BUSINESS LAW (LAW 299)

TEST 2 (JULY 2022)

(20%)

__________________________________________________________________________

PART A (10%): (20 Multiple Choice Questions)

Answer all questions. Choose the best answer.

1. The law on negotiable instruments in Malaysia is covered by the________

A. Contracts Act 1950
B. Bill of Exchange Act 1949
C. Cheque Act 1950
D. Sale of Goods Act 1956

2. A professional partnership may have a maximum number of partners of:

A. 5
B. 20
C. 25
D. No ceiling on the numbers of partners.

3. The following statements are true with regard to a cheque EXCEPT:

A. It is an unconditional order in writing.
B. It is a bill drawn on a banker.
C. The sum is certain in money.
D. It is payable on demand or at a later determinable future time.

4. Which of the following statements reflect the concept of separate legal entity:
A. the company can hold land
B. the company cannot be sued in its own name.
C. the company cannot sue in its own name
D. The liability of the company is limited.

5. To get statutory protection, paying banker must make:

A. Payment to a holder
B. Payment to a holder in due course
C. Payment in due course
D. Payment to a drawee in case of need

6. What is the purpose of crossing a cheque?

A. A drawer can easily exchange the cheque for cash across the counter
B. A drawer can easily present the cheque for payment to the specified person (payee)
C. A drawer can make it difficult for an unauthorized person to obtain payment across the
counter
D. So that it cannot be transferred to another person.

7. The risks faced by the collecting banker are:

A. Liability to the customer for misrepresentation and to the true owner for conversion.
B. Liability to the customer for negligence and to the true owner for fraud.
C. Liability to the customer for non-compliance and to the true owner for negligence.
D. Iability to the customer for breach of contract and to the true owner for conversion.
8. A change made on a bill without the consent of all parties and which is not visible is:
A. An apparent alteration
B. A cheque which is indorsed
C. A non-apparent alteration
D. A forgery

9. The banker's authority to pay on a cheque may be terminated in several ways except:
A. By countermand of payment.
B. By notice of the customer's death.
C. When the customer has sufficient funds.
D. By notice of the customer having become insane.

10. What is a sleeping partner?

A. An invested person who is involved in the daily operations of the partnership.
B. A person who provides some of the capital for a business but who does not take an active
part in managing the business.
C. A person who holds himself out as a partner or permits a partner to hold him out.
D. A person who gives an impression to others that he/she is a partner of the firm.

11. When a minor is made a partner in a firm:

A. The firm will be considered as invalid.
B. The minor will not be liable for the firm's debt.
C. The minor will be equally liable for the firm's debt.
D. The firm will not be liable for the contracts entered by the minor on behalf of the firm.

12. The followings are the mode of the dissolution of a partnership without court intervention
EXCEPT:
A. Upon the completion of a single project.
B. Upon the happening of an event that is just and equitable to dissolve the partnership.
C. By giving notice to dissolve the partnership to the other partners.
D. Upon the happening of any event that may cause the partnership to become illegal.

13. The followings are the reasons for the court to grant an order of dissolution of a partnership
EXCEPT:
A. Expiration of fixed the term
B. Breach of the partnership agreement by a partner.
C. No oppurtunity of making profit.
D. A partner becomes permanently of unsound mind.

14. Which of the statements below do not represent the characteristics of a partnership?
A. The receipt of a share or payment out of the business profit of a partnership will mean
that the recipient will automatically become a partner.
B. A partnership must be registered under the Registration of Businesses Act 1956.
C. The partnership business profit must be shared by all partners equally.
D. A partnership's main objective must be to gain profit.

15. When a customer draws a cheque on his banker, the banker is known as:
A. the collecting banker
B. the paying banker
C. the holder banker
D. the payee banker

16. The word 'business' is defined in section 2 of the Partnership Act 1961 to include;
i. trade
 ii. occupation
iii. profession
iv. charity
A. i & ii
B. i, ii & iv
C. i, ii & iii
D. all of the above

17. In the case of Salomon v Salomon & Co Ltd (1897) the High Court of England held that:
A. Mr Solomon acted as an agent of the company and was therefore liable for the company’s
debt.
B. Mr Solomon acted as a trustee for the company and was therefore liable for the company’s
debt.
C. The company was a separate legal entity and it incurred debts in its own right.
D. The company was not liable to its creditors because the losses were caused by
circumstances beyond Mr Solomon’s control.

18. Amirul was the customer of Bank Kita. He drew a cheque in favour of a friend named Suzan,
for the sum of RM2,000. Unfortunately, as he was in a hurry, he left a space where the amount
should have been stated in words. He also left a space between RM and figure '2'. Suzan took
advantage of this situation and she altered the figure to read RM22,000 and wrote the
appropriate words in the space left blank. Bank Kita paid RM22,000 to Suzan when the cheque
was presented. As a result, Bank Kita debited the account of Amirul for RM22,000. Whether
Amirul can take legal action against Bank Kita?
A. Amirul can take legal action against Bank Kita becuase Bank Kita negligence in debiting
Amirul’s account.
B. Amirul can take legal action against Bank Kita because Bank Kita did not comply with
Amirul’s instruction.
C. Amirul cannot take legal action against Bank Kita because Amirul who was negligence in
drawing up the cheque.
D. Amirul cannot take legal action against Bank Kita because the cheque has been
fraudulently altered by Suzan.

19. A notice in writing by one partner must be given to all the partners of the firm in case of:
A. Dissolution on the happening of contingencies
B. Dissolution of partnership at will
C. Dissolution by court
D. Compulsory dissolution

20. Regarding sole proprietorships, which one of the following statements is NOT true?
A. Sole proprietors are personally liable for the sole proprietorship's debts.
B. Sole proprietors own all the assets of the business and are entitled to all the profits that
the business generates.
C. Sole proprietors are not permitted to take on employees.
D. Sole proprietorships are not legal persons.

(2 x 20 Marks = 40 marks)
PART B (10%): (SHORT QUESTIONS)

This part consist of 4 questions. Answer all.

Question 1

Distinguish between Account Payee Crossing and Not Negotiable Crossing.

(10 Marks)

Question 2

Syafiq drew a cheque for RM50 and it was fraudulently altered to RM500. As the alteration was
not apparent, the bank debited RM500 from Syafiq's account. Syafiq demanded the bank to refund
him RM450, the excess amount the bank had debited from his account. However, the bank refused
to do so. Whether the bank is protected under the Bills of Exchange Act 1949? Give reasons for
your answer and support your answer with the relevant section.
(10 Marks)

Question 3

Explains what you understand by the doctrine of separate legal personality under the company
law.
(10 Marks)

Question 4

Joyah, Senah and Minah decide to form a business enterprise, which will produce cosmetic
products. They enter into an oral agreement under which Joyah will contribute RM20,000 as
capital. Senah will design the cosmetic packaging. Minah will use her skills as a business graduate
to advertise the products. All three will share in the profits and losses equally. Explain whether a
valid partnership has been established by Joyah, Senah and Minah.
(10 Marks)