THE ASSOCIATION OF ACCOUNTING TECHNICIANS OF SRILANKA AAT (SL) INTERMEDIATE EXAMINATION - PILOT PAPER BUSINESS LAW OF. Business Law & Management

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1 THE ASSOCIATION OF ACCOUNTING TECHNICIANS OF SRILANKA AAT (SL) INTERMEDIATE EXAMINATION - PILOT PAPER BUSINESS LAW OF Time: 1 hour 30 minutes Business Law & Management Instructions to candidates: (1) This is the Business Law part of subject - Business Law & Management (2) Answer all questions (3) Answer should be in one language in the medium applied for, in the booklets provided. (4) 50 marks are allocated to this part. 01. Briefly state: a. Invitation for offer. b. Ways of termination of offer. c. Differences between void & voidable contract? d. Capacity to contract of minors. e. The exception clauses of the contract. f. Mistake g. Remedies for unpaid seller h. Benefits available for employees under the employees Trust fund Act. i. Name five negotiable instruments & explain their characteristic elements. j. Duties of agent. Total 10 x 2 = i. What are the main elements of a valid contract? ii. What are the available remedies for the injured party when a contract is breached? Total 5 x 2 = 10 1

2 03. i. What is an industrial dispute? State the methods of settlements for an industrial dispute. ii. What are the benefits that employees enjoy under the employees provident fund Act? Total 5 x 2 = i. What are the implied terms of a sale of goods contract under the sale of goods ordinance? ii. State the exceptions to the rule of NEMO DAT QUOD NON HABEAT. Total 5 x 2 = 10 THE ASSOCIATION OF ACCOUNTING TECHNICIANS OF SRILANKA AAT (SL) INTERMEDIATE EXAMINATION - PILOT PAPER BUSINESS LAW OF Business Law & Management SUGGESTED ANSWER AND MARKING SCHEME 01. a. Invitation to offer is a mere appeal to make a valid contract Exhibiting of a price notice is an invitation to offer. Pharmaceutical Society of Great Britain Vs Boots Cash Chemist. Media advertisements are also an invitation to offer. Fisher Vs Bell. But some advertisements are considered as direct offer Callil Vs Carbolic Smoke Ball Company. b. Offer can be terminated before acceptance. There are a few ways of termination of the offer. 2

3 1. By death of either party before the acceptance. 2. Destruction of the subject matter. 3. Insanity of either party before acceptance 4. Illegality of the offer. 5. The terminated of offer by laps of time. This can be discussed in two instances. a. If the offer or state a specific period for the laps of time, the offer may terminate after the expiration of that time. b. If the laps of time is not mentioned the offer is considered to be terminated within reasonable period of time. 6. By rejection. There are two instances that can terminate an offer by rejection a. When Offeree rejects the offer in writing / orally or by implication b. By making a counter offer. 7. By revocation c. A void contract is not valid from the beginning. Therefore, both parties are released from their contractual liabilities. For instance a contract made by the people insane, bankrupt and contract made, by mistake are void. Candy Vs Lindsay A voidable contract is valid until it is made void. Contracts made by intoxicated person minors and misrepresentation, under influence are included in above category. The property transferred under a voidable contract can be recovered by the first transferred from the transferee. But a third party that obtained the property with bonafide under voidable contract gets a good title. d) Individual under 18 years is considered to be minors. The contracts made by the minors are divided into categories. i. Assisted Contracts A contract made by a minor with the assistance of a natural or legal custodian is called assisted contract. Minors are bound by the liabilities of assisted contract. Inspite of the consent of the natural custodian the immovable property of the minor cannot be transferred unless the approval of the court is obtained. 3

4 ii. Non assisted contracts The contracts made by the minor without the consent of the natural or legal, custodian are called non assisted contracts. Assisted contracts are voidable. But there are three exceptions to the above rule. 1. Contract for necessaries of the minor. 2. Beneficial services contract of the minor. 3. Implied ratification after majority. e) The primary objects of the contract is to fulfill the contractual obligations. Sometimes practices include exception clauses to escape from the Liabilities contained in the contract and these clauses are called exceptional clauses. In respective of the parties consent the court does not like to apply the exceptional clauses. There are two types of exceptional clauses to restrict the liability and these clauses help to escape from the liability. f) Consent of the parties to the contract may not be real consent under mistake. Mistake makes contract void. This can be discussed in three instances. 1. Common mistake Common mistake may be made in two instances. a. Non existence of subject matter. b. The purchaser buys his own goods. 2. Bi lateral Mistake 3. Unilateral Mistake g) Unpaid seller means the seller who is not fully paid. Remedies available to him can be dividend in to two categories. a. Rights against the sold goods. 1. Right lien 2. Right of in transit 3. Right of Resale b. Rights against the buyer. 1. Rights to sue against the buyer to recover the price. 4

5 2. To recover the damage caused by non delivery of the goods. h) Available benefits for the employees under this ETF Acts can be divided into categories. 1. Welfare Benefits. Withdrawing the deposit money in the name of the employee Granting up to Rs. 100, for heart surgeries. Making deposit in the name of the employee s child when the child has passed the scholarship examination in the year five. Cost of intra ocular lens implant following cataract surgery. 2. Insurance Benefits. Life Insurance Permanent disabilities insurance i) Negotiable instruments are a substitute for money, in the commercial transactions cheques, Bills of exchange, promissory notes, dividend certificates; share certificates are some of them. Some common characteristics are found in all negotiable instruments. i. Holder becomes owner by mere handing over or endorsement. ii. Holder is entitled to sue against the predecessor iii. Though the predecessor s title is not good, the holder in due course gets good title. j) Duties of the agent. 1. Should be responsible in discharging duties. 2. Should be not disclose business secrets. principal 3. Should not obtain any commission in the transactions between agent and the 4. Should not make any profit secretly. 5. The authority given to the agent should not be delegated. 02. I. Main elements of valid contract. 5

6 a) Offer b) Acceptance c) Consideration d) Capacity to contract e) Genuineness of consent f) Legality of Object g) Intention to make a legal contract h) Should be relevant to the legal formalities. II. Available remedies for the injured party. a) Claiming for the damage b) An order of specific performance c) An order of injunction d) Rejection of further operation of the contract e) Making the contract void. 03. I. Dispute between employer and employee, employers and employees and employees on: Contract of the employment, contract of non employment, terms of employment, conditions of the labour, termination of employment, is considered to be industrial dispute. Methods for settlement of an industrial dispute. a) Settlement of industrial dispute by collective agreement. b) Settlement of industrial dispute by voluntary arbitration. c) Settlement of industrial dispute by voluntary agreement. d) Settlement of industrial dispute by compulsory arbitration. e) Settlement of industrial dispute by Labour tribunal. f) Settlement of industrial dispute by industrial court. 6

7 II. Instances that employee can obtain benefits under the EPF Act. a) Retirement at the appropriate age b) Women can obtain benefits when she gets married c) Permanent illness d) Permanent settlements abroad e) Joined a pensionable job in the government or local government f) Resign from the service in case winding up, Removing of excess employees.(redundancy) 04. I. Implied conditions a) The quality of the goods should be relevant to the description. passed. b) Seller should have right to sell. The subject matter when the owner ship is c) Goods should be fit for to the purpose. d) The appropriate good should be of merchantable quality. e) The bulk should correspond with the sample in quality. II. The general rule in the law of property is than the non owned property cannot be sold. This is also contained in the sale of goods ordinance. So the property sold by non owner does not give the good little to the buyer. There are few exceptions for the above rule. a) Sale by mercantile agent b) Sale by stopple c) Sale of goods held under a voidable contract. d) Sale by buyer in possession. e) Sale by market overt. f) Sale by special rights. 7

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