BASIC PRINCIPLES OF LAW EXAMINATION. MAY 2012 EXAMINATIONS
SECTION A
1.
1. (i) There is a duty of utmost good faith once a partnership
is established although the contract of partnership is not
itself uberrimae fidei.
( a ) TRUE.
(B ) FAULSE.
(II) A partner’s ostensible authority is different from actual
authority because ostensible authority is:
(a ) vested in a partner by virtue of his status as a
partner.
( b ) conferred on a partner by the terms of the articles
of partnership.
( c ) only applicable in trading partnership.
( d ) Only applies to retired partners.
(iii) In a trading partnership, a partner has an implied
authority to:
(a ) dismiss the other partner if seen not to hard working.
(b ) Employ a lawyer to defend an action against the firm.
( c ) consent to a judgment against the firm.
( d ) Execute a deed.
(iv ) By looking at the memorandum of association of a
company, one may not ascertain :
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(a ) the amount of trade debts of the company.
( b ) the situation of the company.
( c ) the name of the company.
( d ) that the liability of the members is limited
( v ) The decision in the case of Salomon v Salomon &
company ltd ( 1897) was about:
( a ) the powers of directors of a company.
( b ) the formalities to be followed in setting up a
company.
( c ) the personal form of a company as a separate person
from owners.
( d ) The issue of breaking the cooperate veil of a company
legal personality.
2.
( i) According to the principle of sabrogation; the insurers
are:
(a ) allowed not to fully compensate the insured.
(b ) fully compensate the insured and then sue the one
who caused the loss.
( c ) avoid the liability under the contract of insurance.
(ii) Which of the following statements correctly describes a
legal characteristic of most forms of joint ownership of
property.
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( a ) the co owners have undivided right to use the whole
property.
( b ) Upon death of any co owner, title passes to the
surviving tenant.
( c ) Upon death of the co owner, the surviving co owner
gains absolute ownership of the sales proceeds.
( d ) The surviving co owner loses ownership automatically
and the property becomes part of the deceased estate of
the died co owner.
(iii) Periodic tenancies:
(a ) run for a stated period and ends at the end of that
period.
(b ) starts at a specified time and continues for
successive periods until terminated.
(c ) Are terminated by the lessee without notice.
(d ) Runs for a specified period and remains renewable
but can only be terminated by death of either party.
(Iv ) Under a lease agreement, a tenant has the right for
quite possession. This means that:
(a ) the landlord should ensure the property remains in a
quite environment.
(b) the land lord will avoid any action that will disturb the
tenant from using the property freely.
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( c ) the land lord will frequently be inspecting the property
to ensure that it is in good state of repair.
( d ) the land lord will not be allowed to adjust the price
unless the tenant accepts such adjustment.
(v ) A principal would ratify a contract entered into by the
agent if:
(a ) without the use of an agency arrangement, the law
would not allow the principal to enter into such a contract.
( b ) the principal himself would legally enter into such a
contract with impediment of legal requirements.
( c ) the contract being ratified is of value to the principal.
( d ) the agent didn’t disclose that he was acting as an
agent of the principal.
3. (i) Which of the following may not be considered as an
element that is required for a contract to be legally accepted as
valid.
(a)
(b)
(c)
(d)
Offer.
Capacity.
Consideration.
Sex.
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(ii) An offer contains:
(a) Only major terms of the contract.
(b) The price for the intended goods or services.
(c) Terms by which the offeror is prepared to be bound.
(d) Definition of the basic features of the product.
( iii ) A display of goods in a self service store constitutes:
(a) Legally binding contract.
(b) An offer to sell which can be accepted immediately.
(c) Statement of intention.
(d) Invitation to treat.
( IV )
In the course of interpreting statutes; the judge may refer to
the common law as it was before the statute was enacted. This
will be when applying:
(a ) Golden rule.
(b ) literal rule.
( c ) the mischief rule.
( d ) case law.
(v) The decision in Hyde v Wrench ( 1840 ) sets a precedence
on.
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( a) termination of an offer by offeror.
(b) Communication of an offer to the offeree.
(c ) Revocation of an offer by offeror.
( d) Destruction of an offer through counter offers.
4.
1. (I )
Where an exclusion clause is found to be part of the
contract and effectual:
( a) it will enhance clarity of the contract.
(b ) it will help to address needs of third parties who may
wish to be party to the contract.
(c ) it will reduce damages to awarded under the contract.
(d ) it will enable one party avoid liability he would
otherwise carry.
(ii)
Both actual sales and agreement to sell are contracts of
sale, the only difference being that in agreement to sale:
(a ) the price to be paid are in form of goods.
( b) the price will be determined upon manufacturing of
the goods to be sold.
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( c ) the transfer of property in the goods is to take place
at a future time or subject to fulfillment of some other
conditions.
( d ) the validity of the contract will depend on the
willingness of the buyer to pay the price when time comes.
(iii)
A mortgage differs from a pledge in that a mortgage
involves the:
( a ) The transfer of general property in the goods the
mortgaging party to the lender.
( b ) the delivery of goods by one person to another to
secure payment of a debt.
( c ) the assignment of the total value of property as
security of the debt.
( d ) setting aside of one’s interest in a fixed asset until all
obligations are serviced.
( Iv )
Section 15 of the sale of Goods Act set conditions to be met
where:
( a ) goods are sold by hand delivery.
( b ) goods are sold by description.
( c ) where goods are being sold under agreement to sell
contract.
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(d ) goods are being exchanged for other goods.
(v )
when sale contract is contract for sell of unascertained
goods :
( a ) No property passes to the buyer unless and until they
are ascertained.
( b ) property passes immediately a contract is made.
( c ) the risk passes immediately the contract is made from
the seller to the buyer.
( d ) property remains in the goods passes upon payment of
reasonable price.
5.
(I )
When looking at the Bargain and Exchange as an element
of an acceptable contract, courts will:
( a ) check whether consideration was adequate.
(b ) Check whether the service offered by the offeror was
equal in value to the price paid by the offeree.
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(c ) not examine the adequacy of consideration
exchanged.
( d ) examine the durability of the items by exchanged.
(ii )
The principles of the privity of contract defines:
( a ) the party that can be sued in a contract.
( b) That party that can sue and be sued in a contract.
( C ) The privileges that a contract confers on the parties to
it.
( d ) The validity of a contract.
( iii )
The resultant contract may be voidable through DURESS if :
( a ) parties have a special relationship.
( b ) one party entered into the contract because of threat.
( c ) one party entered the contract because the reward was
overly attractive.
( d ) one of the contracting parties is a minro.
( iv )
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A serious breach of a contract will enable the innocent party to
be consider the contract as having been discharged. Such
breach is a breach of:
( a ) Condition.
( b ) confidentiality.
( c ) Trust.
( d ) warranty.
(v)
Quantum Meruit means:
( a ) Specific performance.
( b ) undoing the contract and putting parties in their pre
contact position.
( c ) performance has to be rewarded according to worth.
( d ) Modification of all the principle terms of the
contract.
6.
(I )
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It is true that management of the company is left in the hands
of the directors who make policies and day to day operational
decisions. Majority share holders can however still influence
policies and top management decisions through:
( a ) threatening to pull out their investment.
(b ) election of bigger number of directors to sit on the
board.
( c ) Negotiation with other share holders to subscribe to
their aims and objectives.
( d ) through provision of professional guidance to other
members.
(ii)
The chances of members in a company making it “ alter
ego” are very high in:
(a ) Partnerships.
(b ) Public limited companies.
( c ) Private limited companies.
( d ) Sole proprietorships .
(iii)
The difference between the term INSUANCE and
ASSURANCE is that :
( a ) Insurance refers to cover for events that may occur
while assurance refers to cover for events that must
certainly occur.
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(b ) Assurance refers to cover for the entire loss while
insurance refers to cover for loss up to the sum insured.
(c ) Benefits under insurance will accrue to a third party
while under assurance will accrue to the life being assured.
( iv )
“On ordinary principles of insurance law, an assured
cannot by his own deliberate act cause the events upon
which the insurance money is payable”. This principles was
established in the case of :
(a ) Macaura v Northern Assurance co ( 1925).
( B ) Roselodge v Castle (1966).
( c ) Bereford V Royal Insurance Co (1938).
( d ) Darrell v Tbbits ( 1880).
(v)
“ Where the equities are equal, the law prevails”. This law
principles means that:
( a ) The courts will never consider equity in settling cases.
( b ) Equity is an out dated law.
(c ) Where equitable and legal rights compete, legal rights
prevail over equitable rights.
(d ) Judgment will always favour equity.
SECTION B.
7.
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(a)
Millies Bank sent an offer letter to J & M Enterprises
for a loan of Mk200,000. The loan was to be repaid
over a period of two with an interest of 26% per
annum. J & M sent an acceptance but proposed a
reduced interest rate of 22%. The bank received the
acceptance but before contacting J & M on the issue
of proposed rate reduction, J & M issued some
cheques on the strength of accepted loan offer. The
bank returned the cheque with answer refer to
drawer. J & M is intending to sue the bank for
wrongful dishonor. Discuss with reference to
previously decided cases, the possible out come of
the case.
ANSWER:
In a situation where an offer is answered with another offer,
the first offer is destroyed as the second offer is called a
counter offer. The decision in the cases of Hyde v Wrench (
1840) where a farm was offered at GBP 1000, but the offeree
suggested GBP 950. The offeror refused, the offeree then
suggested GBP1000 as acceptance of the first offer. The court
held that the first offer was no more valid as it was destroyed
by the counter offer.
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In view of the above situation we would conclude that the loan
offer by the bank was destroyed through a counter offer and
therefore there was no loan arrangement.
The bank was therefore right to return the cheques. This action
by J & M is likely to fail.
10 marks.
(B)
When customers are depositing cheques into their bank
accounts, it is common practice for the bank receiving the
deposit to impose a stamp on both the deposit slip and the
cheque. Why do you think it is relevant to stamp even on the
cheque. 5 marks.
Answer.
Such stamping constitutes a special crossing of the cheque
specifically to the bank whose stamp features on the face of
that cheque. This is actually confirmation that it is that bank
whose stamp features on the face of the cheque that has acted
as a collecting bank of the cheque.
(c ) State any two actions by the buyer which according to
section 36 of the Sale Of Goods Act are recognized as
acceptance of the goods from the seller.
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Answer:
The following are the actions:
(I ) Intimate to the seller that he has accepted them.
(ii) if he does anything to the goods which is inconsistent with
the ownership of the seller such sub-selling and delivery of
goods.
(iii) Retains the goods after a lapse of reasonable time without
intimating to the seller that he has rejected the goods.
5 marks.
8.
(a)
X has approached Z who is an estate agent to help him sell
his house. However as Z was still looking for the market, X
found a buyer on his own and sold the house. Z is arguing
that since he was appointed as an agent he must still be paid
his commission. Discuss whether z is really supposed to paid
his commission. 5 marks
ANSWER.
For an agent to earn a commission, the event for which he
was engaged must have occurred and occurred through
the actions of the agent.
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The general rule is that an estate agent does not earn his
commission until the sale is completed and no commission
is payable if the vendor finds a buyer privately and not
through the agent.
In the case at hand therefore z is not entitled to any
commission.
(b) Give five examples of criminal offences against
property: 5 marks.
Answer.
(I ) Theft.
(ii) Robbery.
(iii) Burglary.
(iv) obtaining property by false pretence.
(v ) False accounting.
(c) During the new year festive season a certain newly
wedded couple decided to spend their honey moon
at one of the lakeshore resorts. They paid at the
reception to stay at the resort for one week. When
they entered their room they saw a notice which read
“the proprietors will not hold themselves responsible
for any property lost or stolen at the resort unless
handed to the manageress for safe custody. The
couple lost a bag containing all the money received
during the wedding including their marriage
certificate. The owners of the resort are refusing to
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compensate the couple, saying the notice in the room
was enough disclaimer. Discuss the possibility of
success of legal action by the couple against the
resort owners. 10 marks.
Answer:
While the notice may really be viewed as an exclusion
clause and the resort owners may try to rely on it to
avoid liability, this notice may not qualify to have
formed part of the contract between the two parties,
mainly on the grounds that the notice was brought to
the attention of the couple later after they had
already paid. In fact we could say after the contract
between the two parties had already been formed.
The facts in the matter at hand are similar to that of
Olley Vs Marlborough court hotel ( 1949). In that case
after paying for a room at the desk, a couple saw a
notice inside their room where the hotel owners
were excluding themselves from responsibility of any
loss that may occur to the items of the couple during
their stay at the hotel.
In this case the court held that while the notice had
been communicated effectively enough, the
communication was post-contract and could
therefore not be part of the contract. The hotel
owners were therefore still liable.
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On the basis of the facts stated above, the newly
wedded couple could succeed in their action against
the resort owners.
9. (a)
X has approached Z who is an estate agent to help him
sell his house. However as Z was still looking for the
market, X found a buyer on his own and sold the house.
Z is arguing that since he was appointed as an agent he
must still be paid his commission. Discuss whether z is
really supposed to paid his commission. 5 marks
ANSWER.
For an agent to earn a commission, the event for which he
was engaged must have occurred and occurred through
the actions of the agent.
The general rule is that an estate agent does not earn his
commission until the sale is completed and no commission
is payable if the vendor finds a buyer privately and not
through the agent.
In the case at hand therefore z is not entitled to any
commission.
(d) Give five examples of criminal offences against
property: 5 marks.
Answer.
(I ) Theft.
(ii) Robbery.
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(iii) Burglary.
(iv) obtaining property by false pretence.
(v ) False accounting.
(e) During the new year festive season a certain newly
wedded couple decided to spend their honey moon
at one of the lakeshore resorts. They paid at the
reception to stay at the resort for one week. When
they entered their room they saw a notice which read
“the proprietors will not hold themselves responsible
for any property lost or stolen at the resort unless
handed to the manageress for safe custody. The
couple lost a bag containing all the money received
during the wedding including their marriage
certificate. The owners of the resort are refusing to
compensate the couple, saying the notice in the room
was enough disclaimer. Discuss the possibility of
success of legal action by the couple against the
resort owners. 10 marks.
Answer:
While the notice may really be viewed as an exclusion
clause and the resort owners may try to rely on it to
avoid liability, this notice may not qualify to have
formed part of the contract between the two parties,
mainly on the grounds that the notice was brought to
the attention of the couple later after they had
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already paid. In fact we could say after the contract
between the two parties had already been formed.
The facts in the matter at hand are similar to that of
Olley Vs Marlborough court hotel ( 1949). In that case
after paying for a room at the desk, a couple saw a
notice inside their room where the hotel owners
were excluding themselves from responsibility of any
loss that may occur to the items of the couple during
their stay at the hotel.
In this case the court held that while the notice had
been communicated effectively enough, the
communication was post-contract and could
therefore not be part of the contract. The hotel
owners were therefore still liable.
On the basis of the facts stated above, the newly
wedded couple could succeed in their action against
the resort owners.
10.
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11 (a)
Briefly discuss how the Law Of Equity was established and
state some of the key principles which were used in
exercising this law.
15 marks.
Answer.
Equity is a portion of remedial justice which was formerly
exclusively administered by a court of Equity. This is
different from that portion of justice administered through
the court of common law.
When litigants were dissatisfied with a decision under
common law as administered by the judges, they could
appeal directly to the to the king.
Decisions on these appeals were made on the basis of
morality and fairness. In other words according to
equitable principles.
This system became so popular that a court of equity was
set up and it was presided over by the Lord Chancellor.
So when in making decisions at the common law court, the
judges overlooked some important points, the equity
came in and this body of law came to be known as law of
equity. It had its own procedures, substantive rules and
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remedies. Some of the key principles were set up in short
phrases now called MAXIMS.
Some of these maxims are; Equity will not suffer a wrong
without a remedy; Equity follows the law; Where equities
are equal, the law prevails; he who seeks equity must do
equity; he who comes to equity must come with clean
hands ; delay defeats equity; equality is equity; equity
looks at the intent rather than the form; equity looks at
that as done which ought to be done; and that equity
imputes on an intention to fulfill an obligation.
(b) State five circumstances which will terminate the
banker ’duty to pay cheques drawn by the customer.
(I ) countermand of payment.
(ii ) Notice of the customer’s death.
(iii) commencement of insolvency proceedings against the
customer.
(iv ) court order to stop paying cheques.
(V) Reliable notice of the customer’s insanity.
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