ICAP CAF-4 Other business laws: practice questions with answers

Answer: D. Section 6 of the Partnership Act, 1932: whether a group of persons is a firm, or a person is a partner, is decided by the real relation between the parties, shown by all relevant facts taken together. Sharing profits or gross returns does not of itself make a person a partner (Explanation 1). In particular, a person who receives a share of profits as a lender of money to persons engaged in a business is not, by that alone, a partner (Explanation 2).

Under section 4, partnership also needs a business carried on by all or any of them acting for all. Zahid takes no part and nobody acts for him, so the real relation is that of lender and borrower. He is not a partner.

Answer: A. Section 7 of the Partnership Act, 1932: where no provision is made by contract between the partners for the duration of their partnership or for its determination, the partnership is a partnership at will.

Other kinds: a particular partnership is formed for particular adventures or undertakings (section 8); a partnership for a fixed term runs for a period set in the deed. Section 5 states that partnership arises from contract and not from status.

Saba, Nida and Erum's deed is silent on both duration and determination, so theirs is a partnership at will.

Answer: D. Section 16 of the Partnership Act, 1932 (subject to contract between the partners):
- (a) if a partner derives any profit for himself from any transaction of the firm, or from the use of the property or business connection of the firm or the firm name, he must account for that profit and pay it to the firm;
- (b) if a partner carries on a business competing with the firm, he must account for and pay to the firm all profits made in that business.

The van is firm property (section 14), so Asma must account for and pay the Rs 180,000 to the firm. The deed does not provide otherwise. This also reflects the general duty of utmost good faith in section 9.

Answer: A. Section 30 of the Partnership Act, 1932 (minor admitted to the benefits of partnership):
- Section 30(5): within six months of attaining majority, or of obtaining knowledge that she had been admitted, whichever date is later, she may give public notice that she elects to become, or not to become, a partner. If she gives no notice, she becomes a partner on the expiry of those six months.
- Section 30(7)(a): on becoming a partner, she becomes personally liable to third parties for all acts of the firm done since she was admitted to the benefits of partnership.

Dates:
- Majority: 10 March 2027 (born 10 March 2009, majority at 18).
- Knowledge: 1 May 2027 (later date, so it governs).
- Last date for notice: 1 May 2027 + 6 months = 1 November 2027.

If she stays silent, she becomes a partner on that date, with personal liability for the firm's acts back to her admission in 2024.

Answer: D. Section 8 of the Negotiable Instruments Act, 1881: the holder of a cheque is any person entitled in his own name to its possession and to receive the amount due. As endorsee of the cheque, Fahad is a holder.

Section 9: a holder in due course is a person who, for consideration, became the possessor of a bearer instrument or the payee or endorsee of an order instrument, before the amount became payable, and without sufficient cause to believe that the transferor's title was defective.

Fahad meets the timing and good-faith conditions, but he received the cheque as a gift, so he gave no consideration. He is a holder but not a holder in due course.

Answer: B. Section 5 of the Negotiable Instruments Act, 1881: a bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money to a certain person or to order or to bearer.

Section 6: a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. So every cheque is a bill, but a bill drawn on a banker is a cheque only if it is payable on demand.

Rabia's instruction is an unconditional signed order on Sutlej Commercial Bank to pay Rs 75,000 to Kareem, so it is a bill of exchange. It is payable sixty days after date, so it is not a cheque. Under section 13, it is still a negotiable instrument, because a bill payable to a named person without words prohibiting transfer is payable to order.