F4-Corporate & Business Law ACCA- Free Lectures From the Book 44 Exam Focused Lectures on Corporate & Business Law by Rehan Aziz Shervani-Cell # 0333-4324961

Paper F4 (CL ENG)

ACCA

44 Exam Focused Lectures On ‘Corporate & Business Law’ (English)

With 700 Dictionary Meanings and Technique to Solve Scenario Based Questions. (A Self Explanatory Book) (A Book that Teaches Like a Teacher.) Student Facilitation: 100% Context: Examination. Reference: Old Question Papers. Language: Simple; Student Friendly. Idea: Understanding and Qualifying the Paper. Marks Expectancy: Minimum 80%. By

Rehan Aziz Shervani

Visiting Professor of Law; Consultant Tax, Intellectual Property, Banking & Corporate Laws. (Advocate High Court) LLM;LLB;M.A Economics; M.A Political Science; DCMA; DTL;B.Com. Published By

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Features of the Book:: It gives dictionary meanings of every difficult word; provides technique for solving scenario based questions; minimizes need of a teacher; written in simple language & lay out; expressed in logical sequence on the frequency of lecture as is delivered by a teacher in a classroom; invents natural teaching rhythm & understanding; unnecessary details avoided; to the point; develops passionate learning habit; provides 100% facilitation paraphernalia of learning; makes the subject interesting; develops friendship equation between the subject and the learner; makes a student expert in the subject; provides quotations for the growth of wisdom; written in dialogue form & is exam- oriented.

Other Self-Explanatory Books by the Author: “99 Lectures On Business Law: ‘The Board of Studies’ of ‘Institute of Chartered Accountants of Pakistan’ has recommended the book as ‘suggested reading’ for the paper ‘Mercantile Law’ Module ‘B’, C.A. Foundation; appreciated and commented: “the book is written in lecture form and will be very beneficial for the students”. The book is also an accredited book of ‘Virtual University’ of Pakistan for the subject: ‘Business & Labor Laws’. “29 Lectures on English Jurisprudence”:

English jurisprudence is’ mother of all laws; it is taught in LLB Part I; the book has philosophical lay out with 700 dictionary meanings and is exam oriented. All rights reserved with the author . No part of the book can be reproduced or distributed in any form or by any mean, or stored in a data base or a retrieval system without the prior permission of the data base or a retrieval system without the prior permission of the author. Disclaimer: No responsibility is taken for any error or omission.

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Zero Lecture

Introduction to Law What is ‘Law’? To answer the question, the following definitions are discussed:Austinien’s definition of law: “Law is the command of the sovereign” Command (=Order) Sovereign (= Ruler)

Thus, it may be stated that law is the order of the ruler. Additional information: Kinds of sovereign: (1) de-jure sovereign (Constitutional ruler) (2) de-facto sovereign (Unconstitutional ruler) Aristotle defines constitution as: “A constitution denotes not only an arrangement of office, but, a manner of life. Simple definition: “Law is the right of one, obligation of the other, maintained by law enforcing authority” Right (= Sheltered and recognized interest) Obligation (=Duty) Maintained (=Managed) Enforcing authority (= Implementing power)

Thus, it may be stated that law is the sheltered and recognized interest of one, duty of the other managed and controlled by law implementing power. Aristotle’s definition of law: “Law is the experience, developed by reason and reason, tested by experience”. Experience (=Knowledge) Reason (= Rationale) Tested (=Checked)

Thus, it may be stated that law is the knowledge, developed by rationale and rationale, checked by knowledge.

Relevant quotation: Experience is a very hard teacher she gives the test first, the lesson afterwards. Classical definition of law: Law is the ‘dispassionate reason’ and its content is the same as that of morality. Dispassionate (=Unemotional) Reason (= Rationale) Content (=Substance)

Thus, law is the ‘unemotional rationale’ and its substance is the same as that of morality. Why laws are made? Laws are made to regulate human actions. Who makes laws? Laws are made by super human wisdom. In modern political state they are made by Parliament. Why laws are respected? Laws are respected because "civilization presupposes respect for the law" — that is, law is a foundation of civilization and dictates the tone and colour of what we suppose to be civilization. Advantage of law: The supreme advantage of law is peace and harmony. Law governs both the ruler and the ruled. What is justice? Justice means ‘giving every man his legal right’. Relevant quote on relationship of law and justice: “Justice is an ideal like truth just as a sculptor tries to achieve beauty with his mallet and chisel, so law is the tool of a judge in the pursuit of justice.” Ideal (=Model) Beauty (=Splendor or Prettiness) Mallet (=Hammer) Chisel (=Shape) Tool (=Instrument) Pursuit (=Search)

Thus, it may be said that justice is a model like truth just as a sculptor tries to achieve prettiness with his hammer and a shape, so, law is the instrument of a judge in the search of justice. Justice is the daughter of law. Is law a formal mechanism of social control? Yes, Law is a formal mechanism of social control. It helps in maintaining social order. Following are the two aspects of social control: (1) Formal control mechanism (2) Informal control mechanism What is ‘Corporate law’? Ans: Law relating to business companies. What is ‘Business Law’? Ans: Law relating to business. Exam oriented Question: What is Law?

General Information & Instructions regarding the Paper: ‘Corporate & Business Law’ Why study this book? Because it provides dictionary meanings of every difficult word; minimizes need of a teacher in understanding the concepts; provides technique as to solve scenario based questions; written in simple language & lay out; expressed in logical sequence on the frequency of lecture as is delivered by a teacher in a classroom; invents natural teaching rhythm & understanding, giving examples from general life; Unnecessary details avoided; to the point; develops passionate learning habit; provides 100% facilitation paraphernalia of learning; makes the subject interesting; develops friendship equation between the subject and the learner; makes a student expert in the subject; written in dialogue form & is exam- oriented. Paraphernalia (=kit; tools)

Who is the examiner of F4? Mr. David Kelley

What types of question Mr.David Kelley ask in the paper? He asks ‘challenging questions’. Challenging (=tough; tricky; demanding; taxing; not easy)

What warning David Kelly gives to the students? He is against question spotting and prediction of the topics that will come in the exam. He suggests that from the syllabus nothing should be left undone. Who secures good marks in the Paper? Good marks are secured by those who besides acquiring basic knowledge of the law also develop critical insight as to how laws are practically applied. Formula of solving scenario based question: The scenario based questions are solved by applying the following formula: FOI+Orl+Alfi+D Foi= Framing of Issue Qrl= Quoting relevant law Alfi = Application of the law on the framed issue D= Decision The most technical thing involved in the formula is as to how issues are framed; the following material will make you understand this process: Framing of issues: (1) Issue arises when a material proposition of fact or law is affirmed by the one party and denied by the others. (2) Material propositions are those propositions of law or facts which a claimant must allege in order to show a right to sue or a defendant must allege in order to constitute his defence. Allege (=assert; claim; contend) Law (= rule as laid down by Parliament or by a precedent) Facts (= what ever is perceived by our five senses are facts)

(3) Issues are of the following two kinds: (a) Issue of law (b) Issue of fact Issue of law: An issue of which answer is already prescribed in some rule of law.

Issue of fact: Before dealing with ‘issue of fact’, it is important to first understand the term ‘fact’---‘fact’ includes the following: (a) anything, state of things or relation of things capable of being perceived by senses; and (b) any mental condition of which any person is conscious. Issue of fact means a issue other than a issue of law. While attempting the scenario based question students are required to carefully read the proposition and thereafter ascertain what material proposition of fact or law the parties are at variance and shall thereupon proceed to frame and record the issues on which the right answer of the question appears to be dependent. Proposition (= situation; scheme) Ascertain (= determine) Variance (= difference; conflict) Proceed (= go ahead; advance; progress)

Points to focus (1) Reading the question and being focused on what is asked? (2) 70 percent of the marks available are for showing that you have knowledge of the relevant law. (3) 30 percent marks are available for scenario based question. What should not be done by the students while attempting the paper? Mr. David Kelly mentioned that the following shortcomings must be avoided: (1) Unclear question labeling makes the marker confuse in identifying which question is being answered. (2) Not start each question on a new page. (3) Not using both sides of the paper. (4) Don’t repeat information. (5) Producing ‘long general essays’ to ‘problem questions’ which contains little information regarding the specific issue raised in the question. Whether ACCA allows reading time for question papers? Yes, it allows 15 minutes for reading the question papers. What is the format of the question paper? Following is the format of the question paper: 10 Compulsory Questions for 10 marks each. Three questions are scenario based. Time allowed: 3 Hours.

The examination will comprise of questions drawn across all the syllabus areas. The scenario questions require you to analyze a situation from a legal point of view and give advice. Questions may be divided in to sub questions. The first five questions are knowledge based. Three problem based questions require ‘legal analysis’ and ‘application of the appropriate law’. Terminologies used by the examiner in asking the questions: Questions in F4 exam can not be answered unless the students learn the meanings of the following terminologies: Briefly (=in a few words) Distinguish (=make a distinction) Distinguishing (=unique) Explain (=give detail) Meaning (= sense) In relation to (= with regard to) Contemporary (= current; existing) Differentiate (= separate) Define (= giving description/ detail of a thing by its properties) Scenario (= situation) Describe (= express; explain) Specific (= exact) Effect of (= result; outcome) Analyze (=explore; evaluate; examine) In particular (= specifically) Likelihood (= possibility ) Potential (= would be) Perspective (= view; angle) Stating (= uttering) Advise (= give an opinion) Entitled (= allowed) Scope (= possibility; capacity, range) Conclusion (= ending) Contents (= inside; filling) Context (= back ground; frame work) Whether (= used to ask question) Fluorescent (= shining) Injury (=grievance; wrong) count (= calculation) Assuming (=assume; presumptuous) Extent (= degree; scope) Consider (= judge; evaluate) Advantage (= lead) Relative (= comparative) Concept (= idea) List (= record) Detail (= specify) Consequences (= results; out come) Terms (= conditions) Pursuing (= following) Grounds (= basis; foundation)

With regard (= in relation to)

Points to ponder: Ponder (=think over)

In education, nothing works if the students don't. Donald E. Simanek (1936-) American physicist, educator, humorist. Poor is the pupil who does not surpass his master. Leonardo da Vinci (1452–1519) Italian painter, sculptor, architect, musician, scientist, mathematician, engineer, and inventor. Notebooks. ======================================== [The King himself should be under no man, but under God and the Law.]

Lecture 1

King, House of Commons & House of Lords Origin of England’s name: The name of England was derived from the phrase: ‘land of angles’. In old English the phrase was translated as: “Engla land”. The ‘angles’ were well known ancient Saxon tribe. The tribe occupied the England during the early middle ages. Early Middle Ages (=a period that stretched from about 400 to 1000 of our Common Era, or CE).

Constitution of England: England has unwritten constitution---by unwritten constitution means a constitution which is not contained in a single document but consists of many documents. The English constitution deals with the distribution and exercise of the functions of government. Democratic form of government: The House of Common is elected by a majority of the voters. Government in England is therefore nothing more than government by opinion. Democratic (=self governing)

Parliamentary sovereignty: The expression: ‘parliamentary sovereignty’ means that the King, the House of Lords, and the House of Commons can pass, amend or repeal laws to any extent, and that there are no fundamental laws with which parliament cannot interfere. Amend (= alter; make changes) Repeal (= cancel; rescind) Extent (=level; degree) Fundamental law (= the organic law that establishes the government principles of a state especially constitutional law)

King of England: There is monarchy in England. Every legislation is required to be signed by the King; the ministers are his ministers; the law courts are his courts of justice. English monarchy is a limited monarchy in as much as no act of King is lawful unless approved by

ministers. Politically speaking, England is a democratic republic wherein king is used as a rubber stamp. King is bound to accept the advice of his cabinet. In social life King occupies dignified position. The prestige of the king is surrounded by the elements of the mystic significance which resides in the long history and hereditary situation. It is said about the late kings that they were feared by their breed and famous by their birth. The crown is the hereditary institution which is regulated by parliament by the rules of succession. The British monarchy though hereditary is really constitutional and is bound by definite limitations and restrictions. Formerly the Ministers advised the King, now the practice is reversed and it is the King who advises his Ministers. Monarchy (= kingdom) Politically (= in a way that is connected with politics) Republic (= democracy) Dignified (=regal; grand) Prestige (=esteem; regard) Mystic (= magic; supernatural) Significance (= worth) Hereditary (= genetic; inherited) Succession (= chain; series) Constitutional (= as per constitution) Formerly (= previously)

The House of Lords: It consists of about 750 members consisting of (1) hereditary Lords of Parliament known as peers; they are created by letter of paten or writ of summons; (2) non hereditary Lords of parliament; (3) life lords, including 6 Lords of Appeal in ordinary. As regard legislation, the House of Lords is, in legal theory, co equal in all respects with the House of Commons, but, in-fact its authority is politically very inferior. Its consent is in law as necessary as that of the House of Commons to every act of legislation, but it does not often withhold that consent when the House of Commons speaks emphatically and with the apparent concurrence of the nation on any matter. Its legislative function has been well summed up as a function of cautious revision. It can wisely stand fast against the commons only when there is some doubt as to the will of the people. Bills relating to taxation are never introduced in the House of Lords, but always originate with the Commons. Hereditary (= inherited) Letter of patent (= a document granting some right or privilege) Writ of summons (= a writ by which under the Judicature Acts of 1873-1875, all actions were commenced) Withhold (= refuse to give) Emphatically (= forcefully) Apparent (= obvious; clear) Concurrence (= agreement; harmony) Summed up (= concluded) Cautious (= careful) Revision (= correction; change) Originate (= initiate; start off)

The House of Commons: The House of Commons consists of 615 members, representing 595 constituencies in England, Wales and Northern Ireland. The House is chiefly composed of country

gentlemen, members of the learned professions, successful merchants and manufacturers and the representatives of the labor classes. Constituency (= electorate; population) Merchants (= traders) You cannot teach a man anything; you can only help him find it within himself. Galileo Galilei (1564-1642) Italian physicist and astronomer.

Lecture 5

Statutory Interpretation of Law Etymology of the Term ‘Interpretation’: The term ‘interpretation’ is derived from Latin explain the meaning of words’.

‘Interpres-pretis’ which means ‘to

Etymology (=origin) Derive (=originate or grow) Term (=word or expression)

Meaning of the Phrase ‘Interpretation of Law’: The terms ‘interpretation’ and ‘law’ respectively means ‘understanding’ and ‘rule’. Thus the phrase ‘interpretation of law’ means ‘understanding of rule’. Phrase (=expression) Meaning of the Term ‘Interpretation’ According to Black’s Law Dictionary Edition 8th: The process of determining what something especially the law or legal document means. Process (=method) Determine (=decide) Especially (=particularly or mainly)

John Salmond & Concept of ‘Interpretation of Law’: According to John Salmond, the phrase ‘interpretation of law’ means ‘the process by which court seeks to decide the meanings of law. He believes in the following two kinds of interpretation: (1) Grammatical Interpretation (2) Logical Interpretation Concept (=idea) Seek (=search for)

(1) Grammatical Interpretation: The term ‘grammatical’ refers to the ‘rules of language that govern the structure of a sentence’. In grammatical interpretation of law, language rules are applied to understand the meaning of law. Grammar (=language rules) Govern (=manage) Structure (= arrangement)

Factors Affecting Grammatical Interpretation of Law: Affect (=have an effect on) Following factors affect the process of true grammatical interpretation: (a)Ambiguous language. (b) Inconsistency & (c) Incompleteness. & (=ampersand----An ampersand is a symbol that means "and.")

Ambiguous Language: The term ‘ambiguous’ means ‘doubtful’ or ‘unclear’. Sometimes, a sentence or part of a sentence produces two or more different meanings causing vagueness or elusiveness in understanding the law; under such situation, it is the duty of the court to logically determine the real meaning of the sentence by establishing the more natural, consonant and obvious meaning of the sentence. Natural (=normal) Consonant (=suitable) Obvious (=clear) , comma (=A comma is a punctuation mark used to separate words independent phrases

or clauses in a sentence) Inconsistency in the Construction of Law: The term ‘inconsistency’ means ‘contradiction’ or ‘discrepancy’. Where different parts of law are in contradiction with one another in such a manner that they destroy and nullify the spirit of law, it becomes the duty of court to logically discover the true intention of the legislature and make the parts of law consistent with one another. Construction (=structure) Contradiction (=disagreement or discrepancy)) Destroy (=pull down) Nullify (=cancel out) Spirit (=will or force) Legislature (=parliament or law making body) Consistent (=dependable)

Incompleteness of Law: The term ‘incompleteness’ means ‘lacking some thing’ or ‘having some flaw’. Sometimes there exists a kind of flaw in the law that whole meaning of law cannot be understood. Under such circumstance, the defect is cured by doing logical interpretation. Circumstance (=condition or fact or situation) Rules of Grammatical Interpretation: Following are the rules of grammatical interpretation: (1) The words are understood according to their definitions prescribed in the relevant enactment. Definition (=description of a thing by its properties)

(2) If required, legal meanings of the words may be consulted from authentic legal dictionaries like Black’s Law dictionary, Osborn Law dictionary etc. Authentic (=valid; genuine) etc. (=and others)

(3) If required, meaning of word may be judged by the company it keeps; The Context or company = Surrounding Section or Sections + The whole Act or whole area of legislation. Company (=context) (4) Words are understood in the sense that they possess since the time of enactment of law. Since (=from the time when)

(5) The rule: ‘ mentioning of one person is the exclusion of other’ is applied in a situation where the subject matter of law consists of two subjects and there exists a provision that makes reference to only one of the two subjects; the provision is construed without making the reference to the other subject. For example: where the statute has two

subject matters: building and land. The enactment contains along with other provisions the law regarding land. Here the provision is construed without including the term ‘building’ even though in normal circumstances the term land includes the term ‘building’. Subject matter (=area under discussion) :colon (=A colon is a punctuation mark that is used to introduce a list in a sentence or a quote, to separate two major parts of a sentence) construe (=interpret)

(6) ‘Expressum facit cessare tacitum’ is a rule of interpretation of law which states: ‘express words die down chance of implied interpretation of law’. Die down (=close or finish) Implied (=indirect or oblique)

(8) ‘Ejusdem generis’ is a Latin rule of interpretation which means ‘of the same kind or class’. The rule states: ‘when a general word or phrase follows a list of specifics, the general word or phrase will be interpreted to include only items of the same type as those listed’. Example: In the phrase horses, cattle, sheep, pigs, goats, or any other farm animal, the general language used is ‘any other farm animal’, despite its seeming breadth, would probably be held to include only four-legged, hoofed mammals typically found on farms, and thus would exclude chickens. Follow (=go after) Specifics (=data) General (=common or all purpose) Phrase (=expression) Listed (=scheduled or programmed) Despite (=regardless) Seeming (=apparent) Breadth (=size or wideness) Probably (= almost certainly) Thus (=therefore)

(2) Logical Interpretation: The term ‘logical’ means ‘rational’ or ‘based on reason’. Where grammatical interpretation is impossible, logical interpretation takes its course and the true intention of the legislature is discovered by referring the surrounding facts. Professor Allen grey says, ‘logical interpretation calls for the comparison of the statutes with each other and with the whole system of law and with the consideration and circumstances in which the statute was passed. Rules of Logical Interpretation: Following are the rules of logical interpretation: (1) The first rule is named as ‘golden rule’. Where court finds clerical mistake in the statute, to rectify the errors it introduces saving clause therein for the following purposes: (a) To effectuate the intention of the legislature. (b) To avoid absurd, unjust or immoral interpretations. (c) To uphold the principles of law. Rectify (=correct) Therein (=in the statute or law) Intention (=objective; plan)

(2) The second rule is ‘mischief rule’. It states where a statute has been clearly enacted to suppress mischief of one sort, the interpretation must not be sought to suppress mischief of different sort fall outside the intention of the legislature. Statute (=law) enacted (=passed) suppress (= restrain) Mischief (=misbehaviour) Sort (=kind or variety) Sought (=required or wanted) Intention (=target)

Relevant Case Law: In Cokery v Capenter 1950. It was held that a bicycle was a ‘carriage’ for the purpose of the licensing Act 1872 where a defendant was charged with cycling whilst intoxicated. The purpose of the Act was to prevent people who are in a state of intoxication from operating any form of transport on public roads. (3) The third rule is termed as ‘last antecedent rule’. This rules states that relative words or phrases are to be applied to the words or phrases immediately preceding, and as not extending to or including other words, phrases or clauses more remote unless such extension or inclusion is clearly required by the intent and meaning of the context, or disclosed by an examination of the entire Act. Antecedent (=forerunner or ancestor) Preceding (= previous or earlier) Clause(=part) Remote (=distant or far off) Unless (=if not) Extension (=addition or expansion) Inclusion (=addition) Intent (=aim or purpose) Context (=surrounding circumstances)

(4) The fourth rule is named as ‘four corner rule’. The rule states that intention of the legislature must be gathered from the statute as a whole and not from the isolated part thereof. Gathered (=collected) Whole (=total or entire) Isolated(=lonely or inaccessible) Thereof (= related to statute)

Conclusion: Interpretation of enactments is necessary as they are not flawless. Presumptions applied in interpretation of statute It is understood, except the statute contains express words to the contrary, that the following presumptions of statutory interpretation apply: Except (=with the exception of; excluding) Express words (=articulated communication) Contrary (=opposing) Presumption (=supposition; deductions)

(1) A statute can not be enforced with retrospective effect. Retrospective effect (=extending in scope or effect to matters that have occurred in the past.)

(2) A statute does not bind the crown. Bind (=to impose duty on a person)

(3) A statute cannot impose criminal liability with out proof of guilty intention. However certain statutes rebut this presumption and impose strict liability with out proof of guilty intention. For example strict liability for dangerous driving under the Road Traffic Act. Guilty intention (=intention for committing crime) Rebut (=disprove; refute) Strict liability (= liability that does not depend on actual negligence or intent to harm, but that is based on the breach of an absolute duty to make something safe.

(4) A statute does not have the effect of repealing the other statutes. Repeal (=cancel; annul)

(5) The scope of a statute in limited to the territorial boundaries of UK, however, statute involving international contents must be construed in harmony with the International law. Scope (=range; capacity; scale) Construe (=interpret) Harmony (= agreement; synchronization) International Law (= the legal system governing the relationship between nations.)

(6) A statute does not intend to deprive a person of his liberty, however, if it wants to than clear words must be used to make clear the situation and intention of the legislature. Example of such legislation is legislation for mental health and immigration. Liberty (=freedom from arbitrary or undue external)

(7) On the plea of nationalization if a statute deprives a person from his property, the government is supposed to compensate him. Nationalization (= to put property of an individual or group of individuals under the control of the government which becomes its owner.

(8) A statute does not alter the existing common law. Alter (=change)

Intrinsic & extrinsic aid in interpretation of statutes Intrinsic aid: The word intrinsic means built-in; inherent; basic. Thus the intrinsic aid is a built-in aid within the statute. The intrinsic aid consists of the following: (1) The title of the Act helps in determining the general objective of the enactment. (2) The preamble of the Act usually contains information regarding the objective of the enactment. (3) Interpretation sections of an act are also helpful in interpreting the statutes. (4) Summary notes given in the margin are also helpful in interpreting the statute. Extrinsic aid: The term extrinsic means coming from outside; not built-in. Thus the extrinsic aid is an aid which is not available within the statute. It consist of the following: (1)Reports of the Law Commission (2) Reports of the Royal Commissions (3) Reports of the Law Reform Committee (4) Hansard; the UK Journal of UK Parliamentary debates. This follows a decision of the then House of Lords in Papper v. Hart 1992 where it was decided that it is acceptable to look at the original speech which first introduced a bill to ascertain its meaning, but only if the statute is ambiguous or obscure or its literal meaning would lead to absurdity. Journal (=periodical; magazine)

Absurdity (=illogicality; irrationality; silliness)

Exam Oriented Questions: What is meant by interpretation of statutes? When does need for interpretation of a statute arise? What is literal rule? What is Golden rule? What is Purposive approach for interpretation of statutory law? What is Mischief rule for interpretation of statutory law? What is contextual rule? Discuss Ejusdem generis. Who interprets statutes? What are the aids available for interpretation of statutes? What is the most modern approach of interpretation of statute under English legal system? What are the presumptions regarding interpretation of statute? What is meant by the expression” ‘unius est exclusion alterius’? What is meant by the rule: ‘In Pari materia’? Discuss intrinsic and extrinsic aid for the interpretation of statute law. What is meant by the rule: ‘Noscitur a socis’? Point to remember: The Examiner expects quoting case law in the answer.

[Seriousness is the only refuge of the shallow.]

Lecture 9

What are the vitiating factors that make a contract invalid? Vitiating factors like mistake, misrepresentation and undue influence can partly or wholly make the contract invalid. Vitiate (=to cause to have no force or effect)

‘Mistake’? Error or misconception or misunderstanding or erroneous belief. Kinds of mistake: Following are kinds of mistake: Mistake of law Mistake of fact Mistake of law: An error by a person about legal right or obligation is a mistake of law. It does make contract void. Relevant rule: “Ignorance of law is no excuse” Example: Mathew believes the speed limit on Cochee Bay Road is 80 km/h. In fact, it is 60 km/h. This mistake can not be taken as a defense against the charge of exceeding the speed Misrepresentation: Misrepresentation means and includes the following:

(1) The positive assertion in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true. (2) Any breach of duty without intent to deceive, gain or advantage to the person committing it or any one claiming under him by misleading another to his prejudice or to the prejudice of any one claiming under him. (3) Causing, however, innocently a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement. Positive (=Optimistic or encouraging) Assertion (=Statement) Warranted (=Supported) Prejudice (=Injustice or unfairness) Substance (=Matter or essence) Subject (=Focus or theme)

Thus misrepresentation means and includes the following: (1) The encouraging statement in a manner not supported by the information of the person making it, of that which is not true, though he believes it to be true. (2) Any breach of duty without intent to deceive, gain or advantage to the person committing it or any one claiming under him by misleading another to his unfairness or to the unfairness of any one claiming under him. (3) Causing, however, innocently a party to an agreement to make a mistake as to the essence of the thing which is the focus of the agreement. Undue influence: “A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other, and uses that position to obtain an unfair advantage over the other” Induced (=Made) Subsisting (= Existing) Dominate (=Control) Will (=Self control) Obtain (=Achieve) Unfair (=Unjust) Advantage (=Gain)

Thus it may be stated that a contract is said to be induced by undue influence where the relations existing between the parties are such that one of the parties is in a position to control the self control of the other, and uses that position to achieve an unjust gain over the other. [He who is slowest in making a promise is most faithful in its performance.] Jean Jacques Rousseau Lecture 14

Consideration

Introduction For an agreement to be regarded as a contract, it is necessary that it must be supported by consideration. Consideration is described as an exchange of value for value Value (=price)

Definition of consideration Consideration is the ‘price’ paid by each party to the contract for the other party’s promise. The case of Currie v. Misa (1875) laid down the definition of consideration as under:

“Consideration is some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.” Right (=a legally protected interest) Interest (=concern) Profit (=income) Accrue (=grow) Forbearance (=restraint) Detriment (=loss) Responsibility (=liability) Suffer (=endure) Undertake (=accept)

Thus this definition may be explained as, “Consideration is some legally protected interest, concern, and income or benefit growing to one party, or some restraint, loss or liability given, endure or accept by the other. Kinds of consideration: Following are the kinds of consideration: (1) Past (= an act done or a promise given by a promisee before making a promise sought to be enforced) (2) Present (3) Future (4) Executed ( = a consideration that has been wholly given) (5) Executory (= a consideration that is to be given only after formation of the contract; present or future consideration as opposed to past consideration) Is past consideration a good consideration? Past consideration is not a good consideration.In Eastwood v Kenyon, the guardian of a young girl raised a loan to educate the girl and to improve her marriage prospects. After her marriage, her husband promised to pay off the loan. It was held that the guardian could not enforce the promise as taking out the loan to raise and educate the girl was past consideration, because it was completed before the husband promised to repay it. Where a contract exists between two parties and one party, subsequent to formation, promises to confer an additional benefit on the other party to the contract, the promise is not binding because the promisee's consideration, which is his entry into the original contract, had already been completed at the time the next promise is made. Relevant Case Law: Roscorla v Thomas Roscorla and Thomas contracted to buy a horse for £30. After the sale, Thomas promised Roscorla that the horse was sound; the horse turned out to be vicious. It was held that Roscorla could not enforce the promise, as the consideration given for entering into the contract to buy the horse had been completed by the time the promise was made; in a sense, the consideration was "used up". What are the exceptions to the rule ‘past consideration is not a good consideration’? The rule ‘past consideration is not a good consideration’ is subject to some exceptions : (1) Past consideration is a good consideration to create liability on Bill of exchange (Section 27 of The Bill of Exchange Act 1980)

(2) Right to sue for the recovery of debt become barred if the suit is not filed within six years. (The Limitation Act 1980). However if after the expiry of the time the debtor gives written acknowledgement of the creditor’s claim, the claim becomes enforceable by law. Whether request to provide for service implies promise for the payment? Yes; the request to provide for service implies the promise for the payment. Relevant Case Law: Lampleigh v Braithwaite 1615 The defendant, a ‘murderer’, requested the claimant to seek royal pardon for him. The pardon was sought and the defendant promised to pay 100 Pounds. Later, the defendant refused to pay. It was held that defendant was bound to pay as the request for service entails promise for payment. Implies (=entails; means)

Whether negotiations for services imply payment for the services? Co-owners of patent rights gave their employee an extra assignment to find licensees to work the patents. The employee successfully arranged the new licensees. The co-owners agreed to pay him for the services. Later one of the co-owner died and his executors denied the existence of any binding contract. It was held that the negotiation with the employee implied promise for payment. Exam Oriented Questions: (1) Define and explain consideration =============================================================== Lecture 17

Intention to Create Legal Relationship What is presumption? A legal inference or assumption that a fact exists based on the known or proven existence of some other fact or group of facts. Inference (= conclusion)

What is rebuttal presumption? An inference drawn from certain facts that establish a prima facie case which may be overcome by the introduction of contrary evidence. Contrary (=opposite)

Presumptions as to intention to create legal relationship: Presumption means a ‘legal inference’ or ‘assumption’. It is a presumption that social, domestic and family arrangements are made without intention to create any legal relationship. However, it is a presumption that commercial agreements are made with intention to create legal relationship. No presumption of intention to create legal relationship exists, where, husband and wife living happily do some promise with each other. Relevant Case Law: Balfour v Balfour A husband promised to pay his wife a household allowance of 30 pounds every month, later, the parties separated and the husband refused to pay. The wife sued for the allowance. It was held that the wife was not entitled to receive the allowance as the agreement was made during the time they were living good marital life.

Presumption of intention to create legal relationship exists, where, husband and wife living apart do some promise with each other. Relevant Case Law: Merritt v Merritt 1970 The husband and wife jointly got a house on mortgage. Later they quarreled and started living apart agreeing that the wife would pay the mortgage payments and on discharging all the payments, the husband would transfer the house in her name. The wife paid all the payments but the husband refused to transfer the house by taking the plea that the promise was without intention to create legal relationship. It was held that there was an intention to create legal relationship; the stance of the wife was upheld. No presumption of intention to create legal relationship exists where the parties making the promise are by relationship daughter and father at good terms. Relevant Case Law: Jones v Padavatton The claimant, in 1962, agreed to pay her daughter a monthly allowance if she would go to England to do Barrister ship. The claimant, in 1964, bought a house in England; asked her daughter to live in one portion of the house and collect the rent of the other portions. In 1967 they quarreled with each other and the claimant sued her daughter for the possession of the house; the daughter counter claimed amount on account of agreed monthly allowance. It was held that there existed no intention to create legal relationship between the parties. The stance of the claimant was upheld. Presumption of an intention to create legal relationship exists, where, two of the three parties are close relatives and the other is the paying border. Relevant Case Law: Simpkins v Pays 1955 The defendant, her grandmother and the claimant who was their paying border jointly participated in a competition organized by Sunday newspaper. The entries were made in the name of the grandmother.They won 750 Pounds. The first two refused to give any share to the claimant by taking the plea that there was no contract between them and it was a domestic arrangement. It was held that there was an intention to create legal relationship between the parties and the stance of the claimant was upheld by the court. Intention to create legal relationship is gathered from the wording of the agreement. Relevant Case Law: Rose & Frank v Crompton 1923 The defendants, by virtue of honorable pledge clause, appointed the clamant as distributor in USA manifesting the relationship is not subject to any legal jurisdiction in any country. The defendant terminated agreement without giving any notice. It was held that there was no intention to create a legally binding contract between the parties. Transactions containing the words: ‘binding in honor only’ is made without intention to create legal relationship. ( Jones v Vernons Pools 1938) Letter of comfort does not contain an intention to create legal relationship between the parties. Relevant case Law: Kleinwort Benson Ltd v Malaysia mining Corpn 1989 The claimant lent money to the defendant’s subsidiary. The defendant issued it a letter stating: ‘it is our policy to ensure at all times a position to meet outstanding liabilities’.

The subsidiary went in to liquidation and the claimant sued the holding company for the debts of the subsidiary. It was held that the letter of comfort just stated the policy of the company; it contained no any intention to create legal relationship. Policy (=strategy)

What is the test for gauging contractual intention? (Objectivity, not subjectivity, test for contractual intention) The test of contractual intention is objective, not subjective. Explanation It means it is not important what the parties had in mind, but what a reasonable person would think, in the circumstances, their intention to be. Reasonable (=rational; logical)

Scenario based question with solution: Alan, a qualified accountant, agreed with his father that he would prepare his business annual tax return against the fee of 500 Pounds. Alan filed the return and the father refused to pay the fee saying it is not right of the son to charge fee from his father. Required: Whether Alan can recover the fee from Ben. Solution: Formula: Foi + Qrl + Arlfi + D Framing of issue between Alan and Ben: Whether Alan can recover the fee of 500 Pounds from Ben. Quoting relevant law: The test of contractual intention is objective, not subjective. It means it is not important what the parties had in mind, but what a reasonable person would presume, in the circumstances, their intention to be. More over it is a presumption that social, domestic and family arrangements are made without intention to create any legal relationship. Whereas it is a presumption that commercial agreements are made with intention to create legal relationship. Reasonable (=rational; logical) Presumption (= a ‘legal inference’ or ‘ assumption’.)

Applying the relevant law on the framed issue: By applying the law it is clear that there is a presumption that commercial agreements between the family are binding contracts. Decision: Alan has legal right to recover, the fee of 500 Pounds, from Ben.

Scenario based question with solution: Two years ago Alan separated from his wife Cath. In a written agreement Alan agreed to pay Cath 1000 Pounds per month as maintenance allowance for her and their daughter Dawn and for paying of the mortgage debt a of jointly owned house. Alan promised that on discharging the mortgage debt he will transfer Cath’s share to her but he refused to do so. Required: Cath can require Alan to transfer his part of the house to her. Solution: Formula = FOI+Qrl+Alfi+D Framing of issue between Alan and Cath:

Whether Alan is under contractual obligation to transfer Cath her share in the house? Quoting relevant law: Presumption exists as to the intention to create legal relationship exists, where, husband and wife living apart do some promise with each other. (Merritt v Merritt 1970) Applying the relevant law of the framed issue: By applying the law on the rule it is clear that where a husband and wife living a part do some promise with each other a presumption exists that they had intention to create legal relationship. Decision: Cath has legal right to get the part of the house transferred in her name.

Exam oriented Questions: (1) What is meant by the term ‘presumption? (2) What is meant by the term ‘rebuttal presumption’? (3) What are the presumptions in domestic and commercial arrangements?

Iuris prudentia - the wise provision of law. May law remain wise, and wisdom remain law! Lecture 19

Law of Torts What is Tort.? Tort is a civil wrong for which the remedy is a Common law action for unliquidated damages and which is not exclusively the breach of a contract or the breach of a trust or other merely equitable obligations. Civil wrong (=a violation of non-criminal law) Remedy (=the means of redressing a wrong) Common law action (= a civil judicial proceeding at Common law) Unliquidated damages (=damages that cannot be determined by a fixed formula and must be established by a judge or jury.) Exclusively (=entirely) Breach (=violation) Contract (=an agreement between two or more parties creating obligations that are enforceable at law.) Trust (=the right, enforceable solely in equity, to the beneficial enjoyment of property to which another person holds the legal title.) Equitable obligation(=just; existing under the principles of equity)

Thus, tort is a violation of non-criminal law for which the means of redressing the wrong is a civil judicial proceedings at common law for damages that cannot---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for detail see book-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Negligentia semper habet infortuniam comitem. (=Negligence always has misfortune for companion) Lecture 21

Professional Negligence Professional (=a person who belongs to a learned profession) Negligence =duty to take care + Breach of duty + damage

Accountants/Auditors are Professionals; they act in expert capacity; therefore they have special relations with their clients. Development of the concept of Negligent Professional advice relating auditors: 12/09 Development has been done through the operation of precedent. History reveals the refinement that has been taken place through the precedents, in-fact, the concept of negligence was first time developed in the case of Donoghue v Stevenson (1932) Concept of professional negligence before 1963: In Candler v Crane 1951 the Court of Appeal held that ‘the defendant was not liable for a bad investment based upon a set of negligently prepared accounts because there was no direct fiduciary or contractual relationship between the claimants and investors’. Meaning thereby duty to take care is not owned to strangers. In this case Lord Denning dissented and stated that ‘Accountants owed a duty of care not only to their clients but also to all those whom they know they will rely on their accounts in the transactions for which those accounts are prepared’. After 12 years i.e. in 1963 the dissenting view of Lord Denning was evolved and termed-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for detail see book------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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