Executive Bachelor In Management (Business Law Class Test

Questions)
Question 1
What are the elements governing a contract. What is an invitation to
treat?
Question 2
Consent is to be given freely. State situation Consent is not given freely.
Question 3
What is a Partnership? State the requirements for the formation of a
Partnership. How can a Partnership be dissolved?
Question 4
How is an Agency formed? Elaborate.

Question 5
Define Sale of Goods Act and the remedies for breach of a Condition and
a Warranty.

Question 6
State the situations an Agency can be terminated.
Question 1

What are the elements governing a contract. What is an invitation to

treat?
A contract is much more than an agreement between two people. There must be an
offer and acceptance, intention to create a legally binding agreement, a price paid (not
necessarily money), a legal capacity to enter a contract of your own free will, and
proper understanding and consent of what is involved. Any duress, false statements,
undue influence or unconscionable dealings could make a contract illegal and void.
Offer and acceptance
Intention to create legal relations
Consideration
Legal capacity
Consent
Illegal and void contracts
Invitation to treat.
An invitation to treat is not an offer, it is only an invitation to make an offer. An offer
shuld not be made by a person who is not fuy prepared to take legal consequences of
its being accepted. But a response to an invitation to treat cannot result in a binding
contract.
A court decides whether or not one of the parties has made an offer by looking at what
it thinks that both of the parties intended. All the circumstances of the case will be
considered in reaching this decision.
Advertisement can amount either to offers or to invitations to treat. If an
advertisement is an offer then a person who accepts the offer makes a contract with
the person who advertised. If an advertisement is only an invitation to treat then it
cannot be accepted in such a way that a contract is thereby formed.

Question 2

Consent is to be given freely. State situation Consent is not given freely.

FREE CONSENT
it means an act of assenting to an offer. According to section 13, "Tow or more
persons are said to consent when they agree upon the same thing in the same thing in
same sense." Thus, consent involves identity of minds in respect of the subject matter
of the contract. In English Law, this is called 'consensus-ad-idem'.

Effect of Absence of consent:

When there is no consent at all, the agreement is void ab-initio, i.e. it is not
enforceable at the option of either party. Example: X has one Maruti car and one fiat
car. He wants to sell fiat car. Y does not know that X has two cars. Y offers to buy X's
Maruti car Rs 50,000. X accepts the offer thinking it to be an offer for his Fiat car.
Here, there is no identity of mind in respect of the subject of the subject matter. Hence
there is no consent at all and the agreement is void ab-initio.
Meaning of Free consent: It is one of the essential elements of a valid contract as it is
evidenced by section 10 which provides that all agreements are contracts if they are
made by the free consent of the parties... according to section 14, consent is said to be
free when it is not caused by (a) Coercion, or (b)Undue influence, or (c) Fraud, or (d)
Misrepresentation, or (e) Mistake.
Effect of Absence of free consent:
When there is consent but it is not free (i.e. when it is caused by coercion or undue
influence or fraud or misrepresentation), the contract is usually voidable at the option
of the party whose consent was so caused.

Question 3

What is a Partnership? State the requirements for the formation of a

Partnership. How can a Partnership be dissolved
Partnership is defined by Section 3(1) of the Partnership Act 1961 as the relation,
which subsists between persons carrying on a business in common with a view of
profit. No person may be a partner with himself. There must be at least two or more
persons to form a partnership. Section 3(2) excludes from statutory definition of
partnership.
Dissolution of Partnership
Partners are at liberty to fix the duration of the partnership. Where no fixed term has
been agreed upon for the duration of the partnership, any partner may terminate the
partnership at any time on giving notice of his intention to do so to all the other
partners section 28(1)
By agreement
The partnership articles may fix the duration of partnership, and the partnership is
terminated on the expiry of the period. The partners may mutually agree to dissolve
the partnership at anytime.
By operation of law
Expiration. If the partnership it entered into for a fixed term
(s.34 (1)(a)) or for a single adventure or undertaking (s.34 (1)(b) ), the partnership is
dissolved on the expiration of the fixed term or termination of the adventure or
undertaking.
Notice. If the partnership is entered into for an undefined time, any partner may
determine the partnership at any time by notice to the partners (s.34 (1)(c)). Such a
partnership is a partnership at will and may be determined at any time on notice. The
partnership is dissolve as from the date mentioned in the notice as the date of
dissolution. If no date is mentioned, it is dissolved from the date of the
communication (s.34 (2)).
Death or bankruptcy
Every partnership is dissolved as regards all the partners by the death or bankruptcy of
any partner.
By charging on shares
Where a partner suffers his share of the partnership property to be charged with
payment of his personal debt, the other partners have the option of dissolving the
partnership (s.35 (2)).
By supervening illegality

If an event occurs which makes it unlawful for the business of the firm to be carried
on or for the members of the firm to carry on in partnership, the partnership is
dissolved (s.36).

Question 4
How is an Agency formed? Elaborate.
A person who has capacity to contract can enter into contract either by himself or
though some other person. If he adopts the first method there is no question of agency.
If he adopts the second method, then there is agency. The person who represents
another in his dealing with third parties is called agent and that person who is so
represented by agent is called principal.
The following are different modes of creation of agency.
1. Agency by Express agreement.
2. Agency by Operation of law.
3. Agency by Ratification.
4. Agency by Implied authority.

Question 5
Define Sale of Goods Act and the remedies for breach of a Condition
and a Warranty.
The Sale of Good Act 1957 (SOGA herein forth) was enacted in 1957 and the statue
was applicable to sale of goods in peninsular Malaysia (East Malaysia), excluding the
states of Penang and Malacca. The Act was later revised in 1990 and it includes both
states1. The states of Sabah and Sarawak (West Malaysia) are not governed by this act
instead they are governed by section 5(2) of the Civil Law Act of 1956, which
provides, among others, that the law to be administered in England in the like case at
the correspondent period. The English statue applied is the Sale of Goods Act 1979,
which is a revision of the Sales of Goods Act 1893.As a result Sabah and Sarawak are
bound by statute to continue to apply principles of English law relating to the sale of

goods. The contrast between the laws West and East Malaysia has the potential to
raise unwarranted legal problems, even though English statue is the principle source
of law for both parts of Malaysia (Pheng, 1997; Beatrix and Wu, 1991).
The Act contains definitions or interpretations which clarify what the wording used in
it refers to and the context. Below are some of the definitions of key terms in the
SOGA.
Buyer -a person who buys or agrees to buy goods.
Seller -a person who sells or agrees to sell goods.
Goods -means every kind of movable property other than actionable claims and
money; and includes stock and shares, growing crops, grass and things attached to or
forming part of the land which are agreed to be severed before sale or under the
contract of sale.

Section 59 of the Malaysian sale of goods act is similar to section 56 of the Australian
sale of goods act, but the Australian act further explains the measure of damage as
above.
There are several remedies for breach of contract, such as award of damages, specific
performance, rescission, andrestitution. In courts of limited jurisdiction, the main
remedy is an award of damages.

Question 6
State the situations an Agency can be terminated.
1.

By agreement

a.
On the basis that an agency relationship is created by agreement between the
principal and the agent, such a relationship can also be brought to an end by mutual
agreement between the parties, either in writing or orally.
b.
Termination by agreement may also occur if the agency relationship is terminated
pursuant to the provisions of the agency agreement itself. The following situations may arise
in this context:
i.
If the agreement provides for the appointment of the agent for a specified period of
time, the agency will come to an end automatically when that period of time expires.
ii.
If the agreement provides for the agency to terminate upon the occurrence of a
specified event, the agency will come to an end upon the happening of the specified event.
2.

By act of the parties

An agency may be terminated by the acts of either the principal or the agent, as illustrated
below:

a.

Performance by the agent

If an agent is appointed to accomplish a particular task or for a specific purpose,

when the task is accomplished by the agent or the specific purpose is attained, the agency will
terminate.
b.

Revocation by principal

i.
The authority of an agent may be revoked at any time by the principal. However,
unilateral revocation otherwise than in accordance with the provisions of the agency
agreement may render the principal liable to the agent for breach of the agency agreement.
ii.
Any word or conduct of the principal inconsistent with the continued exercise of
authority by the agent may operate as revocation of the agency.
iii.
Revocation of the agent's power by the principal may not automatically discharge the
principal from liability to a third party who is entitled to rely on the apparent authority of the
agent on grounds of representation by the principal or previous course of dealing with the
agent before notice of revocation is given to the third party. Therefore, notice of revocation of
an agent's power should be given to the third party as soon as possible.
c.

Renunciation by agent

i.
An agent is entitled to renounce his power by refusing to act or by notifying the
principal that he will not act for the principal.
ii.
Unilateral termination of the agency by the agent before he has fulfilled his
obligations to the principal under the agency agreement will render the agent liable to the
principal for breach of the agency agreement, such as payment of damages for loss suffered
by the principal.
d.

By notice

i.
If the agency agreement provides that the agency may be terminated upon either party
serving on the other written notice of a specified duration, for example, three months' written
notice, either party may terminate the agency agreement by serving the required notice on the
other party.
ii.
However, if the agency agreement does not contain any termination provision, the
general rule is that reasonable notice has to be given to the other party to terminate the
agency.
3.

By operation of law

An agency may terminate by operation of law upon the occurrence of the

following events:
a.
Where the party concerned is an individual:

i.

death;

ii.

insanity; or

iii.

bankruptcy.

b.

Where the party concerned is a limited company:

i.

winding-up; or

ii.

receivership.

c.

Frustration of the contract of agency