INSTITUTE OF BANKERS IN MALAWI

CERTIFICATE IN BANKING EXAMINATION

SUBJECT: BASIC PRINCIPLES OF LAW (IOBM-C108)

Date: Saturday, 10thNovember 2012

Time Allocated: 3 hours (08:00 – 11:00 am)

INSTRUCTIONS TO CANDIDATES

1This paper consists of TWO Sections, A and B.

2Section A consists of 20 multiple questions, each question carries 2 marks.

Answer ALL questions.

3Section B consists of 5 questions, each question carries 20 marks. Answer ANY THREE questions.

4You 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.

5Begin each answer on a new page.

6Please write your examination number on each answer book used. Answer books without examination numbers will not be marked.

7DO NOT open this question paper until instructed to do so.

SECTION A(40 MARKS)

AnswerALLquestions from this section.

SECTION A: ANSWER ALL QUESTIONS BY CIRCLING THE CORRECT ANSWER

  1. Which of the following is a subordinate court in Malawi?

(a)Malawi Supreme Court of Appeal

(b)Commercial Division of the High Court

(c)Industrial Relations Court

(d)High Court General Division.

  1. Which of the following is not an example of offences against property?

(a)Theft

(b)Burglary

(c)Robbery

(d)Manslaughter.

  1. Which of the following is not example of a tort?

(a)Trespass to goods

(b)Trespass to land

(c)Nuisance

(d)Theft.

  1. The principle in law where two people cannot by a contract impose on or bind a third party unless one is a party to the contract is

(a)Subrogation

(b)Doctrine of survivorship

(c)Past consideration

(d)Privity of contract.

  1. Which of the following is the duty of the principal towards an agent?

(a)Duty to use proper care and skill

(b)To obey legal instructions

(c)To account for money and property

(d)To comply with the agency contract.

  1. Which of the following is not a sale of goods contract?

(a)Taking a wireless to a radio repair at MK2500

(b)Exchanging a minibus with a saloon car

(c)Giving a second hand car plus cash in return for a new car

(d)Buying a new machine at game stores for MK5, 000

  1. Which of the following is not an implied term in sales by sample under sale of Goods Contract?

(a)The bulk of the goods will correspond with the sample in quality

(b)The buyer will have a reasonable opportunity of comparing the bulk with the sample

(c)The goods will be free from any defect rendering them unmerchantable, which would not be apparent on a reasonable examination of the sample

(d)That the goods are fit for the purpose they are bought for.

  1. One of the principles that was established in the case of Hadley V Baxendale is:

(a)The damages to be awarded to the plaintiff for breach of contract should cover such of his losses as may be fairly considered to arise naturally

(b)Damages to be awarded to be sufficient

(c)Damages to be awarded should be only those that the defendant can afford to pay

(d)Damages to be awarded to be only those that the court has assessed.

  1. One of the differences between partnerships and companies is that:

(a)Companies are bigger than partnerships

(b)Companies are run more efficiently than partnerships

(c)Companies have legal capacity than partnerships

(d)Partnerships have more capital than companies.

  1. Which of the following is an example of negotiable instruments?

(a)Postal orders

(b)Bills of lading

(c)Insurance policies

(d)Treasury bills.

  1. Which of the following is not a ground upon which a court can find that a contract is illegal on the ground of public policy?

(a)Contracts tending to injure public service

(b)Agreements to oust the jurisdiction of courts

(c)Agreements prejudicial to the sanctity of marriage

(d)Contracts to employ children in industries.

  1. To establish constructive dismissal, an employee must show that:

(a)The employer has committed a serious breach of contract

(b)The employer left the employee without resources

(c)The employer harassed the employee

(d)The employer beat up the employee.

  1. Which of the following is not an example of an agent?

a)Estate agents

b)Lawyers

c)Bankers

d)Companies.

  1. In a sale of goods contract, price is determined in one of the following ways:

a)by the course of dealing of the parties

b)As set by the Government

c)Set by the association in that trade

d)As set by the most powerful party

  1. Breach of a condition in a contract results in:

a)Award of damages

b)Repudiation of the contract by the innocent party

c)Both a and b above

d)None of the above

  1. Doctrine of survivorship in joint tenancy agreements mean that:

a)Upon death of one person, the property passes to the relatives of the deceased

b)Upon death of one person, the property passes to the surviving party

c)Upon death of one person, the property passes to the Government

d)Upon death of one person, the property is donated to charity

  1. In company law, piercing the corporate veil means:

a)Registering a private company

b)Lifting the veil of incorporation

c)Strengthening the good governance of the company

d)Shielding members of the company from liability.

  1. In sale of Goods contract, Nemo Dat Quod Habet means:

a)The document is not mine

b)Title will pass after contract is made

c)Man cannot give that which is not his own

d)The seller had the authority or consent of the owner.

  1. In negotiable instruments, an indorsee means:

a)A party who signs the bill as an order given to another person

b)A party to whom the bill is addressed ordering him to pay

c)A party to whom the bill is payable as payee

d)A party to whom the cheque is negotiated by the payee

  1. Payment in due course means:

a)Payment made promptly

b)Payment that is made in due course to the holder of the bill

c)Payment to be made in future

d)Payment made at or made after the maturity of the bill to the holder in good faith and without notice that his title to the bill is defective.

SECTION B(60 MARKS)

Answer ANY THREEquestions from this section.

QUESTION 1

(a)What is the meaning of tort? (2 marks)

(b)Explain the meaning and effect of the following defences which may be put forward to an action of tort:

(i) An act of God

(ii) Statutory authority

(iii) Volenti non fit injuria (9 marks)

(c)Under the Sale of Goods Act, in what circumstances is a buyer deemed to have accepted goods sold to him? (6 marks)

(d)State any three differences between criminal law and civil law. (3 marks)

(Total 20 marks)

QUESTION 2

(a)Define the following legal terms:

(i)A contract of sale of Goods Act

(ii)A hire purchase agreement

(iii)A partnership agreement

(iv)Accommodating party or bill. (8 marks)

(b)Tinyade and her Aunt Ms Tafika, bought a big piece of land in Blantyre which according to the title documents is held in the joint names of the two as joint tenants. The land is valued at MK20.0 million. Ms Tafika has died and her sonTatenda is insisting that Tinyade should sell the land so that the money should be shared with him as a way of getting part of the mother’s worth. Please comment as to whether Tatenda has genuine case with reference to statutes and legal principles. (12 marks)

(Total 20 marks)

QUESTION 3

(a)What are the three functions of bills of exchange? (3 marks)

(b)X insured his house against fire at a total cost of MK200, 000. After sometime, fire gutted the house when the house was being rented out to a tenant. X sued the electricity company who paid him damages totalling MK180, 000 for the loss caused by the fire to his house. Meanwhile, the insurance company has also deposited an amount of MK190, 000 covering the loss incurred. Advise both the insurance company and X as to whether he can benefit from the electricity company and the insurance company. (6 marks)

(c)Dzaone manufacturing company entered into a contract with a certain car dealer for a sale of a car to be used in carrying manufacturing raw materials from countryside. The car dealer while knowing the specifications of the car sought, offered for sale a car that was unable to accomplish the task.Dzaone Manufacturing Company intends to sue the car dealer for breach of contract. Advise. (6 marks)

(d)Describe obligations that an agent owes to his principal and remedies that are available to the principal in time of breach. (6 marks)

(Total 20 marks)

QUESTION 4

(a)X has rented his house to Y at a monthly price of MK50, 000 for a period of 2 years. While the tenancy agreement was still subsisting, Y left for the Republic of South Africa without notifying the landlord. X has therefore rented the house to another tenant at the price of MK50, 000. However, X wants to know whether the position he has taken is legal. Please advise him. (6 marks)

(b)Mention three circumstances in which an agreement that gives or appears to give exclusive possession is only a licence as stated in the case of STREET V MOUNTFORD. (6 marks)

(c)Mention three duties an employer has towards his or her employee under common law? (6 marks)

(d)Define lien. (2 marks)

(Total 20 marks)

QUESTION 5

(a)Define the following terms as regards formation and existence of a company:

(i)Perpetual succession

(ii)The Ultra Vires concept

(iii)Lifting the veil of incorporation

(iv)Corporate personality

(v)Articles of Association (10 marks)

(b)What are the advantages of studying Business Law to students in Banking? (10 marks)

(Total 20 marks)

END OF THE EXAMINATION PAPER

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A qualification examined by the Institute of Bankers in Malawi