Mercantile Law Paper 2013

Q.1. (i) Select the best option/ answer and fill in the appropriate Circle on the OMR Answer
Sheet.( 20x1=20)
(ii) Answers given anywhere, other than OMR Answer Sheet, shall not be considered.

1. Jurisdiction in company matters is to be exercised by:

(a) Civil Court
(b) Any judge of high court
(c) Company Bench of High Court
(d) None of These

2. Any alteration in Article of Association affecting the substantive right or liabilities of

members of the company can be made
(a) If Board of Director pass such alteration
(b) By vote of simple majority of members
(c) By a vote ¾ majority of members
(d) None of these

3. A special audit of a company can be ordered by a commission on an application made by

members holding not less than
(a) 20% Voting Rights
(b) 25% Voting Rights
(c) 51% Voting Rights
(d) None of these

4. A listed company in accordance with companies ordinance is required to have at least:

(a) Two director
(b) Seven director
(c) Three Directors
(d) None of these

5. When a negotiable instrument may be construed either as a promissory note or bill of

exchange, law recognizes it as:
(a) Promissory note
(b) Bill of Exchange
(c) Ambiguous Instrument
(d) (d) None of these

6. When a bill of exchange has been dishonored, the holder can cause such dishonor be
certified by a notary public, such certificate is a:
(a) Claiming
(b) Presentment
(c) Protest
(d) None of these
7. If a cheque is transferred to any person to constitute him as a holder, the instrument is
said to be:
(a) Delivered
(b) Negotiated
(c) Presented
(d) None of these

8. A partner can be expelled from a Firm:

(a) By simple majority of partners
(b) If all partner consent to it
(c) Only by exercise of powers conferred by the Contract
(d) None of these

9. A new partner can be inducted in an existing partnership:

(a) By recommendation of any partner

(b) By the consent of all partners
(c) By the consent of half of the partners
(d) None of these

10. Any admission made by a partner regarding the affairs of the firm in ordinary course of
business:
(a) Is evidence against the firm
(b) Has no validity against the firm
(c) Ordinary statement
(d) None of these

11. An agreement between partners imposing reasonable restriction on a partner for not
carrying on any business within a specified time or local limits on ceasing to be a partner is:
(a) Void
(b) Valid
(c) Illegal
(d) None of these

12. The goods which form the subject of a sale can be:
(a) Existing Goods
(b) Existing and future Goods
(c) Existing, Future and Contingent Goods
(d) None of These
13. If the seller make use of pretended bidding to raise the price the sale is:
(a) Voidable
(b) Void
(c) Illegal
(d) None of these
14. The principle of indemnity does not apply in the case of:
(a) Life Insurance
(b) Marine Insurance
(c) Fire Insurance
(d) None of these

15. Promise which form the consideration or part of the consideration for each other are
called:
(a) Agreement
(b) Contract
(c) Reciprocal Agreement
(d) None of these

16. Mr. Aslam applied to a bank for a loan at a time when there is stringency in the money
market, the banker declines to make the loan except at an unusually high rate of interest,
this is called:
(a) Undue influence
(b) Transaction in the ordinary course of business
(c) Free consent
(d) None of these

(17) When consent to an agreement is caused by coercion, fraud, or misrepresentation, the

agreement is:
(a) Valid
(b) Void
(c) Voidable
(d) None of these

(18) A person who finds goods belonging to another and takes them into his custody; is
subject to the same responsibilities as:
(a) Trustee
(b) Owner
(c) Bailee
(d) None of these
(19) An agreement in restraint of the marriage of any person other than a minor is called:
(a) Valid
(b) Invalid
(c) Illogical
(d) None of these

(20) Authority of any appointed arbitrator or umpire can be revoked:

(a) At the discretion of either party
(b) With the leave of the court
(c) Irrevocable
(d) None of these
Mercantile Law Paper 2011

1: Which of the following contracts is voidable, where:

(a) Aparty is induced by undue influence (b) One party under mistake of fact
(c ) b oth parties under mistake of fact (d) None of these

2: in case of wilful wrong sub agent is responsible to:

(a) Agent (b) Principal (c) Sole agent (D) none of these

3: A tender notice amounts to:

(A) Proposal b. offer c. invitation d. none of these

4: A contract to sell property by minor through guardian is:

A. Void b. voidable c. valid d. none of these

5: How many parties are there in contract of guarantee?

A. 5 B. 4 C. 3 d. none of these

6: Which of the following is eligible to become the director of the company.

A. Minor B. un discharged insolvent
c. person representing creditors d. none of these

7: extra ordinary general meeting of a company includes:

A. Annual general meeting b. statutory meeting c. plenarymeeting
D. none of these

8: Petition for the winding up of company may be moved by :

A. auditor general b. advocate general c. company judge
d. none of these

9: The companies act repealed by the companies ordinance, 1984 pertained to year:
a. 1930 b. 1933 c. 1935 d. none of these

10: penalty for improper use of word “Limited” is:

A. fine b. imprisonment c. fine with imprisonment d. none of these

11. In which of the following an arbitration is not discharged by the death of party.
A. voluntary b. statutory c. contractual d. none of these

12. the assent of arbitrator by court is:

A. optional b. not required c. necessary d. none of these

13. the nomber of arbitration act, 1940 is:

A. 11 b. 15 c. 20 d. none of these

14. natures of misconduct justifying removal of arbitrator should be:

A. Legal b. moral c. procedural d. none of these

15. suit by unregistered firm against third party is :

A. maintainable. B. barred c. permissible d. none of these

16. the partnership is:

A. juristic person b. juridical person c. natural person d. none of these

17. the firm and firm name are:

A. synonymous b. interchangeable. C.differe nt terms. D. none of these

18. the maker of the promissory note is liable as:

A. principal debtor b. principal creditor c. undischarged surety d. none of these

19. valid presentation of a cheque is within six months from:

A. the date is drawn b. date of last correection c. date of delivery d. none of these

20. an exception to “No one can transfer what he does not have “:
A. registered gift b. will c. estoppel by owner d. none of these

Mercantile Law Paper 2010

Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet.

(i) A signs promissory instrument in the following terms:

(a) Mr. B I.O.U. Rs.1000
(b) I promise to pay Rs. 500 seven days after my marriage with C
(c) I acknowledge to be indebted to B in Rs.1000 to be paid on demand, for value received
(d) I promise to pay Rs. 500 to B and to deliver my black horse on 1st January next
(e) None of these

(ii) How many parties are there to a “Promissory note” and a “bill of exchange”?
(a) There are three parties to a “Promissory note” and four to a “bill of exchange”
(b) There are four parties to a “Promissory note” and three to a “bill of exchange
(c) There is one party to a “Promissory note” and two to a “bill of exchange”
(d) There are two parties to a “Promissory note and three to a bill of exchange”
(e) None of these

(iii) In a cheque issued by A to B, amount is stated differently in figures and in words:

(a) the amount stated in words shall be the amount ordered to be paid
(b) the amount stated in figures shall be the amount ordered to be paid
(c) the cheque will be returned to the bearer by the banker for correction by the drawer
(d) None of these

(iv) When consent to an agreement is caused by coersion, fraud or mis-representation, the

agreement is:
(a) valid
(b) void
(c) voidable at the option of a party whose consent was so caused (d) partially void
(e) None of these
(v) A voidable contract is:
(a) An illegal agreement
(b) Partly valid agreement
(c) void ab initio
(d) None of these

(vi) A minor in a firm enjoys the following rights:

(a) He may be admitted to the benefits of partnership
(b) He cannot have access to and inspect and copy any of the accounts of the firm
(c) None of these

(vii) A fully paid share-warrant of a company limited by shares is to be treated like a:

(a) Cheque
(b) negotiable instrument
(c) Bill of Exchange
(d) None of these

(viii) A private company can be incorporated by:

(a) 2 persons
(b) 3 persons
(c) 7 persons
(d) None of these

(ix) A public company must have at least:

(a) 5 persons
(b) 7 persons
(c) 9 persons
(d) None of these

(x) A private company cannot have more than:

(a) 20 members
(b) 30 members
(c) 50 members
(d) None of these

(xi) Eliason V. Hamshaw (1819) Sup Ct US 4 wheaton 225 deals with:

(a) Counter proposed
(b) Implied acceptance
(c) Manner of acceptance
(d) None of these

(xii) A and B contract to marry each other. Before the time fixed for the marriage A goes
mad. In such a case the contract is:
(a) Void
(b) Voidable
(c) Valid
(d) None of these

(xiii) The maxim of Caveat Emptor in a contract of sale means:

(a) The seller guarantees the quality or fitness for any particular purpose supplied
(b) The buyer himself takes the risk as to the quality and condition of the goods
(c) There is an implied condition that the buyer can repudiate the contract at his option
(d) None of these

(xiv) A agrees to sell to B “”a hundred tons of oil” –the agreement is:
(a) Valid
(b) Void
(c) Voidable
(d) Partially valid
(e) None of these

(xv) An agreement entered into before marriage between a Muslim wife and husband that
the wife shall be at liberty to live with her parents after marriage is:
(a) Valid
(b) Void
(c) Voidable at the option of husband
(d) None of these

(xvi) A promises to obtain for B an employment in the Public Service and promises to pay
rupees 1000 to A. The agreement is:
(a) Valid
(b) Void
(c) Voidable
(d) None of these

(xvii) A void contract is:

(a) An illegal agreement
(b) Partly valid agreement
(c) Ceased to be a valid agreement
(d) None of these

(xviii) An agreement to pay one hundred rupees to a holy man for prayers for the success of
a suit in a court is:
(a) Valid
(b) Void
(c) Voidable
(d) Partially Valid
(e) None of these

(xix) A, for natural love and affection, promises to give his son B, Rs.100,000, and puts his
promise to B into writing and registers it. Will the contract be:
(a) Valid
(b) Void
(c) Partially Valid
(d) None of these

(xx) A contract B to sell his horse for Rs.500 by 10th January 2010. The horse so contracted
dies on 8th January 2010. The contract is:
(a) Valid
(b) Void
(c) B can sue A for compensation
(d) A is liable for damages
(e) None of these
Mercantile Law Paper 2009

Q.I. Select the best option/answer and fill in the appropriate box on the Answer Sheet.
(2009)

(i) Select the correct answer:

(a) Promisee and Offeree are one and same party
(b) Offeree is a party who propose an agreement while promisee accepts it
(c) None of these

(ii) Every agreement forbidding marriage of any adult person is void except of a minor:
(a) Yes (b) No (c) Partly correct (d) None of these

(iii) Can a contract executed in Saudi Arabia be enforced in courts in Pakistan?

(a) Yes (b) No (c) None of these

(iv) The effect of coercion on a contract is that the contract becomes:

(a) void (b) voidable (c) valid (d) None of these

(v) The members of partnership carrying out business of banking must not exceed:
(a) 10 (b) 20 (c) 50 (d) None of these

(vi) The minimum number of members required for forming private company is:
(a) 1 (b) 3 (c) 5 (d) None of these

(vii) The minimum number of members required for forming public company is:
(a) 7 (b) 50 (c) 5 (d) None of these

(viii) After its incorporation, the ordinary General Meeting of a company must be held
within:
(a) One year (b) the year of incorporation
(c) Eighteen months from the date of incorporation (d) None of these

(ix) What type of tax is referred to in the sale of Goods Act, 1930?
(a) Income tax (b) Wealth tax (c) Customs duty
(d) Sales tax (e) None of these

(x) The carrier holds the goods in transit as:

(a) Trustee (b) Agent (c) Bailee (d) None of these

(xi) For how much days, a promissory note is entitled to days of grace to be at maturity
when it is not
expressed to be either payable on demand or otherwise?
(a) 30 days (b) 15 days (c) 3 days (d) None of these
(xii) A promissory note is at maturity on Sunday, being public holiday. Whether such
promissory note will be deemed to be due on: (a) the next preceding business day (b) The
next succeeding business day (c) None of these

(xiii) Can a minor become a payee of a negotiable instrument?

(a) Yes (b) No (c) Not himself but his guardian

(xiv) Life Insurance Policy cannot be called in question by an insurer on the ground of
inaccurate or false immaterial statement made in the proposal for insurance after:
(a) one year (b) two years (c) three years (d) None of these

(xv) Willfully making statement false in any document required under Insurance Act. 1938,
shall be punishable with imprisonment upto:
(a) five years (b) four years (c) three years
(d) fine only (e) None of these

(xvi) Whether a minor can be appointed as nominee to Life Insurance Policy?

(a) Yes (b) No (c) His guardian only (d) None of these

(xvii) Caveat emptor:

(a) is a person who institutes pre-emption suit
(b) is seller who discloses defects in the goods being sold
(c) is the buyer who is supposed to be aware of the suitability of the goods (d) is owner of
an empty cave (e) None of these

(xviii) Penalty provided for driving uninsured vehicle is:

(a) imprisonment upto 5 years and fine upto Rs. 1000/- or both
(b) imprisonment upto 1 year and fine upto Rs. 100/- or both
(c) Imprisonment upto 3 months or fine upto Rs. 500/- or with both
(d) fine upto Rs. 10000/- only
(e) none of these

xix) Can a compoundable criminal case be referred to arbitration?

(a) Yes (b) No (c) None of these as only civil matters can be referred to

xx) Within how much period, the arbitrators are legally required to make their award after
entering on the reference?

(a) one month (b) two months (c) three months

(d) four months (e) None of these

Mercantile Law Paper 2008

Q-1 Select the best option and fill in the appropriate box on the answer sheet

I- If the consideration for an agreement is inadequate, the agreement is:

(a) Valid (b) Void (c) Voidable (d) None

II- On a contract by an agent on the behlf of undisclosed principal, the principal:

(a) May sue on contact (b) Cannot sue (c) Is hit by privity of contact (d) None

III- Carlill v Carbolic Smoke Ball Co. Ltd. deals with:

(a) Counter proposal (b) Implied acceptance (c) Implied revocation (d) None

IV- What is the amount of care a bailee is required to take in respect of goods bailed to
him:
(a) Extraordinary (b) Ordinary (c) Reasonable (d) None

V- A void contract is:

(a) An illegal agreement (b) Partly valid agreement (d) None

VI- X agrees not to carry on a similar business with Y for two years in consideration of
Rs.50,000/- as good will. The agreement is:
(a) Void due to restraint of trade (b) Valid (c) Against X's fundamental rights (d) None

VII- Whihc one of the following cannot be called an Act of God:

(a) An unprecedented rainfall (b) An earthquake (c) Fire not caused by lightening (d) None

VIII- An obligation arises from:

(a) A contract (b) From a wrongful act (c) Both a & b (d) None

IX- The rule nemo dat quod non habet means:

(a) No one should interfere in another's business (b) No one should be retained in a
partnership against his will (c) No one can give what he has not got (d) None

X-In a public company the shares are subscribed by:

(a) Government (b) Management (c) Creditors (d) None

XI- Can a minor be:

(a) Admitted as partner in a firm (b) Admitted to the benefits of partnership (c) Admitted as
a sleeping partner (d) None

XII- Transfer of property means:

(a) Delivery of goods (b) Transfer of possession (c) Transfer of ownership (d) None

XIII- Caveat Emptor rule means:

(a) Employer beware (b) Seller beware (c) Creditor beware (d) None

XIV- A liquidator is a person:

(a) Who is chairman of board of directors (b) Promoter of a company (c) Who winds up a
company (d) None
XV- Which one of the following clauses is considered vital in a memorandam of association
of a public company:
(a) Name clause (b) Object clause (c) Capital clause (d) None

XVI- A subsidiary company means:

(a) A supporting company (b) A non entity (c) An unregistered company (d) None

XVII-Which of the following actions an unpaid seller cannot take against a buyer:
(a) Exercise the right og lien (b) Stoppage of goods in transit (c) Sale (d) None

XIX- X is involved in some business; he transfers his share without the consent of all its
members. He is working in:
(a) A company (b) A firm (c) A private company (d) None

XX- At times a contract is discharged under the doctrine of frustration. Does it mean:
(a) Discharge by performance (b) Discharge by agreement (c) Discharge by breach (d)
None

Mercantile Law Paper 2007

(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

(2) Mercantile Law Paper 2006

(1) When an offer can only be accepted by the performance of the person to whom the
offer is made. Is characteristic of:
(a) bilateral contracts;
(b) unilateral contracts;
(c) implied contracts;
(d) None of these

(2) A tells B, “If you stood first in the class, I’ll pay you Rs. 5000.00. B stood first in
class and A paide him Rs. 5000.00. Which of the following is correct?
(a) A and B had a unilateral contract;
(b) A and B had an executor contract;
(c) A and B had an executed contract;
(d) None of these

(3) A offers to sell B his motorcycle at some time in the future. B accepts. Is there a
valid contract?
(a) Probably not, the terms are not definite;
(b) Probably yes;
(c) Definitely not because A failed to communicate the offer;
(d) None of these

(4) Which of the following is not an effective way to terminatean offer?

(a) By rejection;
(b) By acceptance;
(c) By counter offer;
(d) None of these

(5) A offers to sell B his collection of rare books for Rs. 5000. Before b even has a
chance to accept, A says “Sorry, I changed my mind, no deal.” This is an example of:
(a) Revocation;
(b) Rejection;
(c) Counter offer;
(d) None of these

(6) A and B enter into a contract in which A agrees to deliver milk to a restaurant. They
forget to include a price in the agreement. A court will:
(a) refuse to enforce the agreement;
(b) select the lowest quoted price for milk and insert it into contract;
(c) determine a reasonable price and insert it into the contract;
(d) None of these

(7) A agreed to supply food for Walima to b at 1 pm. However, he could hardly supply
the food at 5 pm.
(a) B can reject the delivery;
(b) He cannot reject the delivery
(c) B must accept the delivery
(d) None of these

(8) Which of the following actions an unpaid seller cannot take against a buyer:
(a) Lien;
(b) Stoppage in transit;
(c) Sale;
(d) None of these

(9) When a partnership is found liable for a debt, which assets are first used to pay the
debt?
(a) Individual assets of the partners;
(b) Personal property of the limited partners;
(c) Partnership Assests
(d) None of these

(10) A partnership involves three essential elements. Which of the following is not one of
those elements?
(a) An equal right in the management of the business;
(b) Limited liability for breach of contract;
(c) A joint ownership of the business
(d) None of these

(11) Which of the following actions requires the unanimous consent of all partners
before it may be undertaken?
(a) Hiring a new employee
(b) Purchasing new office equipment
(c) Admitting new partners
(d) None of these
(12) An order Instrument is the one which is payable to:
(a) A named person;
(b) To a bearer;
(c) To both
(d) None of these

(13) A bearer Instrument is the one which is payable to:

(a) A named person;
(b) To a bearer;
(c) To both;
(d) None of these

(14) A holder in due course is the one:

(a) who finds an instrument;
(b) who steals an instrument;
(c) who gets an instrument as a gift;
(d) None of these

(15) For the incorporation of a limited liability company filling of memorandum of

association is essential:
(a) for a public limited company only;
(b) for a private limited company, a public limited company and an unlimited company;
(c) for a public limited company only;
(d) None of these

(16) A subsidiary company is the one:

(a) which holds the majority shares of another company;
(b) which deals in the trading of shares of other companies;
(c) in which the majority shares are held by another company;
(d) None of these

(17) A is considering different forms of business organization for his business. For the
purposes of owning property and being a party to litigation, forms which are legal
entities separate from their owners include:
(a) Limited Partnership only;
(b) Private Limited Companies only;
(c) Both Private and Public Limited Companies;
(d) None of these

(18) A decision made by arbitrators is called:

(a) Sentence;
(b) Award;
(c) Judgment
(d) None of these

(19) An empire in an arbitration reference is appointed when the number of arbitrators

is:
(a) Odd;
(b) Even;
(c) More than 10;
(d) None of these

(20) The appointment of a person of the minor age as an agent is:

(a) Void;
(b) Valid;
(c) Voidable;
(d) None of these