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Bcom 303: Business Law Ii Question Paper
Bcom 303: Business Law Ii
Course:Bachelor Of Commerce
Institution: Chuka University question papers
Exam Year:2012
CHUKA UNIVERSITY
COLLEGE
UNIVERSITY EXAMINATIONS
THIRD YEAR EXAMINATION FOR THE AWARD OF DEGREE OF
BACHELOR OF COMMERCE
BCOM 303: BUSINESS LAW II
STREAMS: BCOM Y3S2 TIME: 2 HOURS
DAY/DATE: TUESDAY 11/12/2012 8.30 A.M – 10.30 A.M.
INSTRUCTIONS:
• Answer question One and any other two.
• Do not write anything on the question paper.
QUESTION 1
(a) Peter runs and owns a small garage next to Nyayo National Stadium in Nairobi. When Peter booked his three wee annual holiday at Mombasa, he arranged that his foreman Joe, would run the garage while he was away. Joe was told that he could sell any car on the forecourt as long as he got at least 90 per cent of the price displayed on the car. He was told not to buy any cars at all, no matter what was the circumstance.
While Peter was away Joe sold a car to Sasha for 85 per cent of the price shown on the car. Sasha thought that Joe owned the business.
Shantel, who regularly did business with Peter, bought a car for 75 per cent of the price shown on it. She knew that Peter usually insisted on at least 90 per cent of the price shown, even when the buyer was, in the motor trade. She asked Joe whether he was sure he could sell the car at 75 per cent of the price shown. Joe, untruthfully, said that Peter had told him to do this if the buyer was motor dealer. Shantel therefore bought the car and paid for it. At the same time, Joe bought a car from Sheila because he saw that it was such a bargain that Peter would want it. Peter examined the car when he returned form his holiday and considered it a good buy. Sheila has discovered that the car was worth more than she thought. Hearing from Joe that she should not really have the car, Sheila intends to reclaim the car. However, Peter has telephoned her to say that she will not be able to claim the return of the car he has definitely bought it. Sheila refuses to accept that she cannot reclaim the car.
Peter does not want to be bound by the contracts which Joe made with Sasha and Shantel. Nor is he willing to let Sheila reclaim the car which she sold.
Advice Peter of his legal position in respect of transactions entered with Sasha, Shantel and Sheila. [20 marks]
(b) C purchased a tin of disinfectant powder from A. A knew that the powder was likely to be dangerous to C if it was opened without special care being taken, but did not tell C about this danger. C opened the tin in the normal way whereupon the disinfectant powder flew into the eyes of C and caused injury. Is A liable to pay damages to C? Give reasons for your answer. [5 marks]
(c) Under a contract for sale of goods, it is very important to know who has the “property in goods” at any given time. Briefly explain why this is important. [5 marks]
QUESTION 2
(a) A who was promoting a company which had not then been registered, made a contract on behalf of the unregistered company with B. After the company had been registered, it attempted to ratify the contract. Later the company due to its insolvency went into liquidation. B went to court to enforce the contract between him and A. A said it was the company which was liable.
[5 marks]
(b) Miss A asked B a pharmacist to sell some tablets which will clear pimples on her face. B sold tablets to her and said it was very perfect as he had specialized in them. A bought the tablets. She took them in a manner prescribed but instead her pimples became worse with side effects. What remedy if any has she against B under sale of goods Act?
[5 marks]
(c) Njenga and Namwamba are Business Law II students at Chuka University College. After their class, they had an argument as to whether a setter can ever sell what he does not own. Njenga said it is not possible at all. Namwamba said that at some instances it is allowed to sell what does not belong to you and yet pass a good title to the buyer. Briefly explain who was right and instances which support your explanation. [10 marks]
QUESTION 3
(a) Explain the conditions and warranties implied in hire Purchase Agreement. [10 marks]
(b) A, to meet the claims of his creditors, borrowed Ksh 10,000/= from B, to protect his interest. B takes out an insurance policy on the life of A. A pays the entire amount to B and then dies. Can B recover on the policy? Give reasons for your answer. [5 marks]
(c) Explain the circumstances under which the seller’s right of stoppage in transit comes to an end. [5 marks]
QUESTION 4
(a) With reference to contract of sale of goods, explain the implied condition on the part of the setter under Cap 31 Laws of Kenya. [8 marks]
(b) Okaka owns certain premises in Chuka which he is contracting to sell. He has a policy against fire in regard to the premises. The purchaser has agreed to pay 10 million the market price of the premises. In the course of negotiation, there was fire and part of the premises was destroyed. Okaka was paid 3 million by the insurance for the loss. He equally went ahead to receive full purchase money without deductions from the purchaser. The insurance has known this and has moved to court. Decide. [6 marks]
(c) Michael and Adam are partners in a business selling garden machinery. State and explain whether the following circumstances, the partners are in breach of their duties.
(i) Michael tells John, who is managing director of a different company also selling garden machinery about the profits of the partnership. [2 marks]
(ii) Adam sets up his business selling garden machinery. [2 marks]
(iii) Michael fails to tell Adam that he has ordered goods to value of 1million for the business. [2 marks]
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