The University of the South Pacific

Serving the Cook Islands, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu, and Vanuatu.

FACULTY OF BUSINESS & ECONOMICS

SCHOOL OF ACCOUNTING & FINANCE

AF108: INTRODUCTION TO LAW FOR COMMERCE

FACE TO FACE MODE
FINAL EXAMINATION – SEMESTER I, 2010

Time allowed: THREE (3) hours

10 minutes Reading Time

INSTRUCTIONS:

• This paper is in three sections. There are twenty (20) multiple choice questions in section A.
The question in Section B is compulsory. There are six (6) questions in section C out of
which you may answer any four (4).

• ALL Questions in Section A and Section B are compulsory

• Answer any FOUR (4) questions from Section C out of the Six (6) questions.

• For questions in parts, answer all parts.

• Section A is worth 20 marks.

• Section B is worth 16 marks.

• Each question in Section C is worth Six (6) marks.

• The exam is worth sixty (60) marks.

• You must score at least twenty-four (24) marks in this examination and fifty (50) marks
overall to be considered for a pass in the course.

• Ensure that you have secured the MULTIPLE CHOICE ANSWER GRID with your answer
booklet by tying it to the answer booklet with a piece of string.

• In your answers, refer to relevant cases and statutes where applicable.

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SECTION A MULTIPLE CHOICE SECTION
This Section is worth Twenty (20) marks.

ALL Questions in this Section are COMPULSORY.

Instructions: Place a tick in the box beside the most accurate answer in the multiple choice grid
provided in your answer booklet and attach the multiple choice grid with a piece of string within
your answer booklet.

1) Benny wishes to recover a debt of $52,000 from Davey. In which Court would Benny
commence legal action:

(a) the Supreme Court

(b) the Magistrates Court
(c) the Court of Appeal
(d) the High Court

2) Seta is arrested and charged with the murder of her husband Eroni. It is the responsibility
of the Prosecution to prove Seta’s guilt, it is not her duty to prove that she did not kill
Eroni. This is because:

(a) she is presumed innocent until proved guilty

(b) the standard of proof in family related criminal cases is on the balance of
probabilities
(c) the standard of proof in criminal cases is beyond a reasonable doubt
(d) murder is a serious offence which must be dealt with by the High Court before a
judge

3) In the case reported as Bad Boys v JLO (2009) 118 FLR 29, it is possible to conclude that
the case was:

(a) a criminal case

(b) a civil case
(c) won by Bad Boys
(d) appealed by JLO

4) Injunction is a remedy which was developed by the:

(a) courts of equity

(b) common law courts
(c) administrative tribunals
(d) the Ombudsman’s office

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5) A judge is required to give legal reasons and state legal principles when they make a
decision in a case. The reasons for a judge’s decision is known as:

(a) Obiter dicta

(b) Volenti non fit injuria
(c) Ejusdem generis
(d) Ratio decidendi

6) What are the three (3) essential elements for the tort of negligence?

(a) duty of care, standard of care and consideration

(b) duty of care, consideration and nuisance
(c) duty of care, consideration and damage
(d) duty of care, standard of care and damage

7) To which of the following contracts would Sale of Goods Act apply?

(a) an agreement to supply skill and labour to make goods

(b) an agreement to supply goods in exchange for other goods
(c) an agreement for the sale of goods with a money consideration
(d) an agreement for the sale of land, provided the agreement was in writing

8) The implied terms in the Sales of Goods Act generally apply to:

(a) sales where the goods are bought by a consumer for private use
(b) sales where the buyer holds himself out as having knowledge about the goods
(c) sales where the goods are sold by a manufacturer to a retailer
(d) sales by a consumer to a retailer

9) If Kelly telephones a paint shop and orders 10 buckets of 10 litres of paint suitable for
external walls, which implied condition would NOT apply?

(a) Merchantable Quality

(b) Correspondence with Sample
(c) Fitness for purpose
(d) Correspondence with description

10) Which of the following practices would be a breach of the consumer protection
provisions in the Fair Trading Decree?

(a) misleading advertising and door to door selling

(b) misrepresenting that goods are new and bait advertising
(c) discrimination and referral selling
(d) mergers and pyramid selling

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11) Which of the following is a defence to an action of negligence?

(a) contributory negligence

(b) ignorance
(c) stupidity
(d) reckless indifference

12) Vicarious liability occurs where:

(a) an employer is liable for a tort which an employee commits in the course of
employment
(b) an occupier is liable to take care to avoid a reasonably foreseeable risk to
anyone who enters their premises
(c) a person suffers a reasonably foreseeable loss from a defective product
(d) a person enters land without the consent of the owner

13) Which of the following is not a tort?

(a) negligent misstatement

(b) assault
(c) theft
(d) defamation

14) A void contract can be defined as a contract which is

(a) valid except for a very small mistake

(b) enforceable between the parties
(c) full of mistakes which need to be resolved before the parties go any further
(d) not enforceable at law

15) Rhea has just read an advertisement in the paper this morning which advertises wedding
gowns at an amazing price of $299.00 per piece in your choice of colour. She rushes over
to the store and arrives just before it opens. She enters the store as soon as the doors open
only to find that the wedding gowns have all been "sold". She is shown another wedding
gown at a more expensive price of $799.00 which she thinks she will buy. This sort of
behaviour by the company under the Fair Trading Decree is known as

(a) bait advertising

(b) referral selling
(c) pyramid selling
(d) misleading conduct about services

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16) Anti-competitive agreements are prohibited under the Fair Trading Decree if they

(a) involve more than 5 persons

(b) involve the acquisition of companies outside Fiji
(c) substantially lessen competition in a market
(d) result in mergers of competing firms

17) If Mater agrees to sell a painting to Dinoco for $100,000 but when Dinoco offers the
money Mater refuses to proceed with the agreement, Dinoco would need to take action
at

(a) Criminal Law

(b) Constitutional Law
(c) Civil Law
(d) Conciliation Law

18) Lightning McQueen was driving down Colma Road in Fiji when he failed to stop at an
intersection where the traffic lights were red. He crashed into Dinoco Stuart Walker’s
1998 Rolls Royce and caused $65,000 worth of damage to Stuart Walker’s car.
Lightning McQueen refuses to pay the money and so Dinoco Stuart Walker is thinking
about suing Lightning McQueen for the money. Which court would Dinoco Stuart
Walker start proceedings in to recover the $65,000?

(a) The High Court

(b) The Supreme Court
(c) The District Court
(d) The Local Court

19) Romalpa Clauses

(a) allows sellers to avoid warranty obligations

(b) aims to preventing buyers claiming tittle to goods until full payment is received by
the seller
(c) specify penalties for buyers who default on the contract
(d) all of the above

20) When does property pass in respect of future or unascertained goods?

(a) When goods are delivered

(b) When contract is made
(c) When goods are weighed, measured or tested and the buyer is notified
(d) When goods are identified

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Section B: This Question is COMPULSORY

This section is worth Sixteen (16) marks.

James owns a house in Butt St, and enters into a lease agreement with Mathew, a USP student
for one of the flats. One of the clauses in the lease agreement states:

“The landlord can exercise the right of forfeiture and eviction if the tenant is in arrears of
rent for more than a week”.

The rental amount is $500 per month, and there is to be one month’s rental as bond money.
Mathew has to pay rent on the 1st day of each month beginning on the 1st of February 2010.
Mathew pays the rent on the 1st of February, plus one month’s bond money as is agreed in the
contract.

On the 1st of March Mathew fails to pay rent, and James advises him not to worry. James after a
week realises that the rent is still unpaid. James then tells Mathew on the 7th of March that
Mathew has to pay the rent by the 10th of March. When on the 10th of March the rent still
remains unpaid James exercises his right of forfeiture. When James enters Mathew’s flat, he sees
a television set which Mathew had bought on hire purchase a month ago, when he moved into
James’s flat. James advertises and sells the television set for $500 although it was a month old
and worth $2,000 and still under Hire Purchase. Mathew comes to you for advice.

Advise Mathew of his rights and liabilities under the Contract for Lease. Also advise Mathew
whether James has acted in breach of the agreement, and whether James is liable to Mathew for
the value of the Television set.

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Section C
This section is worth 24 marks. Students may choose any Four (4) questions out of Six (6)
Questions. Each Question is worth six (6) marks.

Question 1
On 10th of June, John offers to buy Raymon’s car for $10,000. He tells Raymon that the offer is
available till the 17th of June. On the 15th of June Raymon writes a letter of acceptance, and
gives it to his son to post at the post office. The son posts the letter on the 16th of June as he had
forgotten to post it on the 15th. He never tells Raymon that he posted it a day late. Upon hearing
nothing from Raymon till the 17th of June, John buys a car from Carworld for $15,000.
On the 20th of June John received Raymon’s offer. He then phones Raymon and tells him that
the deal is off as Raymon had failed to accept John’s offer by the 17th of June.
Advise Raymon on his rights, and whether he can enforce the agreement against John.

Question 2

Murphy sells his accounting practice to Brown for $1,000,000. The price includes $250,000 for
goodwill. The contract used by the parties is a written contract for Sale of Business. One of the
terms of the written contract provides that Murphy “shall not open or operate another accounting
practice within a radius of 15 kilometres from the existing business for a period of 5 years”.
After one year, Brown discovers that Murphy wants to open another accounting practice 12
kilometres from his new business, and has applied to the Practising Board for approval of his
new business.

Advise Brown on whether he can stop Murphy from opening his business.

Question 3

Sandy obtained a Brochure from Marvellous Kitchens which contained details of a kitchen to be
supplied and installed for $10,000. The brochure stated that the price included "the most up to
date oven" as well as "specially strengthened cupboards" and a "stain free bench top". It also
said that kitchens are sold only in Suva.

Based on this information Sandy signs an agreement with Marvellous Kitchens and the kitchen is
installed and the money paid.
One month later Sandy discovers the oven is a model of 5 years ago, that the cupboards have no
special strengthening and that stains cannot be removed from the benchtop.

Advise Sandy of her rights under the Fair Trading Decree (1992) of Fiji.

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Question 4

Joanne saw an advertisement from Beauty Products Ltd in the local paper for a cream which
would remove face pimples. The advertisement promised the following:

i) That the cream only need be applied each morning and evening for 5
minutes by gently rubbing onto the affected areas; and

ii) That if you did not have a “pimple free face” within 2 months of using the
cream as directed then Beauty Products Ltd would give you $1,000.00 on
return of the unused portion of the cream.

Joanne immediately ordered the cream and started to use it as directed for the entire 2 months,
but at the end of this time she did not have a “pimple free face” as the advertisement promised.
She just ended up with large red marks all over her face.

Joanne returned the unused portion of the cream to Beauty Products Ltd but they refused to give
her the $1,000.00 as was promised in the advertisement.

Does Joanne have a valid contract with Beauty Products Ltd? What legal rights, if any, does
Joanne have under contract law in this case?

Question 5

Bob owned a BMW. Bob instructed Ian Limited to act as his agent. Ian, a director of the
company, ran an auction to sell the car. Ian said to the bidders:

"This car is in immaculate condition and in A1 working order ready to go. What
is the first bid?"

In fact, the car had no engine. Arthur Hill won the bidding at $38,000. Ian the Agent got Arthur
to sign a contract between Arthur and Bob (the Vendor). A clause in the contract said:

"The purchaser shall not rely on any statement made by my Agent and any
liability arising to the Vendor from any such statement is hereby excluded."

Arthur signed the contract and Ian gave him the key. When Arthur opened the bonnet of the car
he fainted.

Discuss any right under statute law (Sale of Goods Act and Fair Trading Decree 1992) and
common law that Arthur may have against Bob or his Agent.

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Question 6

Diana owns and operates a company named “Diana’s Flowers Ltd” which is a retail plant
nursery and flower arrangement experts. Diana visits “Natures Babies Ltd” where she selects
1000 miniature exotic coloured roses and arranges for them to be delivered to her business on the
following working day. The plants are delivered on time but upon closer inspection Diana
discovers that most of the plants are suffering from fungal diseases. This disease seems to have
developed overnight and had reduced the overall appearance of the plants.

1. Discuss the rights of both “Diana’s Flowers Ltd” and “Natures Babies Ltd” under the
Sale of Goods Act.

2. Suggest possible remedies under the Sale of Goods Act