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Business Law 1 Question Paper

Business Law 1

Course:Bachelor Of Commerce (Commerce)

Institution: Kabarak University question papers

Exam Year:2009

KABARAK
UNIVERSITY
EXAMINATIONS
2008/2009 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF BUSINESS
MANAGEMENT & INFORMATION TECHNOLOGY
COURSE CODE: BMIT 212
COURSE TITLE: BUSINESS LAW
STREAM: Y2S1
DAY: FRIDAY
TIME:
9.00
–
12.00
P.M.
DATE: 27/3/2009
INSTRUCTIONS:
Answer question ONE and any other SEVEN questions.
PLEASE TURN OVER
Page 1 of 5
QUESTION ONE
On Friday 10th January, 2008 the following notice was placed in the window of Nakuru
Electronics Limited. “2 very nice printers – Kshs.15,000/= each”. Josephine and
Shalony were very keen to acquire the Printers but thought that the price was too high.
They each offered Nakuru Electronics Limited 12,000/=. Nakuru electronics refused to
sell at that price but said it can accept 13,500/=. Further it said it would keep the offer to
them open until 12 O’clock of the following Monday 13th Jan. 2008, if they each pay it
1,000/=. On Saturday before the deadline, they left the country for other business but
before they left, each posted a letter stating they agreed to buy the printers at the agreed
price of 13,500/= each. Josephine’s letter arrived at 9.30 a.m. on the Monday morning
but Shalony’s letter was delayed and arrived on the morning of Tuesday 14th January,
2008. In any event Nakuru Electronics Limited had already sold both Printers to David
on Saturday 11th January, 2008 for a total of Kshs.30,000/=.
Required:-
Analyse the above situation from the point of Contract Law emphasizing
particularly on the offer and acceptance. In particular advise the parties as to their
rights, liabilities and the potential remedies available to them under Contract Law.

(15mks)
QUESTION TWO
a)
Angela was staying with her Husband Mogaka who was working with the United
Nations in London although they were Kenyan Nationals. They came back for
holiday last December. Angela became sick and was left behind as Mogaka went
to England to resume his job. He promised to be sending her Kshs.50,000/= per
month for her up-keep “as long as I can manage it”. Mogaka has never sent any
money. Angela wants to take him to court to enforce the promise. Can she
succeed? (2.5mks)
b)
Chirchir and Wellington are Business partners, Wellington supplies Chirchir with
goods from London to Nairobi. They expressly provided in their agreement that
their contract was not subject to any legal jurisdiction of either country even if
either country even if either party breaches the agreement. Wellington has failed
to supply the goods. Chirchir has taken him to Milimani Commercial Courts
Nairobi.
Decide.
(2.5mks)
Page 2 of 5
QUESTION THREE
a)
Explain how the constitution and Legislation are main sources of laws of Kenya.

(2mks)
b)
Explain the following with regard to the way in which our courts interpret
statutes;-
i) The
literal
Rule
(1mk)
ii) The
golden
Rule
(1mk)
iii) The
Mischief
Rule
(1mk)
QUESTION FOUR
Alan runs and owns a car showroom next to Afraha stadium in Nakuru. When Alan
booked his three week annual holiday at Dubai, he arranged that his foreman,
Billy, would run the Car showroom while he was away. Billy was told that he could sell
any car on the forecourt, as long as he got at least 90 percent of the price
displayed on the car. He was told not to buy any cars at all, no matter what the
circumstances.
While Alan was away, Billy sold a car to Carol for 85 percent of the price shown on the
car. Carol thought that Billy owned the business.
Dinah, who regularly did business with Alan, bought a car for 75 percent of the price
shown on it. She knew that Alan usually insisted on at least 90 percent of the price
shown, even when the buyer was, in the motor trade. She asked Billy whether he
was sure he could sell the car at 75 percent of the price shown. Billy, untruthfully, said
that Alan had told him to do this if the buyer was a motor dealer. Dinah therefore bought
the car and paid for it. At the same time, Billy bought a car from Elizabeth because he
was sure that it was such a bargain that Alan would want it. Alan examined the car when
he returned from his holiday and considered it a good buy. Elizabeth has now
discovered that the car was worth more than she thought. Hearing from Bill that he
should not really have bought the car, Elizabeth intends to reclaim the car. However,
Alan has telephoned her to say that she will not be able to claim the return of the car as he
has definitely bought it. Elizabeth refused to accept that she can not reclaim the car.
Alan does not want to be bound by the contracts which Billy made with carol and Dinah.
Nor is he willing to let Elizabeth reclaim the car which she sold.
Advice Alan of his position in respect of transaction entered into with Carol, Dinah and
Elizabeth
taking
into
account
Law
of
agency.
(5mks)
Page 3 of 5
QUESTION FIVE
a)
With reference to a contract of sale of goods, explain the implied conditions on
the
part
of
the
seller.
(3mks)
b)
A contract of sale of goods by sample between Ben and Sally provided that
payment of the goods was to be made on arrival against the shipping documents.
Ben, who is the buyer paid for the goods before he had the opportunity to examine
the goods. Later, on examination Ben found that the bulk of the goods did not
correspond with the sample. Explain in details whether Ben can reject the goods.

(2mks)
QUESTION SIX
a)
Compare and contrast the characteristics of a member’s voluntary winding up and
courts
compulsory
winding
up
of
a
company.
(2mks)
b)
Write brief notes on the following:-
i) Unlimited
Companies
(1mk)

ii) Company
Limited
by
guarantee
(1mk)

iii) Companies
Limited
by
shares
(1mk)
QUESTION SEVEN
a)
What are the main requirements which must be satisfied before an employee who
has been dismissed by his employer will be able to succeed in a claim for unfair
dismissal? (2.5mks)
b)
Briefly state the nature of the remedies which may be available to an employee
who
has
been
unfairly
dismissed.
(2.5mks)
QUESTION EIGHT
a)
A, agreed to sing in an Opera for the opening day and the subsequent days of the
show. She failed to sing on the opening night. B, the organizer hired an
alternative singer. A sued B for breach of contract. Taking into account
classification of terms of a contract, can A succeed?
(2.5mks)
b)
A, hired a room in a Hotel. He paid at the reception. When he went into the
room, there was a note excluding the owners of the hotel from liability for loss of
baggage in the hotel. His luggage was stolen. He sued the hotel.

In regard to requirements of a valid exemption (exclusion) clause, briefly explain
whether
A
can
succeed.
(2.5mks)
Page 4 of 5
QUESTION NINE
Write short notes on the following;-

a)
Memorandum
of
Association
and
articles
of
Association. (2mks)

b)
Salomon
–vs-
Salomon
&
Company
Limited
(1897).
(2mks)

c) Lifting
of
the
corporate
veil
of
a
company.
(1mk)
QUESTION TEN
a)
Briefly explain how a contract can be terminated/discharged.
(2.5mks)
b)
What are the remedies available to a party who is claiming breach of a contract by
the
other
party?
(2.5mks)
Page 5 of 5

Business Law 1 Question Paper

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