can share the profits of the firm.
9. Utmost Goods Faith:- A partnership business is based on mutual confidence and trust of the partners. The partners must be just and honest to one another. They must disclose all facts and provide true accounts relating to the business to each other. They must not make any secret profits.
10. Management:- According to law, every partner can take part in the conduct and management of the business of the firm. Generally, the work is divided among the partners according to their experience and knowledge, in practice, the senior exercises overall supervision.
11. Control:- Since a partnership is formed by a agreement its control depends on the terms of agreement. Where all the partners take an active part in the conduct of the business, the control remains with all of them and all major decisions are taken with the consent of all the partners. Otherwise, control may be given to one or more partners under the agreement.
12. Transfer of interest:- A partner cannot transfer his share in the partnership to an outsider without the consent of all other partners. Thus, share in partnership is not freely transferable.
13. Duration:- The partnership continuous at the will of the partners. It collies to an end if any of the partners retires, dies or becomes insolvent. However. if the remaining partners agree to continue the business, the firm will not dissolve.
ADVANTAGES OF PARTNERSHIP
• Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement.
• With more than one owner, the ability to raise funds may be increased.
• The profits : from the business flow directly through to the partners’ personal tax return.
• Prospective employees may be attracted to the business if given the incentive to become a partner. • The business usually will benefit from partners who have complementary skills. Disadvantages of a Partnership
• Partners are jointly and individually liable for the actions of the other partners.
• Profits must be shared with others.
• Since decisions are shared, disagreements can occur.
• Sonic employee benefits are not deductible from business income on tax returns.
• The partnership may have a limited life; it nay end upon the withdrawal or death of a partner.
TYPES OF PARTNERSHIPS THAT SHOULD BE CONSIDERED:
1. General Partnership:- Partners divide responsibility for management and liability, as well as the shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is a written agreement that states differently.
2. Limited Partnership and Partnership with limited liability:- limited” means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decision, which generally encourages investors for short term projects, or for investing in capital assets. This form of ownership is not often used for operating retail or service businesses. Forming a limited partnership is more complex and formal than that of a general partnership.
3. Joint Venture:- Acts like a general partnership, but is clearly for a limited period of time or a single project. If the partners in a joint venture repeat the activity, they will he recognized as an ongoing partnership and will have ICP file as such, and distribute accumulated partnership assets upon dissolution in the entity.
AUTUMN 2015 Course, Mercantile Law Code: 460, Level: ISA/ B.COm Assignment No 2
Q 3: DISCUSS THE CONDITIONS IN WHICH A PARTNERSHIP COMES TO AN END. ALSO NARRATE THE ADJUSTMENT OF ACCOUNTS ON RETIREMENT OF A PARTNER.
What is dissolution?
LAW: Section 39 of partnership act 1932 cover the Dissolution of partnership between the all the partners of the firms or organization
WHAT IS DISSOLUTION:-
DISSOLUTION OF PARTNERSHIP: When one or more partners set aside from partnership due to any reason like death retirement, insane or insolvency but others continue the business in partnership. it is called Dissolution of partnership.
DISSOLUTION OF FIRM: If one partner is set aside from partnership due to death, retirement or insolvency and other partners don’t continue the business in partnership, it is called Dissolution of firm. It means that Dissolution of firm include Dissolution of partnership.
EXPLANATION: Suppose Mr. A. Mr. B and Mr. C were partner in a firm and Mr. A. retired or insolvent from firm the *Partnership firm” and also “Partnership” will dissolve. But if it is already decided in the agreement of partnership that in case of death, retirement or insolvency of a partner, firm will not dissolve. In such case partnership will dissolve but firm will continue its business tinder same name.
MODES OF DISSOLUTION
A partnership is dissolved in the following circumstances and also in the following manner:-
(1) DISSOLUTION BY AGREEMENT: A partnership firm may be dissolved with the consent of all the partners or in accordance with a contract between partners A partnership firm continues as long as the partner’s desire and when all of them agree to dissolve the firm. it can be dissolved. Thus in order to dissolve a firm consent of all the partners in necessary. It will also be dissolved in accordance with a contract between the partners. Thus if partners have agreed that the firm will be dissolved on the happening of a certain event, then it is dissolved on the happening of that event. It is not necessary to obtain the consent of the partners on the happening of that event, because the thinners have already agreed beforehand that dissolution will take place on the happening of that event.
(2) COMPULSORY DISSOLUTION:- A partnership is dissolved when all the partners or all the partners but one are adjudicated insolvent. It is also dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for partners to carry on the business in partnership.
(3) DISSOLUTION ON THE HAPPENING OF CERTAIN CONTINGENCIES:-
(a) A partnership is dissolved on the expiry of the term for which it was constituted. Thus where a partnership was constituted for a fixed term, it will expire as soon as the term is completed.
(b) When partnership is constituted to carry out one or more adventures or undertakings, then it will be dissolved as soon as those adventures or undertaking are completed.
(c) A partnership is also dissolved by the death of a partner.
(d) It is also dissolved by the adjudication of a partner as an insolvent.
(4) DISSOLUTION BY NOTICE OF PARTNERSHIP-AT-WILL:- When a partnership is at will, it may be dissolved by any of the partners giving a notice in writing to all other partners of his intention to dissolve the firm. In such a case dissolution will take effect from the date mentioned in the notice as the date at dissolution.
(5) DISSOLUTION BY COURT:- A partnership is dissolved by the Court when a partner files a suit for dissolution on one of the following points, namely:-
(a) When a partner has become of unsound mind. In such a case the suit for dissolution can be brought by any other partner or by the next friend of the partner who has become of unsound mind.
(b) When a partner other than the partner. Suing, has become permanently incapable of performing his duties as a partner.
(c) When it is shown that a partner is guilty of any conduct which is likely to apes t prejudicially the carrying on of the business.
(d) When it is shown that a partner willfully or persistently commits breach of agreements in respect of management of the affairs of the firm or the conduct of business.
(e) When a partner transfer the whole of his share to a third party. When it is shown that the business of the firm cannot be run except On loss.
(g) The Court can ate dissolve a firm on any other ground not mentioned above which renders it just and equitable that the firm should 1w dissolved.
Q 4: PROVIDE AN INSIGHT INTO THE LABOUR LAWS APPLICABLE IN PAKISTAN. DISCUSS THE LEGAL PROCEDURE FOR THE DISMISSAL OF A WORKMAN.
LABOUR LAWS IN PAKISTAN
The Constitution of Pakistan contains a range of provisions with regards to labour rights found in Part II: Fundamental Rights and Principles of Policy.
• Article 11 of the Constitution prohibits all forms of slavery, forced labour and child labour; • Article 17 provides for a fundamental right to exercise the freedom of association and the right to form unions;
• Article 18 proscribes the right of its citizens to enter upon any lawful profession or occupation and to conduct any lawful trade or business;
• Article 25 lays down the right to equality before the law and prohibition of discrimination on the grounds of sex alone;
• Article 37(e) makes provision for securing just and humane conditions of work, ensuring that children and women are not employed in vocations unsuited to their age or sex, and for maternity benefits for women in employment. Social Justice is the best way to ensure sustainable peace and eradicate poverty. It is believed that people coming together organizing joining forces, making their voices heard.
• Promote and realize standards and fundamental principles and rights at Work
• Create greater opportunities for women and men to secure decent employment and income
• Enhance the coverage and effectiveness of social protection for all
• Strengthen tripartism and social dialogue
APPLICATION OF LABOUR LAWS IN PAKISTAN BUSINESS
INDUSTRIAL RELATION ACT 2008
i) Formation of Trade unions
ii) Regulation of relations between employers & workmen. iii) Avoidance & settlement of any difference arising between them or iv) Matters connected therewith & ancillary thereto
TRADE UNIONS & FREEDOM OF ASSOCIATION
Workers without distinction shall have the right to form trade unions
• Employers without any distinction shall have the right to establish association of employees
• Trade Unions and employers associations shall have the right to draw their constitutions
REGISTRATION OF TRADE UNIONS
• Registration of Trade Unions
• Certificate of collective bargaining agent
COLLECTIVE LABOUR DISPUTES/INDUSTRIAL DISPUTES
• Dispute/differences between the employers and trade unions regarding employment/non-employment or condition of work
SETTLEMENT OF DISPUTE
• Bilateral negotiations
IN CASE FAILURE OF SETTLEMENT
• Lock outs
REDRESSAL OF INDIVIDUAL GRIEVANCE
• Grievance Notice to employer regarding enforcement of any guaranteed right under any law award or settlement
• Grievance petition to the labour court
• Enforcement of right by the labour court
• Implementation of the decision of labour court
UNFAIR LABOUR PRACTICES
• Unfair Labour practices on pita of the employers
• Unfair Labour pray tire on part of the workers
LEGAL PROVISIONS OF INDUSTRIAL RELATIONS ORDINANCE 2002 CHAPTER I – PRELIMINARY
1. SHORT TITLE, EXTENT, COMMENCEMENT AND APPLICATION.
(1) This Ordinance may be called the Industrial Relations Ordinance, 2002.
(2) It extends to the whole of Pakistan.
(3) It shall come into force at once.
(4) It shall apply to all persons employed in any establishment or group of establishments or industry except those employed
CHAPTER II – TRADE UNIONS
3. Trade unions and freedom of association.-
(1) Subject to the provisions of Article 17 of the Constitution of the Islamic Republic of Pakistan, this Ordinance and any other law for the time being in force.
(a) the workers shall. without distinction whatsoever, have the right to form and, subject to the constitution or rules of a trade union, join any trade union of their choice within the establishment or industry they are employed in: Provided that a worker shall not be entitled to be a member of more than one trade union at any one time; provided further that on joining another union, the earlier membership will stand automatically cancelled;
(b) the employers shall, without distinction whatsoever, have the right to form or join any association of their choice and their association shall have the right to draw up their constitution and rules, elect freely their representatives, organize their administration and activities and formulate their programmes;
(c) trade unions of workers and associations of employers shall have the right to form and join federations and confederations of trade unions and associations. and such federations and confederations shall have the right to affiliate with international organizations and confederations of workers and employers. as the case may be; and
(d) every collective bargaining agent union shall have to affiliate with any federation at the national level registered with the National Industrial Relations Commission within two months after its determination as collective bargaining agent or promulgation of this Ordinance, whichever is earlier.
Chapter IV – Labour Courts 44.
Labour Court:- (1) A Provincial Government may, in consultation with the Chief justice of the respective High Court, by notification in the official Gazette, establish as many Labour Courts as it considers necessary and, where it establishes more than one labour Court. shall specify in the notification the territorial limits within which or the industry or the classes of cases in respect of which, each one of them shall exercise jurisdiction under this Ordinance.
The Schedule II [See section 83(2)]
Rights and Duties of Workers and Employers
(a) Right to conduct business:-The employer shall have the right to manage, control and use the property of his enterprise and conduct his business in any manner considered appropriate by him.
(b) Right to manage:- The employer shall have the right to use available resources including human resources efficiently and effectively in the best interest of the enterprise.
(a) While exercising the right to conduct business and the right to manage the enterprise, the employer shall act in accordance with the law and shall comply with the law faithfully.
(b) The employer shall protect rights of the workers as guaranteed under the law or secured to them by any award, agreement or settlement in force.
(c) The employer shall protect and safeguard the interest of his workers and take measures within his resources for their socio-economic uplift and welfare. Ile shall create an environment congenial for enhanced productivity of labour and maximum output of the enterprise.
(d) The employer shall respect the right of the workers to employment, wages, decent living and better quality of working life.
(a) Right to work, wage and welfare: It is the right of a worker to work according to the job assigned and to receive wages as per agreed terms and conditions of employment and to such welfare benefits and safety measures as one is entitled to according to law. agreement settlement and award.
(b) Right to freedom of association and collective bargaining and other rights secured or guaranteed under this Ordinance and other laws.
Worker has inherent right to trade unionism and collective bargaining and the right to enjoy the benefits guaranteed to him under the law, rules and regulations, settlement, award or agreement.
(a) Worker will perform his duty, as assigned by the employer or his representative, according to his best ability with due diligence, care. honesty and commitment.
(b) Worker will fully observe norms of organizational discipline.
(c) Worker, in exercise of his right, will fully respect the rights of the employer and will cooperate with him in the efficient performance of the business of the establishment or. as the case may be, enterprise.
Q # 5 CLICK HERE