Graduate/Postgraduate Diploma in Marketing ……………….. Examination

(Law Related to Marketing -1st Stage)

Date:

PART ONE

Answer all questions.Mark the most suitable answer in the given space in the answer booklet.

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Sri Lanka Institute of Marketing

Founded in 1970Incorporated by Act No: 41 of 1980 of the Parliament of theDemocratic Socialist Republic of Sri Lanka

Time: Duration: Three (03) hrs

There are three parts in this question paper. All questions in Part One and Part Two are compulsory.

Part One includes 20 multiple choice compulsory questions. Select the best answer from the given choices and mark it in the given space in the answer booklet.

Part Two includes six compulsory short answer questions.

Part Three includes 3 questions. Answer two questions from this part.

Instructions to candidates

1 State your Registration number on the front cover of the answer book and on each

and every additional paper attached to it. Your name must not appear anywhere in

the answer book or answer scripts.

2. Always start answering a question on a new page

3. You are reminded that answers should not be written in pencil or red pen except in

drawing diagrams.

4. Answer the questions using:

Effective arrangement and presentation

Clarity of expression

Logical and precise arguments

Clear diagrams and examples where appropriate

5. Illegible hand writing and language errors will be penalized

Question 01 1. A contract is a

a) A legally binding agreementb) A mutual understanding between two partiesc) A verbal understanding between any party d) A written agreement between two or more parties

2. An essential part of a contract is that a) There should be a valid offer and valid acceptanceb) There should be a physical product to transact c) Both parties should live in Sri Lankad) The agreement entered should be certified by an Attorney at Law

3. An agreement as to land to be valid

a) It should be in writingb) It should be in writing and proper stamps should be pastedc) Whether it is verbal or written but agreed in front of a lawyerd) It should be in writing and notarialy executed.

4. Jayalath prepares a medication for Dengu and advertises in the newspaper that compensation of Rs. 50,000 will be paid to anybody who uses his drug in the manner prescribed in the product and still does not get cured of Dengu. He further says that he has deposited Rs. 500,000 in the bank towards this purpose. Geetha Hamarasinghe attracts Dengu fever and uses Jayalath’s drug as prescribed but did not get any cure. Now Geetha sues Jayalath for the compensation.a) Jayalath says there is no contract with Geetha to pay the compensation as Geetha did

not inform him about the acceptance of his offerb) Geetha can ask for the reward despite she has not informed Jayalath as Jayalath’s

offer is made to the whole world.c) Jayalath has no obligation to pay Geetha as advertisements should not be taken

seriously and it does not have any legal implicationsd) Jayalath can pay only the amount paid by Geetha to buy the drug and not any more.

5. Somawansa advertises in newspapers that he would like to sell his car for Rs. 5 million. After one week, Weerawansa comes and offers Rs. 5 million, but Somawansa declines to sell the car to Weerawansaa) Somawansa has to sell the car to Weerawansa as Weerawansa has offered the correct moneyb) Somawansa says there is no offer to accept and the advertisement is only an invitation for offers c) Weerawansa says that an advertisement is an offer for the whole world and therefore any body can accept the offer and therefore Somawansa has to sell the car to himd) Somawansa can decline the offer as Weerawansa is late to offer.

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6. Dallas offered to sell his house to Mangala for Rs. 15 Million by way of posting a letter on 10th March 2009 and asked Mangala to make the acceptance by post. The letter was wrongly addressed and it reached Mangala only on the 15th of March 2009. Mangala accepted the offer and posted a letter on the same day. Meanwhile since there was no reply from Mangala even on 16th, Dallas sells his property to Yapa. The letter of acceptance by Mangala did not reach Dallas until 18th of March.1. Since there is no acceptance of offer is communicated, Dallas can sell the property 2. If post is given the mode of acceptance, the acceptance of the offer will take place as soon as the letter is properly posted. Mangala can sue Dallas for breach of contract.3. There is no contract between Dallas and Mangala as the contract did not take place in time4. Dallas can say that he did not receive the letter of acceptance within the expected period and therefore he thought that Mangala has no interest in accepting his offer.

7. Following are considered as no capacity to contract

a) Persons above 21 years of ageb) Married womenc) Persons of unsound mindd) Non citizens of this country

8. A contract for sale of goods includesa) Sale and an agreement to sellb) Sale onlyc) Agreement to sell onlyd) Sales, Leases and hire purchases

9. Karuna buys some paddy from Baskaran on Monday evening. Pays 75% of the price. Baskaran keeps the paddy sold to Karuna separately from other paddy and asks Karuna to take delivery and he agrees. However, Karuna could not find a lorry to take delivery of the paddy. When he came to take delivery on the next day, Baskaran’s store was bombed, guttered by fire and paddy has burnt and perished.a) Karuna can ask the money he paid from Baskaranb) Karuna can ask Baskaran to supply fresh paddy for him for the price paidc) Baskaran can ask Karuna to pay the balance 25% as well.d) Baskaran can sue Karuna for not taking the delivery of the paddy on the day he sold.

10. Consideration can be made for sale under the sale of goods ordinance by way of a) Money and servicesb) Money onlyc) Money, service and goodsd) Partly in money and partly in goods

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11. One of the implied conditions as to Title in Sale of Goods ordinance isa) The seller has the right to sell the goods if it is a saleb) The goods should be in merchantable conditionc) The goods should match the sampled) The goods should match the sample as well as the description

12. One of the statements is incorrect as to “Fit for purpose” implied condition is considered. Underline that statement a) The buyer makes known to the seller the particular purpose the goods are requiredb) The buyer has to show a sample of the product he wants to buyc) The buyer relies on the seller’s skill or judgmentd) The supplier ordinarily supplies such products in his normal course of business

13. Rajitha bought a car from Randeniya and used it for 6 months. Randeniya had no title to the car. As a consequence Rajitha had to surrender the motor car to the true owner. Rajitha sued Randeniya to recover the money paid.a) Rajitha has no right to sue Randeniyab) Rajitha cannot sue Randeniya for the total he paid as he has used it for six monthsc) Rajitha can sue Randeniya for the total money paid despite he has used it for six monthsd) Rajitha can ask the true owner to sue Randeniya as he has no right to sue him

14. One of the statements is wrong as to the duties of the buyer. Underline that statementa) To accept the delivery of goods when the seller is willing to make the delivery as per

the contractb) To pay the price in exchange for possession of the goodsc) To apply for the delivery of goodsd) Demand delivery of the goods at any time

15. Consumers Protection Act provides

a) Protection to Consumers, Traders and Manufacturersb) Protection to Consumers and Traders c) Protection to Consumers onlyd) Protection to consumers who buy Fast Moving Consumer Goods ( FMCGs)

16. Every trader who sells any goods shall on demand issues to the purchaser a receipt stating certain information. Underline the statement that has incorrect informationa) The date of saleb) The quantity and quality of goods soldc) The price paid for such productsd) Whether sale was wholesale or retail

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17. Underline the correct answer As per the Intellectual property Act No 52 of 2003, a trade mark means

a). Name used by a trader to identify goods and services marketed by him or herb) Any visible sign serving to distinguish the goods of one enterprise from those of othersc) A label, symbol of mixture of any of those used by a marketer to inform the public about its brand named) Any mark that appears in the package where customers can identify the product.

18. When Consumer Affairs Authority makes a determination as to anti competitive practices or monopolies of a company or trader, it should consider whether

a) It is fair by the interest of the public b) It is unfair on the competitorsc) It is a by a multinational or a locally owned companyd) It is about an essential service

19. Patent rights are given for a) Authors of booksb) Trade marksc) Company namesd) Inventions

22020. Underline the statement which is incorrect

A trade mark cannot be registered a) if it indicates a geographical name or a surnameb) A brand name “ cow” can be registered as a trade mark to sell milk

products c) Misleading marks cannot be used as trade marksd) Immoral, scandalous and antisocial marks cannot be used as trade

marks

(Total of 30 marks)

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PART TWO

Answer all questions

Question 02

Question 2.1

Under Law of agency, what is mean by apparent authority?

• Apparent authority ( agency by estoppel/ holding out)• This happens when the principal allows another person to be believed as his

agent for third parties. • When third parties act upon it and contracts with that person, the principal is

estopped • (E.g.. If Wimal makes Ranil believe that Basil is Wimal’s agent, Wimal will be

bound by the contract made by Basil on Wimal’s behalf. • Wimal will be barred/ estopped from denying that Basil is not his agent• no allowed) from denying the other as his agent.

(05 mark)

Question 2.2

Ulra vires will not have affect under the new companies law. Explain briefly.

• In the older versions of company’s laws if the company has acted beyond the powers given by the Memorandum of Association ( which contained the objects of the company) such acts were considered void.

• The doctrine ultra vires ( beyond powers) has been removed from the company’s law. No memorandum is required to establish a company under the new Act of 2007.

• Sec 17 of the companies Act states that even if the objects of a company are stated in the Articles of Association, the capacity and power of the company shall not be affected by such restriction. For existing companies by 2007, memorandum is deemed to form part of the articles. Therefore the doctrine of ultra vires is removed.

(05 marks)Question 2.3

The general rule is that an agent is neither liable nor entitled under contract which he makes on behalf of the principal. What are the exemptions to this rule?

– If the agent acts within the scope of his actual or apparent authority, principal is bound to 3rd parties for the contracts made on behalf of him

– Even if agent ahs acted on agency of necessity or the contract was later ratified by the principal, then the principal is bound on the contracts

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– ( however, if the 3rd party knows that the agents lacks authority, then the principal is not bound. Then the 3rd party has to deal directly with Agent)

The undisclosed principal• If the agent discloses the principal, but does not disclose the name of the principal • If the agent doe not disclose the existence of any agency• The principal would be undisclosed principal. • Then 3rd party can sue the agent or on discovery of principal, the 3rd party can sue

either the agent or the principal { agent also will have the right to sue the 3 rd party on his own name( agent’s name)}

(05 marks)Question 2.4

Why should a marketer give priority to alternate dispute resolution methods?

(05 marks)Question 2.5

What are the important aspects that you should check when you receive a cheque from a customer ?

Drawer should have signed the cheque. Have the amount stated in both words and figures which must agree. Possess all necessary endorsements. Not be stale. Bank will not pay a cheque older than six months from the date of the

cheque. Have had any alteration signed by the drawer.

 Be dated. If a cheque is presented undated the bank will return the cheque. However, a holder may insert the date what he considers to be the true date.

State the payees name or just cash as payee. If the payee is indicated as “cash” such a cheque cannot be crossed as “A/C payee”. Cheque is not mutilated. ( such as crushed, stained or torn) Company rubber stamp or any other authorized signatory’s stamp is placed.

(05 marks)Question 2.6What are the works protected by copy rights and how long a copyright will be valid ?

The Law governing copyrights are now included in the Intellectual Property Act Works of authors of Sri Lanka, works first published in Sri Lanka and all works (even

foreign) which by virtue of treaties entered into by SL are to be protected. Even SL folklore are protected under the Act

Economic rights Author’s lifetime plus 50 years after his death Joint work - during the life time of the surviving author plus 50 years

after his or her death

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Work published anonymous or pseudonym 50 years from the date of publication

Cinema, radio, TV 50 years from the date of broadcasting or public presentationPhotographic works – 25 years

◦ Moral rights Moral rights can be exercised by author and by heirs after the authors

death for 50 years Moral rights can be exercised even if the author or heirs do not have

economic rights ( E.g.. Even after transferring of economic rights)

(05 marks)(Total 30 marks)

PART THREE

Answer a total of two questions from this part

Question 03

a) Explain “Sale by Description” under the Sale of Goods Ordinance Implied condition regarding description ( sec 14)

Where there is a contract sale of goods by description, there is an implied condition that the goods shall correspond with the description. Goods are said to be sold by description when they are described in the contract either by the buyer or by the seller and the buyer contracts in reliance of the descriptionIn Re Moore & Co. and Landauer Co ( 1921)M sold to L, 3100 cases of Australian Canned fruits, the cases to contain 30 tins each. M delivered the total quantity, but about half the cases contained 24 tins, and the rest 30 tins. L rejected the goods. There was no difference in market value between goods packed in 24 tins and goods packed in 30 tins. However, the court held as the goods delivered did not correspond with the description( packing) of those ordered, L could reject the whole lot.

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Beal vs. Taylor – Buyer purchased a car described as 1961 model. The front part was pre 1961 model and it had welded to an old car. Held that the goods did not comply with the description

(10 marks)

b) Explain “ Sale by sample and Description” under the Sale of Goods Ordinance

• If the sale by sample as well as description it should correspond to both. • Nichol vs. Godts ( 1854)• N agreed to sell G some oil described as

“ foreign refined rape oil” as per the sample. Although the goods were as per the sample but it was not foreign refined rape oil. Therefore buyer was entitled to reject the goods as it should correspond not only with the sample but with the description as well.

(10 marks)(Total 20 marks)

Question 04

a) Write a short note on capacity of minors in contract . Minors- Who are under the age of 18 years

Minors cantracts can be classified as unassisted and assisted contracts. Unassisted – minor enters into a contract on his own. Generally they are

unenforceable against the minor . However, it could be ratified by the guardians assistance during his or her minority or by the minor upon reaching the age of majority

Assisted – minor enters into a contract with the assistance of his or her natural guardian( parents)or person appointed by court. These contracts can be enforced against the minor.

Unassisted contracts by Minors This needs more explanation as some contracts can be enforced against them. Generally contracts made by persons under the age of 18 years cannot be enforced

against them. In other words ,they are voidable at the option of minor. However, a minor may enforce against the adult, if he or she wishes to do so.

( limping contracts) On the other hand, there are some contracts that can be enforced against even on

minor by the other party. What are they? 1.Contracts for necessities If the other party can prove that goods are suitable to his status in life and it is

required by him at the time of delivery of the product, then a contract can be enforced against a minor.

However, if the parents can prove that the minor is sufficiently provided with the goods then even though this fact is not known to the other party he may not be able to recover the price agreed.

Nash Vs. Inman ( 12 waist coats ordered by a minor and father's evidence showed- he was adequately provided with and trader could not recover the price from minor)

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2.If the minor has fraudulently shown he was an adult although in fact he was a minor.

3.Beneficial Contract of Service – Costa Vs. AG. A teacher when she was a minor entered into a contract for teacher training. Then the contract of serving for a specific period was breached and when sued she claimed that she was not bound on the bond as she was a minor at the time of signing the bond. But court held even then, training was for her benefit and there is a valid contract created by the Bond.

(10 marks)

b) Write a short note on termination offer Revocation and rejection of offer will terminate the offer

c) An offer may be revoked at any time before it is accepted.d) However a revocation of an offer will not take place until it is actually communicated

to the offeree.e) Byrne Vs. Van Tienhoven ( 1880)f) B in Cardiff sends an offer to T in NewYork. T accepts in on 11 th by telegraph. B

revokes in on 8th by posting a letter. T receives in on the 20th. Held revocation will not have effect until it reaches T and therefore T ‘s acceptance is valid and there is a contract.

Revocation is possible at any given time even if there has been a promise to keep it open until a specific period. However, if it is given by a deed or supported by consideration, then it cannot be revoked until the date specified.

4. Revocation can be communicated directly by the the offeror or by a third party Dickinson Vs. Dodds ( 1876)

◦ A offered to sell a property to B, through a document which stated that this offer is valid until Friday 9.00 a.m. On Thursday A sold the house to Y and B came to know about this sale through the brother in law of A. B, before 9.00 a.m. of Friday delivered his letter of acceptance through his Brother in law. Court held that there is no contract. By knowing that the sale was concluded and having not paid any consideration to keep for a period of time, B has no offer valid to accept. Offeree can reject the offer at anytime saying that he has no interest in accepting the offer.

◦ 2. A counter offer from offeree also makes the offer rejected. ◦ Hyde Vs. Wrench ( 1840)◦ Wrench offered a sell a property for pounds 1000. Hyde then offered to buy it

for pounds 950 but Wrench did not accept the offer. Then he agreed to pay pound 1000.

◦ Court held; As soon as the counter offer of pound 950 was offered the original offer is rejected and therefore there is no offer to accept in the second time.

◦ By accepting the offer with conditions Such as I accept the price of Rs. Five Million for your House, but I will pay in three

installments , I will buy the car at the price quoted by you only if you can do the repairs I

mentioned in my visit. . Lapse of time

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Lapse of reasonable time depending on the mode of offer, nature of the product and also of the nature of the trade practice.

Question 05

a) What are the duties of the seller ?

– Deliver the goods in accordance with the terms of the contract– Willingness to give possession of the goods to the buyer and make

arrangements for the transfer of property in goods to the buyer– To ascertain and appropriate the goods to the contract of sale

– To pass absolute and effective title of the goods to the buyer– To put the goods in a deliverable state and deliver goods as when applied– To deliver goods within the specified time in the contract or within a

reasonable time

b) What are the remedies available for unpaid seller ?

• Unpaid sellers means, seller has not received the whole price or price has been paid partly or in full by a Bill of exchange ( cheque) which is subsequently dishonoured.

• Sellers remedies are two fold– Real remedies ( rights against the goods)– Personal remedies ( rights against the buyer)

• Real Remedies• 1. according to the real remedies under sec 39(1) unpaid seller is entitled to

the following remedies even where the goods have already passed onto the buyer• (A) Right of lien

– The seller’s lien enables the right to retain possession of the goods until payment is received.

– According to sec 40, a lien is available when• The goods have been sold without stipulation as to credit

(In other words, does not have lien on items sold on credit)• The goods have been sold on credit that has already expired• The buyer becomes insolvent

According to sec 42 a lien is lost when• the goods are delivered to the transporter for the purpose of

transportation of goods to the buyer, without reserving the right of disposal

• when the buyer or his agent lawfully obtain possession of the goods• By waiver

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• (B) Right of stoppage in transit– Seller has the right to stop the transit of goods sold under sec 43. Can regain

the possession of them until the payment is made. It could be done when• The buyer becomes insolvent• The goods are still in transit

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• C) Limited right of resale– The right of lien and stoppage in transit would not have been of much value if

the seller had no right to resell the goods, as seller cannot continue to hold the goods indefinitely.

– Unpaid seller may resell the goods when• The goods are of perishable nature, without giving any notice to the

buyer of the resale• Where he gives notice to the buyer of his intention to resell and the

buyer does not pay within a reasonable time• Where the seller expressly reserves the right to resell if the buyer

defaults2. Unpaid sellers right - When the property in goods have not passed to the buyer

• Right of withholding the goods until payment is made.• It is similar to right of lien and right of stoppage in transit when the

property in the goods has passed• to the buyer.

• Personal remedies available for unpaid seller

– Action for price• When the property in goods has passed to the buyer and buyer

willfully neglects payment or refuses to pay the price, the seller is entitled to sue him for the price.

• When the price is payable on a specific day irrespective of the delivery, an action for the price may be brought against the buyer even if the property in goods has not passed or goods have not been appropriated to the contract

• (b) Action for damages for non acceptance ( sec 49)• When buyer wrongfully neglects or refuses to accept the goods buyer

can be sued for damages• The measure of damages would be decided upon facts. • When the goods have a fixed price and the supply exceeds demand

the damages would be the profit on the product that would have earned by the seller

• When there is an available market for the goods, the measure of damages is the difference between the contract price and the market price

• Note : If the product does not have a market at all other than the buyer, even the whole cost of the goods could be recovered as damages.

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•marks)

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