LAW Model Paper AnsweredBy Maxwell RanasingheWith special reference to Law QuestionPaper ofSri Lanka Institute of Marketing ( SLIM)
MCQs – You will get about 10 questions for the exam.but I have answered 20 here questions for your benefit• 1. A contract is a• (a) A legally binding agreement• (b) A mutual understanding between two parties• ( c )A verbal understanding between any party(d) A written agreement between two or moreparties
• 2. An essential part of a contract is that• a)There should be a valid offer and validacceptance• b)There should be a physical product totransact• c)Both parties should live in Sri Lanka• d)The agreement entered should be certifiedby an Attorney at Law
• 3. An agreement as to land to be valid• a)It should be in writing• b)It should be in writing and proper stampsshould be pasted• c)Whether it is verbal or written but agreed infront of a lawyer• d) It should be in writing and notarialy executed.
•• 4. Jayalath prepares a medication for Dengu andadvertises in the newspaper that compensation ofRs. 50,000 will be paid to anybody who uses hisdrug in the manner prescribed in the product andstill does not get cured of Dengu. He further saysthat he has deposited Rs. 500,000 in the banktowards this purpose. Geetha attracts Dengu feverand uses Jayalath’s drug as prescribed but did notget any cure. Now Geetha sues Jayalath for thecompensation.
• a)Jayalath says there is no contract with Geethato pay the compensation as Geetha did notinform him about the acceptance of his offer• b)Geetha can ask for the reward despite she hasnot informed Jayalath as Jayalath’s offer is madeto the whole world.• c)Jayalath has no obligation to pay Geetha asadvertisements should not be taken seriously andit does not have any legal implications• d)Jayalath can pay only the amount paid byGeetha to buy the drug and not any more.
• 5. Somawansa advertises in newspapers that he would liketo sell his car for Rs. 5 million. After one week, Weerawansacomes and offers Rs. 5 million, but Somawansa declines tosell the car to Weerawansa• a) Somawansa has to sell the car to Weerawansa asWeerawansa has offered the correct money• b) Somawansa says there is no offer to accept and theadvertisement is only an invitation for offers• c) Weerawansa says that an advertisement is an offer forthe whole world and therefore any body can accept theoffer and therefore Somawansa has to sell the car to him• d) Somawansa can decline the offer as Weerawansa is lateto offer.
• 6. Dallas offered to sell his house to Mangala forRs. 15 Million by way of posting a letter on 10thMarch 2009 and asked Mangala to make theacceptance by post. The letter was wronglyaddressed and it reached Mangala only on the15th of March 2009. Mangala accepted the offerand posted a letter on the same day. Meanwhilesince there was no reply from Mangala even on16th, Dallas sells his property to Yapa. The letterof acceptance by Mangala did not reach Dallasuntil 18th of March.
• 1. Since there is no acceptance of offer iscommunicated, Dallas can sell the property• 2. If post is given the mode of acceptance, theacceptance of the offer will take place as soon as theletter is properly posted. Mangala can sue Dallas forbreach of contract.• 3. There is no contract between Dallas and Mangala asthe contract did not take place in time• 4. Dallas can say that he did not receive the letter ofacceptance within the expected period and thereforehe thought that Mangala has no interest in acceptinghis offer.
• 7. Following are considered as no capacity tocontract•• a)Persons above 21 years of age• b)Married women• c)Persons of unsound mind• d)Non citizens of this country
• 8. A contract for sale of goods includes• a)Sale and an agreement to sell• b)Sale only• c)Agreement to sell only• d)Sales, Leases and hire purchases
• 9. Karuna buys some paddy from Baskaran on Monday evening.Pays 75% of the price. Baskaran keeps the paddy sold to Karunaseparately from other paddy and asks Karuna to take delivery andhe agrees. However, Karuna could not find a lorry to take delivery ofthe paddy. When he came to take delivery on the next day,Baskaran’s store was bombed, guttered by fire and paddy has burntand perished.• a) Karuna can ask the money he paid from Baskaran• b) Karuna can ask Baskaran to supply fresh paddy for him for theprice paid• c) Baskaran can ask Karuna to pay the balance 25% as well.• d) Baskaran can sue Karuna for not taking the delivery of the paddyon the day he sold.
•• 10.• Consideration can be made for sale under thesale of goods ordinance by way of• a)Money and services• b)Money only• c)Money, service and goods• d)Partly in money and partly in goods•
• 11.• One of the implied conditions as to Title in Sale ofGoods ordinance is• a)The seller has the right to sell the goods if it is a sale• b)The goods should be in merchantable condition• c)The goods should match the sample• d)The goods should match the sample as well as thedescription••
• 12.• One of the statements is incorrect as to “Fit for purpose”implied condition is considered. Underline that statement• a)The buyer makes known to the seller the particularpurpose the goods are required• b)The buyer has to show a sample of the product he wantsto buy• c)The buyer relies on the seller’s skill or judgment• d)The supplier ordinarily supplies such products in hisnormal course of business•
• 13. Rajitha bought a car from Randeniya and used it for 6months. Randeniya had no title to the car. As aconsequence Rajitha had to surrender the motor car to thetrue owner. Rajitha sued Randeniya to recover the moneypaid.• a) Rajitha has no right to sue Randeniya• b) Rajitha cannot sue Randeniya for the total he paid as hehas used it for six months• c) Rajitha can sue Randeniya for the total money paiddespite he has used it for six months• d) Rajitha can ask the true owner to sue Randeniya as hehas no right to sue him•
• 14.• One of the statements is wrong as to the dutiesof the buyer. Underline that statement• a)To accept the delivery of goods when the selleris willing to make the delivery as per the contract• b)To pay the price in exchange for possession ofthe goods• c)To apply for the delivery of goods• d)Demand delivery of the goods at any time
•• 15.• Every trader who sells any goods shall on demandissues to the purchaser a receipt stating certaininformation. Underline the statement that hasincorrect information• a)The date of sale• b)The quantity and quality of goods sold• c)The price paid for such products• d)Whether sale was wholesale or retail•
• 16. Underline the correct answer• As per the Intellectual property Act No 52 of 2003, a trade markmeans•• a). Name used by a trader to identify goods and services marketedby him or her• b) Any visible sign serving to distinguish the goods of one enterprisefrom those of others• c) A label, symbol of mixture of any of those used by a marketer toinform the public about its brand name• d) Any mark that appears in the package where customers canidentify the product.••
• 17. When Consumer Affairs Authority makes adetermination as to anti competitive practices ormonopolies of a company or trader, it shouldconsider whether• A) It is fair by the interest of the public• b)It is unfair on the competitors• C)It is a by a multinational or a locally ownedcompany• D)It is about an essential service
• 18. Patent rights are given for• (a) Authors of books• (b) Trade marks• ( C )Company names• (d) Inventions••
19. Underline the statement which is incorrect•• A trade mark cannot be registered• if it indicates a geographical name or a surname• A brand name “ cow” can be registered as atrade mark to sell milk products• Misleading marks cannot be used as trade marks• Immoral, scandalous and antisocial marks cannotbe used as trade marks•
• 20. The important case as to legal entity of acompany is• 1. Salomon Vs. Salomon Ltd• 2. Balfour Vs. Balfour• 3. Merit vs. Merit• 4. Hyde Vs. Wrench•
Part 2You are required to answer only two questions. But Ihave answered six questions for your benefit• Question 2.1•• Under Law of agency, what is mean by apparent authority?•• Apparent authority ( agency by estoppel/ holding out)• This happens when the principal allows another person to be believed ashis agent for third parties.• When third parties act upon it and contracts with that person, theprincipal is stopped from denying what he let believe.• (E.g.. If Wimal makes Ranil believe that Basil is Wimal’s agent, Wimal willbe bound by the contract made by Basil on Wimal’s behalf.• Wimal will be barred/ estopped from denying that Basil is not his agent• not allowed) from denying the other as his agent.•
• Question 2.2•• Ulra vires will not have affect under the new companies law. Explain briefly.•• In the older versions of company’s laws if the company has acted beyond thepowers given by the Memorandum of Association ( which contained the objects ofthe company) such acts were considered void.• The doctrine ultra vires ( beyond powers) has been removed from the newcompany’s law. No memorandum is required to establish a company under thenew Act of 2007.• Sec 17 of the companies Act states that even if the objects of a company arestated in the Articles of Association, the capacity and power of the company shallnot be affected by such restriction. For existing companies by 2007, memorandumis deemed to form part of the articles. Therefore the doctrine of ultra vires isremoved.•
•(05 marks)• Question 2.3•• The general rule is that an agent is neither liable nor entitled undercontract which he makes on behalf of the principal. What are theexemptions to this rule?– If the agent acts within the scope of his actual or apparent authority, principalis bound to 3rd parties for the contracts made on behalf of him– Even if agent has acted on agency of necessity or the contract was laterratified by the principal, then the principal is bound on the contracts– ( However, if the 3rd party knows that the agent lacks authority, then theprincipal is not bound. Then the 3rd party has to deal directly with Agent)
The undisclosed principal• If the agent discloses the principal, but doesnot disclose the name of the principal• If the agent does not disclose the existence ofany agency• The principal would be undisclosed principal.• Then 3rd party can sue the agent or ondiscovery of principal, the 3rd party can sueeither the agent or the principal
• Question 2.4•• Why should a marketer give priority to alternate disputeresolution methods?•• Mainstream legal procedure often considered as expensive, timeconsuming and cumbersome. Marketers prefer spending time insubstantive marketing activities than spending time in litigation• Litigation is the final method that is used when all other methodshave failed.• Mutual agreement should be the first approach.• Mediation would be another approach• Arbitration for high value matters•
• Question 2.5•• What are the important aspects that you should checkwhen you receive a cheque from a customer ?• Drawer should have signed the cheque.• Have the amount stated in both words and figures whichmust agree.• Possess all necessary endorsements.• Not be stale. Bank will not pay a cheque older than sixmonths from the date of the cheque.• Have had any alteration signed by the drawer.•
• Be dated. If a cheque is presented undated thebank will return the cheque. However, a holdermay insert the date what he considers to be thetrue date.• State the payees name or just cash as payee.• If the payee is indicated as “cash” such a chequecannot be crossed as “A/C payee”.• Cheque is not mutilated. ( such as crushed,stained or torn)• Company rubber stamp or any other authorizedsignatory’s stamp is placed.
• Question 2.6• What are the works protected by copy rights and howlong a copyright will be valid ?•• The Law governing copyrights are now included in theIntellectual Property Act• Works of authors of Sri Lanka, works first published inSri Lanka and all works (even foreign) which by virtueof treaties entered into by SL are to be protected.• Even SL folklore are protected under the Act•
– Economic rights• Author’s lifetime plus 50 years after his death• Joint work - during the life time of the surviving authorplus 50 years after his or her death• Work published anonymous or pseudonym 50 yearsfrom the date of publication• Cinema, radio, TV 50 years from the date ofbroadcasting or public presentation• Photographic works – 25 years•
– Moral rights• Moral rights can be exercised by author and by heirsafter the authors death for 50 years• Moral rights can be exercised even if the author or heirsdo not have economic rights ( E.g.. Even aftertransferring of economic rights)•
Part 3You are required to answer only one questionBut I have answered 6 questions for your benefit•• 3.1 Explain “Sale by Description” under the Sale ofGoods Ordinance• Implied condition regarding description ( sec 14)• Where there is a contract of sale of goods bydescription, there is an implied condition that thegoods shall correspond with the description. Goods aresaid to be sold by description when they are describedin the contract either by the buyer or by the seller andthe buyer contracts in reliance of the description.•
• In Re Moore & Co. and Landauer Co ( 1921)• M sold to L, 3100 cases of Australian Canned fruits, thecases to contain 30 tins each. M delivered the totalquantity, but about half the cases contained 24 tins, andthe rest 30 tins. L rejected the goods. There was nodifference in market value between goods packed in 24 tinsand goods packed in 30 tins. However, the court held as thegoods delivered did not correspond with the description(packing) of those ordered, L could reject the whole lot.• Beal vs. Taylor – Buyer purchased a car described as 1961model. The front part was pre 1961 model and it hadwelded to an old car. Held that the goods did not complywith the description
•• Assume a person in Trincomalee says that he has 200o kgsof kelawalla (Tuna) you agreed to buy it at Rs. 400 a kg.However, when you received the fish in Colombo, you findthat they are not Kelawalla but Balaya which is lower indemand and price. Then you can reject the goods under “not supplied as per the description.•• A canteen manager says he can supply rice packets with redrice. You order a lunch packet but you find white rice in it.You can reject for the error in description•
•3.2 Explain “ Sale by sample and description” under the Saleof Goods Ordinance•• If the sale by sample as well as description it shouldcorrespond to both.• Nichol vs. Godts ( 1854)• N agreed to sell G some oil described as “foreign refinedrape oil” as per the sample. Although the goods were asper the sample but it was not foreign refined rape oil.Therefore buyer was entitled to reject the goods as itshould correspond not only with the sample but with thedescription as well.
• You buy a Nokia phone by seen a sample andthe trader says that it is made in Finland. Thenyou go and open the battery compartmentand finds a sticker “ Made in china” then youcan reject the product and ask for a full refundalthough you have received the sample shownbecause the description as to country of origindoes not correspond.
• 3.4 Write a short note on capacity of minors incontract• . Minors- Who are under the age of 18 years• Minors cantracts can be classified as unassisted and assistedcontracts.• Unassisted – minor enters into a contract on his own. Generallythey are unenforceable against the minor. However, it could beratified by the guardians assistance during his or her minority or bythe minor upon reaching the age of majority• Assisted – minor enters into a contract with the assistance ofhis or her natural guardian (parents) or person appointed by court.These contracts can be enforced against the minor.•
• Unassisted contracts by Minors• This needs more explanation as some contracts can beenforced against them.• Generally contracts made by persons under the age of 18years cannot be enforced against them. In other words,they are voidable at the option of minor.• However, a minor may enforce against the adult, if he orshe wishes to do so.• ( limping contracts)• On the other hand, there are some contracts that can beenforced against even on minor by the other party. Whatare they?•
• 1.Contracts for necessities• If the other party can prove that goods are suitable to his status inlife and it is required by him at the time of delivery of the product,then a contract can be enforced against a minor.• However, if the parents can prove that the minor is sufficientlyprovided with the goods then even though this fact is not known tothe other party he may not be able to recover the price agreed.• Nash Vs. Inman ( 12 waist coats ordered by a minor and fathersevidence showed- he was adequately provided with and tradercould not recover the price from minor)• 2.If the minor has fraudulently shown he was an adult although infact he was a minor.
• 3.Beneficial Contract of Service – Costa Vs. AG. Ateacher when she was a minor entered into a contractfor teacher training. Then the contract of serving for aspecific period was breached and when sued sheclaimed that she was not bound on the bond as shewas a minor at the time of signing the bond. But courtheld even then, training was for her benefit and thereis a valid contract created by the Bond.•• (10 marks)•
3.5 Write a short note on termination offer•• Revocation and rejection of offer will terminate the offer• An offer may be revoked at any time before it is accepted.• However a revocation of an offer will not take place until it isactually communicated to the offeree.•• Byrne Vs. Van Tienhoven ( 1880)• B in Cardiff sends an offer to T in NewYork. T accepts in on 11th bytelegraph. B revokes in on 8th by posting a letter. T receives in on the20th. Held revocation will not have effect until it reaches T andtherefore T ‘s acceptance is valid and there is a contract.•
• b)Revocation is possible at any given time even if there has been apromise to keep it open until a specific period. However, if it isgiven by a deed or supported by consideration, then it cannot berevoked until the date specified.• c)Revocation can be communicated directly by the offeror or bya third party• Dickinson Vs. Dodds ( 1876)– A offered to sell a property to B, through a document which stated thatthis offer is valid until Friday 9.00 a.m. On Thursday A sold the house toY and B came to know about this sale through the brother in law of A.B, before 9.00 a.m. of Friday delivered his letter of acceptance throughhis Brother in law. Court held that there is no contract. By knowing thatthe sale was concluded and having not paid any consideration to keepfor a period of time, B has no offer valid to accept. Offeree can rejectthe offer at anytime saying that he has no interest in accepting theoffer.
• d) counter offer from offeree also makes the offerrejected.– Hyde Vs. Wrench ( 1840)– Wrench offered a sell a property for pounds 1000.Hyde then offered to buy it for pounds 950 but Wrenchdid not accept the offer. Then he agreed to pay pound1000.– Court held; As soon as the counter offer of pound 950was offered the original offer is rejected and thereforethere is no offer to accept in the second time.–
• e) By accepting the offer with conditions• Such as I accept the price of Rs. Five Million foryour House, but I will pay in three installments ,• I will buy the car at the price quoted by you onlyif you can do the repairs I mentioned in my visit.• f) Lapse of time• g) Lapse of reasonable time depending on themode of offer, nature of the product and also ofthe nature of the trade practice.
3.6 – A Describe the main elements of a sale of goodstransaction?•• There should be goods (movable property other thanmoney)• There should be at least two parties called buyer andseller• There should be a consideration called money• The title in goods should transfer now or on a futuredate•
• 3.6 B - What are the duties of the seller ?•– Deliver the goods in accordance with the terms of the contract– Willingness to give possession of the goods to the buyer and makearrangements for the transfer of property in goods to the buyer– To ascertain and appropriate the goods to the contract of sale•– To pass absolute and effective title of the goods to the buyer– To put the goods in a deliverable state and deliver goods as whenapplied– To deliver goods within the specified time in the contract or within areasonable time•