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Legal Aspects Of Business Management Question Paper

Legal Aspects Of Business Management

Course:Higher Diploma In Business Management (Business Management)

Exam Year:2007

HIGHER DIPLOMA IN BUSINESS MANAGEMENT
MODULE 1
LEGAL ASPECTS OF BUSINESS MANAGEMENT
INSTRUCTIONS TO CANDIDATES
Answer FOUR questions as follows:
The Compulsory Question 1 in section A.
Any THREE questions in section B.
Question 1 carries 40 marks while the other questions carry 20 marks each.
This paper consists of 4 printed pages
Candidates should check the question paper to ascertain that all the pages are printed as indicated and no questions are missing
SECTION A (40 marks)
Question 1 is compulsory.
1. Read the case below and then answer the questions that follow.
KING LTD
King Ltd is a private company that was incorporated five years ago. The directors of the company are registered as Mark Otieno and Ben Wafula. The company has been registered with the objectives of pursuing the business of computer software design, both locally and internationally.

The company is located on its own premises in a leafy suburb of the city of Nairobi. The premises comprises of an 1/8 acre piece of land on which stands a four bedroomed bungalow with all the attendant facilities of a functional building. There is also an outer building, a self-contained one bedroom house which used to serve as a servant's quarter, but which currently serves as the main registry and storehouse. The premises was bought from the financial contribution of the directors.

The directors adopted the name King Ltd in the hope of benefiting from the goodwill attendant to another establishment business in the name of Kings Ltd. It is for this reason that King Ltd also adopted a logo that closely resembles the one used by Kings Ltd.

Kings Ltd recently received, by mistake, an inquiry from a customer about a software that has been developed by King Ltd. On further scrutiny, Kings Ltd has discovered that King Ltd has actually developed a product that is very similar to theirs, and the said company is using a logo that is similar to theirs in all aspects (i.e Kings Ltd Logo).

King Ltd, however, has been doing some brisk business since its inception, thanks to its close resemblance to Kings Ltd .It has currently received an order for one of its softwares from Design Concepts, a computer company based in the republic of Utopia. The export of the software will be under the F.O.B. contract terms.

King Ltd has also expanded its business and has branched off into the import and export curios and other artefacts to markets in the Middle and Far East. It has however, not amended its objectives as indicated in the articles and memorandum of association lodged with the registrar of companies.

The two directors of the firm, Mark and Ben, would like to raise additional capital to finance continued expansion of the business. They have been advised that one way of raising such capital is by way of a bank loan using a fixed charge against some of its assets.

Explain:
(a) the extent to which King Ltd may be liable for an action of passing off; (8 marks)
(b) the extent to which operations of King Ltd are ultra vires, and the implications of such actions; (10 marks)
(c) the obligations of King Ltd under its contract terms with Design Concepts; (12 marks)
(d) the course of action available to Kings Ltd against King Ltd, and the remedies that may be available.(10 marks)

SECTION B (60 marks)
Answer any THREE questions.
2. (a) Thomas who intends to undertake an investment venture approaches Tim, a financial consultant, for advice. Tim advises Thomas that the company he is seeking to invest in is economically viable. Relying on this advice Thomas invests in the company, but to his detriment suffers loss as the investment proves to be worthless.
Citing the relevant legal principles, advise Thomas.(10 marks)
(b) The company secretary of a public limited company performs certain duties. Explain five such duties.(10 marks)

3. (a) In the year 2000 Robert borrowed Ksh 5 million from James. The loan was secured by a first legal mortgage over his mansion in Runda Estate. In 2002 Robert borrowed a further Ksh 2 million, attracting interest at 12% per annum from Patroba. This additional loan was secured by a second legal mortgage on his house in Runda Estate.
Robert has now fallen into arrears with his payment of interest due on the second mortgage. James holds the Title Deed to the house in Runda Estate.
(i) Explain the circumstances under which Patroba could sell the Runda Estate house to secure repayment of his loan.(6 marks)
(ii) Explain how any such sale could affect James'position.(4 marks)
(b) With reference to the law governing international trade, give reasons why an export sale to a foreigner poses special legal problems fro the seller.(10 marks)

4. (a) With reference to concept of intellectual property law;
(i) explain the significance of intellectual property law; (6 marks)
(ii) highlight the objectives of the patent system. (4 marks)
(b) Masua bought a saw blade for his woodwork business. While Masua was using the saw blade, the blade flew off its handle and injured him. The saw blade turned out to have been defective. Masua has sued Kali Traders, who had sold the blade to him, for injuries he sustained.

In reference to the consumer protection law, highlight the defences that are available to Kali Traders who have been sued for selling or supplying a defective product.(10 marks)

5. (a) Explain the category of persons held as trustees, and state their liabilities in case of fraudulent disposal of trust property, as is provided under the Penal Code (Cap 63 Laws of Kenya).(10 marks)
(b) With reference to the provisions of the Banking Act, there are certain assets that are defined as liquid assets. Describe five such assets.(10 marks)

6. (a) With reference to Tax Law, explain five features that distinguish direct taxes from indirect taxes.(10 marks)
(b) Waka has just been employed as a salesman of Shauri Yako Co Ltd. The management has asked him to sign a contract which requires him not to injure his employer's interests during the time he will be working with the company, and also not to lure away his employer's customers upon leaving employment. Waka approaches you for advice.
Advise Waka on:

(i) the meaning of a contract in restraint of trade; (2 marks)
(ii) the tests such restraints will satisfy before they can be enforced by the courts.(8 marks)

Legal Aspects Of Business Management Question Paper

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