INSTITUTE OF BANKERS IN MALAWI
CERTIFICATE IN BANKING EXAMINATION
SUBJECT: BASIC PRINCIPLES OF LAW (IOBM - C108)
Date: Friday, 3rd May 2013
Time Allocated: 3 hours (08:00 – 11:00 am)
INSTRUCTIONS TO CANDIDATES
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This paper consists of TWO Sections, A and B.
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Section A consists of 20 multiple questions, each question carries 2 marks.
Answer ALL questions.
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Section B consists of 5 questions, each question carries 20 marks. Answer
ANY THREE questions.
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You will be allowed 10 minutes to go through the paper before the start of the
examination, when you may write on this paper but not in the answer book.
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Begin each answer on a new page.
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Please write your examination number on each answer book used.
Answer books without examination numbers will not be marked.
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DO NOT open this question paper until instructed to do so.
SECTION A
(40 MARKS)
Answer ALL questions from this section.
SECTION A: ANSWER ALL QUESTIONS BY CIRCLING THE CORRECT ANSWER
1. In Statute Interpretation, the Rule that looks at natural and ordinary meaning of the
words as used in the statute is:
(a) Mischief rule
(b) Golden rule
(c) Literal rule
(d) Purpose rule.
2. In Malawi Legal System, one of the subordinate courts is:
(a) Commercial court
(b) High Court
(c) Industrial Relations court
(d) Office of the ombudsman.
3. Zangaphe and Zidzepano have entered into a contract where Zangaphe has to
construct a house for a price of MK2, 000, 000. After commencement of the
construction, when the house was at window level, an earthquake came and
destroyed the house. Subsequently, the department of Meteorology has declared
the site not fit for human occupation. Zidzepano wants to sue Zangaphe for
breach of contract. Which of the following defences will be available to Zangaphe?
(a) Frustration
(b) Inevitable accident
(c) An Act of God
(d) Non fit injuria.
4. Mr. Phiri wants to pay school fees for his son at one of the schools in town. He
does not want to give his son the money for fear that he might use the money on
trivial matters. He wants to issue the cheque to the school meant for school fees
of his son. What kind of indorsement should he use when issuing the said cheque
so that the money is used solely for payment of school fees.
(a) Restrictive indorsement
(b) Special indorsement
(b) Blank indorsement
(d) Conditional indorsement.
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5. In company formation, the Constitution of the Company is:
(a) Memorandum of association
(b) Articles of association
(c) Share certificate
(d) Corporate Governance.
6. Jones has stolen 10 Million Kwacha at his work place. He deposited the money in
one of his accounts at PL Bank. Later, after one week, he has instructed the bank
to pay one of the Local Car Dealers 9 Million Kwacha for a 3 tonner vehicle he has
bought meant for his transport business so as to make the stolen money clean.
Jones is liable in:
(a) Corruption
(b) Theft by servant
(c) Fraud
(d) Money laundering.
7. Two parties have entered into a contract involving the supply of used tyres. In their
formal agreement, they have stipulated that in case of disputes, no court in Malawi
shall have jurisdiction to settle the disputes. On what basis is this provision illegal?
(a) That the provision is too tough to the parties
(b) That the provision is in breach of their own agreement
(c) That the provision is against public policy as it ousts jurisdiction of courts.
(d) That it infringes on individual freedom of choice.
8. Banda was employed by one of the brewery companies as a cashier. While on
duty, it was discovered that Banda failed to account for MK1, 000, 000 he received
from clients. The brewery company through the personnel officer invited Banda
and dismissed him outright for theft that was a serious breach of his contract of
employment. This dismissal is termed as:
(a) Constructive dismissal
(b) Wrongful dismissal
(c) Summary dismissal
(d) Unfair dismissal.
9. In agency relationship, the agent has duties towards the principal. Which of the
following is not a duty towards a principal?
(a) Duty to receive remuneration
(b) To use proper care and skill
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(c) To obey legal instructions
(d) To be loyal.
10. Phiri entered into a contract with Zulu for the supply of a wedding cake for his
son’s wedding, to take place next week. What category of goods will the wedding
cake herein fall into?
(a) Future goods
(b) Specific goods
(c) Merchantable goods
(d) Perishable goods.
11. Which of the following is not an example of negotiable instruments?
(a) Bill of lading
(b) Treasury Bills
(c) Share warrants
(d) Cheques.
12. The duty and authority of a banker to pay a cheque drawn on him by his customer
may be terminated in many ways. Which one of the following is amongst those
ways?
(a) By calling the bank
(b) By placing a notice in a newspaper
(c) By countermand of payment
(d) By closing the account
13. The only unity required in tenancy in common is:
(a) Unity of interest
(b) Unity of title
(c) Unity of time
(d) Unity of possession
14. Zakaria entered into a lease agreement with Nandi as a tenant for a period of one
year. After one year and without renewing the lease agreement, Zakaria is clinging
to the house despite several reminders to vacate the premises. What kind of
tenancy is being depicted here after the expiry of one year?
(a) Tenancy at will
(b) Tenancy for years
(c) Periodic Tenancy
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(d) Tenancy at sufferance.
15. Jane was involved in a road accident involving a minibus owned by James. As a
result of the accident, Jane has sustained a fracture of the left thigh. She has
visited on several occasions, one of the expensive private hospitals in town for
treatment. She now claims refund of the money she paid to the hospital from
James or his Insurers. What kind of damages is Jane seeking in this case?
(a) General damages
(b) Liquidated damages
(c) Special damages
(d) Unliquidated damages.
16. Tinyade is intending to venture into business. She wants the business to be fully
controlled by her and that the business should not be a person in law. What kind
of business venture is she supposed to venture into?
(a) A corporative society
(b) A limited company
(c) Unlimited company
(d) Sole proprietorship.
17. A private company is one that restricts its membership to:
(a) Twenty members
(b) Fifty members
(c) Two members
(d) Ten members.
18. What does the word ‘ultra-vires’ mean in company law?
(a) Legal
(b) Latin Maxim
(c) Illegal
(d) Authority.
19. Which of the following is not an example of an agent?
(a) Estate agents
(b) Auctioneers
(c) Couriers
(d) Bankers.
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20. John was employed by Zani as a Driver to transport its merchandise, with specific
instructions not to take passengers, though the notice was placed behind the body
of the vehicle. John breached this instruction and took passengers. The vehicle
was later involved in a road accident, and the passengers have filed a suit in a
court of law seeking damages. Under what principle will the company be liable?
(a) Law of Negligence
(b) Under principle of personal injuries
(c) Under principle of contract of employment
(d) Under the principle of vicarious liability.
SECTION B
(60 MARKS)
Answer ANY THREE questions from this section
QUESTION 2
a) Zelezi and Sofinala have entered into a contract for the supply of local produce,
100 bags of maize. They did not however agree on time as when these bags of
maize are to be transferred from Zelezi to Sofinala. Mention three rules that will
apply to decide when the maize will be transferred between them?
(6 marks)
b) Atusaye has been retained by Zawo Manufacturing Company as an agent to
transport its merchandise to remote areas of the country. The commodities to be
transferred included tomatoes (perishables). On his way to deliver, the vehicle
without his fault developed a mechanical problem, which prevented him from
delivering the tomatoes. He made a decision to sell the tomatoes to people around
the area where the vehicle had a fault. This was done after failing to contact the
company since all phones were switched off. Atusaye sold the tomatoes at a loss.
The company now wants to claim the lost money from Atusaye. Advise, using
legal principles, the chances of the company being successful in this suit.
(10 marks)
c) Mention four characteristics of a registered company under company law?
(4 marks)
(Total 20 marks)
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QUESTION 3
A customer walks into a banking hall and decides to jump queues. Other customers
react and a row ensues between the other customers and the queue-jumping
customer. The bank teller near to the incident calls security to help but before security
comes, the queue-jumping customer turns to the bank teller, immediately and in rage
he pulls out a handgun and points it to the bank teller. The queue-jumping customer
then utters the following words to the bank teller “You will be dead by the time
security personnel arrives.” People around managed to overpower the queuejumping customer and confiscated the handgun and immediately everyone in the
bank realized that the handgun was actually unloaded. You are a senior prosecutor
and you have been approached by your juniors to advise whether there is a criminal
case that can be commenced against queue-jumping customer as regards what he
did to the bank teller. Back your discussion with the law.
(Total 20 marks)
QUESTION 4
Mr Chandiona, a Malawi renowned investment banker works locally for Investment
Corporate Bank International (hereinafter referred to as the ‘Bank’). This is a
Malawian bank with branches all over the world including in a country called Republic
of Sovereignty. His contract with the Bank as well the terms and conditions of service
clearly stipulate that his place of work is Blantyre, Malawi but that the Bank shall at
all times reserve the right to transfer him to any of its braches here in Malawi or
abroad. The Bank has now decided to assign Mr Chandiona to head its branch in the
Republic of Sovereignty. Mr Chandiona who only joined the Bank in 2012 upon
return from the Republic of Sovereignty where he had worked for another bank for 20
years is refusing giving the following reasons:
(a) That he left Republic of Sovereignty not of his free will but because people of that
country are very intolerant to other religious views and they had petrol bombed his
house on two occasions; and
(b) That on a separate occasion they also nearly kidnapped his children aright at their
school yard.
The Bank on the other hand is not backing down on the posting of Mr Chandiona
saying that it is only doing what the contract as well the terms and conditions of
service allow it to do i.e. to have the right to transfer Mr Chandiona to any of its
braches here in Malawi or abroad.
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The Bank has now decided to dismiss Mr Chandiona on account of his refusal to go
to the Republic of Sovereignty but before effecting its decisions the Bank wants your
legal advice as to whether firing Mr Chandiona has a good legal standing based on
the facts given above. Briefly advise the Bank backing your advice with the relevant
law.
(Total 20 marks)
QUESTION 5
Write brief notes on the following legal principles and cases.
(a) Case Law as a source of law
(b) Nuisance
(c) Byrne –V- Van Tienhoven (1880)
(d) Lee V Lee’s Air Farming (1960)
(Total 20 marks)
QUESTION 6
a) What do you understand by the word ‘crossing on a cheque’?
(3 marks)
b) What is difference between general and special crossing of cheques? (4 marks)
c) Ulemu has entered into a contract with Nyoni for the purchase of a motor vehicle.
Ulemu has accepted the motor vehicle at his home. He took the car for re-painting
at one of the local garages. He has used the car for three months and it has
covered 800 KM. One morning, Ulemu discovered that the engine is not working
at all. He called Nyoni informing him of his intention to repudiate the contract.
Advise them.
(7 marks)
d) What is negotiation of a bill and mention two ways how a bill is negotiated.
(6 marks)
(Total 20 marks)
END OF THE EXAMINATION PAPER
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