STRATHMORE INSTITUTE OF MATHEMATICS
BSG 1201 – BUSINESS LAW
END OF SEMESTER EXAM (2018)
Date: 5th Tuesday March 2019
Time: 2 Hours
Instructions
1.
This examination consists of FIVE questions.
2.
Answer Question ONE (COMPULSORY) and any other TWO questions.
QUESTION 1:
a)
Give a detailed explanation of the legal principle of ‘duty of care’ as explained in the
case of Donoghue v. Stevenson
(10 Marks)
b)
“All Agency relationships are fiduciary relationships. This means the relationship
involves a certain level of trust and confidence. The agent is obligated to act in the best
interests of the principal because the agent’s actions will create legal obligations for the
Principal. The Agency relationship allows the agent to work on behalf of the Principal
as if the Principal was present and acting alone.” ANON
Discuss the following ways through which an agency relationship may come into
existence.
a) By Agreement, contract or appointment (5 Marks)
b) By ratification (5 Marks)
c) By estoppel (5 Marks)
d) By necessity (5 Marks)
QUESTION TWO:
A)
“All things are subject to interpretation whichever interpretation prevails at a given
time is a function of power and not truth.” Discuss the five rules of Interpretation of
law.
(10 Marks)
B)
Sheila places an advertisement in the newspaper which reads as below:
“Once in a lifetime opportunity to own a one-year old Nissan Tiida, low mileage, Kshs.
350,000 cash. The offer is valid for only one day and interested persons are
encouraged to telephone Sheila as soon as possible.”
When Polycarp saw the advertisement, he immediately posted a letter of acceptance
to Sheila’s offer.
Later in the day Aisha, another interested buyer telephoned Sheila informing her that
she was willing to buy the car but asked Sheila if she would keep the offer open until
she could go to her bank to obtain a loan. Sheila accepted the request. However later,
in the day, Walter, another potential buyer said that he would pay Sh. 400,000 in cash
for the car. Sheila agreed to sell the car to Walter.
Polycarp and Aisha are both aggrieved and come to you for advice. Advise the two as
to whether they have a valid cause of action against Sheila.
(10 Marks)
QUESTION THREE:
Define Arbitration, discuss its sources and advantages in resolving business disputes.
(20 Marks)
QUESTION FOUR:
a) Define and Explain the doctrine of privity of contract in relation to the law of
insurance. (6Marks)
b) What is the meaning of the following; negotiable instrument, negotiation in a
negotiable instrument, and endorsement? (4 Marks)
c) Discuss the essential elements of a negotiable instrument. (10 Marks)
QUESTION FIVE:
a) Distinguish the following:
a. Law and Morality,
b. Public and Private Law
c. Common Law and Equity
d. Substantive Law and Procedural Law
e. Ratio Decidendi and Obiter Dicta
(10 Marks – 2 Marks each)
b) Define the following terms:
i.
ii.
iii.
iv.
v.
Agency by Holding Out
Agency by Ratification
Ostensible Authority
Implied Authority
Agency of Necessity
(10 Marks)