CSS Mercantile Law MCQs

This comprehensive set of MCQs on Mercantile Law for the Central Superior Services (CSS) examination is meticulously designed to cover all major topics in the CSS syllabus. Addressing key areas such as contracts, partnerships, sales of goods, agency law, and negotiable instruments, these MCQs aim to equip aspiring CSS candidates with a solid understanding of commercial law principles and their practical applications.

Who should practice CSS Mercantile Law MCQs?

Candidates preparing for the CSS examination who want to strengthen their grasp of commercial laws governing business and trade.
Individuals interested in learning about the essentials of contract formation, partnership agreements, and rights and obligations in sales and agency law, all of which are critical for civil service roles involving legal and regulatory matters.
University students focused on high-yield topics such as offer and acceptance, breach of contract, liability in partnerships, and the functions of negotiable instruments like cheques and promissory notes, crucial for the CSS Mercantile Law syllabus.
Anyone looking to develop analytical skills in interpreting commercial statutes and understanding their significance in business transactions and commerce.
Students committed to mastering the fundamentals of mercantile law to excel in competitive exams and pursue careers in business law, public administration, or regulatory advisory roles.

1. Which of the following is not an essential element of a valid contract under the Law of Contract, 1872?

A) Agreement
B) Consideration
C) Legality of object
D) Written form

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2. A contract without consideration is generally considered:

A) Valid
B) Void
C) Voidable
D) Enforceable

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3. An agreement not enforceable by law is termed as:

A) Void contract
B) Voidable contract
C) Valid contract
D) Quasi contract

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4. The lawful object of a contract means:

A) The contract should be legal and not against public policy
B) The contract should be in writing
C) The contract must involve parties over 21 years of age
D) The contract must involve monetary exchange

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5. Which of the following contracts is not void?

A) Contracts with unlawful consideration
B) Contracts made by incompetent parties
C) Contracts by mutual consent
D) Contracts forbidden by law

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6. In a contract, an offer is terminated by:

A) Revocation before acceptance
B) Acceptance by the offeree
C) Making a counter-offer
D) All of the above

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7. A contract that depends upon an uncertain event happening is called a:

A) Quasi contract
B) Contingent contract
C) Void contract
D) Executed contract

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8. A contract of indemnity is:

A) A promise to do something
B) A promise to bear the loss of the other
C) A promise of repayment
D) A promise to pay on behalf of another

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9. Which section of the Law of Contract, 1872 defines a void contract?

A) Section 2(g)
B) Section 2(h)
C) Section 5
D) Section 10

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10. When parties to a contract exchange their promises, the contract is called a:

A) Executed contract
B) Executory contract
C) Quasi contract
D) Valid contract

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11. If a person is forced to enter into a contract due to undue influence, the contract is:

A) Valid
B) Void
C) Voidable
D) Illegal

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12. A seller’s right of resale arises when:

A) The buyer pays in full
B) The goods are damaged
C) The buyer defaults in payment
D) The buyer agrees to pay in installments

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13. According to the Sale of Goods Act, 1930, the term ‘goods’ includes:

A) Only movable property
B) Only immovable property
C) Both movable and immovable property
D) Services

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14. The doctrine of Caveat Emptor means:

A) Let the seller beware
B) Let the buyer beware
C) Let the law decide
D) Let the court intervene

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15. Under the Sale of Goods Act, an unpaid seller has the right of:

A) Withholding delivery
B) Resale
C) Lien on the goods
D) All of the above

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16. A partnership firm is dissolved compulsorily in case of:

A) Insolvency of all partners
B) Death of one partner
C) Admission of a new partner
D) Change in business location

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17. In the context of partnerships, “holding out” implies:

A) Responsibility for company losses
B) Stating oneself as a partner without being one
C) Transferring shares
D) Withdrawing partnership consent

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18. Which act governs negotiable instruments in Pakistan?

A) Negotiable Instruments Act, 1881
B) Sale of Goods Act, 1930
C) Competition Act, 2010
D) Electronic Fund Transfer Act, 2007

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19. The primary function of the Competition Commission of Pakistan is to:

A) Regulate competition in the market
B) Set interest rates
C) Oversee consumer goods pricing
D) Regulate e-commerce

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20. According to the Electronic Transaction Ordinance, 2002, an electronic document is:

A) Only valid in paper form
B) Recognized and valid as a record
C) Invalid in court
D) Restricted to financial institutions

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21. Under the Law of Contract, 1872, an offer that is revoked before acceptance is:

A) Valid
B) Voidable
C) Void
D) Invalid

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22. The capacity of parties in a contract generally excludes:

A) Minors
B) Insolvent persons
C) Intoxicated individuals
D) All of the above

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23. Under the Sale of Goods Act, 1930, the difference between ‘sale’ and ‘agreement to sell’ is that:

A) Sale transfers ownership immediately, while agreement to sell does not
B) Sale is conditional, while agreement to sell is not
C) Sale involves future goods, agreement to sell does not
D) Both are the same

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24. A contract where both parties agree to act for each other’s benefit is called a:

A) Void contract
B) Bilateral contract
C) Quasi contract
D) Unilateral contract

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25. In a bailment, the person delivering goods is known as the:

A) Bailee
B) Lender
C) Bailor
D) Trustee

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26. Which one of the following does not invalidate consent in a contract?

A) Fraud
B) Undue influence
C) Duress
D) Mutual agreement

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27. Under the Partnership Act, 1932, a “limited partnership” means:

A) All partners have limited liability
B) At least one partner has unlimited liability
C) No partner has personal liability
D) Only one partner has limited liability

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28. An instrument that represents a promise to pay a specific sum to another is a:

A) Cheque
B) Bill of exchange
C) Promissory note
D) Demand draft

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29. According to the Competition Act, 2010, a dominant position is considered abused when:

A) It leads to higher consumer satisfaction
B) It prevents market competition
C) It encourages fair pricing
D) It promotes new entrants

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30. In the Electronic Transaction Ordinance, an electronic signature must:

A) Be handwritten
B) Be verified and secure
C) Be in ink
D) Be notarized

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31. The term “nemo dat” in the Sale of Goods Act, 1930, means that:

A) A person can sell goods he does not own
B) Ownership can be freely transferred
C) No one can give a better title than he has
D) Buyers have absolute ownership

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32. In a partnership at will, the partnership can be dissolved:

A) Only by mutual agreement
B) By giving notice to other partners
C) Only by the court
D) Only after five years

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33. A quasi-contract is:

A) An agreement without any legal obligations
B) A legally enforceable contract without an agreement
C) A contract that can be terminated at will
D) An oral agreement

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34. The term “holder in due course” refers to a person who:

A) Holds a negotiable instrument illegally
B) Holds a negotiable instrument for collection
C) Takes the instrument in good faith and for value
D) Issues the negotiable instrument

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35. Which section of the Partnership Act, 1932 defines ‘firm’?

A) Section 4
B) Section 12
C) Section 18
D) Section 24

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36. A minor in a partnership firm has the following rights:

A) To become a full partner
B) To dissolve the partnership
C) To share profits only
D) To control all decisions

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37. Under the Arbitration Law in Pakistan, the appointment of an arbitrator is made by:

A) The government
B) The court
C) Mutual consent of parties
D) Legal advisory board

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38. An electronic transaction in the Electronic Transaction Ordinance is considered to occur when:

A) It is acknowledged by the recipient
B) It is sent by the sender
C) It is received by a server
D) It is printed

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39. A negotiable instrument is dishonored when:

A) It is lost in transit
B) It is presented before the due date
C) Payment is refused upon presentment
D) It is accepted by the drawee

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40. The Companies Ordinance, 1984 governs:

A) Sole proprietorships
B) Limited liability companies
C) Partnerships
D) Private agreements

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41. The principle of ‘free consent’ under the Law of Contract means:

A) Both parties act with mutual understanding
B) The contract must be signed in the presence of a witness
C) Consent is free from coercion, fraud, or undue influence
D) Contract must be notarized

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42. Under the Competition Act, 2010, mergers must be:

A) Approved by the Competition Commission of Pakistan
B) Carried out without notifying any authority
C) Exclusive to public companies
D) Restricted to international companies

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43. A consumer under the Consumer Protection Act, 2006 refers to:

A) An individual buying goods or services for resale
B) A person purchasing goods for personal use
C) An employee receiving goods as part of employment
D) A retailer of goods

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44. In case of a dispute under the Consumer Protection Act, 2006, complaints are filed before the:

A) Consumer Commission
B) Arbitration Council
C) High Court
D) Competition Commission

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45. The Competition Commission of Pakistan’s main function is to prevent:

A) Trade monopolies
B) Consumer goods shortages
C) Employment discrimination
D) Tax evasion

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46. The term “caveat emptor” in the Sale of Goods Act, 1930 implies that:

A) The seller is responsible for the quality of goods
B) The buyer should inspect goods before purchase
C) Goods once sold cannot be returned
D) The seller guarantees all goods

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47. The essential characteristic of a negotiable instrument is:

A) It must be in writing
B) It must be signed by both parties
C) It can only be transferred by the drawer
D) It cannot be dishonored

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48. Under the Law of Contract, an “executed contract” means:

A) A contract made orally
B) A contract that is completed
C) A contract made in the presence of a witness
D) A contract that can be cancelled

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49. The legal requirement for valid consideration in a contract is that it:

A) Must be in cash
B) Must be lawful
C) Must be of equal value to the promise
D) Can be past, present, or future

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50. A pledge under the Contract Act refers to:

A) A guarantee given by a third party
B) The bailment of goods as security for payment
C) A conditional gift
D) The transfer of property ownership

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51. In a contract of agency, the agent acts on behalf of:

A) The third party
B) The principal
C) The government
D) The buyer

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52. Which of the following is not a negotiable instrument under the Negotiable Instruments Act, 1881?

A) Cheque
B) Promissory note
C) Bill of exchange
D) Contract agreement

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53. Under the Electronic Transaction Ordinance, 2002, an electronic signature is defined as:

A) A handwritten signature scanned digitally
B) A unique identification in electronic form
C) A personal email address
D) A biometric verification

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54. The Consumer Protection Act, 2006 provides for a refund if goods are:

A) Satisfactory to the buyer
B) Not as per specifications
C) Cheap but not durable
D) Imported

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55. Under the Companies Ordinance, 1984, “articles of association” regulate:

A) Rights of creditors
B) Company’s internal management
C) Partnership responsibilities
D) Rules for personal businesses

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56. The primary obligation of a bailee in a contract of bailment is to:

A) Sell the goods
B) Return the goods to the bailor
C) Transfer ownership
D) Keep the goods permanently

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57. A contract that is void ab initio is:

A) Valid initially but void later
B) Void from the beginning
C) Void due to completion
D) Not void at any stage

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58. Under the Partnership Act, 1932, the implied authority of a partner allows them to:

A) Formulate new partnerships
B) Bind the firm through certain acts
C) Change the firm’s name
D) Dissolve the firm

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59. A foreign instrument under the Negotiable Instruments Act is one:

A) Issued within Pakistan
B) Issued outside Pakistan
C) Only used for internal transactions
D) Accepted only in digital form

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60. The doctrine of “holding out” in partnership law implies:

A) A person is held as a partner if they represent themselves as such
B) A partner can avoid liability for debts
C) A non-partner cannot be held liable
D) All partners must agree to hold out

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61. In the context of the Sales of Goods Act, an “unpaid seller” has the right to:

A) Keep the goods permanently
B) Repossess goods in certain situations
C) Disown the buyer
D) Void the contract unilaterally

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62. According to the Contract Act, if a contract is voidable, it can be:

A) Enforced against all parties
B) Cancelled by the affected party
C) Made void by mutual agreement
D) Valid without performance

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63. A negotiable instrument, according to the Negotiable Instruments Act, must be:

A) Signed and sealed
B) Signed by the maker or drawer
C) Sealed by a witness
D) Registered

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64. Under the Companies Ordinance, the main purpose of a “prospectus” is to:

A) Describe the company’s products
B) Seek public investment in the company
C) Disclose shareholder information
D) Detail only the management structure

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65. Arbitration under the Arbitration Law in Pakistan is preferred because:

A) It’s cheaper and faster than court proceedings
B) Only one party is represented
C) It’s informal and unregulated
D) It provides a permanent solution

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66. The Competition Act, 2010 prohibits abuse of:

A) Market equality
B) Dominant position
C) Trade equality
D) Competitive negotiation

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67. In a sale of goods, “express conditions” refer to conditions that are:

A) Implied by trade customs
B) Stated in the contract explicitly
C) Negotiable upon sale
D) Legally unenforceable

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68. Under the Electronic Fund Transfer Act, 2007, “clearing” means:

A) Settlement of funds between banks
B) Returning of all funds
C) Issuing funds to depositors
D) Writing off a transaction

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69. The Consumer Protection Act, 2006 mandates the return of goods if they:

A) Are damaged beyond repair
B) Were bought on sale
C) Are only partially damaged
D) Are unsatisfactory to the provider

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70. An arbitration award can be set aside by the court if it:

A) Is fair and reasonable
B) Was reached through fraud or bias
C) Has been fully enforced
D) Was issued by a single arbitrator

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71. Under the Law of Contract, “free consent” is absent if:

A) Both parties sign the contract
B) There is no misrepresentation
C) One party was under coercion
D) Both parties understand the terms

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72. A “void contract” is defined as:

A) A contract enforceable by law
B) A contract legally binding on both parties
C) An agreement with no legal effect
D) A contract with mutual consent

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73. The term “contingent contract” under the Contract Act refers to a contract:

A) Based on a certain future event
B) That must be performed immediately
C) With multiple parties
D) Without conditions

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74. In a partnership, a “particular partnership” refers to a partnership:

A) Formed to carry on one venture or project
B) Established with a permanent duration
C) Without any limitation of activities
D) Where partners have limited liability

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75. A cheque is dishonored when:

A) The drawer cancels the cheque
B) The bank refuses to pay
C) It is signed by the wrong person
D) It is drawn on an invalid account

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76. The Competition Act, 2010 restricts certain types of marketing practices, such as:

A) Honest advertising
B) Deceptive marketing
C) Ethical trade practices
D) Government-sponsored campaigns

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77. The Sales of Goods Act defines “agreement to sell” as an agreement:

A) That immediately transfers ownership
B) Where ownership is transferred at a future time
C) That cannot be modified
D) Only involving verbal consent

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78. Under the Negotiable Instruments Act, a “holder in due course” is a person who:

A) Holds a negotiable instrument until maturity
B) Holds the instrument in good faith
C) Holds the instrument as a co-owner
D) Is not liable for any payment

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79. Under the Consumer Protection Act, 2006, the primary duty of the provider of goods is to:

A) Ignore customer complaints
B) Ensure the quality and safety of goods
C) Negotiate every sale
D) Keep detailed records of complaints

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80. The Competition Commission of Pakistan has the power to:

A) Pass laws
B) Impose penalties for anti-competitive practices
C) Act as a court
D) Dissolve any partnership

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81. Under the Companies Ordinance, a shareholder’s liability in a limited company is:

A) Unlimited
B) Limited to the amount unpaid on shares
C) Equal to the company’s debt
D) Limited to assets held outside the company

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82. In a contract, the “capacity of parties” refers to:

A) Their physical health
B) Their mental and legal ability to enter a contract
C) Their professional qualification
D) The relationship between the parties

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83. A “quasi-contract” is a contract:

A) With complete terms
B) Arising due to legal obligation without agreement
C) Entered into by mutual agreement
D) Made verbally

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84. A minor partner in a firm:

A) Is liable for all firm debts
B) Cannot be admitted to any firm
C) Can only benefit from profits but not share liabilities
D) Can control firm decisions

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85. The duty of “noting” under the Negotiable Instruments Act involves:

A) Notifying the maker of the instrument
B) Recording the dishonor of an instrument by a notary
C) Reviewing the terms of payment
D) Reissuing the instrument

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86. Under the Electronic Transaction Ordinance, “attribution” of electronic documents refers to:

A) Assigning responsibility for an electronic document
B) Marking the document as confidential
C) Deleting the document after use
D) Transferring the document

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87. The Competition Act, 2010 defines an “abuse of dominant position” as:

A) Helping smaller competitors
B) Charging the lowest market price
C) Engaging in unfair business practices
D) Providing discounts to all customers

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88. The primary purpose of the Arbitration Law is to:

A) Settle disputes without going to court
B) Formalize trade practices
C) Record contracts in writing
D) Establish partnership rights

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89. Under the Consumer Protection Act, “compulsory recall of goods” is initiated when:

A) Consumers demand a refund
B) Goods are found unsafe or defective
C) Goods are surplus in quantity
D) Prices are reduced by the seller

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90. The term “unpaid seller” in the Sales of Goods Act includes a seller who:

A) Has received partial payment
B) Has delivered goods but received no payment
C) Has no ownership of the goods
D) Has returned goods to the buyer

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91. The Negotiable Instruments Act considers an instrument “dishonored” if:

A) It has no date
B) Payment is refused upon presentment
C) It is torn
D) It lacks a signature

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92. Under the Electronic Transaction Ordinance, “electronic certification” is important for:

A) Ensuring document authenticity
B) Marking documents as private
C) Deleting files after use
D) Avoiding taxes

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93. In the Companies Ordinance, “winding up” refers to:

A) Expanding the company
B) Increasing share capital
C) Dissolving the company
D) Appointing new directors

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94. The term “false information” in the Electronic Transaction Ordinance is an offense when:

A) Used to avoid payment
B) Shared on a public platform
C) Intentionally misrepresented electronically
D) Certified by an authority

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95. The Arbitration Law provides that legal proceedings should be stayed if:

A) A valid arbitration agreement exists
B) There is no plaintiff
C) Both parties are minors
D) The arbitration is informal

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96. The Competition Commission’s authority includes:

A) Issuing arrest warrants
B) Evaluating mergers for anti-competitive effects
C) Approving international trade deals
D) Setting company profit limits

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97. A “limited liability partnership” allows partners to:

A) Share unlimited liability
B) Avoid liability for partnership debts
C) Share limited liability as per contribution
D) Limit liability to profits only

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98. In a contract of indemnity, the “indemnifier” is responsible for:

A) Paying interest on funds
B) Compensating for losses incurred by the indemnified
C) Managing the business of the other party
D) Making a gift to the other party

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99. The Consumer Protection Act enforces “offenses and penalties” against providers who:

A) Delay in goods delivery
B) Charge additional fees
C) Sell unsafe goods to consumers
D) Refuse to negotiate prices

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100. The “doctrine of holding out” protects third parties by:

A) Preventing non-partners from acting as partners
B) Allowing partnerships to dissolve without notice
C) Holding those who represent themselves as partners liable
D) Ensuring equal profit distribution

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