1. Answer all questions.
Mark the most suitable answer in the given space in the answer booklet.
Question 01
1. A contract is a
a) A legally binding agreement
b) A mutual understanding between two parties
c) 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 acceptance
b) There should be a physical product to transact
c) Both parties should live in Sri Lanka
d) 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 writing
b) It should be in writing and proper stamps should be pasted
c) Whether it is verbal or written but agreed in front of a lawyer
d) 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 offer
b) 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 implications
d) 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 Weerawansa
a) Somawansa has to sell the car to Weerawansa as Weerawansa has offered the correct
money
b) 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 him
d) Somawansa can decline the offer as Weerawansa is late to offer.
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2. 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
time
4. 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 age
b) Married women
c) Persons of unsound mind
d) Non citizens of this country
8.
A contract for sale of goods includes
a) Sale and an agreement to sell
b) Sale only
c) Agreement to sell only
d) 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 Baskaran
b) Karuna can ask Baskaran to supply fresh paddy for him for the price paid
c) 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 services
b) Money only
c) Money, service and goods
d) Partly in money and partly in goods
11.
One of the implied conditions as to Title in Sale of Goods ordinance is
a) The seller has the right to sell the goods if it is a sale
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3. b) The goods should be in merchantable condition
c) The goods should match the sample
d) 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 required
b) The buyer has to show a sample of the product he wants to buy
c) The buyer relies on the seller’s skill or judgment
d) 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 Randeniya
b) Rajitha cannot sue Randeniya for the total he paid as he has used it for six months
c) Rajitha can sue Randeniya for the total money paid despite he has used it for six months
d) 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 statement
a) To accept the delivery of goods when the seller is willing to make the delivery as per
the contract
b) To pay the price in exchange for possession of the goods
c) To apply for the delivery of goods
d) Demand delivery of the goods at any time
15.
Every trader who sells any goods shall on demand issues to the purchaser a receipt stating
certain information. Underline the statement that has incorrect information
a) The date of sale
b) The quantity and quality of goods sold
c) The price paid for such products
d) Whether sale was wholesale or retail
16. 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 her
b) Any visible sign serving to distinguish the goods of one enterprise from those of others
c) A label, symbol of mixture of any of those used by a marketer to inform the public about
its brand name
d) Any mark that appears in the package where customers can identify the product.
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4. 17. 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 competitors
c) It is a by a multinational or a locally owned company
d) It is about an essential service
18. Patent rights are given for
a) Authors of books
b) Trade marks
c) Company names
d) Inventions
22019. Underline the statement which is incorrect
A trade mark cannot be registered
a) if it indicates a geographical name or a surname
b) A brand name “ cow” can be registered as a trade mark to sell milk
products
c) Misleading marks cannot be used as trade marks
d) Immoral, scandalous and antisocial marks cannot be used as trade
marks
20. The important case as to legal entity of a company is
1. Salomon Vs. Salomon Ltd
2. Balfour Vs. Balfour
3. Merit vs. Merit
4. Hyde Vs. Wrench
(Total of 30 marks)
PART TWO
Answer all questions
Question 02
Question 2.1
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5. 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
stopped from denying what he let believe.
• (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
• not 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 new
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 has acted on agency of necessity or the contract was later
ratified by the principal, then the principal is bound on the contracts
– ( However, if the 3rd party knows that the agent 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 does 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
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6. (05 marks)
Question 2.4
Why should a marketer give priority to alternate dispute resolution methods?
Mainstream legal procedure often considered as expensive, time consuming and
cumbersome. Marketers prefer spending time in substantive marketing activities than
spending time in litigation
Litigation is the final method that is used when all other methods have failed.
Mutual agreement should be the first approach.
Mediation would be another approach
Arbitration for high value matters
(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 2.6
What 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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7.  Work published anonymous or pseudonym 50 years from the date of
publication
 Cinema, radio, TV 50 years from the date of broadcasting or public
presentation
Photographic 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 of 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 description.
In 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
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8. held as the goods delivered did not correspond with the description( packing) of
those ordered, L could reject the whole lot.
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
Assume a person in Trincomalee says that he has 200o kgs of kelawalla (Tuna) you
agreed to buy it at Rs. 400 a kg. However, when you received the fish in Colombo,
you find that they are not Kelawalla but Balaya which is lower in demand and price.
Then you can reject the goods under “ not supplied as per the description.
A canteen manager says he can supply rice packets with red rice. You order a lunch
packet but you find white rice in it. You can reject for the error in 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.
• You buy a Nokia phone by seen a sample and the trader says that it is made in
Finland. Then you go and open the battery compartment and finds a sticker “ Made in
china” then you can reject the product and ask for a full refund although you have
received the sample shown because the description as to country of origin does not
correspond.
(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
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9.  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)
 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
a) An offer may be revoked at any time before it is accepted.
However a revocation of an offer will not take place until it is actually communicated
to the offeree.
Byrne Vs. Van Tienhoven ( 1880)
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.
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10. b)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.
c)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.
d) 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.
◦
e) By accepting the offer with conditions
f)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.
g) Lapse of time
h) 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) Describe the main elements of a sale of goods transaction?
There should be goods (movable property other than money)
There should be at least two parties called buyer and seller
There should be a consideration called money
The title in goods should transfer now or on a future date
b) What are the duties of the seller ?
– Deliver the goods in accordance with the terms of the contract
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11. – 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
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