CONFIDENTIAL LW/OCT 2007/LAW503

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : BUSINESS LAW

COURSE CODE : LAW503
EXAMINATION : OCTOBER 2007
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of SEVEN (7) questions.

2. Answer any FOUR (4) questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:
(i) the Question Paper
(ii) an Answer Booklet - provided by the Faculty

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 6 printed pages
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CONFIDENTIAL 2 LW/OCT 2007/LAW503

QUESTION 1

Maira recently came across an advertisement for a package tour to Pulau Tioman. She
decided to make enquiries with Tradewinds, the travel agency, which advertised the tour.
Vivian, the travel agent at Tradewinds, informed Maira that the package included:

a) both her airfare and hotel accommodation at a 5 star hotel,

b) snorkeling activities organized by the hotel, which were carried out all year round
and

c) fine dining and entertainment at the hotel's restaurants at a 30% discount.

Vivian also assured Maira that she would enjoy the holiday package as many tourists had
given positive feedback about this package.

When Maira got to the hotel however, she realized that it was not a 5 star hotel as promised.
Further, she was informed that the hotel only conducted snorkeling activities at certain times
of the year and no activities were currently organized for the hotel guests. Maira was also
upset to find that the hotel only served local food at normal price.

When Maira got back to her room after a swim at the hotel swimming pool, she was shocked
to find her expensive underwater camera missing. She reported the matter to the hotel
manager who informed her that the hotel was not liable for her loss. He pointed out a notice
at the registration desk, which said:

"The hotel accepts no liability for the loss or theft of the belongings of hotel guests. Any
valuables should be placed in the safe vaults in the rooms or given to the Manager for
safekeeping".

Stressed out from her holiday, she decided to go for a massage at her favourite spa,
"Luscious". In fact, she had already prepaid RM1500.00 for a five treatment package last
month. However, when she got to the spa, she was distressed to find that it had burnt to the
ground in a fire.

Maira now seeks your advice on whether she has any remedy against Tradewinds under the
law and if she can get back the money she paid to the spa for her treatment.
(100 marks)

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CONFIDENTIAL 3 LW/OCT 2007/LAW503

QUESTION 2

Mr.Alex Wong is the owner of a furniture company called, "Barang-barang Alex". He employs
three salespersons and pays them monthly wages and a commission on the sales they
make. He also has a manager, Mr.Balan, who is in charge of the overall administration of the
store. Alex leaves the manager and salesperson free to run the business but he is very
particular about selling on credit and insists only on cash sales. As a result, Alex does not
allow the salespersons to sell on credit nor does he allow credit card purchases.

Recently Alia and Danni dropped by the store to buy a new dining table. May Lee, the
salesperson, attended to them. When they found the table, they informed May Lee that as
they did not have enough cash on them, they would give a deposit on the table and pay the
balance in two monthly installments. May Lee consulted Mr.Balan, who agreed to sell the
table to Alia and Danii as he wanted to meet his sales target for the month. Mr.Balan agreed
to deliver the table to Alia and Danii in two days time.

In his office, Alex has a private collection of antiques, which are not for sale. However, Najib,
another salesman, sold a rare antique table from this collection to Mr. Tong, an antique
collector. Mr. Tong paid RM1.000 in cash and said that he would collect the table the next
day. In fact, the table is valued at RM5.000.

Further, when Najib was helping another customer load a settee onto the delivery truck, his
foot was injured when the settee fell on it accidentally.

When Alex found out about the two sales, he was very upset with Mr.Balan for allowing the
sale of the dining table on credit and the sale made by Najib. He now refuses to deliver the
dining table Alia and Danii and wants to return the money to Mr.Tong. He has found out that
Mr. Tong had given Najib RM500 as a cash reward for the table. He now refuses to pay
Najib his commission on the sale of the coffee table and does not want to pay for Najib's
medical bill for the injury to his foot.

Advise Alex, Mr. Balan and Najib on their rights and liabilities under the law of agency.

(100 marks)

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CONFIDENTIAL 4 LW/OCT 2007/LAW503

QUESTION 3

a) Damai and his wife, Una, run a cake making business. They recently sold:

i) a batch of 100 chocolate cakes to Dahlia's bakery, a local outlet at the Shah
Alam Mall. Dahlia, the owner of the bakery, wanted to pay for the cakes by a
cash cheque when the cakes were ready for delivery the next day.
ii) Two trays of cup cakes to Puan Mahani who had ordered the chocolate chip
cupcakes. Puan Mahani agreed to pick up the cupcakes the next day.

However, Damai found out that Dahlia has recently been declared a bankrupt and
was worried that when she paid for the cakes, her cheque might bounce. Further,
Puan Mahani's order got mixed up and instead of chocolate chip cupcakes, they had
made two trays of chocolate chip cookies. Damai wants to know if he can refuse to
deliver the cakes to Dahlia. Further, Puan Mahani is very angry that the bakery has
got her order wrong and is refusing to take delivery of the cookies.

Advise the parties on their rights under the Sale of Goods Act 1957.
(60 marks)

b) James recently brought his two year old washing machine which wasn't working to
David's Electricals, which repairs all types of electrical items. Within a week, the
washing machine was repaired but James who was on a one month work
assignment in Japan, did not collect it. In fact, it was left in the shop for three months.
During that time, Madam Wong, who was looking for a secondhand washing machine
saw James' washing machine in David's shop and so offered to buy it. David sold the
washing machine to Madam Wong for RM300.00 to cover the cost of the repairs. A
day later, James came by and asked if the washing machine was ready for collection.
David informed James that as he had not come to collect the washing machine, it
had been sold to cover the cost of the repairs.

James is very upset and wants your advice as to his legal position under the Sale of
Goods Act 1957.
(40 marks)

QUESTION 4

Nina wishes to introduce hire-purchase facilities in her electrical shop. Explain to her:

a) what a hire-purchase contract is,

b) the formalities necessary for the creation of a valid hire-purchase contract and

c) the owner's right to repossession.

(100 marks)

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CONFIDENTIAL 5 LW/OCT 2007/LAW503

QUESTION 5

P draws a cheque to Q to pay a debt of RM 300. The cheque is drawn "Pay Q or

bearer". It is drawn on Bank Selatan.

Consider the legal effect of the following matters on the parties:

a) leaving the cheque an open cheque and alternatively crossing it,

(30 marks)

b) adding the words "Not Negotiable" in between the transverse lines if the cheque is
crossed, and
(30 marks)

c) what if Q changes the amount from RM300 to RM3,000.00.

(40 marks)

QUESTION 6

Ahmad has an account with Bank Makmur. He approached the manager of the Bank for
overdraft facilities amounting to RM200,000.00 for three (3) months which the Bank agreed
to do, provided Ahmad had a guarantor for the overdraft. Ahmad informed the Bank that his
uncles Datuk Megat, a well-known businessman, and Encik Alias, a school teacher, were
willing to stand as joint sureties for the overdraft. The next day, Datuk Megat and Encik Alias
arrived at the Bank and signed the guarantee as required. They agreed to be jointly liable for
the whole amount under Ahmad's overdraft facilities.

Shortly afterwards, Ahmad drew a cheque for RM200,000.00 on his account to settle some
debts. As the cheque amount was within his overdraft credit limit, the Bank allowed the
cheque to be cleared. However, the manager of the Bank being suspicious ordered Ahmad
to provide some jewellery worth RM50,000.00 as additional security. Neither Datuk Megat
nor Encik Alias were told of this arrangement.

When the repayment of the overdraft became due, Ahmad defaulted. The Bank took no
steps to demand repayment until six (6) months later but by then Ahmad was almost
bankrupt. At the same time, the jewellery was stolen from the Bank's safe as a result of the
bank's negligence. The Bank has now commenced legal action against Encik Alias to
recover the RM200,000.00 under the guarantee. The Bank is not suing Datuk Megat
because he is having financial difficulties after his last divorce.

Advise Encik Alias as to his rights and liabilities.

(100 marks)

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