Sunway Tes EDC Kit MYS Law

ACCA
CORPORATE AND BUSINESS LAW [LW]
EDC – Jan - June 2023

Paper LW [Mar & June examinations]
( Question Booklet)
[Full & Part time]
Prepared by Ms Pushpa ACIS [U.K.);LLB [Hons][U.K.];

LLM [U.M]
Law Lecturer [Sunway Tes]
SUNWAY UNIVERSITY COLLEGE
1
PART A. ESSENTIAL ELEMENTS OF THE MALAYSIAN LEGAL SYSTEM
[2023]
MALAYSIAN LEGAL SYSTEM
GENERAL - LAW
1. How is ‘law defined legally? [ State any two answers]
A. The Oxford English Dictionary defines law as ‘the body of enacted or customary rules
recognised by a community as binding’.
B. Law is a formal control mechanism. It provides a structure for dealing with and resolving
disputes that may arise.
C. Law includes ethical and moral guidance which has developed over a period of time
D. Law deals with formal structure as well as informal structure
2. The Malaysian legal system distinguishes several different types of law; which of the following is
not one of them?
A. Private law (law of contract and trust) and Public law (constitutional and criminal law)
B. International law (public international and private international law)
C. Criminal and civil law
D. National law and customary law
3. Which of the following statements is legally inaccurate?
A. The Judiciary is responsible for the creation of common law

B. The Parliament is responsible for creating statutory law
C. The Government is responsible for creating acts of parliament
D. The Attorney General’s department is responsible for creating criminal law
4. Which one of the following is not a legal characteristic of private law? [state any 2]
A. It deals with the relationships and interactions between businesses, customers etc
B. Should any dispute arise, it is for the parties to decide for themselves whether to initiate an
action
C. The state merely provides a framework for dealing with the disputes and for enforcing the
decisions but does not initiate the action
D. It also concerns itself with the operation and functions of public organisations
5. Which one of the following is not a characteristic of public law?
A. It is mainly concerned with the government [councils and local authorities]

B. Public law may be divided into constitutional and criminal law
C. The state does not prosecute under public law; the government does
D. Examples of public law are found in planning rules of the state
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6. Are the following statements legally accurate in a criminal case?
(i) A crime is conduct prohibited by the law True/False

(ii) The state is the prosecutor True/False
(iii) The community as a whole suffers if the law is broken True/False
(iv) Punishable by fines or imprisonment only True/ False
(v) The Public Prosecutor will initiate the action True/False
(vi) The burden of proof is on the prosecution True/False
(vii) The standard of proof is on a balance of probabilities True/False
7. Are the following statements legally accurate in a civil case?
(i) It regulates disputes over the rights and obligations of persons

dealing with each other and seeks to compensate injured parties True/False
(ii) It is a form of private law True/False
(iii) The case must be proved on a balance of probabilities True/False
(iv) There is concept of punishment and compensation True/False
(v) The parties can choose to settle out of court True/False
(vi) The claimant sues the defendant True/False
8. A broken leg caused to a pedestrian by a drunken driver is a single event which may give rise to
a legal action. Name two main causes of action available;
A. Criminal case
B. Civil case
C. Constitutional case
D. Public case
9. Constitutional law deals with the fundamental rights and freedom of the individual as enshrined
in the Federal Constitution from Article 5 to Article 13. Is the above statement true or false?
A. True
B. False
10. While on a sales trip, one of your employees is involved in a car accident. The other vehicle
involved is damaged and it is alleged that your employee is to blame. What legal proceedings may
arise as a result of this incident? Which one of the following statements does not legally depict
the legal scenario?
A. The employee may be guilty of reckless driving

B. The police may prosecute him in the courts
C. The owner of the damaged vehicle may sue the driver in criminal proceedings to recover
damages
D. A claim would probably be brought in the Sessions or High Court
11. Which of the following statements is accurate?
A. The aim of the criminal law is to regulate behaviour within society by the threat of punishment
B. The aim of the criminal law is to provide a means whereby injured persons may obtain
compensation
C. The aim of the criminal law is to ensure that the will of the majority is imposed upon the
minority
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12. Which of the following is associated with private law?
A. Constitutional law
B. Criminal law
C. Insolvency law
13. Which of the following term is used to describe the person against whom a case is brought?
A. Prosecution
B. Defendant
C. Plaintiff
14. What is the normal standard of proof placed upon the prosecution in a criminal case?
A. Balance of probabilities
B. Beyond every reasonable doubt
C. Beyond reasonable doubt
15. Which of the following is an example of public law?
A. Law of contract
B. Law of tort
C. Constitutional law
SUBJECTIVE QUESTIONS
1. What is the DEFINITION OF LAW?

2. What is the CONSEQUENCE OF BREACH of the law?
3. What are the TWO MAIN TYPES OF LAW?
4. Define CIVIL LAW?
5. What is the MAIN AIM OF CIVIL LAW?
6. WHERE ARE CIVIL CASES BEING TRIED?
7. Who has the BURDEN OF PROOF IN CIVIL LAW and what is the STANDARD REQUIRED BY LAW?
8. Define CRIMINAL LAW?
9. What is the MAIN AIM OF CRIMINAL LAW?
10. Give some EXAMPLES OF CRIMINAL LAW?
11. WHO INITIATES CRIMINAL ACTIONS?
12. Who has the BURDEN OF PROOF and what is STANDARD REQUIRED BY LAW?
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THE COURT SYSTEM
1. Which courts would fall under the Subordinate courts under the Subordinates Courts Act 1948?
A. The High Court, The Court of Appeal and Sessions Court

B. The Sessions Court, and The Magistrates Court
C. The Magistrates Class 1, The Magistrates Class 2 and the Sessions Court
D. The Federal Court, The Sessions Court and The High Court
2. What constitutes superior courts?
A. The High Court, The Court of Appeal and Sessions Court

B. The Sessions Court, The Magistrates Court
C. The Magistrates Class 1, The Magistrates Class 2 and the Sessions Court
D. The Federal Court, The Court of Appeal and The High Court
3. Article 121(2) of the Federal Constitution establishes two high courts of co-ordinate jurisdiction
and status and the High court has four main jurisdictions. Which of the four mentioned below
would constitute its jurisdiction?
(i) Original
(ii) Appellate
(iii) Revisionary
(iv) Supervisory
A. (i), (ii) and (iii)

B. (ii), (iii) and (iv)
C. (i) and (iii) only
D. All of them
4. DELETED
5. Which of the following statement is not true of the jurisdiction of the Native court?
A. They are restricted to Sabah and Sarawak only and they deal in native customs
B. They are empowered to try civil and criminal cases where the subject matter does not exceed
RM25 in civil cases
C. The parties need to be natives
D. The jurisdiction is not the same as that of the Syariah courts in West Malaysia
6. The 1st class magistrate court has the power to try offences punishable up to ____ years’
imprisonment; but sentences passed cannot exceed _____ years imprisonment and a fine up to
RM ____, whipping up to ____ strokes.
A. 20 ; 10 ; 10,000; 10
B. 10 ; 5 ; 10,000; 12
C. 10 ; 5 ; 10,000; 10
D. 10 ; 5 ; 10,000; 10
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7. The Sessions court has the criminal power to deal with all offences except offences punishable
with __________ and the civil jurisdiction is limited to RM_______ unless exceptions apply.
A. Life imprisonment; 200,000

B. Death ; 1,000,000
C. Death; 25,000
D. Life imprisonment; 100,000
8. The Court of Appeal deals only with ____________ jurisdiction.
A. Civil
B. Criminal
C. Appellate
D. Constitutional
9. The Federal Court has the following jurisdiction;
A. Original, appellate, advisory and referral

B. Original, revisionary, advisory and referral
C. Original, supervisory, advisory and referral
D. Original, appellate, revisionary and referral
10. The Children’s Court, which was established under the Juvenile Courts Act 1947 is a court which
is presided by a _________ and assisted by two ____ advisers and they can only try juveniles.
A. 2nd class Magistrate; legal

B. 1st class Magistrate; lay
C. The President of the Sessions Court; legal
D. The High Court; lay
11. Which of the following may be used to resolve disputes, even after court proceedings have been
commenced? [ADR – Alternate Dispute Resolutions]
I. Negotiation
II. Expert determination
III. Mediation
IV. Adjudication
A. I only
B. II, III and IV
C. I, II only
D. All of them
12. The civil jurisdiction limit of the First Class Magistrate has been increased under Subordinate
Courts (Amendment) Act 2010 (Act A1382) from the previous RM25,000 to RM_____. The Act
came into force in March 2013.
A. 60000
B. 70000
C. 1000000
D. 100000
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DELEGATED LEGISLATION / SUBSIDIARY / INDIRECT
1. Delegated legislation is defined as ____________ under the Interpretation Act 1967. Which of
the following indicate an accurate description under the Act?
A. Any proclamation, rule, regulation, order, bye-law or other instrument made under any
Enactment or other lawful authority and having legal effect.
B. Any proclamation, rule, regulation, order, bye-law or other instrument made under any
Ordinance or other lawful authority and having legal effect
C. Any proclamation, rule, regulation, order, bye-law or other instrument made under any
Ordinance, Enactment or other lawful authority and having legal effect
D. Any proclamation, rule, regulation, order, bye-law or other instrument made under any lawful
authority and having legal effect
2. Which of the following statement is legally truly accurate as to subsidiary law making?
A. Proclamations are made by the Yang Di Pertuan Agung; rules and regulations by the
Ministries and orders and bye laws by the local authorities
B. Proclamations are made by the Yang Di Pertuan Agung; rules and regulations by the local
authorities and orders and bye laws by Ministries
C. Proclamations are made by the Yang Di Pertuan Agung; rules and regulations by the
Ministries
3. What are some of the advantages of delegated legislation?
I. Speed and flexibility

II. Technical knowledge and expertise
III. Take into account future needs
IV. Saving of parliamentary time
A. All of the above

B. I, II and III
C. II, III and IV
D. III and IV only
4. The disadvantages of delegated legislation override the advantages of delegated legislation;

however, there are effective controls to keep delegated legislation in check. What are some forms
of control?
I. Consultation
II. Judicial Review
III. Lack of Publicity
IV. Lack of Parliamentary control
A. All of the above

B. I and II only
C. III and IV only
D. I, II and III only
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5. What is meant by ‘Breach of Separation of Powers’ as a disadvantage of subsidiary legislation?
A. Law is not passed by Parliament as it is the legislature that makes or unmakes law in the
country; instead law is being passed by officers of government department
B. Law is being passed by Parliament as it is the legislature that makes or unmakes law in the
country
C. Law is not passed by government as it is the government that makes or unmakes law in the
D. Law is not passed by the judiciary as it is the judiciary that makes or unmakes law in the
6. Delegated Legislation is the law made by an ______ authority acting under the powers given to
them by the ___________, in order to implement and administer the requirements of various act.
A. Legislative; primary legislation

B. Executive; primary legislation
C. Judicial; primary legislation
D. Executive; secondary legislation
7. Any subsidiary legislation made in contravention of a procedure in either a parent Act [enabling
statute or main act] or the Constitution is _______ Eng Keock Cheng v PP [1966]
A. Void
B. Voidable
C. Unenforceable
D. Illegal
8. Both statutes and delegated legislation under it are expressed in general terms. It is not possible
to provide in the Act for each eventuality which falls within its remit. It therefore often falls to
judges to interpret Acts.
Do you agree with the above statement?
A. Yes
B. No
C. Maybe
9. Do you agree/disagree with the following statements? [Delegated Legislation]
1. As subsidiary legislation can be produced in large volumes, ordinary MPs and the public find
it difficult to keep up to date with developments [Yes/No]
2. The system is unrepresentative in that some power is given to civil servants who are not
democratically elected [Yes/No]
3. It saves time as Parliament does not have to examine matters of detail[Yes/No]
4. The system allows law to be enacted very slowly [Yes/No]
5. All subsidiary legislation must be published in the Gazette [Yes/No]
10. Prior consultation with relevant agencies is often required before the finalisation of delegated
legislation. To disregard this requirement may result in the subsidiary legislation to become
___________ and therefore ______. [Any two answers]
A. Ultra vires; void

B. Procedurally ultra vires; void
C. Procedurally intra vires; void
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HUMAN RIGHTS
1. The phrase Fundamental Liberties refers to __________ and these rights are found in the Federal
Constitution and said to be enshrined or entrenched as these rights cannot be removed unless
___________ agree to the amendment; however, the passing of an Act of Parliament only requires
a __________ majority.
A. Certain rights, which may be considered as basic and essential to ensure the freedom of the
individual; a simple majority; unanimous
B. Certain rights, which may be considered as basic and essential to ensure the freedom of the
individual; a two thirds majority; simple
C. Certain rights, which may be considered as basic and essential to ensure the freedom of the
individual; a 75% majority; simple
D. Certain rights, which may be considered as basic and essential to ensure the freedom of the
individual; a majority; simple
2. In Malaysia human rights is basically enshrined in ____________ as well as by the ______
A. Federal Constitution; State Constitution

B. Federal Constitution; Suhakam
C. Federal Constitution; Human Rights Commission of Malaysia Act 1999
D. Federal Constitution; Human Rights Act 1999
3. The Fundamental Liberties enshrined in the Federal Constitution appear to be absolute powers.
Do you agree?
A. Yes, because the Federal Constitution is the supreme power in Malaysia

B. Yes, because the Executive cannot pass laws to contradict the Federal Constitution
C. No, there are qualifications to the liberties as Parliament has passed laws which restrict some
of these rights
D. No, the government has the power to restrict some of these rights
4. Article ____ states that ‘no person shall be held in slavery’ while Article ______ states that ‘no
person shall be deprived of his life or personal liberty’.
A. 9 and 10
B. 5 and 6
C. 11 and 12
D. 6 and 5
5. Article ____ of the Federal Constitution states that citizens cannot be discriminated against in
relation to the providing of education, merely on grounds of religion, race, descent or place of
birth; however this right is subject to Article ____, which permits the granting of special
privileges to the Bumiputras and the Natives of Sabah and Sarawak.
A. 153 and 6
B. 153 and 9
C. 8 and 153
D. 5 and 153
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6. What are some of the FUNCTIONS of SUHAKAM as set out under Section 4(1) of the Human
Rights Commission of Malaysia Act 1999
I. To promote awareness of and provide education relating to human rights;
II. To advise and assist Government in formulating legislation and procedures and recommend
the necessary measures to be taken
III. To inquire into complaints regarding infringements of human rights
IV. To study and verify any infringement of human rights
A. All of the above

B. I, II and III
C. II, III and IV
D. III and IV
7. What are some of the POWERS of SUHAKAM as set out under Section 4(2) of the Human Rights
Commission of Malaysia Act 1999
I. To issue public statements on human rights as and when necessary

II. To undertake appropriate activities as are necessary
III. To study and verify any infringement of human rights
IV. To undertake research by conducting programs, seminars and workshop
A. All of them
B. None of them
C. I, II and III
D. II, III and IV
8. Match the following with the respective Article;
A. Every person has the right to profess and practice his religion – Article ____
B. No person shall be deprived of property save in accordance with the law – Article ___
C. No citizen shall be banished or excluded from the Federation – Article ___
D. All persons are equal before the law and are entitled to equal protection of the law- Article
____
9. The Constitution is the supreme law of the Federation and any law passed after Merdeka Day
which is inconsistent with this Constitution shall to the extent of the inconsistency be ____ -
Article _____ of the Federal Constitution.
A. Valid and 3
B. Void and 4
C. Voidable and 4
D. Unenforceable and 3
10. Religion is a very sensitive issue as Article ____ of the Federal Constitution clearly states that
Islam is the official religion of the country even though other religions may be practised peacefully;
however restrictions may be placed upon the propagation of other religions among _____.
A. 3 and Non Muslims

B. 3 and Muslims
C. 4 and Malays
D. 4 and Bumiputras
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11. Which of the following is NOT a human right provided for under the Federal Constitution?
A. Freedom of speech
B. Right to education
C. Freedom of religion
LEGISLATION
1. What is the composition of Parliament ?
A. Dewan Rakyat, Dewan Negara and the Prime Minister

B. Dewan Negara, Dewan Rakyat and the Yang di Pertuan Agung
C. Dewan Rakyat, Dewan Negara and the Prime Minister and Cabinet
2. Define an Enactment?
A. Law passed by the State Legislative Assembly, after going through the relevant procedure
B. Law passed by the State of Sarawak, after going through the relevant procedure
C. Law passed by the State of Sabah, after going through the relevant procedure
3. Ordinance may refer to which of the following;
I. Laws promulgated by the Yang di Pertuan Agung

II. Laws passed during the Malayan Union
III. Laws passed by the Sarawak State Legislative Assembly
IV. Laws passed by the Sabah State Legislative Assembly
A. I, II and III
B. II, III and IV
C. I and II only
D. All the above
4. A majority of ______ is required in order for the Bill to clear the ______ stage otherwise the Bill
would be cancelled and the opposition would want to advocate a vote of no confidence.
A. 75%; 3rd stage

B. 51%; 2nd stage
C. 51%; final reading
D. 75%; 2nd reading
5. A draft of a proposed legislation is known as ___________ .
A. Act of Parliament
B. A bill
C. A statute
D. A code
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6. When the Bill has been passed by both the Houses of Parliament, it is then sent to the _________
for his Royal consent; however, it only becomes law upon receiving the _____.
A. Monarch, Royal Assent

B. Yang di Pertuan Agung, Royal Assent
C. The King, Prime Minister
7. An amendment to Article ____ of the Federal Constitution states that the Yang Di Pertuan Agung
must assent to the Money Bill within ____ days of it being presented to him.
A. 76; 31 days
B. 77; 30 days
C. 66; 30 days
8. What is the importance of the Report Stage in the law making process?
A. The committee stage ends and a motion is passed

B. The findings of the committee is reported back in Parliament
C. The Members of Parliament are aware of the committee stage
9. Why may an Act of Parliament be passed?
I. To create new law

II. To authorise taxation
III. To codify existing law
IV. To consolidate existing statutes
A. All of the above

B. None of the above
C. I, III and IV only
D. II, III and IV only
10. Which of the below mentioned category is the supreme authority in Malaysia as far as the country
is concerned?
A. Parliament
B. Federal constitution
C. Government
D. Prime Minister
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JUDICIAL PRECEDENTS
1. What is common law or case law?
A. It is law decided by a judge on a particular case and it is based on judicial decisions rather
statutes
B. It is law decided by a judge on a particular case and it is based on statutory decisions rather
judge made law
C. It is law decided by a judge while sitting in a court of law
D. It is law decided by a judge on a particular case and it is based on the court’s interpretation
2. ______ happens when a court considers the facts of a previous case to be substantially different
from the facts of the current case. As a result the court will not be bound by the ruling on the
previous case.
A. Reversing
B. Overruling
C. Distinguishing
D. Disapproving
3. In simple words, a binding precedent means ____________
A. That judges follow as per the intentions of the legislature

B. That judges follow what their predecessors had done earlier in a similar situation
C. That judges follow the decisions of previous cases as long as the facts are identical
D. That judges follow the directions given to them
4. ______ refers to the statements or principles of law upon which a judgment is based. In other
words it is the legal reasoning behind a particular decision of the court
A. Ratio decidendi
B. Obiter dicta
C. Distinguishing
D. None of the above
5. The main advantages of precedents are as follows;
A. Certainty, predictability and uniformity

B. Certainty, rigidity and consistency
C. Certainty, uniformity and complexity
D. Certainty, complexity and flexibility
6. Previous decisions of the Judicial Committee of the Privy Council are still probably binding on
the Malaysian Courts in the following situation
I. If the law was decided based on a Malaysian appeal case

II. If the law was from a Commonwealth country which is in pari materia with Malaysian law
III. If the law was from a Commonwealth country which is not in pari materia with Malaysian
law
IV. If there is a lacuna in Malaysian law
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A. All of them
B. I and II only
C. I , II and III only
D. II and III only
7. Is the Federal Court bound by its own precedents?
A. Yes because it is the final appellate court

B. No, because it is the final appellate court
C. Maybe
8. Precedents are strictly observed in ______ courts but not necessarily in ______ courts.
A. Civil ; criminal
B. Criminal ; civil
C. Open ; closed
D. National ; martial
9. Are precedents set by the Supreme Court in England binding on our Malaysian Courts?
A. Yes, since Malaysia follows English law

B. No, because Malaysia is a federation and a sovereign state
C. It is subject to the judge’s discretion
10. What are the main disadvantages of precedents?
I. Uncertainty
II. Voluminous
III. Complexities
IV. Rigidity
A. All of the above

B. I, II and IV
C. II, III and IV
D. I, II and III
11. Which of the following describes a statement that is made ‘obiter dicta’?
A. It is binding in certain courts hearing similar disputes

B. It is not binding unless made by the House of Lords
C. It is a principle of law which relate to the facts of the dispute upon which the decision is based
D. It is not binding on any later court determining a similar dispute but may be regarded as
judicial authority
12. Which of the following describe the legal reasoning behind a judicial decision?
A. Per incuriam
B. Obiter dicta
C. Ratio decidendi
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13. What does overruling mean?
A. A lower court disagrees with the original decision made by a higher court
B. A higher court overturns the original decision of a lower court
C. A higher court agrees with the original decision of a lower court in the same case
14. Which of the following statements is ‘ratio decidendi’?
A. The legal reasoning behind the decision

B. Something said in a dissenting judgment
C. Speculation on the outcome of the case if the facts had been different
SOURCES OF MALAYSIAN LAW
1. In Malaysia there are two main sources of law; written law and unwritten law. A third source is
Muslim law which applies to all persons who are practising Muslims. Which one of the following
statement is not legally accurate?
A. Written law is legislation which takes precedence

B. Unwritten law are laws not enacted by Parliament or State Assemblies and are not found in
the Federal or State Constitution
C. Unwritten laws also consist of English law, judicial law and practise or customs
D. Written law also consists of the law made by the judges
2. What constitutes examples of written law?
i. The Federal constitution

ii. The State constitution
iii. Legislation
iv. Delegated legislation
A. (i) and (ii)

B. (i), (ii) and (iii)
C. All of them
D. (i), (iii) and (iv)
3. What constitutes examples of unwritten law?
i. English law
ii. Judicial law
iii. Customs
iv. Subsidiary legislation
A. All of them
C. (i), (iii) and (iv)
D. (ii), (iii) and (iv)
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4. The Civil Law Act 1956 (Section 3 and 5) enables the incorporation of English law and Equity
into Malaysia; however, it is subject to two main limitations. Which of the following accurately
depict the two main limitations?
A. Applicable if there is a lacuna in Malaysian law
B. Applicable only if it suits our local circumstances and conditions
C. Applicable if it is made fairly and equitably
D. Applicable if Malaysian judges want to adopt it
5. Name a right that may not be found in the articles of the Federal Constitution;
A. It establishes a system of bicameral parliament

B. It provides for Islam to the official religion of the Federation
C. It provides for a constitutional monarchy
D. It established a system of full democracy
6. Under the Constitution, Islam is the official religion in Malaysia; however, freedom of worship is
guaranteed under the Constitution. Do you agree with the above statement?
A. Yes
B. No
C. Maybe
7. Federal laws are passed at ______; laws passed by Parliament are called ____while that passed by
the State Legislative Assembly are called ______, with the exception of the State of Sarawak,
where they are called _____.
A. Federal level; laws; enactments; ordinance

B. Federal level; statutes; enactments; ordinance
C. Federal level; bills; enactments; ordinance
D. Federal level; laws; ordinance; enactments
8. Subsidiary legislation refers to rules and regulations passed by a person or a body and these
powers are given to them by the Federal Parliament. Is the above statement true?
A. Yes
B. No
C. Maybe
9. Malaysian law maybe be classified as written law and unwritten law; written referring to the law
in writing and unwritten law being not in writing. Do you agree?
A. Yes
B. No
C. Maybe
10. Judicial decisions of the superior court consists of the High Court, Court of Appeal and the
Supreme Court. Do you agree with the above statement?
A. Yes
B. No
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STATUTORY INTERPRETATION
1. Do judges have the power to change statutory law as a particular statute may be invalid for various
reasons?
A. Yes, because they are in charge of making the common law

B. Yes, because it is part of the job of the judiciary
C. No, because that function only belongs to Parliament
D. Yes, because judges are given the task of interpreting the law
2. Name some of the canons of interpretation?
I. Literal rule
II. Golden rule
III. Mischief rule
IV. Ejusdem Generis rule
A. All of them
B. None of them
C. I, II and III
D. II, III and IV
3. The Literal rule allows a judge to literally interpret the meaning of the word or words according
to __________
A. The ordinary, grammatical meaning of the word or words even though it may not make sense
B. The ordinary, grammatical meaning of the word or words but it must make sense and be
reasonable
C. The ordinary, grammatical meaning of the word or words
D. The ordinary, grammatical meaning of the word or words and its main aim is to find a remedy
for the mischief
4. The _____ rule is applied if there is ambiguity or vagueness in the words or phrase of the statute
or where there are two apparently contradictory meanings to a particular word used in the statute;
however, the court cannot ignore or replace any legislative provision because it considers it
absurd.
A. The Literal Rule

B. The Golden Rule
C. The Mischief Rule
D. The Ejusdem Generis Rule
5. Which rule is applied by the courts to interpret words or phrases, which are ambiguous or unclear
by looking at the statute as a whole, where the court will enquire into the spirit and intent of the
statute and this rules were laid down in the classic case of _______?
A. The Golden Rule and Lim Moh Joo v PP

B. The Mischief Rule and Heydon’s case
C. The Literal Rule and Corkery v Carpentar
D. The Mischief Rule and Corkery v Carpentar
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6. In the Malaysian case of PP v Pengurus Hong Trading & Co, the relevant part of the statute
referred to a prohibition on tea containing any, ‘Prussian blue, or lead or any compounds of lead
or other matter’. The court, applying the _______ held that ______
A. The Mischief rule and the phrase ‘other matter’ referred to things of the same category as
‘Prussian blue, lead or compounds of lead’.
B. The Ejusdem Generis rule and the phrase ‘other matter’ referred to things of the same
category as ‘Prussian blue, lead or compounds of lead’.
C. The Literal rule and the phrase ‘other matter’ referred to things of the same category as
D. The Mischief rule and the phrase ‘other matter’ referred to things of a different category than
7. When a statute uses words ‘such as oxen, bulls, goat, cows, buffaloes, sheep, horses, etc,’ the word
etc cannot include _______; but may include ______.
A. Wild animals such as lions or tigers; dogs and cats

B. Wild birds ; dogs and cats
C. Cockerel and hen; animals such as lions or tigers;
8. A person was charged for being drunk, while in charge of a bicycle. He was subsequently charged
and convicted under the Licensing Act with being drunk while in charge of a carriage; however
specific reference was not made to a bicycle in the legislation.
Was the conviction justified?
A. Yes, since the purpose of the Act is to prevent people from using any form of transport on the
highway whilst in a state of intoxication
B. Yes, since the purpose of the Act is to prevent people from using any form of transport on the
highway whilst in a state of intoxication and bicycle would fall under the word ‘carriage’
C. Yes, since the purpose of the Act is to prevent people from being drunk on highways as it
poses a danger to everyone using the highway
D. Yes, since the purpose of the Act is to prevent people from being in a state of intoxication
9. What were the matters laid down in the case of Heydon [1584]
I. What was the common law before the making of the statute?
II. What was the mischief that common law did not provide for?
III. What was the remedy that Parliament had provided for?
IV. What was the true reason for the remedy?
A. All of the above

B. I, II and III
C. II, III and IV
D. III and IV only
10. The courts have evolved a number of rules to assist in the interpretation of a statute, where there
is a doubt as the meaning of the word or phrases. Are these canons of interpretation mandatory
for judges to follow?
A. Yes
B. No
18
11. Which rule of interpretation requires the interpretation in the ordinary sense of words unless that
would lead to some absurdity?
A. The golden rule

B. The literal rule
C. The mischief rule
12. Which rule of interpretation involves an examination of the former law in an attempt to deduce
Parliament’s intention?
A. The golden rule

B. The literal rule
C. The mischief rule
13. Which of the following presumptions are valid when interpreting legislation?
1. Statutes operate retrospectively

2. The crown is not bound by the statute
3. The statute does not intend to deprive a person of his liberty
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. All of the above
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PART B – THE LAW OF OBLIGATIONS
OFFER
1. Darma puts a notice in the local post office saying;
‘Reward. Lost caveliar King Spanial named Bamby. RM15000 reward for his safe
return’.
Flower finds Bamby and unaware of Darma’s notice, takes him to Darma’s home address which is
inscribed on the dog’s name tag.
Which of the following statements best describes the legal position?
A. Flower is not entitled to the reward. The offer is invalid as it is not made to an identifiable
class of persons
B. Flower is entitled to the reward. The offer is valid and her acceptance of the offer can be
inferred from her act of returning the dog.
C. Flower is not entitled to the reward. She failed to claim the reward at the time of returning
Bamby [and accepting Darma’s offer] and therefore waived her right to receive it.
D. Flower is not entitled to the reward as she did not even know that a reward was being offered
2. Clarence sells champagne and high quality wines from home. He delivers a glossy flyer to all the
one million homes in the Mount Kiara area of Kuala Lumpur, offering a 1998 Chablis for RM100 a
bottle. On reading his copy of the flyer, Kean Seng goes to Clarence’s home and asks for a case of
Chablis.
Is the flyer issued by Clarence a valid offer?
A. Yes
B. No
Is Clarence in breach of contract if he says to Kean Seng that the Chablis is out of stock and that he is
unable to get hold of any more?
C. Yes
D. No
3. Mati goes shopping in her local village store. Roses are on display priced at RM2 each. Mati has
RM6 in her purse and takes three roses to the counter to pay.
Does the display of clearly priced roses constitute an offer which Mati accepts when she picks up the
roses?
A. Yes
B. No
Can the shopkeeper refuse to sell the roses to Mati?

C. Yes
D. No
20
4. A local newspaper, The Malay Mail advertises ‘50 Stereo headphones remaining; only RM20 each’.
Which legal term best describes the advertisement?
A. Offer
B. Statement of intention
C. Invitation to treat
D. Supply of information
5. Pamela appears on 'Crimewatch' and offers RM10,000 as a reward for anyone who can provide
information leading to the conviction of the thief who stole her family jewels. Not having seen or
heard about this particular episode of ‘Crimewatch', Felicity contacted the police and gave evidence
about having seen someone leaving Pamela's house through a back window. She later identifies this
man at an identity parade and he is subsequently convicted.
Can Felicity claim the reward?
A. Yes, because she did what was required

B. Yes, because the felon was successfully convicted on the basis of her evidence
C. No, because she did not know about the reward
D. No, because whether or not she knew about or claimed the reward was irrelevant to the
conviction
6. Jane tells Tanya that she will sell Tanya her stallion on 10 May for RM3,000, unless it wins a horse
breeder's competition on 9 May, in which case the price will be RM4,000, or if it comes second, in
which case the price will be RM3,500.
Is Jane's communication
A A statement of intention?
B An invitation to treat?
C An offer?
D A mere supply of information?
7. Are the following statements true or false?

An advertisement in a newspaper can never constitute a valid offer, as it is merely an invitation to
treat.
A True
B False
An offer can be made to the world at large.

C True
D False
8. Will runs a market stall. His prize cauliflowers are priced at RM1 each. Tammy picks out one
cauliflower and hands Will RM1 but Will refuses to accept the money or to allow Tammy to take a
cauliflower.
Has Will made an offer to sell the cauliflower selected by Tammy?

A Yes
B No
21
Has Tammy made an offer to buy the cauliflower that she selected?
C Yes
D No
9. The auctioneer had advertised that certain goods, including office furniture would be sold at a
certain place on a certain day. The plaintiff went for the sale and all that furniture he was interested
in were withdrawn. He sued for the loss of time and expenses.
Would the plaintiff be successful?

A. Yes, as the advertisement was an offer
B. No, as the advertisement was a case of an invitation to treat
C. No, as the advertisement of sale was a mere statement of intention to hold a sale
D. Yes, as the advertisement was a case of an offer as there was an intention to sell
10. Abang promises by letter, to sell a house to Baby at a certain price.

When is the communication of proposal complete as against Abang?
A. The communication of proposal is complete when Baby receives the letter

B. The communication of proposal is complete when Baby accepts the letter
C. The communication of proposal is complete when Baby posts the letter
D. The communication of proposal is complete when Abang receives the letter
11. Bibi sees the following notice in a newspaper:

‘20 orthopaedic beds, RM1000 each’
How would you describe this notice in terms of contract law?
A. Offer
B. Invitation to treat
C. Supply of information
D. Advertisement
12. Ken offered to sell Laila a flick knife for RM20. He also advertised the flick knives in the local
newspaper and put one on display in his shop window with a price tag on it.
Will he be liable to prosecution for ‘offering for sale’ an offensive weapon?
A. The advertisement and shop window display are offers, not invitation to treat and render him
guilty of the offence
B. The advertisement and shop window display are not offers, but rather invitation to treat and
therefore do not render him guilty of the offence
C. The advertisement is an offer and render him guilty of the offence
D. The shop window display is an invitation to treat and therefore does not render him guilty of
the offence
13. A proposes, by letter, to sell a house to B at a certain price.

As per the Contracts Act 1950, the communication of the proposal is complete when
A. B sends the letter to A

B. B receives the letter
C. B posts the letter of acceptance
D. B confirm receipt of the letter
22
14. Which of the following statements is false as per the Contracts Act 1950?
A. When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted: a proposal when accepted, becomes a promise
B. The person making the proposal is called the ‘promisor’ and the person accepting the proposal
is called the ‘promisee’
C. An agreement not enforceable by law is said to be unenforceable
D. An agreement enforceable by law is a contract
15. As a general rule, can a party recover goods from a third party where the contract turns out NOT
to be valid but
Void?
A Yes
B No
Voidable?
C Yes
D No
16. Which of the following does not need to be present in order to create a valid contract for the sale
of goods not made by deed?
A. Consideration
B. Written evidence of the principal terms of the contract
C. An intention to create legal relation
D. Agreement
17. A commercial contract for the sale of land, which is based on an agreement and is supported by
consideration but which is not made in the correct form, is;
A. Void
B. Voidable
C. Unenforceable
D. Illegal
18. An auctioneer put up an advertisement in the newspaper that an auction of office furniture
would be held on a particular day. The claimant came from a distant place to buy the
furniture, but the auction was cancelled.
Which of the following depicts the legal position of the subject matter?
A. The advertisement of the auction was only an invitation to treat and not an offer
B. The advertisement of the auction was an offer and not invitation to treat
C. The advertisement is neither an offer or invitation to treat
19. David lived next to a field owned by Frances. He wished to widen the access to his
property by 2 feet. When they met at the village fete, Frances agreed to transfer a strip of land
2 feet wide and 30 feet long, provided David erected attractive fencing. She also said that
there was no need for him to pay for the land. Which of the following best describes the agreement
between them?
23
A There is no contract because there is no consideration for the transfer of land
B The contract is void because it is not in writing
C The contract is voidable because it is not in writing
D The contract is unenforceable because it is not in writing
20. Janet owes George RM500. Rhiannon telephones George and promises that she will
guarantee to pay the sum owed if Janet cannot or does not pay. Janet fails to pay the RM500 and
so George writes a letter to Rhiannon demanding payment. Which of the following best
describes the legal position as to whether Rhiannon is obliged to pay George the RM500?
A There is a valid agreement between George and Rhiannon and she must pay
B George's letter is written evidence of the terms of guarantee and Rhiannon must pay
C Rhiannon is not a party to the original contract which created the debt owed by Janet so she
cannot be liable on the guarantee
D The guarantee is unenforceable so Rhiannon is not liable
1. Cindy read an advertisement in a local newspaper, which stated that a well-known department store
was selling branded shoes at half-price. She decided to take advantage of the sale. Upon arriving at
the store, she saw a window display of several brands of shoes. Beside the display was a large card
which stated, ‘Special Offer. Half Price. For Today Only’.
Cindy went into the shop and chose two pairs of shoes and took them to the payment counter. The
salesgirl told her that she would have to pay the full price as all half-priced items had been sold out.
Cindy wishes to know whether she could legally insist on buying the shoes at half-price.
Required:
Advise Cindy.
(a) What are the two main essentials required for an agreement to come into being?
(1 mark)
(b) How do you distinguish an offer from invitation treat? Give a classic authority to explain the
distinction (3 marks)
(c) What would be your advice to Cindy? (2 marks)
[6 marks]
TERMINATION OF OFFERS
1. Matthew offers to buy Tom's trailer tent for RM850. Tom says that he's keen to sell but that he
will not accept anything less than RM900 in any circumstances. Which of the
following best describes the status of Tom's reply?
A It is a counter offer
B It is a request for information
C It is a revocation of the offer
D It is an acceptance
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2. Noel offered to sell Tamsin his caravan for RM500. Tamsin wrote to Noel saying that she would
buy it for RM400. When she didn't hear anything further from Noel, she telephoned him and said that
she would pay RM500 after all. However, in the meantime, Noel has sold his caravan to Gail.
Is Tamsin's initial response a counter offer?
A Yes
B No
Is Noel in breach of contract with Tamsin?
C Yes
D No
3. Dorothy breeds poodles. Shortly before a litter was due, Nigel offered to buy a puppy for RM600
but Dorothy did not reply. After nine months, Dorothy wrote to Nigel accepting his offer, advising
him that he should collect the puppy on Monday.
Which of the following best describes the legal position?
A There is a valid contract and Dorothy is entitled to payment from Nigel

B There is an implied revocation of the offer because Nigel did not follow up his offer when
the litter was born
C There is an implied rejection of the offer because Dorothy did not respond in time
D The offer has been terminated through lapse of time and is no longer capable of acceptance
4. With regards to the revocation of an offer;
As a general rule, is revocation sent by letter effective on posting?

A Yes
B No
Must a revocation be made expressly in precisely the same manner as the original offer in order to be
effective?
C Yes
D No
5. Which of the following will NOT have the effect of terminating an offer?
A. Rejection
B. Counter offer
C. When a pre-condition is satisfied
D. A lapse of time
6. Michael offers to sell his Laser 2000 sailing dinghy to Rupert for RM15000, provided he gets the
job for which he has just been interviewed, since that would result in him having to live somewhere
too far from sailing facilities. Rupert is delighted and thinks RM15000 is an excellent price. Michael
fails to get the job.
What is the consequence of Michael failing to get the job?
A. The offer is terminated

B. The contract is rendered voidable
C. The contract is rendered unconditional
D. The contract is rendered unenforceable
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7. On Monday George offers to sell his piano to Shau for RM15000, to be delivered on Thursday. On
Tuesday Shau replies saying that he will only buy the piano if George will delay delivery until the
following Monday. George does not reply but sells the piano to Ivy on Thursday. On Friday Shau
sees George and accepts his offer.
Is there a binding contract between George and Shau?
A. Yes, Shau’s reply on Tuesday constitutes an acceptance of the offer

B. No, Shau’s reply on Tuesday constitutes a counter offer which destroys the original offer
C. No, the offer is terminated when George sells the piano to Ivy on Thursday
D. Yes, Shau’s reply on Tuesday is a request for information only and on Friday he accepts the
offer
8. Froddie offered Mary his bicycle for RM500. Mary asked whether he might be willing to accept
RM100 now and RM400 at the end of the month when she is paid.
Which of the following best describes the status of Mary’s reply?
A. It is a rejection of Froddie’s offer

B. It is an implied acceptance because she was clearly agreeable to the price
C. It is a counter offer
D. It is a request for further information
9. Mark emails Nathan and offers to sell his tandem to him for RM500. Nathan texts him back to say
that he would love to have it but he could only pay RM350. Two days later Mark says he will accept
RM350 but Nathan has bought one on eBay for only RM200.
Which of the following best describes the legal position between the parties?
A. Nathan’s reply is a rejection of Mark’s offer

B. Nathan’s reply is a counter offer which Mark accepts
C. Nathan’s reply is merely a request for information
D. Nathan’s reply constitutes a counter offer but this is revoked when he buys the tandem from
eBay.
If an offer states that it will remain open for three months, the offeror cannot revoke it before three
months has passed.
A. True
B. False
A letter of revocation of offer is effective when posted
C. True
D. False
11. Which of the following is NOT required for revocation of an offer to be effective?
A. It must be in writing
B. It must be made before the offer is accepted
C. It must be made by the offeror or his authorised agent
D. It must be communicated to the offeree
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12. The defendants made a proposal to plaintiff via telex for a sale of land and the plaintiff was to
confirm within a stipulated time. The plaintiff further discussed with the defendants the sale of three
more lots but later decided to only proceed with the sale of the first lot. The plaintiff applied for specific
performance.
State the legal position in law?
A. Since the defendant proposed to purchase three other lots, this amounted to a binding contract
between the parties
B. Since the plaintiff proposed to purchase three other lots, this amounted to a counter proposal,
and the plaintiff claim should be dismissed
C. Since the plaintiff proposed to purchase three other lots, a new contract had already come into
being
D. Since the defendant proposed to purchase three other lots, this amounted to a counter offer
and the plaintiff’s claim should be dismissed
13. The claimant offered to sell tools to the defendant. Their quotation included details of their
standard terms. The defendant ‘accepted’ the offer, enclosing their own standard terms. The claimant
acknowledged acceptance by returning a tear – off slip from the order form.
Explain the legal situation?
A. The defendant’s order was really a counter offer. The claimant had accepted this by returning
the tear off slip
B. The defendant’s order was an offer which is binding in law by the acknowledgement of the
claimant
C. The defendant’s order was a counter offer which is not recognised by law
D. The defendant’s order was a binding acceptance which is recognised in law
14. The defendant offered to sell iron at ‘40s net cash per ton, open till Monday’. The claimant enquired
whether he would agree to delivery spread over two months. The defendant did not reply and within
the stated time, the claimant accepted the original offer. Meanwhile the defendant had sold the iron to
a 3rd party.
Is there a binding contract between the parties?
A. There was no contract as there is a modification of the terms of the offer

B. There was a contract as the claimant had merely enquired as to a variation of terms
C. There was a no contract as it is a case of invitation to treat only
D. There was a contract as the parties had agreed to the terms
15. X offered to guarantee payment by Y in respect of goods to be supplied by the claimant. X died
and the claimant, in ignorance of his death, continued to supply goods to Y. The claimant then sued
X’s executors on the guarantee.
Was the guarantee binding in law?
A. X’s offer was a continuing commercial offer which the claimant had accepted by supply of
goods after X’s death. The guarantee was binding.
B. X’s offer had lapsed with the death of X; therefore the guarantee was not binding
C. X’s offer was binding; however the guarantee may not be deemed to be binding as the requisite
law had not been complied with
D. The death of X terminates all contracts made by X; therefore the guarantee was not binding.
27
16. The respondent agreed conditionally to transfer her half share of a piece of land to the appellant,
should the appellant obtain approval from the state authority by 31st December 1977, failing which
the agreement shall be null and void. The condition was not fulfilled.
What is the effect of the contract?
A. Since the condition was not fulfilled by the deadline the contract became void
B. Since the condition was not fulfilled by the deadline the contract became voidable
C. Since the condition was not fulfilled by the deadline the contract became unenforceable
D. Since the condition was not fulfilled by the deadline the contract became illegal
17. Explain the correct legal interpretation of Section 5(1) of the Contracts Act 1950?
‘A proposes, by a letter sent by post, to sell his house to B.’

When may A be able to revoke the offer or proposal?
A. A may revoke the proposal at any time before or at the moment when the letter
communicating it reaches A, but not afterwards
B. A may revoke his proposal at any time before or at the moment when B posts his letter of
acceptance, but not afterwards
C. A may revoke his proposal at any time before or at the moment when the letter is delivered
18. Explain the correct legal interpretation of Section 5(1) of the Contracts Act 1950?
‘A revokes his proposal by telegram’

When is the revocation complete?
A. The revocation is complete as against B when the telegram is despatched. It is complete as

against A when B receives it.
B. The revocation is complete as against A when the telegram is received by B. It is complete as
against B when B accepts it
C. The revocation is complete as against A when the telegram is despatched. It is complete as
against B when B receives it
D. The revocation is complete as against A when the telegram is posted. It is complete as against
B when the telegram is posted
19. The defendants applied to the company in June for shares and paid a deposit. At the end of
November the company sent him an acceptance by issue of a letter of allotment and requested payment
of the balance due. The defendant contended that his offer had expired and could no longer be accepted.
Was the defendant justified that his offer had expired?
A. The offer was for a reasonable time only and five months was much more than that. The offer
had lapsed.
B. The offer was for a reasonable time only and five months was reasonable under the
circumstances. The offer had not lapsed
C. The offer was for a reasonable time only and the parties could have concluded a contract as
there were no vitiating factors present
28
20. Which of the following statement is true as per the Contracts Act 1950?
A. The communication of a proposal is complete when it comes to the knowledge of the person
to whom it is made
B. The communication of a proposal is complete when it comes to the knowledge of the persons
C. The communication of a acceptance is complete when it comes to the knowledge of the person
to whom it is made
D. The communication of a proposal is complete when it is posted
1. Samy wrote to Jenny offering to sell his car (a rare Jaguar Mark 99) to her for RM500,000. Jenny
wrote back expressing her interest in purchasing the car and asked whether Samy would accept
RM450,000. Samy did not reply. Jenny then wrote to Samy accepting his offer at RM500,000.
However, Samy has now changed his mind and refuses to sell.
Advise Jenny
a) The requirements for an agreement to come into being? (2 marks)

b) The effect of a counter offer with the assistance of a case study (2 marks)
c) Explain whether and, if so, when an acceptance may be revoked (2 marks)
[6 marks]
2. When and how a proposal (offer) be revoked under the Contracts Act 1950? Illustrate your answer
with appropriate examples and decided cases, if any;
(a) By communication of the proposal (2 marks)

(b) By lapse of time (2 marks)
(c) Failure to fulfil a condition precedent to acceptance (2 marks)
[6 marks]
ACCEPTANCE
1. Brian wrote to Amber offering to buy her tandem for RM100 and, sure that she would accept his
offer, said 'If I don't hear from you, I'll consider it mine'. Amber meant to write back to Brian to say
that she was willing to accept his offer but never got round to it.
Which of the following is NOT true?
A Silence cannot constitute acceptance

B There is an implied acceptance because Amber does not reject Brian's offer
C Acceptance may be inferred from conduct
D Acceptance may be made by the offeree or his authorised agent
2. On 10 April, Lucy offered to sell her flute to Harriet for RM300. Harriet said she'd pay
RM275. Lucy said she'd take RM285 and Harriet should let her know (in writing) by lunchtime Friday
14 April if she agreed to that price, because she was attending an orchestra rehearsal on the Friday
evening and, if Harriet didn't want it, she might sell it there. Harriet posted her reply along with a
cheque for RM285 in the 7am post on Friday. On Friday evening, Lucy sold the flute to Alice. The
next day, Lucy receives Harriet's cheque.
29
A A valid contract exists at 7am on Friday when Harriet posts her acceptance of Lucy's offer
B A valid contract exists on Saturday when Lucy receives Harriet's cheque and Lucy is in
breach of contract
C There is no valid contract because Lucy impliedly revokes her offer when she sells the flute
to Alice
D There is no valid contract because Harriet does not effect a valid acceptance of it while the
offer remains open and capable of acceptance
3. With regard to communication of acceptance:
Can the offeror impliedly waive the need for acceptance to be communicated to him?
A Yes
B No
If the offeror sends an offer by letter but does not prescribe a particular method for communicating
acceptance, is the offeree obliged to reply by the same method, ie by letter?
C Yes
D No
4. Gemma offered to sell Karina her tenor saxophone for the bargain price of RM340. However, she
told Karina that someone else was also interested so if Karina wanted it she must leave a message on
Gemma's mother's answer phone that evening since she (Gemma) was staying there overnight en
route to the airport. Karina was unable to find the number of Gemma's mother, so left a text message
on Gemma's mobile instead. Unfortunately Gemma did not receive the message from Karina because
she had lost her mobile and so she asked her mother to sell the saxophone on her behalf while she was
on holiday.
A There is a valid contract because Karina's acceptance was communicated in a way that was
as expeditious as the one prescribed by Gemma
B There is no valid contract because Gemma prescribed a method of acceptance in very
particular terms and Karina's failure to comply with it means that her acceptance was
ineffective
C There is a valid contract because it was reasonable for Karina to suppose that Gemma would
have her mobile phone with her
D There is a valid contract because it was unreasonable for Gemma to be so particular about
how acceptance was to be communicated, especially since the telephone number given was
not her own
5. Pamela appears on 'Crimewatch' and offers RM10,000 as a reward for anyone who can provide
information leading to the conviction of the thief who stole her family jewels. Not having seen or
heard about this particular episode of ‘Crimewatch', Felicity contacted the police and gave evidence
about having seen someone leaving Pamela's house through a back window. She later identifies this
man at an identity parade and he is subsequently convicted.
Can Felicity claim the reward?
A Yes, because she did what was required

B Yes, because the felon was successfully convicted on the basis of her evidence
C No, because she did not know about the reward
D No, because whether or not she knew about or claimed the reward was irrelevant to the
conviction
30
6. On 28 May Abigail writes to Gill and offers to sell her all her ACCA manuals for RM500. Gill posts
a letter together with a cheque for RM500 on 1 June saying that she will pick them up on 3 June.
However on 2 June Abigail discovers that she has failed two of her papers and so sends a letter to Gill
saying that the books are no longer for sale. On 3 June, each receives the other’s letter.
Does the letter of revocation take effect on 2 June?

A. Yes
B. No
Does Gill’s acceptance take effect on 3 June?

C. Yes
D. No

Acceptance may be express or inferred from conduct
A. True
B. False
Acceptance must always be communicated to the offeror in order for it to be effective
C. True
D. False
8. On 1 May Hugh offered to sell his boat to Jeff for RM5million, stating that his offer had to be
accepted by ‘notice in writing’. Jeff posted a letter of acceptance on 3 May, but it never arrived.
Does the postal acceptance apply i.e is the acceptance effective as soon as it is posted?
A. Yes
B. No
Is there a contract between Hugh and Jeff?

C. Yes
D. No
An acceptance of a contractual offer sent by fax takes effect as soon as the person accepting the offer
presses the ‘send’ key
A. True
B. False
Whether or not postal acceptance is within the contemplation of the parties is a question of fact and
maybe deduced from all the circumstances.
C. True
D. False
10. On Monday Peter writes to Quentin offering to sell his car to Quentin for RM9000. Peter’s letter
is received the next day. On Wednesday, Peter posts a letter to Quentin saying that he has changed
his mind. Later that day, Quentin speaks to Peter and says that he accepts his offer.
Is there a valid contract between Peter and Quentin?
31
A. No, because Peter posted his revocation before Quentin accepted the offer
B. Yes, because Quentin accepts the offer before he receives Peter’s letter of revocation
C. No, because Quentin’s acceptance should have been in writing since the offer was made in
writing
D. Yes, because Quentin’s acceptance is made in more expeditious manner than the offer
11. DELETED
12. A vendor agreed to sell a mushroom farm under a contract which was declared to be ‘a provisional
agreement until a legalised agreement is signed’.
Is there a binding agreement between the parties?
A. Yes
B. No
C. Maybe
13.Which of the following would be regarded as valid, binding acceptance?
A. A counter offer
B. Acceptance ‘subject to contract’
C. A tender to perform one task
D. Posting a letter of acceptance
14.Which TWO of the following statements regarding acceptance of an offer are correct?
1. Acceptance does not need to be communicated in a unilateral contract

2. If two identical offers between two parties cross the post, then one will be regarded as
acceptance of the offer
3. Under the postal rule, a letter of acceptance that has been posted does not have to be received
by the offeror to be valid acceptance
4. If no method of communicating acceptance is stated in the offer, then acceptance must be made
by post
A. 1 and 2
B. 1 and 3
C. 2 and 3
D. 2 and 4
15. A tender for building work was not signed, but on the basis of an agreement made, the building
work was started. [customary practices]
Is there a binding building contract between the parties?
A. No binding contract existed as the commencement of the building work. A positive act was
not enough to imply acceptance
B. A binding contract existed as the commencement of the building work was a positive act,
enough to imply acceptance
C. No binding contract existed as the commencement of the building work to imply acceptance
D. A binding contract existed at the commencement of the building work.
32
16. Nicholas Cage offers to sell his car to Derek for RM700 on 1 June, but in reply Derek merely asks
how old the car is, what its mileage is and how many owners it has had. Nicholas Cage provides this
information on 3 June and on that date states that the offer will be kept open only until 10 June. On 7
June Derek says he will take the car for RM600. On 8 June Hugh Grant buys the car from Nicholas
Cage for RM700 and Derek is told that it has been sold.
On 10 June, what is the state of the relations between Nicholas Cage and Derek?
A. There is a contract to sell RM600 so Derek may recover the car from Hugh Grant as his
property
B. There is a contract to sell at RM700 which has been terminated by Nicholas Cage’s breach
when he sold the car to Hugh Grant
C. There is an offer from Nicholas Cage to sell for RM700 which is still open for Derek to accept
D. There is an offer from Derek to buy at RM600 which Nicholas Cage cannot accept
17. In commercial negotiations, both parties often try to have their own standard terms and conditions
included as the contract’s terms by including them on all documents. This is known as ______ .
A. Letters of intent
B. Letters of comfort
C. Battle of the forms
D. Choice of forms
18. DELETED
19. A reward was offered for information leading to the arrest and conviction of a murderer. C claimed
the reward, admitting that though he was aware of the reward, he had acted to save his own skin and
that all thought of the reward had passed out his mind.
Would C be able to claim the reward?
A. Yes since he was aware of the reward

B. No as there cannot be acceptance without knowledge of the offer
C. No as there is a motive attached
D. All of the above
20. Which of the following statement does not accurately describe the legal principle under the
Contracts Act 1950?
A. In order to convert a proposal into a promise the acceptance must be absolute and unqualified
B. Performance of the conditions of a proposal or the acceptance of any consideration for a
reciprocal promise which may be offered with a proposal, is an acceptance of the proposal
C. A proposal may be revoked at any time before the communication of its offer is complete as
against the proposer but not afterwards
D. The communication of an acceptance is complete as against the acceptor, when it comes to the
knowledge of the proposer
33
1. Ali wrote to Bidin on 1 June 2002 offering to sell to Bidin his antique 15th century China vase for
RM250,000. He further stated in the letter that if Bidin did not reply the letter by 10 June 2002, he
(Ali) would consider that Bidin had accepted the offer. Bidin did not reply the letter. Ali wishes to sue
Bidin for breach of contract.
Advise Ali on his chances of success;
a) State and discuss the general rule on ‘whether silence amounts to good acceptance’ in law
(3 marks)
b) Highlight and explain with the assistance of a case study the law on whether ‘mental
acceptance amounts to a good form of acceptance’. (3 marks)
[6 marks]
2. Ding wrote to Bing on 1 August 2003 offering to sell to Bing a song album from his collection of
old albums. The letter stated that Bing was to reply by 5 August 2003 if he wished to accept the offer.
Bing received the letter on 3 August 2003 and immediately sent an SMS to Ding accepting the offer.
The next day (4 August 2003), he posted a letter to Ding accepting the offer. On the same day Ding
wrote a letter to Bing revoking his offer. Bing's letter of acceptance was received by Ding on 8 August
2003. Ding's letter of revocation of his offer was received by Bing on 7 August 2003. On 10 August
2003, Ding sold off his entire collection of song albums to Kong.
Required:
Bing wishes to sue Ding for breach of contract. Advise Bing on his chances of success as to;
a) Explain the general rule of acceptance? (1 mark)

b) Explain the general exception to the rule of communication (1 marks)
c) What is the effect of SMS? (2 marks)
d) What is the effect of revocation of offer made by Ding? (2 marks)
[6 marks]
INTENTION TO CREATE LEGAL RELATIONS
1. An employment contract between Boss Products Sdn Bhd and its employee, Hans, provides for
Hans to receive ex gratia payments in the event of the company receiving additional business that is
attributable to Hans' efforts beyond the scope of his contractual duties. Notwithstanding this
agreement, Hans complains that it has not been honoured on at least six occasions in the past 12
months.
Is there a rebuttable presumption in commercial transactions that the necessary intention to create
legal relations does exist?
A Yes
B No
Does the fact that the payments are described as EX GRATIA mean that the court will treat the situation
as not giving rise to legal relations?
C Yes
D No
34
There is a rebuttable presumption that social, domestic and family arrangements are not intended to
be legally binding
A. True
B. False
There is an irrebuttable presumption that parties to a commercial agreement intend it to be legally

binding.
C. True
D. False
3. Mr and Mrs Gupta own two flats in Bangi which they let to students. When their eldest son, Shah
Rukh Khan, was offered a place at UKM University to read law, he and his parents entered into a
contract allowing him to reside at one of the flats during his university studies for a rent of RM200
per month. He was allowed to sublet the second bedroom for a rent of RM400 per month.
In light of the rebuttable presumption that no intention to create legal relations exists in the case of
social, family or domestic arrangements, which of the following statements best describes the legal
position as to whether the necessary intention to create legal relations exist in this instance?
A. No, because it is a family or domestic arrangement and so no such intention is presumed

B. No, because the fact that Shah Rukh Khan pays a reduced rent is evidence that no such
intention exists
C. Yes, the normal presumption in family arrangements is rebutted by the fact that the parties
enter into a written agreement and rent is payable
D. Yes, because the normal presumption does not apply where the arrangement relates to
property
4. A British company agreed to make the claimant, an American company its sole vendor in America.
The agreement included a clause stating that the document was not a formal one and was not subject
to legal jurisdiction in either country. Subsequently the British company terminated the agreement
after giving notice; the claimant brought an action for breach of contract and for delivery of goods.
Explain which statement reflects the legal position?
A. The documents were not legally binding and the ouster clause is recognised by the law
B. The documents were legally binding; the ouster clause is not recognised by the law
C. The documents were not legally binding as notice has been given.
D. There is an intention to create legal relations between the parties
Are ‘ouster clauses’ recognized in law so long as the terms are fair between the parties?
A. Yes
B. No
5. The claimant and two members (defendants) of a family together decided to take part in a weekly
competition organised by the Star newspaper. The entries were made in one of the defendant’s names.
However, the entry fee was paid jointly. The claimant and the defendant’s shared the payment for
postage and other expenses. Their entry won RM1million. The defendants refused to share the prize
with the claimant. The defendants claimed that this was only a friendly gesture and there was no
intention to create legal relations
35
State the legal position of the parties?
A. There is an intention to create legal relations as evidence showed that it was a joint exercise
and the parties expected to share any prize money that was won. The defendants must pay
the claimant his share of the prize money
B. There is no intention to create legal relations as evidence showed that it was only a joint
exercise made informally and the parties had not been expected to share any prize money that
may be won. The defendants need not pay the claimant his share of the prize money
C. There is an intention to create legal relations as the parties were serious in their intentions to
create legal relations; however as this was not put in writing, it will not be enforceable in law;
therefore the defendants need not pay the claimant his share of the prize money
D. There is no intention to create legal relations as evidence showed that it was a domestic
agreement only which is not supported by any form of consideration.
6. The husband moved from the matrimonial home, which was jointly owned by the husband and the
wife. The husband met the wife after that and promised to pay her RM500 per month, from which she
undertook to pay the outstanding loan on their house. The wife made her husband sign a note stating
these terms and an undertaking to transfer the house to her name when the loan was paid off. The
wife paid off the loan but the husband refused to transfer the house to her name.
Advise the wife whether she has any legal rights in law?
A. The agreement was enforceable because the circumstances of the case clearly indicate that the
parties had an intention to enter into a legally binding agreement
B. The agreement was enforceable because the parties had signed a note indicating the intention
to be bound by it.
C. The agreement was not enforceable because the circumstances of the case clearly indicate that
the parties did not have an intention to enter into a legally binding agreement as it was a
domestic contract
D. The agreement was not enforceable because the agreement was made between a husband and
wife
7. A husband promised his loving wife that he would pay her RM1000 in the form of monthly
allowances for her maintenance while he was away on work transfer. The wife could not accompany
on grounds of poor health. The husband defaulted and the wife sought the assistance of the law. Advise
her?
A. There is a binding agreement as there is an intention to create legal relations

B. There is no binding agreement as there is no intention to create legal relations as it is a
domestic agreement
C. There is an intention to create relations as there is a promise made which is binding in law
D. There is a binding agreement because he made the promise to his loving wife
8. Many football pool coupons contain the words ‘this transaction is binding in honour only.’. What
is the legal implication of these words?
A. It shows an intention to create legal relations as it is a commercial agreement

B. It does not show an intention to create legal relations as it is a commercial transaction
C. It shows an intention to create legal relations in commercial agreements; as the parties agreed
to the clause at the time of contracting
D. It shows an intention to create legal relations but is not recognised as the clause has rebutted
the intention to create legal relations
36
9. Which is the following depicts the actual legal position on the law of intention to create legal
relations?
A. A domestic contract presumes an intention to create legal relations

B. A domestic contract does not presume an intention to create legal relations
C. A commercial contract does not presume an intention to create legal relations
10. The claimants lent money to the defendant’s subsidiary, having received a letter from the main
defendants [holding company] stating ‘it is our policy to ensure that the business is at all times in a
position to meet its liabilities to you’. The subsidiary went into liquidation and the bank claimed
against the holding company for the outstanding indebtedness.
Advise the bank as to the legal position?
A. The letter of comfort was a statement of existing policy and not a promise that the policy
would continue in the future; therefore there was no intention to create legal relations
B. The letter of comfort was a statement of existing policy and therefore a promise that the policy
would continue in the future; therefore there was an intention to create legal relations
C. The letter of comfort was a statement of existing policy; therefore there was an intention to
create legal relations
D. The letter of comfort was a statement of existing policy to make parties feel comfortable;
therefore there was an intention to create legal relations
11. DELETED
1. On their tenth wedding anniversary, Danny promised his loving wife, Linda, that he would buy her
a diamond necklace. However, he never kept his promise. They have since separated, and Linda now
wishes to sue Danny for breach of contract.
Advise Linda
a) What does it mean by intention to create legal relations? (1 marks)

b) What are the two main presumptions made by law? (2 marks)
c) Illustrate with the assistance of two case studies to show how this principle works in domestic
cases? (3 marks)
[6 marks]
CONSIDERATION
In the event of a dispute about whether a contract is supported by consideration, the courts will
determine if the alleged consideration is adequate.
A True
B False
In the event of a dispute about whether a contract is supported by consideration, the courts will
determine if the alleged consideration is sufficient.
C True
D False
37
2. Jane is due to pay Michaela RM500 on 10 December but is struggling to find the money.
If Jane offered Michaela her exercise machine instead, would that be valid consideration for Michaela
agreeing to waive the debt?
A Yes
B No
If Jane offered to pay Michaela RM400 on 30 November instead, would that be valid consideration for
a promise by Michaela not to demand the full sum owing?
C Yes
D No
3. David owed Michael RM1,000. Michael said that he would accept a cheque.
If David were to offer RM900 in cash instead of a cheque, would that constitute valid consideration?
A Yes
B No
If Zak were to offer to pay RM900 on behalf of David, would that constitute valid consideration for
Michael's promise to release David from his original debt?
C Yes
D No
4. Which of the following best describes the doctrine of the privity of contract?
A The terms on which parties contract are a private matter between the contracting parties
B Consideration must be sufficient but need not be adequate
C A person may have enforceable rights and obligations under a contract only if he is a party
to it
D A valid contract must contain the essential elements of agreement, consideration and
intention to create legal relations
5. Alain, a professional cook, agrees to make a wedding cake for Brenda at a price of RM250.
Alain believes that Brenda might be intending to give the cake to her daughter, Clarissa, who
is getting married next month. Who can enforce the contract under common law?
A All of them
B Brenda and Clarissa
C Alain and Brenda
D Alain and Clarissa
6. A contract may be entered into electronically.
A True
B False
Where works are commenced on the basis of a letter of intent and before the terms of the intended
contract are finalised, any claim for breach of contract must be considered on the basis of the draft
contract which is attached to the letter of intent.
C True
D False
38
7. Cogs Sdn Bhd has been a manufacturer of parts for mill wheels for over 100 years. It has recently
contracted to supply several parts to Wheatmagic Sdn Bhd, following the liquidation of that
company’s regular supplier. Each party argues that its own standard terms and conditions apply to
the contract between them.
The term used to describe such a situation is ‘the battle of the forms’
A True
B False
In such a situation, the rule is that the terms and conditions most recently sent from one party to the
other will apply to the contract.
C True
D False
8. Which of the following is not a type of consideration relevant to contract law?
A. Past consideration
B. Executed consideration
C. Executive consideration
D. Executory consideration
9. Which of the following statements best describes consideration?
A. Consideration must be adequate and sufficient

B. Consideration must be adequate but need not be sufficient
C. Consideration must be sufficient but need not be adequate
D. Consideration need be neither sufficient nor adequate
10. Can the following constitute valid consideration?

The payment of RM1 per year as rent for a house
A. Yes
B. No
A promise made by Adam not to pursue his action for breach of contract against Benjamin, if Benjamin
agrees to do Adam’s accounts for 12 month without charge.
C. Yes
D. No
11. The claimant married the daughter of G. On the occasion of the marriage, the claimant’s father
and G exchanged promises that they would each pay a sum of money to the claimant. G died without
making the promised payment and the claimant sued G’s executors for the specified amount.
Applying the strict rule of the doctrine of privity of contract, can the claimant bring an action against
the estate of the deceased?
A. Yes as the claimant had provided consideration for G’s promise

B. No, as the claimant had not provided consideration for G’s promise
C. Yes as the terms have already been specified
D. No, as the terms are not specific
39
12. The appellant who bought shares from the respondent and agreed to discharge the title deed of
the respondent’s land, but failed to do so. The respondent’s wife, the administratrix of her deceased
husband claimed damages for losses suffered. Would the wife succeed under the general rule of the
doctrine of privity of contract?
A. As the wife was not a party to the contract, she cannot sue and cannot claim for the losses
suffered
B. As administratrix of the will she had the right to sue for the damages
C. The wife, as a general rule would have such rights if she is a legal wife under the law
D. The wife should have a right to claim for the damages under the ‘just and equitable principle’
13. A written agreement was entered between the appellant to sell his house to the respondent and
specific performance was ordered. The appellant appealed to the court.
What form of consideration is the above classified as?

A. Executed consideration
B. Executory consideration
C. Future consideration
D. Anticipatory consideration
14. Section 26 of the Contracts Act states that ‘an agreement without consideration is void unless it
falls under the exceptions to the section. Which of the following is excluded?
A. It is in writing and registered

B. Is a promise to compensate for something done
C. Is a promise to pay a debt barred by limitation law
D. Is a promise to compensate for something to be done
15. The deceased Tan Soh Sim expressed his last wish that the estate should be divided amongst his
adopted sons and daughter.
Could the adopted sons have a share of the property?

A. Yes as that was the wish of the deceased party under the law
B. No as they did not provide the legal consideration under the law of consideration
C. No as they did not fall under the exceptions to the general rule of consideration
D. Yes since they have provided consideration under the Contracts Act 1950
16. Is there a valid or a void contract in the following cases? [Yes – valid; No – void]
a) A, promises for no consideration, to give B RM1000. Yes/No
b) A, for natural love and affection, promises to give his son, B RM1000.
A puts his promise to B into writing and registers it under a law for the
time being in force for the registration of such documents. Yes/No
c) A finds B’s purse and gives it to him. B promises to give A RM500 Yes/No
d) A supports B’s infant son. B promises to pay A’s expenses in so doing Yes/No
e) A owes B RM1000, but the debt is barred by limitation. A signs a written

Promise to pay B RM500 on account of the debt Yes/No
40
17. The respondent refused to transfer a parcel of land which was agreed to earlier because of
inadequacy of consideration.
Was she justified in her act of refusal?
A. No because consideration was sufficient in law and need not be adequate

B. Yes because consideration was sufficient in law and adequate
C. No because consideration must be adequate
D. Yes because consideration was adequate and in accordance with the law
18. The claimant had been subpoenaed to give evidence on behalf of the defendant in another case. He
alleged that the defendant had promised to pay him RM1000 for appearing as a witness in court.
Would he be successful to claim for the RM1000?
A. Yes as there was consideration for it

B. No as there was no sufficient consideration in law
C. Yes as the promise is an executed promise in law
D. Yes as these were the terms of the agreement
19. At a time of industrial unrest, colliery owners, rejecting the view of the police that a mobile force
was enough, agreed to pay for a special guard on the mine. Later they repudiated liability saying that
the police had done no more than perform their public duty of maintaining order and that no
consideration was given.
Would the police be able to claim for the extra duties rendered by them?
A. No, as the police were in the performance of their duties only and this is deemed as insufficient
consideration
B. Yes, as the police had done more than what they were required to do under their duties and
this is deemed as sufficient consideration
C. Yes, as the police were upholding their promise as per the terms of the agreement
20. The claimants agreed to do carpentry work for the defendants, who were engaged as contractors
to refurnish a block of flats at a fixed price of RM20000. The work ran late and so the defendants
concerned that the job might not be finished on time promised to pay the claimants an extra RM10000
to ensure that the work would be completed on time. They did this so that they will be able to avoid
a penalty clause under their contract and also the problems associated with the contract. There was
no duress or fraud when the promise was made. On completion they refused to pay the additional sum
of RM10000.
Would the claimants be able to succeed?
A. No as there was no consideration for the promise to pay the RM10000, as they claimants were
only performing their act in accordance to the contract
B. Yes, as there was consideration for the promise to pay the RM10000 by performance
C. Yes, as the defendants had derived the added practical benefit of not having to engage
somebody else to complete the work and also of avoiding a penalty clause for the late
performance
D. Yes, as the defendants had derived the added practical benefit of not having to engage
somebody else to complete the work
41
21. The defendant owes the plaintiff a sum of money. The defendant offered lesser sum and gave a
cheque with the condition that the cheque should be returned in the event the sum is not agreeable.
The plaintiff cashed the cheque and claimed for the balance. Would the plaintiff be successful in
recovering the balance?
A. The plaintiff would not be successful as the conditions were very precise
B. The plaintiff would not be successful as payment of a smaller sum will extinguish the balance
C. The plaintiff would be successful as payment of a smaller sum does not extinguish the
remaining balance

A owes B RM5000. C pays to B TM1000 and B accepts them in satisfaction of his claim on A. This
payment is a discharge of the whole claim.
A. Yes
B. No
A owes B under a contract, a sum of money, the amount of which has not been ascertained. A without
ascertaining the amount, gives to B, and B in satisfaction thereof, accepts the sum of RM2000. This is
a discharge of the whole debt, whatever may be its amount.
C. Yes
D. No
1. With reference to the Contracts Act, define 'consideration' in relation to the law of contract and
explain the exceptions to the general rule that an agreement without consideration is void
a) Define consideration? (1 mark)

b) Define the exceptions to the rule under Section 26 of the Contracts Act 1950;
i. Natural love and affection is good consideration (1 mark)
ii. Past consideration is good consideration (2 marks)
iii. Statute Barred debts (2 marks)
[6 marks]
2. Muthu, a student aged 19, agreed to give his electronic calculator worth RM500 to his best friend
Alice. In consideration Alice agreed to give Muthu her favourite story book, 'Ali Baba and the Forty
Thieves', which she had bought for RM10, more than five years ago.
Muthu has now decided not to give the calculator to Alice on the ground that the consideration was
inadequate.
Required:
a) Explain the main rule of consideration that is applicable to this case study (2 marks)
b) Advice Alice on the application of the above law to the facts of the case (4 marks)
[6 marks]
42
CAPACITY
1. Palu, aged 16 executed transfers of land in favour of the defendant and the transfers were witnessed
and registered. The plaintiff [by his next of friend] later applied to the court to set aside the transfer.
Advise the plaintiff, Palu whether he would be able to succeed?
A. The plaintiff will succeed as he is assisted by his friend

B. The plaintiff would succeed as the transaction would be deemed to be void
C. The plaintiff would succeed as the transaction may not be recognised in law
D. The plaintiff will not succeed as he should have known of the consequences
2. Are the following statements true?

A minor is a person who has not reached the age of 21 under the Age Majority Act
A. True
B. False
The general rule is that all contracts entered into by a minor is voidable.
C. True
D. False
3. An undergraduate of the University of Malaya asked the tailor to stitch 10 pairs of three piece suits,
which was duly delivered to the undergraduate. The father of the undergraduate gave evidence that
his son was already adequately stocked with clothes of similar nature.
Would the three piece suits be deemed a necessity for the minor?
A. Yes, as he requires clothes for his kind of lifestyle

B. No, the clothes are no longer a necessity as he is adequately stocked with such goods
C. No, the clothes are no longer a necessity due to the fact that he is rich
D. Yes, the clothes are a necessity for the minor
4. What is a ‘necessity’ may vary according to the position of the minor. The test depends on a number
of factors; such as;
I. The nature of goods supplied

II. The minor’s actual needs at the time of sale and delivery
III. The minor’s station in life
IV. The minor’s conduct
A. All of them
B. I, II and III only
C. II and III only
D. II, III and IV only
5. The Age of Majority Act 1971 has created several exceptions to the general rule on minors.
Which of the following areas are generally listed as exceptions?
I. Marriage contracts
II. Contracts of Insurance
III. Scholarship contracts
IV. Employments contracts
43
A. All of them
B. I, II and III
C. I, II and IV
D. II, III and IV

The necessaries must have been actually supplied [executed] in order to be effective under this area
of law
A. True
B. False
The minor’s liability includes necessaries supplied to ‘anyone’ whom he is legally bound to support
C. True
D. False
7. By virtue of the Contracts (A) Act 1976, a scholarship agreement has been defined as an agreement
between a minor and an appropriate authority and it cannot be invalidated on grounds of being a
minor.
Who is the appropriate authority in this case?
A. The court
B. The University
C. Individuals
D. The schools
8. ‘A person is said to be of sound mind for the purpose of making a contract if, at the time when he
makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his
interests’.
This statement is shown in which section of the Contracts Act 1950?
A. Section 12(2)
B. Section 12(3)
C. Section 12(1)
D. Section 12(4)
9. The effect of a contract entered by a person of unsound mind is deemed to _____ under the law.
A. Void
B. Voidable
C. Unenforceable
D. Valid
10. There are no hard and fast rules that a contract must be in a written form; however, statutory law
contains a number of provisions requiring agreements to be in written form. Among them are;
I. Agreements under section 26(a)

II. Agreements to pay statute barred debts under 26(c)
III. Agreements under the Hire Purchase Act 1967
IV. Agreements for love and affection
44
A. All of them
B. I, II and III
C. II, III and IV
D. II and III
11. Which of the following statements is not true?
A. All agreements are contracts if they are made by the free consent of parties competent to
contract for a lawful consideration and with a lawful object and are not hereby expressly
declared to be void
B. Every person is competent to contract who is of the age of majority according to the law to
which he is subject and who is of sound mind and is not disqualified from contracting by any
law to which he is subject
C. A person is said to be of sound mind for the purpose of making a contract if, at the time when
he makes it, he is capable of understanding it and of forming a rational judgement as to its
effects upon his interests
D. A sane man, who is delirious from fever or who is so drunk that he cannot understand the
terms of the contract or form a rational judgement as to its effects on other person’s interests
cannot contract whilst under such delirium
12. The case involved Hindu parties where the bride was a minor. The bridegroom to be breached the
promise to marry and the bride brought an action against the bridegroom for the aforesaid breach.
Would she succeed under the exceptions?
A. No because she is a minor

B. Yes, marriage contract is an exception to the general rule on minors capacity
C. Yes, because there was a binding contract just like any other contract in law
D. No because the terms of the contract of marriage were not followed by the bride
1. In relation to contract law:
(a) Explain who is a minor; and (2 marks)

(b) Explain and discuss any four exceptions to the general rule that contracts entered into by minors
are deemed to be void (4 marks)
[6 marks]
2. Dizzie suffers from a rare mental illness that causes her to occasionally lose all powers of reasoning.
She is normally a very rational person but during these sudden spells she becomes irrational and does
things she cannot afterwards explain.
Last week, she entered into a contract with one Mr Queekdeal to sell off her car, a Daimler Mark 99,
to him at a price of RM250,000. She now refuses to sell the car, claiming that the contract is not valid
because of her rare illness.
Advise Mr Queekdeal on the following;
a) State the general rule/law on capacity of contracts entered into by a person of unsound mind?
(2 marks)
b) How is sound mind defined under Section 12 of the Contracts Act (2 marks)
c) What is the effect of contracts affected by unsoundness of mind of the contracting party have
a case study to authenticate your analysis) (2 marks)
[6 marks]
45
3. Section 69 of the Contracts Act 1950 states;
‘if a person, incapable of entering into a contract or anyone else whom he is legally bound to support
is supplied by another person with necessaries suited to his condition in life, the person who has
furnished such supplies is entitled to be reimbursed from the property of such incapable person’.
Answer the following questions based on the above section;
a) Define ‘person’ (1 mark)

b) Define ‘anyone else’ (1 mark)
c) Define ‘condition in life’ (1 mark)
d) Define ‘reimbursed’ (1 mark)
e) Define ‘property of incapable person’ (1 mark)
f) Explain ‘scholarship contracts? (1 mark)
[6 marks]
CONSENT CLAUSES
1. Are the following statements legally true?
Section 30 and section 26 are deemed to be void in law; but section 15 and 16 are deemed to be voidable
in law
A. True
B. False
The effect of a void contract is seen under section 66 of the Contracts act 1950 while the effect of a
voidable contract is seen under section 65 of the Contracts act 1950
C. True
D. False
2. Purchasers agreed to buy houses, whereby they agreed to pay RM50000 each for the houses. They
were subsequently forced to pay an additional RM10000 for fear the consequences would be bad.
Can they recover the RM10000?
A. Yes because there is pressure exerted

B. Yes because there is a vitiating element
C. Yes because there is the presence of coercion
D. Yes because there is the presence of undue influence
3. Ahmad, being in debt to Balu, the moneylender of the village, contracts a fresh loan on terms which
appears to be unconscionable.
Whose burden is it to show that the contract was not induced by undue influence?
A. Ahmad
B. Balu
C. Anyone
46
4. An elderly illiterate Malay woman unknowingly executed a gift of landed property to her nephew.
She claimed that her nephew took advantage of her position as she depended on him for everything.
Would the court set aside the transaction?
A. Yes
B. No
A moneylender sued an agriculturist on a promissory note which provided for an interest rate of 40%.
Would the court interfere in such circumstances?
C. Yes
D. No
5. Section 17 of the Contracts Act does not define ‘fraud’ as ______
A. A promise made with intention to defraud

B. A promise made fraudulently
C. A promise made without any intention of performing it
D. A promise made on terms which are fair
6. Ahmad, intending to deceive Batu, falsely represents that 600 gantangs of rice are made annually
at his factory; and thereby induces Batu to buy the factory.
What is the nature of the contract and at whose option may it be affected?
A. Voidable at Batu’s option

B. Void at Batu’s option
C. Voidable at Ahmad’s option
D. Void at Ahmad’s option
7. Ah Kow agrees to sell Bambie a specific cargo of goods which is on the way from China to Malaysia.
It turns out that the day before the bargain, the ship conveying the cargo had been cast away and the
goods were lost. Neither party was aware of the facts at the time of the contract.
A. Void
B. Voidable
What kind of a mistake is reflected in the case study above?
C. Common
D. Mutual
8. There was an agreement to buy and sell some goods from a ship called Peerless. Unknown to the
parties there were two ships with the same name. One party was thinking about the Peerless sailing
in October while the other party was thinking of the one sailing in November.
A. Void
B. Voidable
47
What kind of mistake is reflected in the case study above?
C. Common
D. Mutual
9. Section 23 of the Contracts Act states that ‘A contract is not voidable merely because it was caused
by one of the parties to it being under a mistake as to a matter of fact’. What is the effect of such
contracts?
A. Void
B. Voidable
C. Valid
D. Unenforceable
10. Abu promises to obtain for Boring an employment in the public service and Boring promises to
pay Abu RM10000.
What is the effect of the contract under Section 24 of the Contracts Act if Abu is to enforce it against
Boring?
A. Void
B. Valid
Ali promises to drop a prosecution charge which he has instituted against Bising for robbery if Bising
gives him RM1 million in return. What is the legal effect of such contracts?
C. Void
D. Voidable
11. A transfer was executed in the presence of the Sultan and two Japanese officers during the World
War 11.
What is the effect of the agreement?
A. The agreement was void as it is not enforceable

B. The agreement was voidable as there was no free consent
C. The agreement was unenforceable as the Trading with the Enemy Act applies
D. The agreement was voidable as there was undue influence
12. A deed of gift of a landed property was executed by an illiterate old woman to her nephew through
a lawyer who failed to advise her properly on the status of the transfer.
Is there a presumption of undue influence?
A. Yes
B. No
C. Maybe
48
13. The plaintiff co-owned a piece of land with her husband and had unwillingly agreed to transfer the
property to her brother in laws. After his death she brought an action to set aside the transfer: Salwath
Haneem v Hadjee Abdullah
Would the brother in laws be able to discharge the burden that there was no undue influence?
A. Yes since there was a confidential relationship
B. Yes they were to discharge in the above case
C. No they were not able to discharge the burden
D. The court set aside the transaction
14. ‘Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not
fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of
the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech’ –
Explanation to Section 17 Contracts Act 1950
Which of the following statements is true?
A. Silence or non disclosure amounts to fraud

B. Silence amount to misrepresentation
C. Silence or non disclosure may not amount to fraud
D. Silence or non disclosure may amount to fraud
15. B says to A, ‘if you do not deny it, I shall assume that the horse is sound’. A says nothing.
Is silence equivalent to speech?
A. Yes
B. No
C. Maybe
16. A and B, being traders enter upon a contract. A has private information of a change in prices which
would affect B’s willingness to proceed with the contract. A is not bound to inform B.
Does silence amount to fraud?
A. Yes
B. No
C. Maybe
49
TERMS OF A CONTRACT
1. The claimant had entered into a contract with the defendant to sing in an opera that they were
producing. As she fell ill, she was unable to sing on the first few nights. When she recovered, the
defendants refused her services as they had hired a replacement for the entire run of the opera.
What is the legal consequence of her failure to appear for the opera?
A. Her failure to appear on the opening night had been a breach of a condition and therefore the
defendants were at liberty to treat the contract as discharged
B. Her failure to appear on the opening night had been a breach of a warranty and therefore the
defendants were at liberty to treat the contract as discharged
C. Her failure to appear on the opening night had been a breach of a innominate term and
therefore the defendants were at liberty to treat the contract as discharged
D. Her failure to appear on the opening night had been neither a breach of a condition nor a
breach of a warranty.
2. The claimant had entered into a contract with the defendants to complete a number of engagements.
He also agreed to be in London for rehearsals six days before his opening performance. As he fell ill,
he arrived only three days before the opening night and the defendants refused his services.
What is the legal consequence of his failure to appear for rehearsals?
A. The failure to appear for rehearsals was only a breach of warranty. The defendants were
entitled to damages, but could not treat the contract as discharged.
B. The failure to appear for rehearsals was a breach of condition. The defendants were entitled
to damages, but could not treat the contract as discharged.
C. The failure to appear for rehearsals was only a breach of warranty. The defendants were
entitled to damages, and treat the contract as discharged.
D. The failure to appear for rehearsals was neither a breach of warranty nor a breach of a
condition. The defendants were entitled to damages, and treat the contract as discharged.
3. The defendants sold metal melting furnace giving an undertaking that it would have temperature
not lower than 2600F. The defendant did not meet up with the undertaking.
What is the legal consequence?
A. It is a breach of a condition
B. It is a breach of a warranty
C. It is a breach of an innominate terms
D. It is neither a breach of a condition nor warranty
4. Which of the following is not legally true as to terms of a contract?
A. Under the parol evidence rule, a written contract’s terms cannot be altered or explained by
parol evidence
B. An intermediate term is neither a breach of a condition nor a breach of a warranty; it depends
on the consequences of breach
C. As a general rule Parol evidence cannot be admitted to explain the meaning of any contract
terms
D. Terms may only be implied by customary practises
50
5. Which Act defines terms of a contract?
A. The Contracts Act 1950
B. The Sale of Goods Act 1957
C. The Supply of Goods Act 1957
D. The Contracts (Terms) Act 1957
6. Which of the following is not true as to the distinction between a term and a representation?
A. A term is part of a contract while a representation is not part of a contract

B. A term is part of the constituents of a contract while a representation does not give any rights
to a breach of contract
C. A term can expressed or implied by the parties to the contract while a representation can only
be implied
D. Both terms and representations may be expressed or implied
7. In negotiations for the sale of hops the buyer emphasized that it was essential to him that the hops
should not have been treated with Sulphur adding that, if they had, he would not even bother to ask
the price. The seller explicitly replied that no Sulphur had been used. It was later discovered that a
small proportion of the hops had been treated with Sulphur. The buyer refused to pay the price.
Is the act of the buyer justified?
A. Yes, the representation as to the absence of sulphur was intended to be a term of the contract
B. Yes, the representation as to the absence of sulphur was not intended to be a term of the
contract
C. No, the representation as to the absence of sulphur was not intended to be a term of the
contract
D. Yes, the representation was a term of the contract
8. Which of the following actions can a party take where a term of the contract proves to be untrue?
A. Sue for breach of contract

B. Sue for misrepresentation
C. Sue for wrongful contract
9. Which of the following statements is true regarding representations?
A. A representation is not a term of a contract

B. A representation does not induce the formation of the contract
C. A representation is a statement made after a contract is formed
10. The defendants wished to buy a motor van from the claimants on hire purchase. They placed an
order ‘on the understanding that the balance of the purchase price can be had on hire purchase terms
over a period of two years’. The hire purchase terms were never discussed or specified.
Was there a binding contract between the parties?
A. There was a binding contract between the parties as the terms were clear
B. There was no binding contract as the terms were vague
C. There was no binding contract because the language used was very vague to construe the
existence of a contract
51
11. The defendants entered into an agreement with the plaintiff for the sale of timber. The licence was
refused despite the fact that attempts to obtain it were made. The plaintiff sued for breach of contract.
Is there a breach of contract?
A. It was an implied term that the sale of timber was subject to the obtaining of licence and since
the licence was refused, the contract became impossible to perform, leading to frustration
B. It was an express term that the sale of timber was subject to the obtaining of licence and since
the licence was refused, the contract became impossible to perform, leading to frustration
C. It was a customary term that the sale of timber was subject to the obtaining of licence and
since the licence was refused, the contract became impossible to perform, leading to frustration
D. It was a term that the sale of timber was subject to the obtaining of licence and since the
licence was refused, the contract became impossible to perform, leading to frustration
12. The defendants were tenants in a tower block owned by the claimants. There was no formal
tenancy agreement. The defendants withheld rentals, alleging that the claimants had breached implied
terms because inter alia the lifts did not work and the stairways were unlit.
Would the tenants succeed?
A. Yes as the tenants can only occupy the buildings with the basic essentials
B. Yes as the tenants can only occupy the buildings with access to stairs and lifts as these are
implied in the tenancy agreement
C. Yes as the tenants can only occupy the buildings with access to stairs and lifts as these are
explicit in the tenancy agreement
D. Yes as the tenants can only occupy the buildings with access to stairs and lifts.
13. A salesman approached Mary to sell her a shampoo. He told her that a very well - known actress
also uses the same shampoo.
Could the statement made by the salesperson regarding the product constitute fraud?
A. Yes, if the statement is not true

B. No, because the statement was only an opinion of the salesperson
C. Yes because a representation has been made
14. Alan has entered into a contract to buy Jenny’s car. He has made it clear to Jenny that he wants to
buy her car because the car is old and hence rare.
Would the model of the car constitute a term of the contract?
A. Yes
B. No
C. Maybe
15. How are express terms incorporated into a contract?
A. By a decision of the courts

B. By statute law
C. By the parties themselves
D. By what is customary in the particular trade
52
16. Which of the following is true concerning the incorporation of terms into contracts?
A. A person is not bound by the contract they have signed if they have not read it
B. A history of consistent dealings between the parties is not sufficient to incorporate terms into
the contract
C. Particularly unusual or onerous terms in a contract must be sufficiently highlighted
1. Amarjit wanted to buy a van for his catering business. He entered into a contract with Bescars Bhd
for the purchase of a new van, a Rhoton 2.5. He specifically stated that he wanted a green coloured
van fitted with a green sun tint and an Anaconda alarm system. The van that was delivered to him
was, in fact, fitted with a grey sun tint and a Python alarm system.
Bescars Bhd is prepared to remedy the default, or pay reasonable compensation for breach of warranty.
However, Amarjit wants to rescind the contract on the ground that Bescars Bhd had breached terms
which are conditions of the contract.
Required:
a) What is the main issue in this question? [1 mark]

b) Define a condition? [2 marks]
c) Define a warranty? [2 marks]
d) Advise Amarjit? [1 mark]
[6 marks]
CONTENTS OF CONTRACT
1. A agrees to sell to B ‘a hundred tons of oil’. There is nothing whatsoever to show what kind of oil
was intended. What is the effect of the contract?
A. Valid
B. Void
C. Voidable
D. Unenforceable
2. A agrees to sell to B one hundred tons of oil of a specified description, known as an ‘article of
commerce’. What is the effect of such a contract?
A. Valid
B. Void
C. Voidable
D. Unenforceable
3. A, who is a dealer in coconut oil only, agrees to sell to B, ‘one hundred tons of oil’. Has A entered
into a _____ contract for the sale of coconut only?
A. Valid
B. Void
C. Voidable
D. Unenforceable
53
4. A agrees to sell to B ‘my white horse for ringgit five hundred or ringgit one thousand’. There is
nothing to show which of the two prices was to be given. The agreement is said to be ________ .
A. Valid
B. Void
C. Voidable
D. Unenforceable
5. A agrees to sell to B ‘all the grains in my granary at Ipoh’. What is the status of the contract?
A. Valid
B. Void
C. Voidable
D. Unenforceable
6. Section ____ of the Contracts Act 1950 deals with uncertainty of agreements.
A. 21
B. 30
C. 66
D. 65
1. Tan, the owner of an orchard, could not find sufficient time to look after and maintain it properly.
He then decided to grant a lease of the property to his friend, Lim. The period of the lease was
stipulated as, ‘for as long as Lim wishes’.
Tan now has second thoughts about granting the lease. He wishes to know if the validity of the lease
could be challenged on any ground.
Your advice is required on the following areas;
a) State the law on certainty of contracts? [2 marks]

b) State an illustration as per the Contracts Act 1950? [1 mark]
c) Advise Tan as to whether he could challenge the validity of the lease? [2 mark]
d) State 2 essential elements for the formation of a contract? [1 mark]
[6 marks]
54
EXCLUSION CLAUSES
1. As a general rule, will an exclusion clause be incorporated into an unsigned contract, even
though the other party has not read the clause, when the party seeking to rely on the clause has given
reasonable notice of its existence before the contract is made?
A Yes
B No
A signed document, even though the other party has not even read it?
C Yes
D No
2. Which of the following is NOT a requirement in respect of an exclusion clause to be considered

incorporated and enforceable in a contract?
A. It must be an integral part of the contract

B. The person relying on the clause must not have given any misleading explanation of its effect
C. The contract must be signed
D. The exclusion clause must be put forward before or at the time the contract is entered into
3. A husband and wife arrived at a hotel and paid for a room in advance. On reaching their bedroom
they saw a notice on the wall by which the hotel disclaimed liability for loss of valuables unless handed
to the management for safe keeping. A thief obtained the key and stole the wife’s furs from the
bedroom. Can the hotel rely on the disclaimer?
A. The hotel could not rely on the notice disclaiming liability since the contract had been made
when they checked in and the disclaimer was too late
B. The hotel could not rely on the notice disclaiming liability since the contract had been made.
C. The hotel could rely on the notice disclaiming liability since the contract had been made when
they checked in and the disclaimer was implied.
D. The hotel could rely on the notice disclaiming liability since the contract had been made when
they checked in and notice of the disclaimer was made
4. The claimant bought a cigarette machine for her cafe from the defendant and signed a sales
agreement (which was in fine print) without reading it. The agreement provided that ‘any express or
implied condition, statement or warranty... is hereby excluded’. The machine failed to work properly.
Could the defendants rely on the clause?
A. Yes, the claimant is bound by the document that he signs even if he has not read it (provided
there is no fraud or misrepresentation)
B. No, the claimant is not bound by the document that he signs if he has not read it (provided
there is no fraud or misrepresentation)
C. Neither the claimant nor the defendant is bound by such a document (provided there is no
fraud or misrepresentation)
5. The claimant (Curtis) took a wedding dress to be cleaned to the defendants. She was asked to sign
a piece of paper headed ‘receipt’. When Curtis enquired why, the company’s employee said it was to
disclaim liability for damage done to ‘beads and sequins’ on the dress. The receipt in fact contained a
clause excluding liability ‘for any damage howsoever arising’. When the dress was returned it was
badly stained. Curtis sued the cleaners. Would she succeed?
55
A. Curtis should be able to succeed as her signature was obtained by misleading her; therefore
the cleaners cannot escape liability
B. Curtis should not be able to succeed as she has willingly signed the receipt; and as long as she
signs the receipt she is bound by the clause
C. Curtis should not be able to succeed as she only signed after getting an explanation and she
should have taken the precautions as ‘caveat emptor’ applies.
D. Curtis should not be able to succeed as her signature was obtained willingly
6. In relation to exclusion clauses, which of the following describes the ‘contra proferentem rule’
A. Exclusion clauses are valid unless unreasonable

B. Any ambiguity in exclusion clauses are interpreted against the person seeking to rely on them
C. Exclusion clauses must be validly incorporated into the contract
7. DELETED
8. Does the Contracts Act 1950 have a provision for exemption of exclusion clauses?
A. Yes
B. No
Does common law apply in Malaysia for exemption clauses?
C. Yes
D. No
9. Which of the following statements is true?
A. Contra proferentem rule – it means that any ambiguity will be construed in favour of the party
disadvantaged by the clause
B. Contra proferentem rule – it means that any ambiguity will be construed in favour of the party
advantaged by the clause
C. Contra proferentem rule – it means that any ambiguity will be construed in favour of the party
disadvantaged and advantaged by the clause
D. Contra proferentem rule – it means that any ambiguity will be construed in favour of the
parties.
10. If the document is not signed, then it must be shown that the person whose rights it restricts was
_______________ of it at the time of making the contract.
A. Sufficiently made aware

B. aware
C. Given notice
56
SECTION B
1. Ali, the neighbour of Badrul, hearing cries for help from Badrul's home, jumped over the fence and
saw Badrul's son, Effendi, struggling in the swimming pool of the house. He quickly jumped into the
water and saved Effendi from drowning.
When Badrul returned home and heard how A1i had saved Effendi's life, Badrul promised Ali a
reward of RM5,000. However, to date Badrul has not fulfilled his promise.
Ali wishes to sue Badrul for breach of contract. Advise him on the following;
a) Define consideration? [2 marks]

b) Are there any exceptions to the general rule of consideration? [3 marks]
c) Would Ali be successful in his claim? [1 mark]
[6 marks]
2. On 3 March 2008, Azman wrote to Benny offering to sell to Benny his yacht, Lightning, for RM1
million. The letter expressly stated that if Benny did not reply by 10 March 2008, he would be
deemed to have accepted the offer.
On 9 March 2008, Azman sent a letter to Benny revoking his offer. On 10 March 2008 Benny posted
a letter to Azman accepting Azman’s offer. Azman’s letter of revocation reached Benny on 11 March
2008. Benny’s letter of acceptance reached Azman on 12 March 2008.
Benny wishes to know whether there is a valid contract between him and Azman for the sale and
purchase of the yacht, Lightning.
Advise Benny under the law of contract on the following issues;
a) Define an offer, acceptance and whether mental acceptance would be effective in the above case?
[3 marks]
b) Is there a binding contract between the contracting parties? [3 marks]
[6 marks]
1
3. Last week, Nancy sent an email to Sophia, making the following offers:
(i) An offer to lease her apartment in Penang to Sophia, 'for as long as you wish to live there'.
(ii) An offer to sell her car for RM60,000.
Sophia immediately responded and accepted Nancy's offer for the apartment.
As for the other offer, Sophia replied that she would be willing to take the car for RM50,000 but
Nancy refused. A day later, Sophia wrote to Nancy and said that she will accept Nancy’s original
offer at RM60,000. However, Nancy now refuses to grant the lease as well as to sell the car to
Sophia.
(a) Explain whether there is a valid contract between Nancy and Sophia in respect of the lease of the
apartment. (3 marks)
(b) Explain whether there is a valid contract between Nancy and Sophia in respect of the sale of the
car. (3 marks)
(6 marks)
4. Grampa, who is 90 years old has two sons, Sonny aged 53 and Tony aged 55. Grampa has always
mentioned that when he dies, all his property is to be shared equally between Sonny and Tony.
In the last 5 years Grampa has been staying with Sonny who has taken good care of him. Although
Tony visits quite often, Sonny has become Grampa's favourite son and Grampa tends to heed the
advice of Sonny.
Last week, Grampa transferred a major portion of his property to Sonny, 'in appreciation of Sonny's
love and kindness'. Two days ago, Grampa went into a coma and has been hospitalised. Doctors say
that he is unlikely to recover.
Tony who has just heard about the transfer of property in favour of Sonny seeks your advice as to
whether the validity of the transfer can be challenged on the ground that it was procured by undue
influence.
Advise Tony.
(a) Explain what is undue influence in the context of contract law and state the situations in
which a person is deemed to be in a position to dominate the will of another? (4 marks)
(b) What is the effect of an agreement caused by undue influence? (2 marks)

(6 marks)
2
5. Bala, a motor mechanic, entered into a contract with Oyls Sdn Bhd, a manufacturer of motor oils,
for the purchase of 20 drums of ‘First grade, high viscosity premium engine oil’. When the drums of
oil were delivered, Bala found the oil to be extremely low quality and highly unsuitable for motorcar
engines.
He wished to sue Oyls Sdn Bhd for breach of contract. However, Oyls Sdn Bhd denies liability
relying on a clause in the contract which states, ‘Oyls Sdn Bhd does not give any warranty, express
or implied, as to the quality of the product contracted for’.
Advise Bala;
(a) State what is an exclusion clause in relation to contract law and what is its general effect.
(2 marks)
(b) Explain the application of the contra proferentem rule as an aid to the interpretation of exclusion
clauses. (4 marks)
(6 marks)
THE END
3
4
1. Bakri, a handicapped person, who had one leg shorter than the other, ordered a specially designed
car so that he could drive to work. The contract was made with Car-4-Needy Sdn Bhd, a company
whose object is, according to the objects clause, inter alia, to design and make cars suitable for the
handicapped.
Two weeks later, the car was delivered to Bakri. Bakri finds that he cannot drive the car because it is
not suitable for handicapped persons like him. He threatened to sue Car-4-Needy Sdn Bhd but the
company seeks to rely on a clause in the agreement which states that it (Car-4-Needy Sdn Bhd), ‘does
not give any warranty, expressed or implied as to the quality of the goods supplied’.
Advise Bakri on the following areas of law;
a) What is an exemption clause? [1 mark]
b) Do the courts interfere with the terms of the contract? What is the effect of the case of Playing
Cards Sdn Bhd v China Navigation Sdn Bhd? [2 marks]
c) When do the courts intervene with the terms? [1 marks]
d) What is meant by the ‘contra preferentum rule’? [2 marks]

[6 marks]
BREACH OF CONTRACT AND REMEDIES

In all cases where a party to a contract fails to perform his contractual obligations, he will be liable
for breach of contract.
A True
B False
Provided a party to a contract substantially performs his contractual obligations, that is a sufficient
discharge of the contract and the other party has no redress for those parts of the contract which were
not performed.
C True
D False
2. Esther agreed to bake and freeze 100 birthday cakes for her friend Jane, who was planning to open
a small shop selling home-baked products, at a total price of RM200. When Esther had frozen 60
cakes, she learned that Jane had been unable to secure a lease of the retail premises. She telephoned
Jane to confirm that she had baked 60 cakes and was all ready to bake the last 40, but Jane said she
had decided to go back to teaching instead. Esther feels very let down and wants nothing more to do
with Jane.
A Esther has no cause of action against Jane because she could have avoided any loss by waiting
until Jane had secured the lease
B Esther has no cause of action against Jane because she can still use or sell the cakes, so she
has not suffered any loss
C Esther can recover the agreed sum of RM200 from Jane because she would have been
entitled to this sum had Jane not been in breach of contract
57
D Jane is in breach of contract and Esther can sue for damages or bring a quantum meruit
claim for RM120 in respect of the 60 cakes already prepared
3. Jason employed Joseph to build him a Mirror sailing dinghy. He specified that he wanted the hull
to be painted 'Moisture Blue' and that the tow straps should be webbed nylon. The agreed contract
price was RM5,000, payable on delivery of the boat. When Joseph delivered the boat, Jason discovered
that Joseph had actually used 'Sky Blue' paint and that the tow straps were, in fact, canvas only. Apart
from these points Jason was pleased with Joseph's work.
A. Joseph has substantially performed his contractual obligations and is entitled to receive the
contract price
B. The contract has been sufficiently discharged and Jason must pay Joseph the agreed contract
price
C. Joseph is entitled to receive the contract price less a sum in respect of those obligations that
were not properly performed
D. Joseph has not performed his contractual obligations properly and is therefore not entitled
to receive any payment until he rectifies the outstanding defects
4. Jemima arranged a weekend holiday with Hassle Free Holidays Sdn Bhd for the members of the
Amateur Dramatics Society of which she was a member. The society was going to see a Gilbert &
Sullivan production in Oxford. Hassle Free Holdings Sdn Bhd was obliged to endeavour to
accommodate all 45 members in one hotel and had booked the Riverside Hotel. However, the night
before the society was due to travel, the Riverside Hotel was burned down and Hassle Free Holidays
Sdn Bhd claimed that it could keep the deposit but was under no further obligation to the Society
because the contract had been discharged by frustration.
Has the contract been discharged by frustration?

A Yes
B No
As a general rule, where a contract is discharged by frustration, should any deposit received be repaid?
C Yes
D No
5. When a contract is discharged by frustration
Will the provisions of the Civil Law Act override any express contractual terms which cover the event
that has occurred?
A Yes
B No
If a party has received some valuable benefit (other than money) under a contract before it is frustrated,
can he be required to pay a sum in respect of that benefit to the other party?
C Yes
D No
58
6. Are the following true or false?
Where a party is in breach of contract, the other party may choose either to treat the contract as
discharged (and sue for damages) or to affirm the contract.
A True
B False
Where a party causes an anticipatory breach of a contract, i.e. he indicates in advance that he has no
intention of performing the contract, the other party may continue to incur costs himself in performing
the contract and take action against the party in breach.
C True
D False
7. Barney, who operates a vehicle transporter, agreed to deliver a new van to Norman who ran a
business delivering refrigerated foods to households in a remote corner of Scotland. Barney had
mechanical problems with the transporter and ended up being 15 days late reaching Norman. Norman
sued Barney for;
(i) The loss of earnings from his inability to make his usual deliveries and
(ii) The loss of a special contract that he had entered into with a local food supply company to
store 50kg of fresh lobster over the 4 days when he would not be using the van. He was
particularly cross about losing this contract which he had expressly told Barney all about,
because he felt there was potential for more business with the company in the future and
(iii) Distress which was caused to him because he let down his usual customers
What can Norman generally recover in damages?

A (i) only
B (i) and (ii) only
C (i), (ii) and (iii)
D (ii) and (iii) only
8. With regard to damages for breach of contract;

Are damages recoverable for financial loss only?
A Yes
B No
Is the burden of proof on the claimant to show that he took reasonable steps to mitigate his loss
C. Yes
D. No
9. Crunch Sdn Bhd agreed to sell its factory to Cool Cookies Sdn Bhd for RM590,000 but after
contracts were exchanged, the market value increased considerably and Crunch Sdn Bhd sold the
factory to Krisp Bhd for RM700,000. There was no other available property that was comparable.
What is the normal remedy that is awarded by the court in the event of a breach of contract for the
sale of property?
A. Specific performance
B. Damages
59
In the event that the court award damages to Cool Cookies Sdn Bhd, are these likely to be in the
region of
C. RM110,000
D. RM590,000?
10. A contract may be discharged in several ways; which are some of the ways that a contract may be
discharged?
I. Agreement
II. Frustration
III. Performance
IV. Breach
A. All of them
B. I, II and III
C. II, III and IV
D. III and IV
11. A party is said to be in breach of contract where, without lawful excuse, he does not perform his
contractual obligations precisely; however a person may sometimes have a lawful excuse not to
perform his contractual obligations. What are some of the situations where this may be possible?
I. Performance is impossible because of a unlawful act

II. He has tendered performance but this has been rejected
III. The other party has made it impossible to perform
IV. The contract has been discharged by frustration
A. All of them
B. I, II and III
C. II, III and IV
D. II and III
12. Which term best describes a contract, such as a building contract, that provides for the payment
at various stages of the contractor’s progress?
A. A divided contract
B. A segmented contract
C. A severable contract
D. A partial contract
13. Anna employs Derek to build a children’s playground in the grounds of her house. Derek finishes
the work on time but omits to paint one side of the mega slide frame. Which of the following best
describes the legal position?
A. Anna is not obliged to pay Derek until he completes the job exactly as required
B. Derek is entitled to full payment under the doctrine of substantial performance
C. Derek is entitled to payment of the contract price less a reasonable amount in respect of the
omission made
D. Anna should seek an order of specific performance to ensure that the contract is completed
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14. In which of the following situations would the contract not be discharged by frustration?
A. Where a house is let for a wedding reception and the house is destroyed by fire a week before
the wedding
B. Where Shakira contracts to perform in a concert but is taken ill and is unable to perform
C. Where a contract between an English boat supplier and an Iranian leisure company is
subjected to onerous legal requirements because of tensions between the two nations
D. Where a room overlooking the estuary is hired out for the purposes of watching the Kucing
regatta but the regatta is cancelled due to a freak tornado and a minor earthquake
15. Asmah agrees to let her flat to Xray for one day for the purpose of viewing a carnival. Xray pays
her a deposit of RM50 deposit with RM80 due to be paid at the end of the carnival. Due to civil unrest,
the government prohibits all street entertainment and the carnival is cancelled just before Xray is due
to travel to the flat. Neither party has incurred any costs (save for the payment of the deposit) in
performance of the contract. Applying the Civil Law Act, which of the statements is correct?
A. Asmah can keep the deposit but cannot claim the balance
B. Asmah can keep the deposit and Xray is liable to pay the balance
C. Asmah must pay back the deposit and Xray need not pay the balance
D. Asmah can keep the deposit and Xray must pay an additional RM15 so that each party bears
an equal loss
16. Are the following true or false under the Civil Law Act?
Where a contract has been frustrated and B has derived no benefit from it, A may retain a part of any
deposit paid by B, in order to cover the cost of any expenses incurred in performance of the contract
up to the time the contract was frustrated.
A. True
B. False
If either party has obtained a valuable benefit (other than the payment of money) under the contract
before it is discharged by frustration, the court has a discretion to order that party to pay all or part
of that value.
C. True
D. False
17. Are the following statement true or false?
Anticipatory breach may be implied from conduct and need not be explicit
A. True
B. False
Where an innocent party elects to treat a contract as discharged, he waives the right to claim damages
from the party in default
C. True
D. False
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18. Farhan contracts with Gurun to perform a solo dancing routine for seven consecutive nights
beginning on 25 May. On 5 May Farhan tells Gurun that he has had a better offer elsewhere and will
no longer be available to perform as agreed. Which of the following statements is not legally very
correct?
A. Farhan has committed an anticipatory breach

B. Farhan’s breach deprives Gurun of substantially the whole benefit of the contract and
automatically discharges the contract
C. Gurun may choose to treat the contract as continuing and is entitled to damages should
Farhan fail to fulfil the contract
D. Notwithstanding his repudiatory breach, Farhan may still have a claim against Gurun for any
breach of contract on Gurun’s part in respect of obligations due before or at the time of
termination
Damages for breach of contract are primarily intended to restore the injured party to the same position
he was in at the time when the contract was made
A. True
B. False
The claimant is required to take every opportunity to mitigate his loss arising as a consequence of a
breach of contract
C. True
D. False
20. Henri agreed to advertise the services provided by his father’s business, The Complete Box Sdn
Bhd in appropriate publications over a period of 24 months. It was agreed that Henri would be liable
to pay a sum of RM50000 in respect of every mistake in any advertisement or missed deadline or
inappropriate choice of publication. Which of the following describes this contractual provision?
A. A liquidated damages clause

B. An unliquidated damages clause
C. An exclusion clause
D. A penalty clause
21. Which of the following is not true in relation to contractual remedies?
A. Specific performance is awarded at the discretion of the court where damages would not be an
adequate remedy
B. Specific performance is likely to be more appropriate than damages in a contract involving
personal services
C. Specific performance is likely to be awarded in a contract for the sale of land
D. A mandatory injunction often has the same result as specific performance but is less common
22. Jeremy was engaged as a coach of the Badminton Association of Malaysia (BAM) and his contract
contained a clause that he would not coach any other team without the consent of the BAM. The BAM
management discovered that unknown to them, he had in fact been coaching the Badminton
Association of Indonesia (BAI) for three months and brought action against him for breach of contract.
Which of the following is the most likely remedy to be granted in addition to possible damages?
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A. A mandatory injunction
B. A quantum meruit award
C. Specific performance
D. A prohibitory injunction
23. The equitable remedy of specific performance can be awarded in cases involving:
The performance of personal services
A. True
B. False
A contract to build a house

C. True
D. False
24. A singer contracted with the appellant’s night club and agreed that in the event of a breach, the
respondent should not perform in Kuala Lumpur during the fixed period of the contract. The singer
went ahead and sang at a rival club. What would be the most appropriate remedy under such
circumstances?
A. Specific performance
B. Interlocutory injunction
C. Mareva injunction
D. Anton pillar injunction
25. Plaintiff contracted to perform certain work on the defendant’s land. Defendant agreed to pay
fortnightly. Defendant ceased payment because the plaintiff who is supposed to employ 7,200 workers
only employed 3355. Plaintiff stopped work on the account of non payment and sued the defendant
for damages.
Was the defendant justified in ending the contract?
A. Defendant was right to end the contract because the plaintiff who agreed to work
expeditiously; his action in employing less than half the number of workers amounted to a
breach of contract
B. Defendant maybe right to end the contract because the plaintiff who agreed to work
expeditiously; his action in employing less than half the number of workers amounted to a
breach of a warranty of contract
C. Defendant had not right to end the contract because the plaintiff in employing less than half
the number of workers amounted to a breach of warranty of contract
26. Which one of the following is not one of the methods of discharging a contract?
A. Discharge by agreement
B. Discharge by performance
C. Discharge by frustration
D. Discharge by execution
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27. The parties made an agreement for the sale of 3000 tins of canned fruit packed in cases of 30 tins.
When the cases of tins were delivered, although the total number of tins was 3,000, many cases
contained not 30 but only 24 tins. The market value was affected.
Could the buyer reject the consignment under common law?

A. The buyer could not reject the consignment as it was a term of the contract
B. The buyer could reject the consignment as the goods did not match the description
C. The buyer could not reject the consignment as the total quantity was still there
28. Which of following is NOT a correct statement of the law relating to frustration of contract?
A. Parties are discharged from their contract if altered circumstances render the contract
fundamentally different in nature from what was originally agreed
B. Parties are discharged if an event, for which neither party is responsible , occurs which renders
performance impossible or futile
C. Parties who contract that something should be done are discharged if performance becomes
substantially more expensive or onerous
D. Parties who contract that something should be done are discharged if their assumption that
certain conditions (which are fundamental to the contract) would continue, proves to be totally
false
29. Canai agreed to buy a car from Roti’s Motors for RM6000. Roti had paid RM5500 for the car. On
the agreed day Canai arrives at the dealers but refuses to accept or pay for the car. In the meantime,
the car’s market value has risen to RM7000. The following week Roti sells the car for RM7500. Roti
claims against Canai for damages.
What sum is Roti likely to be awarded?
A. RM10
B. RM5500
C. RM6000
D. RM7000
30. Edith and Furhaha are negotiating the terms of a contract whereby Furhaha is fitting out Edith’s
shop. Edith is due to open on 1 June and she has calculated that, if the shop opens late, she will lose
RM400 a day. She therefore wants to include a clause in the contract stating that if Furhaha overruns,
she will pay Edith damages of RM400 per day.
Would such a clause be binding?
A. As this a genuine pre-estimate of loss, it is likely that this would be construed as an enforceable
provision for liquidated damages
B. As this is not a genuine pre-estimate of loss, it is unlikely that this would be construed as an
enforceable provision for liquidated damages
C. As this a pre-estimate of loss, it is likely that this would be construed as an enforceable
provision for damages
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1. Khalid, the president of a badminton club, entered into an agreement with ABC Sdn Bhd, the owner
of a badminton hall, to hire the hall for one week at the cost of RM1000 per day for the purpose of
holding an inter club badminton competition.
Unfortunately, two days before the competition was due to be held, fire destroyed the hall and the
competition had to be called off. Khalid wants to get a refund of the deposit of RM1000 from ABC Sdn
Bhd.
Advise Khalid on the following areas of law
a) Define frustration? [2 marks]

b) What is the legal effect of the destruction of the hall? [2 marks]
c) Would he be able to get back his deposit? [2 marks]
[6 marks]
2) Jana entered into an agreement with Prefab Sdn Bhd (the company), under which the company
agreed to build a double storey, five-bedroom house on Jana's land, for a price of RM1 million. Jana
paid the company a sum of RM200,000 as an initial payment. The balance was to be paid upon
completion of the construction of the house. Subsequently, the company bought building materials
worth RM100,000 for the purpose of commencing construction of the house. However, before it could
commence construction, the State government compulsorily acquired the land. Jana claims that the
contract has been discharged by frustration and claims a return of the amount of RM200,000 paid to
the company. The company refuses to do so.
Advise Jana;
a) Does the intervention by the State government frustrate the contract; if so define the law of
frustration [2 marks]
b) What is the effect of the contract under The Contracts Act as well as The Civil Law? Explain
with legal reasons in favour of both parties? [4 marks]
[6 marks]
3. In relation to the law of contract:
(a) Explain the remedy of specific performance; (2 marks)

(b) State TWO circumstances in which the court may grant specific performance of a contract; and
(2 marks)
(c) State TWO circumstances in which the court may NOT grant specific performance of a contract.
(2 marks)
[6 marks]
4. Raja visited a car exhibition last month. During that visit Raja took a fancy for a rare 90-year-old
Jaguar Mark 007, owned by a Japanese tycoon, one, Watamoto. Raja offered to buy the car for the
sum of RM 1 million. Watamoto immediately accepted the offer. The car was to be delivered to Raja
one week later. The purchase price was to be paid upon delivery of the car. Yesterday Watamoto
informed Raja that he had changed his mind about selling the car. Raja is furious. He wishes to sue
Watamoto for breach of contract.
Advise Raja with reference to relevant statutes and cases;
a) The most appropriate remedy for him (1 mark)

b) Discuss the law on Specific Performance; would it be an adequate remedy for him (2 marks)
c) Name one example where the remedy of specific performance may be lost (1 mark)
d) In the event the remedy of Specific Performance is not available, what is the most appropriate
remedy for him? (2 marks)
(6 marks)
65
5. State and, very briefly, explain the following remedies which may be available to a plaintiff for a
breach of contract;
a) Rescission (2 marks)
b) Injunctions (2 marks)
c) Quantum Meruit (2 marks)
(6 marks)
6(a) Define the meaning of breach under the Contracts Act 1950? (2 marks)
(b) What is the effect of breach under the said Act? (2 marks)
(c) What are the rights of the affected party in the event of an anticipatory breach? (2 marks)
(6 marks)
LAW OF TORTS
1. After celebrating his 50th birthday with a champagne breakfast, Gerald drives to work. On the way
(and as a result of his careless driving), he injures one of the self-employed workers, Franz, who is also
on his way to work at the site. You are asked to advise Gerald as to whether he may be liable in crime,
in tort to Franz and/or in contract to Franz.
Which of the following is correct?
A Crime and tort only

B Crime and contract only
C Tort and contract only
D Crime, tort and contract

Where A is in breach of a duty of care that he owes to B and B suffers loss, A will be liable in negligence
to compensate B for all the loss and damage he suffers.
A True
B False
Tort is part of the law of negligence.
C True
D False
3. Which of the following does a claimant NOT need to prove in order to succeed in a claim
for negligence?
A That the defendant owed him a duty of care

B That the defendant was in breach of a duty of care
C That the claimant suffered loss as a result of the defendant's breach
D That the claimant took all reasonable steps to mitigate his loss
4. DELETED
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5. A trainee doctor, Zak, was treating a patient, Lily, for depression. In January 200X, Zak changed
her drug treatment but Lily became even more depressed and in August 200X unsuccessfully tried to
commit suicide. Lily sued Zak, alleging that he was in breach of his duty of care in failing to introduce
the new treatment at a much slower rate, in accordance with guidelines published by the Malaysian
Medical Association (MMA) in July 200X.
Is the standard of care owed by Zak that of a reasonable trainee doctor?
A Yes
B No
Will Zak be judged by the standards of the MMA's published guidelines?
C Yes
D No
Where a claimant is particularly vulnerable, the standard of care owed by the defendant is
correspondingly higher, where the defendant is aware of the special vulnerability.
A True
B False
Emergency circumstances prevailing at the time an act or omission occurred are taken into account
when determining whether the defendant was in breach of his duty of care.
C True
D False
7. In an action for negligence:

Does there need to be some sort of pre-existing relationship between the claimant and defendant at
the time of the act complained of, although not necessarily a contractual relationship?
A. Yes
B. No
Does the court need to be satisfied that public policy would allow a duty of care to exist?
C. Yes
D. No
8. Which of the following statements is not true?
A. If the defendants succeeds in arguing ‘res ipsa loquitur’, the burden of proof is then on the
claimant to show negligence
B. In arguing ‘res ipsa loquitur’, it must be shown that the thing that caused the damage was
under the management and control of the defendant
C. ‘Res ipsa loquitur’ is relevant where the reason for the damage is not known
D. Whether a breach of the duty of care has occurred is a matter of fact
67
9. Neil is a private pilot. After celebrating receiving his private pilot’s licence, he drinks two bottles of
wine. He then offers a lift to his teetotal girlfriend, Kate, back to her family residence in the country
where her father has a small airfield. Kate accepts, even though she knows that he has drunk two
bottles of wine. Neil crashes the plane and Kate breaks her neck.
A. Neil has no liability because volenti non fit injuria applies

B. Volenti does not apply but Neil’s liability may be reduced on grounds of contributory
negligence
C. Neil is not liable because Kate knew well the risk she was taking
D. Neil is not liable because Kate consented to taking a risk
10. Esther sues Nathan for negligence. The court finds that Nathan was guilty of negligence but that
Esther was also to be blamed. Esther has suffered a loss of RM30,000.
Which of the following is accurate?
A. Nathan must pay damages of RM30,000 to Esther because, although blameworthy, she would
not have suffered any loss but for his negligence
B. Nathan must pay damages of RM15,000
C. Nathan is not liable to pay damages because Esther’s loss would not have been so great but
for her own negligence
D. The courts will consider all the circumstances of the case to determine the proportion of the
loss that Nathan should pay
11. Winston is a fireman. On a recent call out to a major fire, he sped through red traffic lights and
injured a cyclist as a result. Winston provides you with a copy of an article in a publication of a
Firefighters’ Organisation, written by a fellow fireman, saying that going through a red light is
acceptable practice on the way to an incident, but not on the way back.
Are the following statements true or false?
The fact that Winston was responding to an emergency will be taken into account in assessing the
standard of care owed by him?
A. True
B. False
The article is evidence of professional opinion that supports his action and will negate any potential
liability that he may have?
C. True
D. False
12. Which of the following statements are NOT established by, or relevant to, the landmark case of
Donoghue v Stevenson, which involved an allegation that there had been a decomposing snail in a
bottle of ginger beer?
A. That no contractual relationship is necessary to found an action for negligence

B. That there must be sufficient degree of proximity or neighbourhood between the parties
C. That the manufacturer could owe a duty of care to a person who did not actually buy his goods
D. That there should be a special relationship of some sort between the parties
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13. Which of the following is NOT considered to be within the scope of trespass to the person?
A. Battery
B. Assault
C. False imprisonment
D. Nuisance
14. There are two main types of nuisance; they are
A. Public and private nuisance

B. Civil and criminal nuisance
C. Legal and non - legal nuisance
D. Local and foreign nuisance
15. Is the following statement true or false?
Trespass to land involves one or a combination of the following acts without lawful justification:
a) Entering land that is owned by the claimant

b) Remaining on the land
c) Placing objects or projections onto the land
A. True
B. False
There are two types of nuisance, private and public;
a) Private nuisance is the ‘unlawful interference with a person’s use or enjoyment of land or some
right or in connection with it’
b) Public nuisance is not related private nuisance as they are created by statute and are therefore
criminal offences
C. True
D. False
Battery involves the intentional bringing of a material object into contact with another
Person, while assault is the intentional act of putting another in reasonable fear or apprehension of
immediate battery
A. True
B. False
False imprisonment involves unlawful arresting, imprisoning or preventing a person from leaving
from where they are. The claimant does not have to prove damage was caused as it was their liberty
that was taken from them
C. True
D. False
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17. John has run his fish and chips shop called “Fry and Fish for the last ten years. He finds out that a
fish shop called ‘Fish and Fries’ run by Kevin has recently opened round the corner from him. Angry
that he may lose customers he arranges for leaflets to be printed that state ‘..Kevin of Fish and Fries
hates fish and everyone who eats it..’ John distributes the leaflets to homes in the vicinity of the shops
even though he knows that the statement is untrue.
Which tort may be have probably committed?
A. Tort of defamation
B. Tort
C. Assault and passing off
18. P was employed by K on vehicle maintenance. P had already lost the sight of one eye. It was not
the normal practice to issue protective goggles since the risk of eye injury was small. A chip of metal
flew into P’s good eye and blinded.
Is K responsible for the injury; is there breach on the part of the employer K.
A. Yes, as there is a standard of care owed to P because an injury to his remaining eye would
blind him
B. Yes, as there was a higher standard of care owed to P because an injury to his remaining eye
would blind him
C. No, there was no duty as it was not a normal practise to issue goggles. P is responsible for his
own negligence
D. No as it is a ‘res ipsa loquitor’ case
19. Would the defence of contributory negligence be available in the following cases?
a) The defendant was unable to give a clear picture of the accident. The court deduced from the
sketch plan that the plaintiff had encroached into the defendant’s rightful path and that there was
evidence that the defendant was under the influence of alcohol
A. Yes
B. No
b) The claimant was injured whilst trying to climb out of a public toilet cubicle that had a defective
lock
C. Yes
D. No
1. In the context of the law of obligations:
(a) Define a tort. (2 marks)

(b) Describe the following torts:
(i) tort of negligence; and (2 marks)

(ii) tort of defamation. (2 marks)
(6 marks)
70
PROFESSIONAL NEGLIGENCE
1. Mohammed was a shareholder in Blip Bhd. When he read the annual accounts, he sold his entire
shareholding because the accounts revealed a loss and the projections were not favourable. It later
became clear that the accounts had been prepared negligently and, in fact, the company was in an
extremely healthy financial state. Mohammed sued the firm of accountants that prepared the accounts,
Dodi & Co.
Is Dodi & Co liable to Mohammed in negligence?
A Dodi & Co is liable because it owed a duty of care to all existing shareholders
B Dodi & Co is liable because Mohammed's losses were incurred as a direct result of reading
the accounts
C Dodi & Co is not liable because it did not owe a duty of care to existing shareholders
considering their investments
D Dodi & Co is not liable because investors in the stock market do so at their own risk
2. Geary & Smith, a firm of accountants, acted on the audit of Musica Bhd and, owing to the negligence
of the audit team manager, misrepresented the company's financial position. Geary & Smith had
known that Moments Musicaux Bhd had been promised a set of the audited accounts as soon as they
were available in order to assist it in proposing a takeover bid price that would be acceptable to the
shareholders in Musica Bhd.
Can Moments Musicaux Bhd sue Geary & Smith in the tort of negligence?
A No, because its loss is purely financial and it should have carried out its own professional
investigation into the accuracy of the accounts
B No, because no duty of care is owed to potential investors, only to the existing body of
shareholders as a whole
C Yes, because when a takeover is anticipated, a special relationship arises between accountants
and all recipients of the accounts
D Yes, because Moments Musicaux Bhd was a bidder known to Geary & Smith to be highly
likely to rely on the accounts
3. David was a passenger in Martin's car when it was involved in an accident due to Martin's
negligence. It was reasonably foreseeable that David would suffer some degree of personal injury, but in
fact the degree of injury was surprisingly serious. Can David recover damages for the injuries he actually
suffered or only for the level of injury which was reasonably foreseeable?
A All injuries suffered

B Reasonably foreseeable injuries only
Can David recover damages if the injuries he suffered were reasonably foreseeable but the actual
manner in which the injuries came about was not reasonably foreseeable?
C Only if the manner in which the injuries were inflicted was reasonably foreseeable
D However the injuries came about
4. Sharon is a trainee accountant at Fern Accountants. She is part of an audit team working at the
offices of a client, Crushing Bhd, in the seaside town of Beacham for a week. During the Friday
lunchtime, Sharon meets up with some of her friends living in Beacham and goes go-karting. In her
exuberance, she carelessly causes an accident by driving her go-kart off the track and into the waiting
area, injuring a young child.
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Who is liable for Sharon's negligence?
A Sharon only
B Sharon and Fern Accountants
C Fern Accountants and Crushing Sdn Bhd
D Fern Accountants only
5. Paddy is a coach driver. One day, when driving a school class to a museum for the day, he agrees to
take them on a detour to see a new statue of David Beckham that has been erected in the town square.
Whilst on the detour, he causes an accident in which two of the children are injured.
Is Paddy acting in the course of his employment?
A Yes
B No
Is Paddy's employer vicariously liable?
C Yes
D No
6. Osama, an accountant, prepares financial statements for Malkis Bhd, knowing that the company
was considering three takeover bids, including one from Growth Bhd. In the event Osama prepares
the statements negligently, indicating that the company is financially secure when it is not, and
Growth Bhd takes over Malkis Bhd on the basis of those accounts:
Can Growth Bhd recover any resulting losses it makes on the takeover?
A. Yes
B. No
Will Osama be liable to pay damages to the other takeover bidders where they were also identified to
him as potential takeover bidders who would be relying on the accounts?
C. Yes
D. No
7. Tina, a trainee accountant, was approached by Kassim, the husband of Tina’s senior colleague, Jill,
at an office party. Kassim asked her for some professional advice. Flattered that he had asked her
rather than Jill, Tina obliged. However her advice flawed. Is she liable for the resulting loss suffered
by Kassim?
A. No because she is only a trainee

B. No because the advice was not given in a professional capacity
C. Yes because she knows him and assumes responsibility for her advice
D. Yes because she owes a duty of care for which the standard is that of a reasonable qualified
accountant.
8. Campbells, a firm of accountants, prepared annual accounts for Sunway Tes Bhd. The director of
Taylor’s College Bhd, which held shares in Sunway Tes Bhd, saw the accounts and as a result, the
company lent Sunway Tes Bhd RM1 million to finance its new premises. In fact the accounts had been
prepared negligently and Sunway Tes Bhd was actually facing mounting debts. Taylor’s College Bhd
sued Campbells.
72
Which of the following best describes the legal position regarding Campbell’s potential liability to
Taylor’s College Bhd?
A. Campbells is liable because it owes a duty of care to potential lenders

B. Campbells is liable because it knew that Taylors was a shareholder and would therefore have
sight of the accounts
C. Campbells is not liable because the accounts were not prepared for the purpose of enabling
people to decide whether or not to lend money to the company
D. Campbells is not liable because such a lender should have investigated the accounts and
concluded that they were inaccurate
9. An accountant prepared draft accounts for a company chairman but the claimant also inspected the
accounts and then took over the company. Does the accountant owe a duty of care to the claimant?
A. Yes
B. No
Would your answer differ if the information was prepared in the knowledge that a particular person
was contemplating a transaction and would rely on the information in deciding whether or not to
proceed with the transaction?
C. Yes
D. No
10. Would an auditor owe a duty of care to a takeover bidder when he has been expressly informed
that the bidder will rely on the accounts for the purpose of determining the value of his bid and bidder
does so rely on them?
A. Yes
B. No
On the facts of Morgan Crucible v Hill Samuel Bank Sdn Bhd, do the accountants owe a duty of care
to a known takeover bidder?
C. Yes
D. No
11. Barings collapsed in 1995 after loss-making trading by the general manager of its Singapore
subsidiary, BFS. BFS was audited by the defendant’s Singapore firm, which provided Barings directors
with consolidation schedules and a copy of the BFS audit report. The defendant tried to argue that
there was no duty of care owed to Barings, only BFS.
Is there a duty of care owed to Barings?
A. Yes there is a duty of care owed to Barings as they relied on it

B. Yes there is a duty of care owed to Barings, as the defendants must have known that their
audit report and consolidation schedules would be relied upon at group level
C. No there is no duty of care owed to Barings, as the defendants must have known that their
D. Yes there is a duty of care owed to the defendants, as the plaintiffs must have known that their
73
12. Which of the following is a realistic method that accountancy firms can use to limit their liability?
A. Form a limited liability partnership

B. Avoid giving professional advice
C. Form a limited liability collective
D. Take legal advice before giving professional advice
1. ABC Bhd published its annual report for 2008 in April 2009. The report included the audited
accounts for the year ended 31 December 2008, which indicated that the company had made
substantial profits for 2008 and that the company was financially sound. The auditors’ report which
accompanied the accounts stated that the auditors were of the opinion that the company had observed
accounting standards and that the auditors were satisfied that the accounts represented a true and fair
view of the financial position of the company as a whole.
Relying on this report, Ali, a member of the public, purchased 100,000 shares of ABC Bhd, on the
Stock Exchange. It has now been discovered that ABC Bhd was in fact insolvent at the time of the
audit. This has resulted in the shares of the company becoming almost worthless. Ali considers that
the auditors had not carried out their audit properly. He wishes to sue the auditors in the tort of
negligence.
1. State the elements that Ali must prove in order to bring an action for negligence? [3 marks]
2. Would Ali be successful if he brings an action against the auditors? Do the auditors owe him a duty
of care? [3 marks)
[6 marks]
74
PART C - LAW OF EMPLOYMENT
1. A contract between Gary and his employer Go-Go Sdn Bhd contains the following four provisions.
Three of them are critical if the contract is to be regarded as a contract of employment. Which ONE
is NOT critical?
A The contract refers to Gary as 'the employee' and Go-Go Sdn Bhd as 'the employer'
B The contract provides that Gary must perform his duties himself unless he is ill, in which
case he can delegate them to either of two named persons
C The contract provides for Go-Go Sdn Bhd to exercise control over Gary in a number of
respects
D Go-Go Sdn Bhd is required to provide work and Gary is required to perform it
2. Which of the following best describes what is referred to as 'mutuality of obligations'?
A It is the duty of trust and confidence owed by both the employer and the employee to each
other
B It is the obligation of the employer to provide work and the obligation on the employee to
perform the work provided
C It is the mutual obligations of both the employer and the employee to work to promote the
success of the business
D It is the obligation on the employee to obey reasonable instructions and the obligation on
the employer to issue only instructions that are reasonable
3. You need to determine whether Raphael is an employee or an independent contractor of Big Build
Sdn Bhd. Which ONE of the following factors is NOT consistent with there being a contract of service
between Raphael and Big Build Sdn Bhd?
A Raphael only works for Big Build Sdn Bhd

B Raphael is allowed to delegate his work in the event that he is unable or unwilling to do the
work himself
C Raphael is paid net of tax
D Big Build Sdn Bhd provide Raphael with all the equipment that he needs to undertake his
work
4. Hilary is employed by Howard in his restaurant. Howard deducts tax and national insurance from
her monthly salary. She is entitled to paid sick leave of up to 10 weeks per year. She is given at least
48 hours' notice of when she is required to work and Howard is required to ask Hilary to work before
offering the work to the other non-permanent staff. Hilary wears a uniform provided by Howard,
bearing the name of the restaurant.
Is Hilary an employee or an independent contractor?
A She is an employee because she is paid after deductions for tax and national insurance
B She is an independent contractor because she works for Howard on and as-and-when-
required basis
C She is an employee because she wears a uniform supplied by Howard and is entitled to sick
leave
D She is an independent contractor because she is free to work for other employers when she
is not working for Howard
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5. Which of the following is applicable to an independent contractor only [State 2]?
A He must make income tax payments on his own

B He may need to register for VAT
C His acts of negligence may render his employer vicariously liable
D He has preferential rights as a creditor for the payment of any outstanding salary in the
event of his employer's insolvency
6. An employee is required to obey all of his employer's reasonable instructions except in certain
circumstances. Three of the following are examples of circumstances which would permit an employee
to refuse to obey his employer's reasonable instructions. Which of the following is NOT one of those
circumstances?
A If they require him to do something unlawful

B If they require him to do something that is not in his best interest
C If they require him to do something that exposes him to personal danger not inherent in his
work
D If they require him to do something outside his employment contract
7. With regard to an employer's implied duties:

Is he bound to indemnify his employee against expenses incurred in the course of his employment if
there is no such express provision in the contract?
A Yes
B No
Is he obliged to provide a reference for his employee, if requested to do so?
C Yes
D No
8. Which of the following is NOT part of the common law duty of an employer to protect his
employees against reasonably foreseeable risks to their health, safety and welfare at work?
A The duty to provide a safe system of work

B The duty to provide reasonably competent fellow employees
C The duty to protect an employee's personal property whilst he is engaged in performing his
contractual duties
D The duty to provide safe plant and appliances
9. Lady Gaga works for owner of the local country hotel, Hilton Sdn Bhd, as a self employed singer.
Which of the following best describes the legal status of the arrangement between Lady Gaga and
Hilton Sdn Bhd?
A. A contract of employment
B. A contract of service
C. A contract for services
D. A contract of agency
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10. Ivy works at Gorgeous Gowns Sdn Bhd. Which one of the following factors is consistent with her
being treated as self employed?
A. Ivy’s employer deducts tax at source

B. Ivy wears a Gorgeous Gowns apron at work
C. Ivy is entitled to holiday pay
D. Ivy provided her own car for delivering flowers
11. Which of the following does not constitute a duty owed by an employee towards his employer
under the common law?
A. A duty not to misuse confidential information

B. A duty to provide faithful service
C. A duty to maintain trust and confidence
D. A duty to obey all orders given to him by his employer
12. Barnaby is employed by Flintstone and Co to order the season’s new clothing for men from various
suppliers. In many cases, when he places an order, he receives a commission from the suppliers and
keeps the commission for himself, regarding it as a perk of the job. In respect of which implied common
law duty is Barnaby in breach?
A. The duty of fidelity

B. The duty to obey lawful and reasonable orders
C. The duty not to misuse confidential information
D. The duty to exercise reasonable care and skill
13. Which of the following does the employee not establish in order to claim that he has been
constructively dismissed for the purposes of his claim?
A. That his employer has committed a serious breach of contract

B. That he has treated the contract as repudiated
C. That his conduct did not contribute in any way to his dismissal
D. That he did not waive the breach and affirm the contract
The Employment Act defines a contract of service ‘as any agreement whether oral or in writing .and
includes an apprenticeship contract’.
Is there a requirement by law that contracts may be oral or in writing at the discretion of the parties?
A. Yes
B. No
Is a contract of employment defined under The Industrial Relations Act more or less similar to the
Employment Act?
C. Yes
D. No
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15. What are the different tests used to determine whether a contract falls under a contract of service
or for services?
I. The control test

II. The business integration test
III. The multiple test
IV. The employment test
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
16. What is the definition of a wage period under the Employment Act?
A. The period in respect of which wages are paid

B. The period in respect of which wages earned by the employee are payable
C. The period of one month is the normal wage period
D. The period when the employee should be paid
17. What are some of the circumstances where the employer can lawfully deduct an employee’s wages?
I. Overpayment by the employer made during the immediately 3 months due to the employer’s
mistake
II. Deductions for the indemnity for breaching the contract
III. Repayment of advances of wages
IV. Lawful deductions such as EPF and Income Tax
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
18. Section 22 states that an employer as a general rule must not exceed his one month’s wages unless
such an advance is made to enable him;
I. To enable him to purchase a house or improve a house

II. To enable him to purchase land
III. To enable him to purchase livestock
IV. To enable him to purchase a motorcar or a bicycle etc
Which of the above reflects the right legal answer?
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
19. No employee shall be compelled to work on a rest day unless he is engaged in such work which by
nature requires his attention. Which of the following circumstances would make it compulsory in law
for the employee to work?
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I. Accident, actual or threatened in respect of place of work
II. Work essential to the life of the community
III. Urgent work to be done to the plant and machinery
IV. Work essential to the defence and security of the country
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
20. Under the Employment (Limitation) of Overtime Work Regulations 1980, an employee is
permitted to work up to a limit of _____ hours of overtime in any one month and this excludes work
on rest days, any of the ten chosen gazetted holidays.
A. 103
B. 104
C. 105
D. 102
21. An employee who has worked for more than 5 years of continuous service with an employer is
entitled to an annual leave entitlement of _____ days in a year.
A. 15
B. 16
Similarly an employee who has worked for more than 5 years of continuous service with an employer
is entitled to paid sick leave of _____ days in a year.
C. 24
D. 22
22. By virtue of Section 12(2) of the Employment Act, the length of notice given to an employer shall
be less than a certain number of days. Which of the following depict the legal requirements;
I. 4 weeks notice if the employee has less than 2 years of service

II. 6 weeks notice if the employee has more than 2 years but less than 5 years of service
III. 8 weeks notice if the employee has more than 5 years of service
IV. 12 weeks notice is the employee has more than 10 years of service
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
An employee may terminate his contract of service without notice if he or his dependants are
immediately threatened by danger of death, violence or diseases by any person or circumstances, even
if no such conditions may be stipulated in his contract of service.
A. True
B. False
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The employer or employee may terminate the contract without notice if the other party wilfully
breaches a condition of the contract of service
C. True
D. False
An employer is not liable to pay any termination benefits or lay off benefits if the employee has attained
the age of retirement or on grounds of misconduct after conducting a due inquiry.
A. True
B. False
Under Regulation 6 of the Employment (Termination and Lay off Benefits) Regulations 1980 the
amount of termination benefits to which an employee is entitled shall not be less than;
C. 15 days wages per year of service, if he has 2 years or more but less than 5 years of service
D. 25 days wages per year of service if he has five or more years of service
25. This is a remedy that the Industrial Court is likely to award in normal cases of unfair cases of
unjustified dismissal where the employee who has been dismissed is put back into the position he
would have been in had he not been so dismissed.
Which of the following is the requisite remedy?
A. Reinstatement
B. Re-engagement
C. Compensation in lieu of reinstatement
D. Re- employment

Redundancy refers to a situation where an employer has surplus of labour and has to downsize his
labour force
A. True
B. False
Constructive dismissal may be said to have occurred in circumstances where the employer has
breached the contract of employment, thereby entitling the employee to resign.
C. True
D. False
80
1. Jack is a director of New Era Sdn Bhd, which has just been incorporated. He intends to recruit
several persons as employees. He seeks your advice on the following matters:
(a) How many hours can the employees be required to work in a day? (1 mark)
(b) In what situations can this limit be exceeded? (2 marks)
(c) If he requires them to work longer hours, must he pay them for such overtime work, and if so, at
what rate? (1 mark)
(d) Are the employees entitled to paid sick leave? If so, for what duration? (2 marks)
Advise Jack of the legal position in respect of the above matters under the Employment Act 1955.
(6 marks)
2. During a telephone interview between Koolie and M. Ploir, the managing director of Semua Bisnes
Sdn Bhd, Koolie was offered a position as a clerk in Semua Bisnes Sdn Bhd, at a monthly salary of
RM700 per month. Koolie accepted the offer and has been in employment for the last three months.
During this period he has always received his wages late, i.e. each month's wages is paid between the
15th and 20th of the following month.
He has been approached by his colleagues to join their trade union but M. Ploir has told him that if he
does so, his chances of promotion would be very slim and that as he is a fairly new employee he would
be likely to be dismissed if he displeases the employer.
Koolie wishes to know whether under the Employment Act 1955:
(a) There is any requirement that contracts of service must be in writing. (2 marks)
(b) The late payment of wages is lawful. (2 marks)
(c) The employer can restrict the employee from joining a trade union. (2 marks)
[6 marks]
3(a) Explain FOUR ways by which a contract of service may be terminated under the Employment
Act 1955. (4 marks)
(b) Explain, and illustrate using relevant examples, what constitutes ‘constructive dismissal’.
(2 marks)
[6marks]
4(a) What is the number of rest days an employee is entitled to under the Employment Act 1955 and
in what circumstances does the said Act allow an employee to be required to work on a rest day?
(3 marks)
(b) What is the rate of pay that an employee is entitled to under the Employment Act if he is required
to work on a rest day? (3 marks)
[6marks]
81
PART D - THE FORMATION AND CONSTITUTION OF BUSINESS ASSOCIATIONS
1. LAW OF AGENCY
1. Alan enters into a contract with Tom for the purchase of Tom's car. Alan is acting as agent for
Peter. Applying the basic principles of agency law, who may sue and be sued on the contract?
A Alan and Tom

B Peter and Tom
C Alan and Peter
D Alan, Tom and Peter
When an agent enters into a contract with a third party, the principal must have full contractual
capacity to be liable on the contract.
A True
B False
An agent may be appointed orally or in writing.
C True
D False
3. Alain retired as a partner of the Le Gourmet, a business with three French restaurants in London,
but neither he nor the remaining partners, Pierre and Marie, informed the firm's supplier of French
wines. Alain used some old letter headed paper (showing the three partners' names) to order a crate
of champagne for Christmas. The supplier sent the invoice to Le Gourmet's office. Which of the
following statements best describes the legal position?
A Le Gourmet is not bound by the contract because Alain is no longer a partner

B Le Gourmet is not bound to settle the invoice because Alain has no authority
C Le Gourmet is bound by the contract because an agency by estoppel has arisen
D Le Gourmet is obliged to settle the invoice because Alain gave the impression that he was
still a partner
4. Emma was a vet who lived in the same village as Natasha, a wealthy landowner who owned twenty
horses and who (in Emma's opinion) failed to look after them properly. They had never spoken to each
other. One day Emma was out walking and saw one of Natasha's horses trying to deliver a foal but
could see that the birth was not straightforward. She called her assistant and together they
anaesthetized the horse and delivered the foal safely. Emma sent Natasha a letter asking for
reimbursement of her costs and in respect of her assistant's time.
Has an agency of necessity arisen under the general rule?
A Yes
B No
Would your answer differ if Emma was not the vet regularly called in to attend Natasha's horses?
[Provided the conditions have been observed]
C Yes
D No
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5. With regard to ratification of a contract by a principal.
Can he ratify, even though he had no legal capacity at the time the contract was made, provided he
has full legal capacity at the time of any purported ratification?
A Yes
B No
Can he ratify even if the agent had no authority at all to enter into the contract?
C Yes
D No
6. Edward entered into a contract to take a lease of a waterside office being built in Stratford.
Completion was due one month after the architect's certificate verifying completion of the building.
Shortly after entering into contract, Edward's solicitor advised him that he should incorporate his
business in order to lessen his potential liabilities and to improve his tax position. Edward did so and
re-established his business in the name of E. Smith Bhd.
Can E. Smith Bhd ratify the contract entered into by Edward and complete the lease?
A Yes
B No
If the other party to the contract fails to complete the building in Stratford, who could sue for breach
of contract?
C Edward
D E. Smith Sdn Bhd

The relationship between a principal and his agent is a fiduciary one.
A True
B False
The agent only owes duties to a principal to the extent that such duties have been negotiated and
included in the contract between them.
C True
D False

An agent has a right to exercise a lien over property owned by the principal and in the agent's
possession, pending payment of any sums owed to him by the principal.
A True
B False
An agent is not permitted to delegate the performance of his tasks to another, even if his agreement
with the principal permits delegation.
C True
D False
83
9. Raj is 16 and works as a bookkeeper for a rich businessman, Edgar. Freddie is Edgar's agent, who
deals with Edgar's property matters. One day Edgar tells Raj to go to the local wine merchant and
purchase 3 cases of good wine for a leaving party that he is organising for one of his employees. He
also instructs Freddie to book a nightclub on the northern edge of town for the occasion.
Is Raj bound to comply with Edgar's instruction to purchase the wine for the leaving party?
A Yes
B No
Can Freddie refuse to book the nightclub, honestly and reasonably believing that to do so is in Edgar's
best interests, although he knows that the nightclub is right in the middle of a notorious area?
C Yes
D No
10. For the past 20 years, William has acted as an agent for Mohammed. Following a recent incident
when William sold Mohammed's boat without his authority, they decided to part company. When his
appointment is terminated, William claims that he should be paid in respect of the following:
(i) Expenses that he has had to meet during the course of his agency
(ii) Expenses that Mohammed should actually have paid himself but William has paid for him
(iii) Expenses incurred in advertising Mohammed's boat for sale
(iv) Remuneration that he is due for the past three months
To which sums is William entitled?

A None of them
B All of them
C (i) (ii) and (iv) only
D (i) and (iv) only
11. Walter is appointed by Boris to sell his vintage sports car for at least RM10,000. Apart from
stating the amount that Walter is to be paid, provided he is successful, no other terms are discussed
or contained in the appointment.
Does Walter also have authority from Boris to advertise the car for sale?
A Yes
B No
Does Walter have authority from Boris to negotiate on the price and accept, say, RM9,000?
C Yes
D No
Usual authority arises when a principal expressly delegates a task to his agent.
A True
B False
84
An agent's ostensible authority may exceed his actual authority.
C True
D False
13. Chloe Smith and Karmel Jones are accountants in partnership together, serving small businesses
in their local community. Chloe obtained a law degree before training as an accountant and sometimes
gives legal advice in addition to her usual role as an accountant. She does so in the name of Smith &
Jones, their partnership. Karmel is aware of Chloe's conduct in this respect but has never objected,
believing it to be a good source of extra business. When Chloe gives some negligent legal advice, the
client sues the partnership. Karmel seeks to argue that the legal advice was not part of the firm's
business and therefore only Chloe should be liable in respect of it.
Which of the following statements best describes the legal position?
A. Smith & Jones is liable because Chloe's actions in giving incidental legal advice are part of the
implied usual authority of an accountant in business
B. Smith & Jones is liable because Chloe had ostensible authority to bind the firm, arising out of
Karmel's acquiescence
C. Smith & Jones is not liable because Chloe had no actual authority to give legal advice
D. Smith & Jones is not liable because giving advice is not part of the firm's major business and
therefore a partner cannot bind his firm in respect of it
14. Nadeem owns a boat yard and is appointed to sell Martin's yacht for him. In carrying out this task,
Nadeem buys a half page of advertising in Yachts' Monthly at a cost of RM400. Martin did not tell
him to advertise in magazines and had rather expected that Nadeem would simply sell it to one of his
regular customers, although the matter had never been discussed. Martin refuses to pay the bill for
the advertisement when it is forwarded by Nadeem.
A. Martin is liable to pay the bill because he gave Nadeem express authority to sell
B. Martin is liable to pay because Nadeem had implied incidental authority
C. Martin is not bound to pay because Nadeem did not have the necessary authority
D. Martin is not bound to pay because such authority cannot be implied without further
evidence
Where a person leads a third party to believe that he is acting as agent for a principal and the third
party relies on that representation and suffers loss as a result, the principal is estopped from denying
that an agency relationship exists.
A True
B False
Where a principal has represented to a third party that an agent has authority to act and then
subsequently revokes the agent's authority, the principal's liability will cease at the same time as the
authority is revoked.
C True
D False
85
16. Abigail enters into a contract with Tamsin, on the express instruction of Phoenix, but Tamsin
believes Abigail to be acting on her own account. In the event of a breach of contract
Can Tamsin sue Abigail?

A Yes
B No
Can Phoenix sue Tamsin?

C Yes
D No
17. Arthur tells Thelma that he is acting for Pauline, a well known and reputable horse breeder, when
he agrees to buy Thelma's horse. Thelma delivers the horse but when she goes to pick up the money
from Pauline, Pauline says that she knows nothing about the sale.
Can Thelma enforce the contract against Pauline?

A Yes
B No
Can Thelma sue Arthur?

C Yes
D No
18. A directs B, his advocate, to sell his estate by auction, and to employ an auctioneer for the purpose.
B names C, an auctioneer, to conduct the sale. Is C a sub agent?
A. Yes he is a sub agent as he is A’s agent

B. No, he is not a sub agent for the conduct of the sale
C. None of the above
19. A instructs B, a merchant, to buy a ship for him. B employs a ship surveyor of good reputation to
choose a ship for A. The surveyor makes the choice negligently and the ship turns out to be
unseaworthy and is lost. Who is responsible for the loss?
A. B is not but the surveyor is, responsible to A

B. B is responsible not the surveyor
20. Julie who 22 years asks Jack who is 12 years to find a buyer for her car. Jack agrees to it. Is there
an agency relationship between the parties?
A. Yes; Julie is the principal and Jack is the agent

B. Yes; Julie as the principal has the capacity, while Jack as the agent has also the capacity even
though he is a minor
C. No; as Jack has no capacity since he is a minor even though Julie has the capacity
D. No; Jack and Julie have no capacity
21. A hotel was taken over by new owners and most of the staff was absorbed in the new venture. The
manager was absorbed in the normal course of the take - over. The new owners expressly forbade the
manager from buying the cigars on credit. In contravention to the orders of his new employer, the
manager bought cigars on credit from a third party. The payment for these cigars was not made and
the third party sued the owners for the payment.
86
Is the contract binding on the principals?
A. Yes; as the cigars were purchased in the course of the normal authority given to the manager
in his normal course of work
B. Yes; as the principals are normally bound by the acts of their agents
C. No; as the agent exceeded his authority, therefore the principals would not be liable
22. The Chairman and Chief Executive Officer acted as the de facto Managing Director (MD) of the
company although he was never formally appointed as the MD of the company. He purported to bind
the company with a particular transaction. The company denied the enforcement of the transaction
by claiming that the Chairman had no authority to bind the company.
Was the company right in their justification?
A. Yes, because no actual authority was given to the MD

B. Yes, because the MD exceeded his authority
C. No, as the position of MD gave him implied authority to bind the company on the transaction.
D. No, as the position of MD gave him ostensible authority to bind the company on the
transaction
23. Bobby appointed Sunny to buy some goods for him. However, Sunny without authority, bought
other goods along with goods specified by Bobby. Bobby later paid the price of all the goods.
Has the contract been ratified by Bobby or Sunny?
A. Bobby had ratified the contract made by Sunny

B. Sunny had ratified the contract made by Bobby
24. Which type of agent runs an accountancy practise?
A. Company director
B. Partner
C. Commercial agent
D. Promoter
25. The claimant stored his furniture in a room of the defendant, free of charge. After the lapse of
about three years the defendant wanted to use this room because his premises had been damaged due
to bombing. He made efforts to communicate with the claimant for this purpose, but could not find
his whereabouts. Consequently, he sold the furniture in an auction.
Is there an agency by necessity created?
A. Yes, there is an agency by necessity as it was an emergency situation

B. No, there was no agency by necessity since no emergency had arisen
26. A broker was entrusted with some goods to sell them at a proper price. Without making an
estimate of the value of the goods in accordance with the prevailing customs of that trade, he sold
them at an inadequate price.
Would the agent [broker] be liable for the loss?
87
A. The broker was justified in his acts as he did not receive any instructions from the principal
B. The broker was not justified in his acts as even though he did not receive any instructions
from the principal, he should have conducted his business according to the prevailing customs
C. The broker was justified in his acts as he was after all the agent of the principal and was
conducting the business as he thought right
27. In this case a ship was consigned by the claimant to a company in China for sale, fixing a minimum
price of RM90,000 payable in cash. The company, with the consent of the claimant, employed the
defendant [an agent in Japan] to sell the ship. The defendant made efforts to sell the ship but failed.
The defendant thereupon purchased the ship himself and paid RM90,000 for it. After some time, the
defendant resold the ship for RM160,000. When this fact came to the knowledge of the principal, he
brought an action to recover the profits gained by the defendant.
Would the defendant be able to keep the profits?
A. The defendant was bound to account for the profits gained by him for resale of the ship as it
was wrong on the part of the agent to buy the property himself, which he received from the
principal for sale
B. The defendant was not bound to account for the profits gained by him for resale of the ship as
it was justified on the part of the agent to buy the property himself, which he received from
the principal for sale
C. The defendant was bound to account for the profits gained by him for resale of the ship as it
was wrong on the part of the agent to buy the property himself, which he received from the
principal for sale unless he has disclosed this fact to the principal.
28. In this case the defendants, the auctioneers, were engaged by the claimants for the sale of a certain
property. The claimant agreed to pay them a certain commission and certain other expenses. While
charging the full amount from the claimant, they did not deduct the discount received from the
printers and advertisers.
Can the agents keep the discount?
A. The agents cannot keep the discounts as it amounts to a secret profit since there is no
disclosure
B. The agents can keep the secret profits as it is regarded as a perk in the business of agency
C. The agents can keep the profits as this was given to them due to their own hard work and
initiative.
29. Which one of the following is NOT one of the ways in which an agency maybe terminated by the
act of the parties?
A. By revocation
B. By lapse of time
C. By performance
D. By frustration
88
1. In relation to the law of agency:
(a) Define agency, and (1 marks)
(b) Describe the following ways in which an agency may come into existence.
(i) Agency by Ratification
(ii) Agency by Necessity
(iii)Agency by estoppel (5 marks)
[6 marks]
2. In relation to the law of agency explain what is meant by:
(i) 'named' principal;

(ii) 'disclosed' principal;
(iii) 'undisclosed' principal. (3 marks)
(b) Name three statutory presumptions where an agent may personally be liable to the third party for
acts done on behalf of the principal? (3 marks)
[6 marks]
3(a) An agent is in a fiduciary position towards the principal and as such he has a duty not to make
any secret profit out of the performance of his obligations.
Explain this duty. (3 marks)
(b) Discuss three remedies available to a principal when the agent has breached his duty not to make
a secret profit. (3 marks)
[6 marks]
89
2. LAW OF PARTNERSHIP
1. Caitlin and Miles set up in business together in order to design and manufacture memorabilia for
the London Olympics 2012. Caitlin is the driving force behind the venture and so Miles agrees that
she should receive 60% of the profits. In fact they make a loss. They call their business Catimil & Co.
Is their business a partnership?
A Yes, it is a partnership relationship

B No, the name of the business denotes a company
C No, the business is not profitable
D No, the business is only for a single venture
2. Peter and Kieran are in partnership together. Peter takes a 60% share of the profits and Kieran takes
40%. They have never drawn up a formal partnership agreement.
Since there is no express provision in respect of losses, do they share losses equally?
A Yes
B No
In the absence of an express provision are they entitled to remuneration for their respective
contributions to the partnership?
C Yes
D No
3. Amy, Ben, Carol, Don and Ely are in partnership together. They have never drawn up a formal
partnership agreement.
Can Amy, Ben and Carol introduce Finley into the partnership without Dan's and Ely's consent?
A Yes
B No
Can Carol, Don and Ely appoint Gary as the business secretary to the partnership without the consent
of Amy and Ben?
C Yes
D No
4. Ali, Elgar and Imran are in partnership as architects. They agree that Ali should purchase a bulk
supply of paper for the drawing of architects' plans, up to a maximum cost of RM4,000. Ali orders
RM6,500 worth of paper using the partnership letterhead. When it is delivered by the suppliers,
Reams Sdn Bhd, the firm refuses to pay the bill.
Can Reams Sdn Bhd enforce the contract against the firm?
A No, only Ali is liable on the contract because he acted without the authority of the
partnership
B. No, Reams Sdn Bhd should have enquired about the extent of Ali's authority
C. Yes, Elgar and Imran failed to notify Reams Sdn Bhd that Ali's authority was restricted
D. Yes, Reams Sdn Bhd had no notice of the restriction and Ali's action is in the usual course of
partnership business
90
An ordinary partnership is NOT a body corporate with a legal personality separate from its partners.
A True
B False
An ordinary partnership cannot create a floating charge over its business assets.
C True
D False
6. Shiram and Asif are in partnership together selling camping gear. They are thinking of
incorporating the business in its entirety as a private limited company and seek answers to the
following questions:
Would they still own all the assets of the business jointly?
A Yes
B No
Would it mean that their liability for the debts of the company would be limited?
C Yes
D No
7. Reginald and Perry have been operating as an informal partnership running a floristry business for
the past 15 years. They have decided to formalise their business relationship. They have two questions
for you:
Will they need to register their partnership under the Partnership Act 1961?
A Yes
B No
Will they be required to provide annual audited accounts?
C Yes
D No
8. Arthur Smith and Brian Jones propose to register a limited liability partnership called The Smith
& Jones Partnership.
Is their proposed name in compliance with the Limited Liability Partnerships Act 2012?
A Yes
B No
Do they need to file a copy of their partnership agreement with the Registrar of Companies when
they register their limited liability partnership?
C Yes
D No
91
9. Barry is preparing to register New Ideas LLP. The Limited Liability Partnerships Act 2012 requires
certain information to be included in the incorporation document of an LLP.
Which of the following pieces of information is Barry NOT required to include in New Ideas LLP's
incorporation document?
A The location or domicile of its registered office

B The address of its registered office
C The addresses of all its members
D The profit sharing ratio between its members
10. With regard to limited liability partnerships (which are governed by the Limited Liability
Partnerships Act 2012): Can a majority of existing members agree to admit a new member?
A Yes
B No
Does every change in membership need to be notified to the Registrar of Companies?

C Yes
D No
11. Jefferson is a member of Low Lines LLP. He is authorised by the other members to buy office
supplies, subject to a maximum of RM10,000 for any one contract. Without seeking the approval of
the other members, Jefferson orders RM13,000 worth of supplies, using his personal stationery and
arranging to pick up the goods and the invoice, which is made out in his name. When Jefferson
presents the invoice for the RM13,000 worth of supplies to the other members of Low Lines LLP,
they refuse to pay it. Is Low Lines LLP bound by the contract?
A Yes, an LLP member has authority to bind the LLP on all business-related transactions
B Yes, an LLP member is an agent of the LLP with full power to bind
C No, Jefferson had been instructed not to enter into contracts of this value so the LLP cannot
be bound
D No, Jefferson lacked authority and the supplier did not know or believe him to be a partner
A limited liability partnership (LLP) may be put into winding up.
A True
B False
Where it can be shown that a member knew that his LLP would become insolvent, a withdrawal made
by him within the 20 months prior to the making of a winding up order can be claimed back.
C True
D False
13. Are the following statements true or false in relation to a limited liability partnership (LLP)?
An LLP has a legal personality distinct from the members
A. True
B. False
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An LLP must have at least one member whose liability is unlimited
C. True
D. False
14. Asraff and Maniam plan to set up a limited liability partnership (LLP) to continue the business,
Asraff & Co; that they have conducted for the past 15 years as an ordinary partnership. They
particularly do not want to change the name because it is a successful business. Can they register the
LLP under the name Ashraff & Co
A. Yes
B. No
Do they have to have a formal partnership agreement?
C. Yes
D. No
15. Maniam, Nora and Ong are in a partnership together running a cattle market, under the name of
Cattle Galore & Co. Maniam enters into the contract, using the firm’s headed writing paper, to
purchase 10 bulls from Farmer Goodheart for the firm. When Nora and Ong hear about it they refuse
to honour the contract because they had agreed at the previous partnership meeting, that they would
not purchase any more livestock for the next six months due to the firm’s financial situation. Maniam
insists that the contract was too good an opportunity to miss. Which of the following best describes
the legal position?
A. Maniam alone is liable on the contract because he acted without the other partner’s authority
B. Maniam, Nora and Ong are personally liable, since partners are agents of each other
C. Cattle Galore & Co is liable as it was a contract entered into for the purposes of the partnership
business
D. The firm and therefore, all of its partners are liable on the contract to purchase 10 bulls from
Farmer Goodheart

The Partnership Act states that the receipt by a person of a share of the profits of the business is prima
facie evidence of a partnership.
A. True
B. False
Are there any exceptions to this rule?
C. Yes
D. No
17. DELETED
18. DELETED
19. DELETED
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20. Which of the following is NOT a characteristic of the liability of partners in a limited liability
partnership?
A. All partners of an LLP enjoy limited liability

B. Partners of an LLP enjoy limited risk arising from the careless or accidental negligence of
another partner
C. All partners may participate in the control of the business and still maintain their limited
liability
D. Some partners may not be allowed to participate in the control of the business
21. Answer the following questions
A wife received a share of the profits of her husband’s business. Has she become a partner of the firm?
A. Yes
B. No
Mala and Maha are the joint owners of a flat given on rent. They share the amount of rent equally.
Are Mala and Maha partners of the firm?
C. Yes
D. No
22. Masai is a partner in a firm with Jana and Jack. He takes no share in the active business of the
partnership but is entitled to a share of the profits and is subject to a share in the losses as well. Masai
would be deemed as _______ partner.
A. Dormant partner
B. Salaried partner
C. Limited partner
D. Unlimited partner
23. Which of the following statements is NOT true of the characteristic of a limited liability
partnership?
A. The LLP is a body corporate

B. The LLP is a separate legal entity
C. The partners in an LLP are not employees of the partnership
D. LLP’s are available to charities
24. DELETED
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1. Under the Partnership Act 1961, persons who are not partners may be held liable as partners where
there has been a 'holding out'.
(a) Explain what is meant by 'holding out' in this context? [1 mark]
(b) What are the requirements to be satisfied by Section 16 of the Partnership in relation to the
doctrine of holding out? [3 marks]
(c) Discuss the extent to which those persons can be made so liable. Illustrate your answer with
relevant cases. [2 marks]
[6 marks]
2(a) Define a partnership. (1 marks)
(b) State three of the rules provided for in the Partnership Act 1961 to determine the interests of
partners in partnership property and their rights and duties in relation to the partnership.
(3 marks)
(c) State two ways in which the courts may dissolve the partnership (2 marks)
[6 marks]
3. In relation to partnership law:
(a) Discuss the liability of a retiring partner for the debts of the partnership incurred both before, and
after, his retirement from the partnership; and (2 marks)
(b) Explain the steps that a retiring partner may take to protect himself from liability for future debts
of the partnership. (2 marks)
(c) Give two case studies to show actual notice is required for existing members? (2 marks)
[6 marks]
95
PT[2] Section B
Qn. 46.
1. Danny, Devi, Darul and Din are the partners of 4D & Co, a firm of hair stylists. Din is a dormant
partner and is expressly prohibited from rendering any hair styling services to clients.
On one occasion, in the absence of the other partners, Din attended to a client, Maniam, who wanted
his hair styled. Unfortunately, Din negligently applied an inappropriate hair lotion which resulted in
Maniam’s black hair turning white.
(a) Explain whether the other partners, Danny, Devi and Darul, could be held liable to Maniam for
the damages suffered by him as a result of Din’s negligence. (3 marks)
(b) Explain whether the other partners, Danny, Devi and Darul can avoid liability, if any, on the basis
that Din was expressly prohibited from rendering hair styling services to clients. (3 marks)
(6 marks)
As for the other offer, Sophia replied that she would be willing to take the car for RM50,000 but Nancy
refused.
A day later, Sophia wrote to Nancy and said that she will accept Nancy’s original offer at RM60,000.
However, Nancy now refuses to grant the lease as well as to sell the car to Sophia.
car. (3 marks)
(6 marks)
3. Jenny asked Ken to act as her agent to purchase a house for her. Ken agreed to do so for free. Jenny’s
instructions were that the house should be located in Petaling Jaya, it should have at least four
bedrooms and should not cost more than RM350,000. Ken found a suitable house in Petaling Jaya but
the owner was only willing to sell it at the price of RM370,000. Ken decided to purchase the house
and entered into a contract with the owner on behalf of Jenny.
Required:
(a) As there is no written agreement between them, and there is no consideration given by Jenny,
explain whether a valid agency exists between Jenny and Ken. (2 marks)
(b) Explain whether the contract made by Ken on behalf of Jenny is binding upon Jenny. (2 marks)
(c) In the event that the contract is not legally binding upon Jenny, state whether or not she can
choose to accept it. (2 marks)
(6 marks)
4. Zul, the auditor of Sunshine Bhd, certified the accuracy of the accounts of the company for inclusion
in its latest annual report. The accounts, prepared by the accounts manager, showed that the company
had made substantial profits. However, Zul had failed to examine certain relevant documents which
would have shown that the company had made a small loss.
Jin Seng, a member of the company, bought more shares on the stock exchange relying on the latest
annual report. He suffered a loss due to a fall in the price of the shares on the stock market after the
public became aware of the accounting inaccuracy.
(a) Explain whether Zul may be liable to the company in the tort of negligence. (4 marks)
(b) Explain whether Jin Seng could successfully sue Zul in negligence for the losses suffered by him
due to the fall in price of the shares. (2 marks)
(6 marks)
5. Amin who has been employed since 1991 by Kerja Selalu Sdn Bhd, a private limited company, was
involved in a minor accident while on his way to work. He was taken to a nearby private clinic where
he received treatment and given medical leave for five days.
On his return to work on the sixth day, his employer refused to listen to his explanation. He also did
not accept the sick certificate issued by the doctor and told him that five days leave would be deducted
from his wages. Further he was told that disciplinary action would be taken against him for being
absent without reasonable excuse. Ali seeks your advice on the following matters:
(i) Whether an employee is entitled to any paid sick leave under the Employment Act 1955 and the
limitations, if any, upon such entitlement. [3 marks]
(ii) Whether the employer is entitled to terminate his contract of service without notice or impose any
other punishment upon him and in particular, whether five days wages may be deducted from his
wages. [3 marks]
[6 marks]
3. PROMOTERS
1. Jamal and Kamal decided to form a private limited company called Mah and Mah Sdn Bhd. The
relevant documents for registration were submitted to the Companies Commission of Malaysia on 2
January 2003.
Kamal, who owned a piece of land in Johore, sold it to the company at its current market value of RM2
million. The purchase on behalf of the company was approved by Jamal and Kamal as directors of the
company. This land had been purchased by Kamal 30 years ago at a mere RM2,000. However, Kamal
did not disclose this matter either to the board of directors or to the members of the company
Advise the company, whether it can seek to recover the profit made by Kamal on the sale of the land
to it, on the basis that Kamal had breached his fiduciary duty to the company to disclose the original
purchase price of the land.
A. The company may be advised that it is unlikely to be successful if it sues Kamal for the
recovery of the profit made by him on the sale of his land to the company as, he did not
purchase the property in his capacity as a promoter.
B. The company may be advised that it is likely to be successful if it sues Kamal for the recovery
of the profit made by him on the sale of his land to the company as, he purchased the property
in his capacity as a promoter.
Advise the company, as to the most appropriate remedy that it can seek against Jamal for failure to
disclose the true value of the property.
C. The company in such case only has the option of rescinding the contract or affirming it.
D. The company in such case only has the option of rescinding the contract.
2. To whom does the promoter owe the fiduciary duties to?

A. The company
B. The shareholders
Where the promoter makes a secret profit he has a fiduciary duty to;
C. To disclose it to one of the board of directors
D. To make an adequate disclosure to a company in general meeting
3. Define a promoter?
A. A person/s who takes procedural steps to get a company incorporated which includes anyone
who makes business preparation for the company
B. A person who acts as a professional in company formation such as a solicitor or an accountant
The definition of a promoter is stated under _____ Act
C. The Promoters Act

D. The Companies Act
4. What are the main remedies open to a company for a breach of duty by the promoter?
(i) Rescission
(ii) Damages
(iii) Recovery of secret profit
(iv) Rectification
96
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV

A promoter usually incurs expenses in preparations, such as drafting legal documents, made before
the company is formed. They have no automatic rights to recover these ‘pre-incorporation expenses’
from the company.
A. True
B. False
A pre-incorporation contract is a contract purported to be made by a company or its agent at a time

before the company has been formed.
C. True
D. False
6. Farhan is the promoter of Peneraju Bhd. Before the company is incorporated, he enters into a
contract purportedly on its behalf. After the notice of registration is issued, the contract is breached.
Who is liable?
A. Farhan
B. Peneraju Bhd
Would Peneraju Bhd be able to ratify the contract under the Companies Act?
C. Yes
D. No
A company is formed under the Companies Act 2016 by a minimum of one person subscribing to the
constitution, who comply with the requirements regarding registration by virtue of the Companies
Act
A. True
B. False
The application for registration must be made and submitted to the Registrar with other relevant
documents such as the company’s proposed name, the location of its registered office and whether the
company is public or private.
C. True
D. False
8. Must a company have a constitution?
A. No
B. Yes
C. Maybe
97
The notice of registration is a certificate issued by the Registrar which denotes that, from the date of
incorporation, the subscribers, together with any persons who from time to time become members,
become a body corporate ‘capable of exercising all the functions of an incorporated company’.
A. True
B. False
The notice of registration is conclusive evidence that;

(i) All the requirements of the Companies Act have been complied;
(ii) The company is a company authorised to be registered and has been duly registered;
(iii) If the certificate states that the company is a public company, it is conclusive.
C. True
D. False
If irregularities in formation procedure or an error in the certificate itself are later discovered, the
certificate is nonetheless valid and conclusive.
A. True
B. False
A private company with a share capital may be able to re-register as a public company; a public
company may re-register as a private one.
C. True
D. False
To trade or borrow, a public company needs to submit a statutory declaration. Private companies may
commence business on registration.
A. True
B. False
A company must keep registers of certain aspects of its constitution, including the registers of
members, charges and directors.
C. True
D. False
A company is required to keep accounting records sufficient to show and explain the company’s
transactions. They must comply with the Financial Reporting Act 1997 and the Malaysian
Accounting Standards Board.
A. True
B. False
98
Accounting records must be kept for a period of 7 years.
C. True
D. False
13. Ben sets up a new company, Water Art Sdn Bhd, to continue his existing business. At the same
time as preparing the necessary documentation for incorporation, Ben exchanged contracts with Land
Managers Sdn Bhd for the purchase of a small industrial unit for the business. He receives the notce
of registration for Water Art Sdn Bhd a day before completion is due on the purchase of the industrial
unit. Land Managers Sdn Bhd fails to complete the sale because it has received a better offer.
Can Water Art Sdn Bhd ratify the contract under the Companies Act1965?
A. Yes
B. No
Can Ben enforce the contract against Land Managers Sdn Bhd without the approval of the members
of Water Art Sdn Bhd under Companies Act 1965?
C Yes
D No
14. It was proposed that a company with the name FM Sdn Bhd. Must be formed to manage a pop
group called ‘Cheap, Mean and Nasty’. The manager induced Phonogram Sdn Bhd to advance
RM6,000 to finance FM Sdn Bhd, after which the pop group would enter into a recording agreement
with Phonogram Sdn Bhd. An agreement was signed between Phonogram Sdn Bhd and the manager.
The manager entered into a contract as ‘for and behalf of FM Sdn Bhd’. However the album was never
produced and FM Sdn Bhd was never formed.
A question arose whether it was FM Sdn Bhd or the manager who was liable to return the advance
received from Phonogram Sdn Bhd?
A. The manager had made the contract on behalf of the proposed company; therefore he should
be liable
B. The company had made the contract; therefore they should be liable as the manager is an
agent of the company
C. Neither the manager nor the agent should be liable as the company had not been formed as
yet.
15. Once the Registrar is satisfied that all the requirements are complied with, he will issue a notice
of registration. Such a certificate is NOT conclusive evidence that;____
A. The company is properly incorporated under the Companies Act

B. It places the existence of company as a legal person beyond reasonable doubt
C. It is conclusive proof that the promoters have complied with requirements as regards
formation under the Companies Act
D. It is conclusive evidence that all registrable charges are duly registered
99
1.(a) Ahmad and Balu decided to form a company to be called Goodstart Sdn Bhd (the company). After
the relevant documents for registration had been submitted to the Registrar of Companies but before
the company obtained its certificate of incorporation Ahmad purchased a piece of land from Ah Meng
at a bargain price of RM60,000. (The market value of the land was RM100,000).
After the company was formed he sold it to the company without disclosing his purchase price. The
company has now discovered the true facts and wishes to rescind the sale, or alternatively, to claim
from Ahmad the profit of RM40,000 which he made on the sale.
Advise Goodstart Sdn Bhd on the following:

a) Define promoters? (1 mark)
b) Define fiduciary duties of promoters? (2 marks)
c) State the three main remedies which may be available for the company for breach of duty using
relevant authorities (3 marks)
[6 marks]
2. A week before the company obtained its certificate of incorporation, Balu, acting on behalf of it,
entered into a contract with Jojo Sdn Bhd, whereby Jojo Sdn Bhd was to supply RM50,000 worth of
office machinery to the company. After the company's incorporation, it refused to honour the contract.
In relation to the above;
(a) Define a pre-incorporation contract at common law? (3 marks)

(b) Define a pre-incorporation contract under the statutory law (3 marks)
[6 marks]
100
4. CORPORATIONS AND LEGAL PERSONALITY
1. Hanna and her friends wish to set up a small business. Hanna is concerned that, following here
initial investment, she will have no access to additional funds and is worried what might happen if
anything goes wrong.
Advise her?
A. She should form a private limited company

B. She should form a public limited company
C. She should form a limited partnership

A partnership is a relationship between two or more persons but is not a separate legal entity; but a
company exists as a formal and legal entity in its own right, it is separate from its shareholders
A. True
B. False
A sole trader is entitled to all the profits; while in a partnership the profit is shared among the partners
in an agreed profit sharing ratio; however in a company the entire profit belongs to the company and
some may be distributed to the members as dividends.
C. True
D. False
3. Explain the meaning and effect of limited liability?
A. The concept of Limited liability suggests that the liability of shareholders for the debts of a
corporation or limited company is limited to the value of their shares issued
B. The concept of Limited liability suggests that the liability of shareholders for the debts of a
corporation or limited company is limited to the present value of their shares
C. The concept of Limited liability suggests that the liability of shareholders for the debts of a
corporation or limited company is limited to the number of the shares
D. The concept of Limited liability suggests that the liability of the corporation for the debts of
the corporation is limited
4. A person possesses legal rights and is subject to legal obligations. In law, the term ‘person’ is used
to denote two categories of person.
An individual human being is a [A or B]; while companies and limited liability partnership are [C or
D].
A. Natural persons
B. Legal persons
C. Corporate persons
D. Artificial persons
5. Which of the following statements is legally true?
A. Members of companies limited by shares are required to pay the amount they guaranteed if
required when the company is wound up
101
B. Members of companies limited by guarantee are required to pay the amount they guaranteed
if required when the company is wound up
C. Members of companies limited by guarantee are required to pay the amount they guaranteed
as and when required by the directors
D. Members of companies limited by guarantee are required to pay the amount they guaranteed.
6. There is an important distinction between public companies and listed public companies. Listed
companies are those that [A or B] while private companies are [C or D] in this way.
A. Trade their shares on the stock exchange

B. Have an option to trade
C. Not entitled to sell
D. Entitled to sell

A multinational company is a company that produces and markets its products in more than one
country
A. True
B. False
A foreign company is one that may be in the form of a corporation, society, association or other body
incorporated outside Malaysia
C. True
D. False
8. Jack was a skilled worker in leather and ran a business as a sole trader making bridles, saddles and
other leather goods. He was advised by his solicitor to incorporate his business as a private limited
company. He took this advice, buying 98 of the 100 shares in Lush Leather Sdn Bhd. The company's
liabilities quickly exceeded its assets and the company became insolvent, owing RM87,000. Is Jack
liable to indemnify Lush Leather Sdn Bhd against its debts?
A. Yes, the veil of incorporation will be lifted to reveal the company as a sham
B. Yes, in practice there is no difference between Jack as sole trader of the business and Jack as
98% shareholder in the business
C. No, the debts belong to the company alone
D. No, the company's liability is limited and therefore the members' liability is also limited
9. With regard to the veil of incorporation that is said to exist between companies: As a general rule,
is the veil lifted in the case of companies that are part of the same group of companies?
A. Yes
B. No
Can a director who is also a shareholder ever be held liable for the debts of a private limited company?
C. Yes
D. No
10. In some cases, the courts lift the corporate veil, for example to ignore the incorporated nature of
a business altogether in those cases where it appears to be nothing but a sham. Are the courts likely
to lift the corporate veil in the following situations?
102
Where the creditors of a subsidiary company are unlikely to receive settlement of their debts even
though the holding company is financially very secure
A. Yes
B. No
Where a company is registered in Malaysia but all its members, except one, belong to Neverland, a
country with which Malaysia is at war?
C. Yes
D. No
11. Lee Air Farming Sdn Bhd was formed by Mr.Lee. The company’s main business was aerial
spraying. Mr.Lee owned all shares of the company except one and appointed himself as the governing
director of the company for life. The articles of association of the company made Mr.Lee the chief pilot
of the company at a salary arranged by Mr.Lee. The articles of association also provided that a
relationship of master and servant will exist between Mr.Lee and the company.
The company’s plane crashed while Mr.Lee was piloting the aircraft as part of the work and he was
killed on the job. Mr.Lee’s widow attempted to collect her dues under the Workman Compensation
Fund.
The main issue is whether Mrs.Lee would be able to collect her dues?
A. Yes, the company is a separate legal entity

B. Yes, because the company has a separate existence than its shareholders
C. Yes, because Mr.Lee was an employee of the company and the company and Mr.Lee are two
different entities in law
12. The claimant formed a one-man company and transferred his timber estate to it. However, he
continued to insure the estate in his own name. The timber owned by the company was lost in the fire.
Can the claimant claim the losses in his own name?
A. Yes, as essentially the company was run by him and he has an insurable interest in the subject
matter
B. Yes, as the company and the claimant were one and the same and as such should be able to
claim for the losses
C. No, as the company and the claimant were two separate entities in law and the claimant has
no insurable interest in the property
D. Yes, as the timber was insured under his name and therefore he has an insurable interest in
the subject matter
13. Two minority shareholders of a company claimed that the directors have fraudulently
misappropriated the assets of the company. They initiated proceedings on behalf of the shareholders
(other than the director) against the directors of the company.
Will the claim of the minority shareholders succeed?

A. The claim of the minority shareholders will be rejected, as if a wrong is done to the company
the proper plaintiff would be the company itself
B. The claim of the minority shareholders will be accepted, as if a wrong is done to the company
the proper plaintiff would be the company itself
C. The claim of the minority shareholders will be considered, as if a wrong is done to the
company the proper plaintiff would be the company itself
D. The claim of the minority shareholders will be rejected as they have no such rights of action
103
14. As an ex employee of the Gilford Motor Company, Mr.Horne was contractually prevented from
soliciting the companies customers. To get around this and to be able to solicit Gilford Motor
Companies’ customers, Mr.Horne incorporated a limited company in his wife’s name. Gilford Motor
Company brought legal action against him.
Would the corporate veil be lifted?
A. Yes, an injunction would be given

B. Yes, as Mr.Horne was using the company to hide his fraud
C. Yes, as Mr.Horne was perpetrating a fraud by incorporating s new company and the new
company is regarded as a cloak to hide this fraud
D. No, as the company and Mr.Horne are regarded as two different entities in law
104
1. In relation to company law:
(a) State the main differences between a non-exempt private limited company and an exempt private
limited company. (4 marks)
(b) Define a wholly-owned subsidiary. (2 marks)
[6 marks]
2.(a) Explain three advantages of incorporating a company under the Companies Act 2016, as opposed
to other forms of business organisation. (3 marks)
(b) Describe three characteristics of a private company as distinguished from a public company
(3 marks)
[6 marks]
3. Two months ago, Chitto, who owned a durian orchard, agreed to sell it to Mikko for RM300,000.
The transfer of the orchard was to be completed by the end of next month. Last week, Chitto,
discovered that other orchard lands in the vicinity of his orchard were fetching much higher prices
and changed his mind about selling the orchard to Mikko. He proceeded to set up a company, Teepu
Sdn Bhd (the company), of which he was the majority shareholder and managing director. His wife,
who is also a director, is the only other shareholder of the company.
He then transferred the orchard to the company. He then informed Mikko that he will not be able to
proceed with the sale of the property to her as it has been sold to a third party, i.e. the company, but
that he is prepared to pay damages for breach of contract.
Mikko wishes to sue both Chitto and Teepu Sdn Bhd for specific performance of the contract of sale
of the orchard.
Required:
(a) Discuss the veil of incorporation? (2marks)
(b) Advise Mikko whether she will be successful in her claim for specific performance.
(You are required to confine your answer to issues relating to company law.) (4 marks)
[6 marks]
105
THE COMPANY’S CONSTITUTION
1. Which of the following could comprise of the composition of the company’s constitution?
I. The powers of shareholders and directors

II. The rights of preference and ordinary shareholders
III. Resolutions of the company
IV. Agreements of the company
A. All of them
B. I, II and III only
C. II, III and IV only
D. I, III and IV only
2. Which of the following statements are true or false?
Special Resolutions are decisions passed by members which directly affect the company’s constitution
as they are used to introduce, amend or remove provisions in the constitution
A. True
B. False
Agreements made, for example between the company and members are also deemed as amending the
constitution.
C. True
D. False
3. Companies limited by guarantee must have a constitution by the Companies Act 2016.
A. True
B. False
C. Subject to the relevant company
A person who is not a shareholder but an employee whose contract is contained in the constitution
cannot obtain an injunction to prevent the constitution from being altered, but they may be entitled
to damages for breach of contract
A. True
B. False
An alteration may be void if the majority who approve it are not acting bona fide in what they deem
to be the interests of the company as a whole.
C. True
D. False

The constitution may be altered by a special resolution. The basic test is whether the alteration is for
the benefit of the company as a whole.
106
A. True
B. False
6. The constitution was altered to enable the directors to purchase at a fair price the shareholding of
any member who competed with the company in its business. The minority against whom the new
clause was aimed did carry on a competing business. They challenged the validity of the alteration on
the ground that it was an abuse of majority power to expel the member.
Advise the minority?
A. There was no objection to a power of expulsion by this means. It was a justifiable alteration if
made bona fide in the interests of the company as a whole.
B. The alteration was invalid as the power was meant to benefit the majority parties of the
company
C. The alteration is deemed to be invalid based on the facts of the case
D. The alteration may be deemed to be biased as it favours the majority over the minority
7. The company needed further capital. The majority who held 98% of the existing shares were willing
to provide more capital but only if they could buy up the 2 % minority. As the minority refused to sell,
the majority proposed to alter the constitution to provide for compulsory acquisition on a fair value
basis. The minority objected to the alteration.
Advise the minority?
A. The alteration was invalid because it enables the majority of the shareholders to compel any
shareholder to transfer his shares. The powers were too wide
B. The alteration was invalid since it was merely for the benefit of the majority.
C. The alteration was invalid since it was not done bona fide in the interests of the company; but
the majority
D. The alteration is valid as the board or directors are given the powers by way of the law.
8. The constitution of Sunway Tes Sdn Bhd contained a clause which stated that Jana would be the
company’s solicitor for 20 years and shall not be removed except on the grounds of misconduct. After
2 years, Jana was removed by the company as solicitor on the grounds other than on misconduct.
Which of the statements is or are accurate?

I. The removal of Jana is not valid
II. The removal of Jana is valid
III. The constitution cannot create a contract between the company and an outsider
IV. The constitution cannot create a contract between its members and the company
A. I, III and IV
B. II, III and IV
C. II and III
D. III and IV
9. The constitution required that (a) every director should be a shareholder and (b) the directors must
purchase the shares of any member who gave them notice of his wish to dispose of them. The directors,
however denied that a member could enforce the obligation on them to acquire his shares.
Advise as to the legal position in law?
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A. There was a contract between a member and member – directors in relation to their holdings
of the company’s shares in the constitution and the directors are bound it.
B. There was no contract between a member and member – directors in relation to their holdings
of the company’s shares in the constitution and the directors are not bound it.
C. There was a contract between a member and directors in relation to their holdings of the
company’s shares in the constitution and the directors are bound it.
D. There was a contract between a member and member and the directors are bound it.
10. [delete]
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1(a) The resolution was to alter the company’s constitution to empower the directors to compulsorily
purchase the shares of any member who runs a business which is in competition with the business of
the company. Mat, a member of ABC Bhd, runs a business which competes with the business of the
company. He seeks your advice on the validity of the said resolution.
Required:
Advise Mat? (3 marks)
(b) The company wishes to alter article 224; [Article 224: Any member wishing to sell his shares must
sell to any other member willing to buy them.] to the effect that any member wishing to sell his shares
must first offer them to Mr Kam or Mr Goh at a fair price. Kechik, a member, wishes to know the
procedure for the alteration of the constitution and whether there are any grounds on which he could
challenge the validity of the proposed alteration.
Required:
Advise Kechik? (3 marks)
[6 marks]
2(a). The third resolution was to alter the name of the company from ABC Bhd to ZZZ Bhd. Manis, a
member of ABC Bhd, has informed the company that she intends to take legal action to challenge the
validity of the resolution. She has pointed out that the constitution of the company contains a clause
that the name of the company is unalterable.
Required:
Advise Manis whether she is likely to be successful if she challenges the validity of the resolution.
(3 marks)
(b) Ainon and Banu wish to effect a change of name of the company.
Required:
Advise them whether there are any restrictions on the choice of company name and the legal
requirement for effecting a change of name of the company. (3 marks)
[6 marks]
3. The constitution of Simpel Sdn Bhd state, inter alia;
(i) 'Ahmad shall be the solicitor of the company.'
(ii) 'Any member wishing to sell his shares must sell to other members willing to buy.'
The company has appointed Baloo as its solicitor. Further, Chan, a member, wishes to sell his shares
to Dodol, a non-member, although Emma, a member, wishes to buy those shares.
Advise Ahmad and Emma as to their legal position. (6 marks)
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GENERAL QUESTIONS ON COMPANY LAW

At common law any transaction which is beyond the objects of the company is deemed to be ultra
vires and therefore void.
A. True
B. False
2. What is meant by the doctrine of constructive notice?

A. 3rd parties dealing with the company are deemed to have knowledge of the contents of the
registered public documents of the company
B. Contracting parties are deemed to have knowledge of the contents of the registered public
documents of the company
C. 3rd parties dealing with the company are deemed to have knowledge of the contents of the
documents of the company
D. 3rd parties dealing with the company are deemed to have knowledge of the memorandum and
articles of the company
3. Members rights are conferred by the Act, constitution as well as the general law. Which of the
following fall under the personal rights of the members;
I. Observance of the constitution of the company

II. To restrain the company from acting ultra vires
III. To attend and vote at general meetings
IV. To be treated fairly
A. All of them
B. I, II and III
C. II and III
D. I and III
4. By virtue of the Companies Act, every company, through their directors must attach a Director’s
report to every balance sheet laid before the company at its AGM. What are some of the details to be
included in this report?
I. Names of the directors in office

II. Principal activities of the companies
III. Net amount of profit and loss
IV. Action taken on bad debts
A. All of them
B. I, III and IV
C. II, III and IV
D. III and IV
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5. Every company must lodge an annual return, signed by a director, manager or secretary with the
Registrar on the anniversary date of the registration of the company. What are the matters to be
stated in the annual return?
I. A company having a share capital must attach a copy of its last audited balance sheet and
Profit and Loss account, unless it is an exempt private company
II. Particulars of the secretaries, directors and managers at the date of the return and a list of
members must be included.
III. A company having a share capital must attach a copy of its last audited balance sheet and
Profit and Loss account.
IV. Particulars of the secretaries, directors and managers at the date of the return
A. All of them
B. I and II
C. II and III
D. I and IV
6. Is it true that every company must ensure that the minutes of all proceedings of general meetings
and all meetings of its directors and managers are entered in the books kept for that purpose within
14 days of the date upon which the relevant meeting was held.
A. Yes
B. No
C. Maybe
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PART E - CAPITAL AND FINANCING OF COMPANIES
1. SHARE CAPITAL
1. Class rights are those rights, if any, that are attached to all shares in a company irrespective of their
type.
A. True
B. False
C. Maybe
2. In the absence of any express provision in the company's constitution, how are class rights varied?
A. By an ordinary resolution of the relevant class

B. By a special resolution of the relevant class
C. By the directors
D. By an alteration of the constitution
3. Where application is made to the court to have a variation of class rights cancelled, can the court,
instead of cancelling the variation:
Confirm the variation as made?

A Yes
B No
Modify the terms of the variation?

C Yes
D No

The ‘equity share capital' of a company is the issued share capital excluding any part of it that, neither
as respects dividends nor as respects capital, carries any right to participate beyond a specified amount
in a distribution.
A True
B False
The amount of a company's loan capital is the amount of money the company has borrowed.
C True
D False
5. Atlas Bhd has ordinary and preference shares. The constitution provide that the preference shares,
carry a 10% preference dividend and that these shareholders have the right to appoint a consultant
who is entitled to attend board meetings and speak on behalf of the preference shareholders. Only the
preference shares these rights
Is the right to receive a 10% dividend a ‘class right’.
A. Yes
B. No
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Is the right to appoint a ‘consultant’ a class right?
C. Yes
D. No
6. Following a variation of class rights, the holders of a certain percentage of the issued shares of the
class in question may apply to the court to have the variation cancelled. What is that percentage?
A. 20%
B. 15%
C. 10%
D. 5%
7. Spencer Sdn Bhd had two classes of ordinary shares, RM1 shares and 50sen shares; each share
carrying one vote. A resolution was passed to subdivide each RM1 share into two 50sen shares, thus
doubling the votes of that class. Has there been a variation of the class rights of the 50sen shares?
A. Yes, because the voting rights attached to the 50sen shares have been affected
B. Yes, because other shares have been created that have the same nominal value and voting
rights as the 50sen shares
C. No, because the 50sen shares still carry one vote per share
D. No, because rights attaching to a class of shares cannot be varied
8. Sunway Tes Sdn Bhd is a private limited company, limited by shares with 100 shares of RM1 each.
Is Sunway Tes Sdn Bhd able to;
Subdivide each of its RM1 share into 10 10sen shares?
A. Yes
B. No
Consolidate pairs of 50sen into RM1 shares?
C. Yes
D. No
9. Redeemable preference shares may not be redeemed;
I. Except out of profits which would be available for dividends

II. Unless they are fully paid up
III. Except out of proceeds of a fresh issue of shares made for purposes of redemption
IV. Except out of the capital provided if it meets the solvency tests
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and I
10.When a discretion is given to directors to refuse to register a transfer of shares, this power must
be used bona fide in what they consider is in the interests of the company; however if the directors
refuse to transfer they must the parties within ____ months of the date the application is made.
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A. One
B. Two
C. Three
D. Four
11. DELETED
12. A forged transfer is [A or B] and [ C or D] can pass under it.
A. Null and void

B. Valid
C. No title
D. A title
The power to transfer shares must be exercised within a reasonable time of one month, otherwise the
right of refusal may be lost.
A. True
B. False
The constitution conferring discretion on directors to refuse to register a transfer of shares do not
apply when shares are transmitted upon the death of the shareholder.
C. True
D. False
14. The term capital is used in a variety of meanings. Capital means the amount invested in the
company by the promoters for carrying on its business. The company may raise capital in many ways.
Is the above statement true?
A. Yes
B. No
C. Maybe
15. A share may be defined as _____________.
A. A share is an interest in the capital of the issuing company measured by a sum of money for
the purpose of liability in the first place and interest in the second
B. A share is the interest of a shareholder in the company measured by a sum of money for the
purpose of liability in the first place and interest in the second
C. A share is the interest in the company measured by a sum of money for the purpose of liability
in the first place and interest in the second
D. A share represents a set of mutual covenants which all shareholders enter into
16. Which of the following is NOT a type of share capital under the Companies Act?
A. Authorised capital
B. Issued capital
C. Reserve capital
D. Share capital
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17. Which of the following is NOT one of the features of an ordinary share?
A. The holders of ordinary shares are entitled to exercise their voting rights in the general
meeting
B. The holders of ordinary shares are entitled to fixed dividends as a general rule
C. The holders of ordinary shares have no priority in return of capital as a general rule
D. The holders of ordinary shares share in the proceeds of liquidation if there is a surplus
18. A company has issued 5% cumulative preference shares. The company cannot pay any dividend to
the shareholders in one year. Their claim for dividend will be carried forward to next year. In that
year the company could not pay dividends again. In the third year the company decided to pay.
How much is the shareholders’ entitlement?
A. 5%
B. 10%
C. 15%
D. 0%
19. DELETED
20. Which of the following is NOT a feature of preference shares?
A. They are less risky than ordinary shares in that they carry a guaranteed dividend
B. They have the right to receive the dividend before the ordinary shareholders
C. They have the potential for repayment of capital before ordinary shareholders in the event of
winding up
D. They have the right to share in the surplus profits of the company in the event of liquidation
115
1(a) State and explain two rights which may be given to preference shareholders. (3 marks)
(b) (i) Explain how a company may vary the class rights attached to a class of shares, assuming that
the company has adopted the constitution and the class rights are stated therein. (3 marks)
(6 marks)
2. Yusof, a shareholder in Happy Trading Sdn Bhd, a small private limited company having only 10
shareholders, wanted to transfer his shares to his friend Hanisah. However, last week the directors of
the company informally indicated to him that they will not approve the transfer, relying on a clause
in the constitution which states: 'The directors may in their absolute and uncontrolled discretion
refuse to register a transfer of shares'.
Yusof wishes to know:
(i) Whether it is legal for companies to restrict members' rights to transfer their shares. (2 marks)
(ii) Whether there is any time limit within which shareholders have to be notified of the refusal to
register the transfer. (2 marks)
(iii) Whether it is possible to challenge the exercise of the discretion by the directors.
(2 marks)
Advise Yusof. [6 marks]
3. The constitution of ABC Sdn Bhd provide, among other things, that preference shareholders shall
have the right to a fixed dividend of 10% per annum and a voting right of one vote per share on all
matters at general meetings of the company. The company has previously issued 2 million preference
shares. It now proposes to make a second issue of 1 million preference shares carrying the same
dividend and voting rights.
The present holders of preference shares are unhappy with this proposed issue of preference shares
and wish to challenge it on the ground that it amounts to a variation of their class rights. They also
wish to know the procedure for variation of class rights.
Required:
(a) Advise the preference shareholders on the procedure for variation of class rights and whether the
proposed issue of preference shares would amount to a variation of their class rights.
(4 marks)
(b) If the proposed second issue of preference shares was to rank pari passu with the first, explain
whether this would amount to a variation of the preference shareholders’ class rights.
(2 marks)
[6 marks]
116
2. LOAN CAPITAL
1. Does a company need to obtain the consent of the appropriate chargeholder if it wishes to deal with,
or dispose of, assets that are subject to a:
Fixed charge?
A. Yes
B. No
Floating charge?
C. Yes
D. No
2. Which of the following events will cause a floating charge to crystallise?
(i) The liquidation of the company

(ii) The appointment of a receiver (in respect of goods subject to the charge)
(iii) The cessation of the company's business
A. (i) only
B. (ii) only
C. (i) and (iii) only
D. (i), (ii) and (iii)
3. With regard to the creation of a floating charge:
Can a charge be construed as a floating charge in the absence of a term that describes it as such?
A. Yes
B. No
If both parties to a charge agree that it shall be a floating charge and describe it as such, could the
charge be a fixed charge nonetheless?
C. Yes
D. No
The certificate of registration issued by the Registrar of Companies, once a charge is registered, is
conclusive evidence that the registration requirements have been satisfied.
A True
B False
Failure to register a charge is an offence punishable by a fine and/or imprisonment.
C True
D False
117
A floating charge created over the ‘undertaking and assets’ of a company applies only to current assets
at the time of the charge
A. True
B. False
A floating charge is converted into a fixed charge upon crystallisation
C. True
D. False
6. Every charge entered into by the company has to be registered. Within how many days must
registration take place, beginning on the day after the charge was created?
A. 14 days
B. 21 days
C. 30 days
D. 28 days
7. Mariam is the company secretary of Swansong Sdn Bhd and seeks your advice. She has failed to
register a charge entered into by Swansong Sdn Bhd within the prescribed period laid down by the
Companies Act and wants to know whether the charge is still valid. What is your advice?
A. The charge is void against any liquidator or administrator but not the charge or any other
creditor
B. The charge remains valid but Swansong is liable to a fine
C. The charge remains valid but the charge holder has the option of demanding immediate
repayment
D. The charge is void against any liquidator, administrator or creditor
8. A characteristic of a floating charge is that;
It is a charge over a class of assets present and future
A. Yes
B. No
It is a charge over a class of assets, which, in the ordinary course of business of the company will
change;
C. Yes
D. No
9. What is meant by ‘crystallisation’ of a floating charge?
A. It occurs when a floating charge is converted into a fixed charge

B. It is the transformation of a floating charge into fixed charge over assets within the class of
assets
C. It is the charge who will convert the floating charge to a fixed charge
D. The transformation of another charge will cause the event to occur
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10. What are the events that may give rise to ‘crystallisation’?
I. The liquidation of a company

II. Cessation of business of a company
III. Active intervention by the chargee
IV. When the charge document provides for it
A. All of them
B. None of them
C. I, III IV
D. I, II and III
11. A company created a charge over book debts. The company retained the freedom to pay the
proceeds into its bank account and use them in the ordinary course of business. What kind of a charge
in this?
A. Fixed charge
B. Floating charge
Would your answer have differed if the company could not operate the account without the consent
of the bank?
C. Yes
D. No
12. Any floating charge on the undertaking or property of the company created within [ A or B] from
the commencement of winding up shall be [C or D]unless the company is solvent after the creation
of the charge.
A. 6 months
B. 12 months
C. Void
D. Valid
13. The bank had a charge over the company’s entire property. It was termed as a fixed and specific
mortgage and charge. However, the bank permitted the company to use inventory sales to maintain
the viability of its enterprise. The bank also permitted the company to sell inventory to pay wages
and payroll deduction obligations.
What is the name given to such a charge?

A. Fixed charge
B. Floating charge
C. A mortgage
D. A general charge
14. Which one of the following answers gives an INCORRECT picture of fixed and floating charges?
A. A fixed charge followed by another fixed charge – the fixed charge created first shall have
priority over the subsequent fixed charge
B. A floating charge followed by a fixed charge – the fixed charge shall have priority over the
floating charge
C. Floating charge followed by another floating charge – the floating charge created first shall
have the priority over the subsequent floating charge
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D. Fixed charge followed by a floating charge and then another fixed charge – the floating charge
will have the priority over the fixed charges
15. Which one of the following is NOT a difference between a fixed and floating charge?
A. A fixed charge can be created by any person on any asset owned by him; while floating charges
can be created only by an incorporated body
B. A fixed charge can be created by any person on any asset owned by him; while floating charges
can be created only by an unincorporated body
C. In the case of the fixed charge, a company cannot deal with the assets charged but in the case
of a floating charge the company can deal with the assets charged
D. A fixed charge is normally created on fixed assets, but a floating charge is normally created
on assets which are generally in the changing stage (for example book debts)
120
1. Two months ago Nomunny Sdn Bhd, a trading company, borrowed RM1,000,000 from Kashmo
Bank. This loan was secured by a fixed charge on the factory building owned by the company and a
floating charge over all the other assets and undertaking of the company. The bank has recently
appointed a new manager. He discovers that the charges have not been registered with the Registrar
of Companies. Further, he is not familiar with floating charges.
Advise him on the following matters:
(i) What is a floating charge? (2 marks)
(ii) Do the fixed and floating charges have to be registered with the Registrar of Companies?
If so, by whom should it be registered and what is the time limit for such registration as
specified in the Companies Act 2016? (2 marks)
(iii) What is the consequence of non-registration of registrable charges? (1 mark)
(iv) Is it possible to register the charges after the time limit for registration has expired?
(1 mark)
[6 marks]
2. In relation to company law:
(a) explain and distinguish between a fixed charge and a floating charge; (2 marks)
(b) state two types of company charges that require registration under the Companies Act 2016; and
(2 marks)
(c) explain the consequences of non-registration of a registrable charge, under the Companies Act
2016. (2 marks)
[6 marks]
3. In the context of company law:
(a) What is a debenture? (2 marks)
(b) State FOUR DISADVANTAGES of the floating charge as a security to a lender.

(4 marks)
[6 marks]
121
CAPITAL MAINTENANCE
1. The capital of a company must be held for the payment of the company’s debts and may not be
returned to members except under procedures which safeguard the interests of the creditors; that the
price that members of a limited company have to pay for the protection of limited liability. However,
the capital may be returned in some ways.
Which of the following represents some of the ways?
I. Under a winding up
II. Reduction of share capital
III. Dividends payable out of distributable profits
IV. A premium obtained out of the allotment of shares
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
2. What is meant by the doctrine of ‘capital maintenance?
A. It is the fundamental principle of law, that companies should not be allowed to make payments
out of capital to the detriment of the company’s creditor
B. It is the fundamental principle of law, that unlimited companies should not be allowed to make
payments out of capital to the detriment of the company’s creditor
C. It is the fundamental principle of law, that all forms of business organisations should not be
allowed to make payments out of capital to the detriment of the company’s creditor
D. It is the fundamental principle of law, that limited companies should not be allowed to make
payments out of capital to the detriment of the company’s creditor
3. It was established in the case of _____ that the purpose was to ensure that the company’s share
capital is properly maintained. Any purchase of a company of its shares will whittle down the
company’s capital.
A. Ooregum Gold Mining v Roper

B. Trevor v Whitworth
C. Matang Holdings v MCA
D. Hardings v Spencer
4. Can a company issue shares at a discount as the common law rule is towards upholding the doctrine
of maintenance of capital.
A. Yes
B. No
C. Discretion of court
D. Maybe
5. A company may issue shares at a premium and if it does so, the premium must be reflected in the
share premium account. The share premium can only be made use of in very specific circumstances.
Which of the following specify the above circumstances?
I. In paying up bonus shares to be issued to members

II. In paying up unpaid balances on shares previously issued
III. In paying up shares to be issued as dividends
IV. In paying cash dividends for the shareholders
122
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
6. Can a public company buy back its own shares [A or B], if so what is the rationale, if any for the
purchase [C or D]?
A. Yes, by virtue of Section 127 Companies Act 2016

B. Yes, by virtue of Section 67(1) Companies Act 2016
C. It may help the majority shareholders to retain control of the company while stabilising share
prices on the Stock Exchange and create a healthy environment for capital market
D. It may help the minority shareholders to retain control of the company while stabilising share
prices on the Stock Exchange and create a healthy environment for capital market
7. A company may reduce its capital if the conditions under Section 116 of the Companies Act are
satisfied; in particular the act stipulates 3 main orders;
Which of the following comprise of the three main orders?
I. By extinguishing or reducing the liability on any shares in respect of share capital not being
paid up
II. By cancelling any paid up capital which is lost or unrepresented by the available assets
III. By paying off any paid up share capital which in excess to the needs of the company
IV. By applying the share premium account for the providing of funds in event of any shortage
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
8. Where application is made to the court for confirmation of a reduction of capital, the court may
require that creditors should be invited by advertisement to state their objections.
In which of the following ways can the need to advertise be avoided?[name 2 ways]
A. Paying off all the creditors before the application to the court
B. Producing a statement/document signed by the directors stating that the company’s ability
to pay its debts
C. Producing a guarantee from the company’s bank that its existing debts will be paid in full
D. Renouncement by existing shareholders of their limited liability in relation to existing debts
9. A listed company generally pays two dividends in a year. A [A or B] is based on interim profit
figures; while [C or D] is based on the annual accounts and approved at the Annual General Meeting.
A. Interim dividend
B. Final dividend
C. Final dividend
D. Interim dividend
A member may obtain an injunction to restrain a company from paying unlawful dividends
123
A. Yes
B. No
The company can recover from members an unlawful dividend if the members knew or had reasonable
grounds to believe that it was unlawful
C. True
D. False
11. The company passed a resolution to pay dividends on ordinary shares at a general meeting.
Does the company have such powers?
A. The company had no power to declare a dividend because this is a decision to be made by the
shareholders
B. The company had no power to declare a dividend unless it is first recommended by the Board
of Directors
C. The company had the power as it is stated in the Table A articles of the Fourth Schedule
D. The company has the power as it is stated in the Articles of Association of the company
12. DELETED
13. DELETED
14. If a dividend is paid otherwise than out of the distributable profits of the company, the directors
and the shareholders may be involved in making good the unlawful distribution.
In which of the cases mentioned below, would the directors NOT be liable for the unlawful dividends
A. Recommend or declare a dividend which they know is paid out of capital

B. Declaring or recommending a dividend without preparing the accounts
C. Declaring or recommending a dividend by making a mistake or misinterpreting the accounts
of the company
D. Declaring or recommending a dividend after honesty relying on the facts and figures which
reasonably disclose an apparent distributable profit out of which the dividend could be
properly paid
15. What is the penalty imposed by law for directors for a payment of unlawful dividends to the
shareholders?
A. Imprisonment of 5 years or a fine of RM3,000,000 or both

B. Imprisonment of 10 years or a fine of RM250,000
C. Imprisonment of 15 years or a fine of RM25,000 or both
D. Imprisonment of 10 years or a fine of RM25,000 or both
16. Which of the following statement is NOT a true representation of the law?
A. A member may obtain an injunction to restrain a company from paying an unlawful dividend
B. Members voting in the general meeting can authorise the payment of an unlawful dividend
C. The company can recover from members an unlawful dividend if the members knew or had
reasonable grounds to believe that it was unlawful
D. Members cannot release the directors from their liability to pay the dividends back to the
company in the event of an unlawful payment
124
1. Andy, Bachan, Chin and Din are the directors of Aybisidi Furniture Sdn Bhd (the company). They
are also the only shareholders of the company holding equal shares. Din is in urgent need of money
and wishes to sell off his shares to Emma. However, the others do not want an outsider to become a
member of the company. Instead, they propose to assist Din in one of the following ways:
(i) To make the company itself purchase Din's shares.

(ii) To make the company give a loan to Andy to enable him to purchase Din's shares.
(iii) To allow Andy to take a loan from Kwikdraw Bank. with the company providing
security in the form of a fixed charge over its land in favour of Kwikdraw Bank.
The directors seek your advice as to whether they may legally execute all or any of the above
proposals.
Advise them on the following;
(a) Can the company give financial assistance? (2 marks)

(b) Are there any exceptions to the above rules (2 marks)
(c) What are the consequences of the contravention (2 marks)
[6 marks]
2. DELETED
3. Beta Bhd is a public listed company. Anas, Baloo, Charles and Darul are its executive directors; with
Anas being its managing director. The company has recently faced some cash flow problems requiring
the company to borrow quite heavily from several banks. This has caused the company's share prices
on the stock exchange to fall substantially. All the directors are confident that the company will
recover in the near future. They wish to purchase as many shares as possible on the stock exchange
in their own names, partly to make a profit for themselves, and partly with the intention of arresting
the fall in share prices and to restore public confidence in the company.
However as they do not have sufficient money to purchase the shares; they are contemplating the
following possibilities:
(i) Borrowing, on behalf of Beta Bhd; a sum of RM3 million from Lenfas Bank and subsequently
borrowing the same amount from the company so as to enable them to purchase the shares in their
own names.
(ii) Borrowing in their own names a sum of RM3 million from Lenfas Bank on the strength of security
provided by Beta Bhd. Advise the directors:
(a) What is a ‘share buy back’ (2 marks)
(b) Are there any advantages for the company to effect a share back (2 marks)
(c) Alternatively, whether they can make the company itself purchase and hold the shares and later
sell them at a profit for the company's benefit. (2 marks)
[6 marks]
4. ABC Bhd was formed in January 1999 with an authorised capital of RM2 million. It has an issued
capital of RM I million made up of one million ordinary shares of RM I each The company has not
been doing well and the share value currently stands at only 80 sen per share. The company requires
more capital and proposes to issue 500,000 preference shares of RM I each at a discount of 20%.
125
ABC Bhd also wishes to be advised in respect of the following questions:
(i) In what circumstances can it issue shares, which may later be redeemed by it? (2 marks)
(ii) What are the conditions, if any, which have to be satisfied in order to effect a redemption of the
shares? (4 marks)
[6 marks]
5. In recent years, Uphill Bhd has enjoyed exceptional prosperity as a housing developer. It now has
capital which is in excess of its needs. Last week, the board of directors of the company resolved to
return the excess capital to its members on a pro-rata basis. The board wishes to implement the
resolution next week.
EZ bank, a creditor of Uphill Bhd, is unhappy with the board’s resolution and has written to the
company objecting to its proposal to reduce its capital by returning the excess capital, stating that the
company had not followed the procedure which is required under the Companies Act 1965.
Required:
Advise the board
(i) What are the general conditions to be satisfied before a company can effect a share reduction
exercise (2 marks)
(ii) What is the protection given to EZ Bank and is their objection valid (4 marks)
[6 marks]
6. Deevi Denz Sdn Bhd was incorporated as a private limited company In January 1995. Its main
business is the manufacture of steel and steel products.
Since its inception, the company has suffered losses every year except for the year 2000. Its
accumulated losses of circulating capital till the end of 1999 amounted to RM25 million. Losses by
way of depreciation to plant and machinery amount to RM5million. However, in the year 2000 the
company made a turnaround and made a trading profit of RM30 million. Further its land at Sepang,
which was originally bought at a cost of RM2 million, has been revalued and sold for RM10 million.
The board of directors proposes to utilise all the trading profit of RM30 million as well as the profit
of RM8 million on the sale of the land to pay a cash dividend to its shareholders. The constitution of
the company states, 'no dividends shall be paid except out of the profits of the business of the company'.
(a) Advise the Board of Directors whether they may legally proceed with their proposal.
(4 marks)
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PART F- MANAGEMENT, ADMINISTRATION AND REGULATION OF COMPANIES
DIRECTORS
1. Which of the following terms describes someone who acts as a director of a company but who has
not been formally appointed as such?
A. An alternative director
B. A de facto director
C. A shadow director
D. A non-executive director
2. Munir has entered into a series of transactions on behalf of a company of which he has been
appointed a director. It has now come to light that his appointment was defective.
What is the likely impact of the defective nature of Munir's appointment on these transactions?
A. Their validity is not affected

B. They are rendered void
C. They are rendered voidable at the option of the party affected by the relevant action
D. They remain valid but the director is liable to indemnify the company or third party
against any loss
3. George is the finance director of Goldrush Sdn Bhd and has a service contract with the company.
He owns 20% of the shares in the company, the remainder being owned by Bernice (65%) and Ellis
(15%). Bernice wishes to appoint Holly in place of George.
Does Bernice need Ellis to vote with her in order to remove George as a director?
A. Yes
B. No
Will George be able to seek any redress under his service contract, provided he is removed by the
requisite majority?
C. Yes
D. No
4. Under company law, there are several ways in which the members can exercise control over the
directors. Which of the following is NOT one of those ways?
A Members can remove directors from office by ordinary resolution

B Members are required to give approval of directors' service contracts guaranteed for over
two years
C Members are required to give approval of any borrowing by directors
D Members may re-allocate powers by altering the articles
5. Mark is 18 and a first time director of First Flights Sdn Bhd, a company that offers training to
glider pilots. When he is sent an insurance proposal for the next 12 months he asks his secretary to
complete the details. He then signs it off by way of acceptance. When a claim is made on the insurance,
the insurance company refuses to pay out because one of the questions on the form had been answered
incorrectly. Is he in breach of his duty as a director of First Flights Sdn Bhd?
127
A Yes
B No
Is his lack of experience relevant in determining if he is in breach of any duty?
C Yes
D No
6. The minimum age limit for a director is ______
A. 18
B. 21
C. 70
D. 71
7. A call on shares was disputed by some shareholders on the grounds that a director had at the
relevant time, parted with his share qualification shares.
Is the call deemed to be valid in law? [A or B]
A. Yes
B. No
Can a director who is deemed to be an undischarged bankrupt in law, ever act as a director of a
company? Is there a total bar?
C. Yes
D. No
8. A director of a private company may be removed by way of an [A or B]; while a director of a public
company may only be removed by [C or D] before the expiry of the term of office.
A. Ordinary resolution
B. Special resolution
C. Ordinary resolution subject to special notice
D. Special resolution subject to special notice
9. Zamri, a member of ABC Sdn Bhd, approaches you for advice in respect of the following matter that
has occurred in the company. He said that in June this year, Miss Lee, one of the directors, retired
from the company. The company, following a decision taken at a meeting of the board of directors,
granted her an ex-gratia payment of RM300,000.
Zamri wants to know whether there has been any contravention of the Companies Act 2016 in respect
of the aforesaid transactions. [A or B]
A. It is not lawful for a company to make to any director any payment by way of compensation
for loss of office as an officer of that company or its subsidiary or as consideration for or in
connection with his retirement from office
B. It is lawful to make payments for any bona fide payment by way of pension or lump sum
payment in respect of past services and any payment to a director pursuant to an agreement
between the company and the director made before he became a director and as consideration
for agreeing to serve as a director; however all this only apply under the exceptions
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Would the company be able to recover the money in the event of a contravention? [C or D]
C. Yes, because Ms Lee is a constructive trustee

D. No, because she is justified in keeping the compensation
10. What is the meaning of a ‘connected person’ in law?
I. A member of the family

II. A body corporate associated with the director
III. A trustee under which director or member of his family is a beneficiary
IV. A partner of that director or a partner of a person connected with that director
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
11. What are the main forms of disclosure of interests under the Companies Act?
I. Disclosure of interests
II. General duty to disclose
III. Disclosure of accounts
IV. General disclosure
A. All of them
B. I, II and III
C. II, III and IV
D. I,III and IV
12. The newly minted Section 223 reflects the law acting in favour of third parties; which of the
following reflect the new position of the section as to the meaning of the word ‘substantial portion’?
I. Its value exceeds 25% of the total assets of the company or

II. The net profits after the deductions attributed to more 25% of the total net profit of the
company or
III. Its value exceeds 25% of the issued share capital of the company whichever is higher
A. All of them
B. None of them
C. I and II
D. II and III
13. There were four shareholders who were also directors. Three of them negotiated a contract on
behalf of the company but later diverted the contract to another company formed by them. When the
fourth director protested, resolutions were passed by the three of them as shareholders approving the
transaction.
Would the court be in favour of the act of ratification? Can the company get back the benefit of the
contract? [A or B]
A. The court will hold that the three directors had breached the duty to avoid conflict of duty
and personal interest. The purported ratification was not valid as it constituted a fraud on the
minority. The company was entitled to get back the benefit of the contract
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B. The court will not hold that the three directors had breached the duty to avoid conflict of duty
and personal interest. The purported ratification was valid. The company was not entitled to
get back the benefit of the contract
As a general rule, would the act of the three directors be justified under the Companies Act 2016? [C
or D]
C. Yes
D. No
14. What is the ‘business judgment rule’ in the context of directors of a company?
A. The business judgment rule, is a rule prevents the courts from questioning the merits of
business decisions made by company directors.
B. The business judgment rule is a form of ‘safe harbour’ provision in that if the decision had
been made within the boundaries of that rule, the director will be ‘safe’ from liability
C. The business judgment rule, is a rule which prevents the courts from questioning the merits
of business decisions made by company directors. It is a form of ‘safe harbour’ provision in
that if the decision had been made within the boundaries of that rule, the director will be ‘safe’
from liability
15. Directors preferred one take-over bid as opposed to another, which was supported by the majority
shareholding. In order to defeat the bid they disliked, the directors issued new shares, effectively
reducing the existing majority to a minority holding in the company, incapable of blocking their
preferred take-over bid.
Were the directors abusing their powers?
A. Yes, there was a clear abuse of powers and the directors were not acting in the best interest
of the company
B. Yes, there was a clear abuse of powers as the directors had usurped the powers of the company
C. No, there is no abuse of powers as it is within their powers to do as they are the stewards who
lead the company
D. No, there was no abuse of powers as they were using the business judgment rule
16. A company owned a cinema house. The directors of a company formed and financed a subsidiary
of the company to purchase two other cinema houses. The directors sold both the companies at profit
to a third party. The purchaser brought an action against the directors stating that they have breached
their fiduciary duties.
Were they in breach of duty?
A. Yes, they were in breach of their fiduciary duties as they had profits at the expense of the
company for their own benefit
B. Yes, they were in breach of their fiduciary duties as directors cannot make a profit out of their
position unless they have disclosed it to the company in general meeting and have obtained
their consent
C. No, they were not in breach of their fiduciary duties as they are within the implied powers of
the board of directors.
D. No, they were not in breach of the fiduciary duties because they had gathered their powers
from the company in general meeting
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17. The directors of Bamford allotted 500,000 unissued shares to a third party to thwart a take-over
bid. A month after the allotment a general meeting was called and an ordinary resolution was passed
ratifying the allotment, [the holders of the newly issued shares not voting]. The claimants (minority
shareholders) alleged that the allotment was not made for a proper purpose.
A. The ratification was valid and binding as the allotment was good as it is within their powers
B. The ratification was valid as even though there was a breach of fiduciary duty, this act has
been validated by an ordinary resolution passed at the general meeting
C. The ratification was not valid even though this act has been validated by an ordinary
resolution passed at the general meeting
18. C was the managing director of the company which provided consultancy services to gas
companies. A gas company was unlikely to award a particular contract to a company but C realised
that, acting personally, he might be able to obtain it. He told the board of his company that he was ill
and persuaded then to release him from his service agreement. On ceasing to be a director of the
company, C obtained the contract for his own behalf. The company sued him to recover the profits of
the contract.
Is C accountable for the profits?
A. Yes, he will be accountable for the profits

B. No he will not be accountable for the profits
C. It is left to the discretion of the courts whether he would be liable
19. Hudson, the managing director of the company took up mining exploration licences in
circumstances where the company was financially unable to do so. He made a full disclosure of his
intention to take up the licences personally and the company gave him the consent. He then resigned
as the managing director. He later sold the rights to an American company and earned royalties.
Could he keep the profits?
A. Yes as he had made a full disclosure and consent was given

B. Yes as he was not hiding anything from the company
C. Yes as he was not stealing anything from the company
131
1. Two Australians, Alan and Barry wish to set up a company in Malaysia, called 'Alabar Trading Pty
Sdn Bhd.' They are to be the first directors of the company. The proposed shareholders of the company
are themselves and two Malaysians, Chandra and Daud. They are to be equal shareholders.
Advise Alan and Barry as to the following matters:
(a) Whether there are any restrictions under the Malaysian Companies Act 2016 as to who may
or may not be appointed as directors of a company. (5 marks)
(b) Whether they qualify to be appointed directors, as proposed? (1 mark)
[6 marks]
2. ABC Sdn Bhd wishes to appoint the following persons as directors:
(i) Jessie, a retired professor of corporate governance at the University of Corporate Values, in South
Africa. She is a citizen of South Africa and currently resides there. (3 marks)
(ii) Joe, a Malaysian, who had been declared bankrupt by the High Court six years ago. He has a
reputation for being an excellent corporate manager and has a track record of reviving and
transforming ailing companies into very profitable ones. (3 marks)
[6 marks]
Required:
Advise ABC Sdn Bhd whether there would be any legal obstacles to the appointment of Jessie and Joe
as directors of ABC Sdn Bhd.
3. Joe comes to see you with the following problem. He says:
‘I have been a director of Bagus Selalu Bhd for the last six years. In December last year, I was
appointed as the managing director of the company for a period of three years, ending December 2009.
There are six other directors on the board. The company has been doing very well under my
management.
However, since my appointment, I have always received objections and criticisms from two of the
directors, Bee Sing and Istrabella, who are strong supporters of Azman, the former managing director
of the company who is now 75 years old.
Last week, I was informed by the chairman of the board that following a board of directors’ meeting
(of which I had not been given notice) I have been removed as a director of the company with
immediate effect. A letter to that effect, signed by the chairman, was handed to me. No reason has
been given for the removal.
I was also informed that the former managing director, Azman, has been re-appointed as the managing
director. I wish to know whether I could challenge the legality of my removal as well as the
appointment of Azman as managing director. I think he is not qualified to be appointed as a director.
I also wish to know whether, in the event the company had the right to remove me from the board, I
am entitled to damages from the company for breach of contract.’
Required:
Advise Joe.
a) Is Joe’s removal justified under the Companies Act? State the procedure for removal of a
director of a public company (4 marks)
b) Is Joe entitled to damages for breach of contract? (2 mark)
[6 marks]
132
4. Serena is a non-executive director of two companies, Lotsamunny Bhd, a large public company and
Minibiz Sdn Bhd, a small private company which has only five shareholders. Serena urgently requires
a loan of RM150,000, partly for meeting medical expenses of her mother, who requires an urgent
operation, and partly to finance the purchase of a car for her husband.
Serena is contemplating obtaining a loan from either of the two companies.
Required:
Advise Serena under the Companies Act the following issues;
(a) The legality of the giving of loans to directors (1 mark)

(b) The three main exceptions to the general rule (3 marks)
(c) Whether the answer would differ if Minibiz Sdn Bhd is an exempt private company
(2 marks)
[6 marks]
5. Jack and Jill are the directors of J-J Sdn Bhd, a company which specialises in the manufacture and
sale of perfumes and aromatic oils. The company is quite profitable and its products are in much
demand. Recently, Snowyte, a member of the company, discovered the following:
Last month, Jack and Jill bought a piece of land for J-J Sdn Bhd from Jenny, for RM 300,000. Snowyte
complains that the members of the company were not notified of the purchase. She has also learnt that
Jenny is Jill’s sister-in-law.
Snowyte wishes to know whether Jack and Jill have breached any of the provisions of the Companies
Act 1965
(a) As to the purchase of the land (1 mark)

(b) What is meant by the term ‘requisite value’? (1 marks)
(c) What are the consequences of breach? (2 marks)
(d) Is Jenny a ‘connected person’? (1 mark)
(e) What is your advice to Snowyte? (1 mark)
[6 marks]
6. XYZ Sdn Bhd (XYZ) recently entered into a contract with LMN Building Contractors Sdn Bhd
(LMN). This was for the building by LMN of a factory for XYZ. The decision to award the contract
to LMN was made three weeks ago at a meeting of the full board of directors of XYZ.
One of the directors of XYZ, Ben, is also a substantial shareholder of LMN. Ben did not disclose this
fact to XYZ, or its board. A further fact was that although Ben was present at the board meeting at
which the decision to award the contract to LMN was made, he remained silent throughout the
meeting and did not vote on the matter.
Yesterday XYZ discovered Ben’s shareholding in LMN and seeks your advice as to whether it may
avoid the contract with LMN.
Advise XYZ as to the following issues;

(a) What is the main issue in this case? (2 marks)
(b) What is the common law case that reflects the law in this case study (2 marks)
(c) What provision of the Companies Act is affected? (1 mark)
(d) What is your advice to the company XYZ (1 mark)
[6 marks]
133
7. Jack and Jill are the directors of J-J Sdn Bhd, a company which specialises in the manufacture and
sale of perfumes and aromatic oils. The company is quite profitable and its products are in much
demand. Recently, Snowyte, a member of the company, discovered the following:
Jack has set up a business in partnership with his brother, Tom. Their firm, J T Brothers, also deals
in the manufacture and sale of perfumes and aromatic oils. Jack has been able to bring in substantial
business to the firm. J-J Sdn Bhd has lost some of its business due to the competition from J T Brothers.
Advise Snowyte on the following issues;
(a) What is the common law position on fiduciary duties of directors? (1 mark)
(b) What is the statutory position on fiduciary duties of directors under the Companies Act 2016
(1 mark)
(c) Is there a conflict of interests under the Act (2 mark)
(d) What is the consequence of the contravention? (1 mark)
(e) What would your final advice be for Jack and Jill? (1 mark)
[6 marks]
8. ABC Sdn Bhd (‘ABC’) has three shareholders, namely Ali, Balu and Chan. Ali and Balu each hold
36% of ABC’s shares and are the directors of the company. Chan holds 28% of the shares of ABC and
is not a director of the company.
Since January last year, Ali and Balu have had many differences of opinion with Chan. Chan has on
two occasions used his voting rights to block the passing of special resolutions at general meetings of
ABC. To prevent Chan from using his voting rights to block special resolutions in the future, Ali and
Balu propose to issue a large number of ABC’s unissued shares to their friend, Danny. This issue of
shares will reduce Chan’s shareholding in ABC to 15%. Ali and Balu intend to issue the shares by
passing a resolution at a meeting of the board of directors next week.
Advice Chan on the following;
a) Would the proposal to issue shares be in breach of the Companies Act? (2 marks)
b) Would the proposal to issue shares be a breach of common law as well (2 marks)
c) What is the duty of a director under his fiduciary duties in relation to issuance of shares
(2 marks)
[6 marks]
134
COMPANY OFFICERS – COMPANY SECRETARY AND AUDITORS
1. Which of the following parties associated with a company appoints the company secretary?
A. The members
B. The directors
C. The auditor
2. Which of the following are eligible to act as company’s auditor?
A. An employee of the company

B. The partner of an employee of a company
C. The accountancy firm is responsible for producing the company’s account
3. Which of the following parties appoints the company’s first auditor’s?
A. The members
B. The Registrar of Companies
C. The directors
4. Which of the following is a statutory duty of an auditor?
A. To report to the members that the accounts are accurate and free from error
B. To report to the members that the accounts give a true and fair view and have been properly
prepared in accordance with the Companies Act
C. To report to the members that the accounts have been prepared in line with accounting
standards
5. Which of the following sets the specific duties expected of a company secretary?
A. The Articles of Association

B. The Companies Act
C. The Memorandum of Association
D. The Board of Directors
6. Which of the following contracts does a company secretary have the power to bind their company
in?
A. Purchase of an inventory from the suppliers

B. Acquisition of a head office building
C. Car hire for transporting customers to meetings with the directors
D. A bank loan
7. Which two of the following duties would a company secretary expect to perform?
1. Establishing and maintaining the company’s statutory registers

2. Filing accurate returns with the Registrar of Companies
3. Hiring firing of directors
4. Reviewing the work of a company auditor
135
A. 1 and 2
B. 1 and 4
C. 2 and 3
D. 3 and 4
8. Which of the following is a statutory right of a company auditor?
A. To attend board meetings

B. To vote in the company’s general meetings
C. To have access at all times to the books, accounts and vouchers of the company
D. To appoint non - executive directors
9. What type of company resolution is required to remove an auditor before the expiry of the term of
office?
A. Ordinary resolution
B. Ordinary resolution with special notice
C. Special resolution
D. Special resolution with special notice
10. How is a company secretary removed from office?
A. Ordinary resolution subject to special notice

B. Special resolution of the Board of Directors
C. The Board of Directors
D. Ordinary resolution
136
CASE STUDIES
1. Best Systems Sdn Bhd wishes to appoint one of its directors, Terry, as its company secretary. Terry
holds a master’s degree in public and corporate administration from a local university, but has no
previous experience as a company secretary.
Required:
Advise the company, with reference to the Companies Act 2016, as to:
(i) the qualifications required to become a company secretary; (2 marks)

(ii) the disqualifications, of a company secretary; and (2 marks)
(iii) whether Terry is qualified to be appointed as the company secretary of Best Systems Sdn Bhd.
(2 marks)
[6 marks]
2. The directors of Zam Zam Sdn Bhd are contemplating appointing Khatijah (the sister of one of the
directors) as the company secretary.
Required:
Advise the directors;
(i) on the requirements for the appointment, qualifications and disqualification of a company secretary
under the Companies Act 2016, explaining whether Khatijah could take up the appointment of
company secretary of Zam Zam Sdn Bhd. (3 marks)
(ii) the main duties of a company secretary. (3 marks)

[6 marks]
3. In relation to company law state:
(a) who is an approved company auditor under the Companies Act 2016; and (2 marks)
(b) the persons who are empowered under the Companies Act 2016 to appoint the auditors of a
company. (4 marks)
[6 marks]
4. Ah Peng was recently appointed as the company secretary Nidtu Lernmo Sdn Bhd (the company).
Realising that no auditor had yet been appointed, he proceeded to appoint his good friend, Bistari, as
the company‘s auditor. Bistari owes the company a sum of RM1,000. Rajini, a member of the company,
feels that Bistari's appointment as auditor is not valid and seeks your advice as to the following:
(i) whether there are any grounds on which Bistari's appointment as auditor may be challenged.
(3 marks)
(ii) if the appointment itself is valid, whether the auditor may be removed from office and if so, the
procedure for effecting such removal (3 marks)
[6 marks]
137
COMPANY MEETINGS
1. Evershine Bhd is a public company with only ten shareholders. Its board of directors consists of
Jim, Jack and Jill with Jim as the chairman of the board.
Advise the board on the following matters:
The board has recently received a requisition from members, Allen and Bakri, requesting the board
to convene an extraordinary general meeting next month. Together, Allen and Bakri hold a total of
9% of the company's paid up share capital. The board wishes to know whether it is bound to comply
with the request [A or B].
A. Yes, the board is bound to comply with the request as the members had a right to request for
one
B. No, the board need not comply as the members did not have the requisite majority required
by law
In the event it is bound to hold the extraordinary general meeting as requested, the board also wishes
to know [ C or D]
(1) quorum required for the meeting and

(2) whether Jack may preside as the chairman at the meeting.
C. 1 and Jack cannot preside as Chairman as Jim is the chairman of the Board
D. 1 and Jack can preside as the Chairman as he is member of the Board
2. The first AGM of a company must be held within [A or B] of incorporation
A. 1 year
B. 18 months
A subsequent AGM must be held not more than [C or D] since the last AGM
C. 15 months
D. 18 months
3. What is a ‘special resolution’?[A or B]
A. A special resolution is a resolution which has been passed by a majority of not less than three
fourths of such members as being entitled so to vote in person or, where proxies are allowed,
by proxy, at a general meeting of which no less than twenty-one day's notice specifying the
intention to propose the resolution as a special resolution has been given.
B. A special resolution is a resolution which has been passed by a majority of not less than three
sixth of such members as being entitled so to vote in person or, where proxies are allowed, by
proxy, at a general meeting of which no less than fourteen day's notice specifying the intention
to propose the resolution as a special resolution has been given.
138
What is special notice? [C or D]
C. Special notice of a resolution refers to a requirement to give the company notice of the
intention to move a resolution at least twenty eight days before the meeting at which it is
moved
D. Special notice of a resolution refers to a requirement to give the company notice of the
intention to move a resolution at least twenty one days before the meeting at which it is
moved.
4. When is special notice required? [A or B]
A. Special notice is required under the Companies Act 2016 for two matters. First, for the
removal of a director of a public company and secondly for the removal of an auditor.
B. Special notice is required under the Companies Act 2016 for two matters. First, for the
removal of a director of a company under s.28 and secondly for the removal of an auditor
under s.172
5. How do you remove a director of a public company by an ordinary resolution before the expiry of
his term of office, notwithstanding anything in its constitution or in any agreement between it and
him?
A. The section requires that special notice must be given to the company of any resolution to
remove a director. Upon receiving such a notice, the company is required forthwith to send a
copy of the said notice to the director concerned. The director concerned has the right to make
written representations of a reasonable length and require that copies of them be forwarded
to the members. If the company does not comply, either because it received the representations
too late or due to its own default, the director may require the representations to be read out
at the meeting. He is also entitled to attend the meeting and to be heard orally.
B. The section requires that a special resolution be passed to remove a director. Upon receiving
such a notice, the company is required forthwith to send a copy of the said notice to the
director concerned. The director concerned has the right to make written representations of
a reasonable length and require that copies of them be forwarded to the members. If the
company does not comply, either because it received the representations too late or due to its
own default, the director may require the representations to be read out at the meeting. He is
also entitled to attend the meeting and to be heard orally.
6. Minutes are a record of the proceedings of meetings. Company law requires minutes to be kept of
all company meetings. Who is the authorised person who normally signs the minutes?
A. The chairman
B. The company secretary
C. The board of directors
D. Two directors
7. Which of the following decisions cannot be taken by the members in general meeting?
A. Alteration of articles
B. Change of name
C. Reduction of share capital
D. Appointment of managing director
139
8. What are some of the basic rules for the appointment of proxies?
I. Any member may appoint a proxy

II. The proxy does not have to be a member
III. The proxy may speak at a meeting
IV. The proxy may vote on a poll
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
9. What are some of the instances for which a special resolution is required?
I. A change of company’s name
II. Change of objects
III. Reduction of share capital
IV. Winding up of a company
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
10. The period of notice for a general meeting at which a special resolution is proposed is
A. 14 days
B. 21 days
C. 28 days
D. 7 days
11. What is the difference between a vote by poll and vote by show of hands?[A or B]
A. In a vote by show of hands each member personally present is entitled to one vote. On the
other hand, in a vote by poll each member is entitled to one vote per share held by him.
B. In a vote by show of hands each member personally present is entitled to one vote per share.
On the other hand, in a vote by poll each member is entitled to one vote per share held by him.
What is one of the main differences between an ordinary business and special business?[C or D]
C. The text of ordinary business must be set out in full in the notice convening the meeting and
must be described as an ordinary business. This is not necessary for special business
D. The text of special business must be set out in full in the notice convening the meeting and
must be described as a special business.
12. Nalab Bhd, whose registered office is in Kuala Lumpur, held its latest annual general meeting
(AGM) on 15 October 2009. The meeting was held at the Discount Hotel in Johore Bahru. The notice
calling for the meeting was sent out by the company on 1 October 2009.
Advise Ahmad, a member of Nalab Bhd, who seeks your advice on the following:
Whether the validity of the AGM can be challenged on the ground that it was not held in Kuala
Lumpur? What is the current status of the law?
140
A. Company meetings are required to be held in the State where the registered office was situated
B. Companies are required to hold all meetings of its members within Malaysia and may even do
so at more than one venue using any technology that allows all members a reasonable
opportunity to participate
Whether the validity of the AGM can be challenged on the ground that the duration of notice given
to members was insufficient
C. The Companies Act 1965 only requires a notice of 14 days for all meetings of a company or a
class of members other than a meeting for the passing of a special resolution. This is deemed
as sufficient
D. The AGM of a public company shall be called by notice in writing of not less than 21 days
before the AGM or such longer period as is provided in the articles. This is deemed as
sufficient
13. DEF Bhd (‘DEF’) was incorporated on 1 November 2011. Chow, Ella and Fong, who together
hold 9% of DEF’s shares, are the company’s minority shareholders.
An annual general meeting of DEF was not held in 2011 or in 2012. Chow, Ella and Fong wrote to
DEF several times in 2012 urging DEF to hold its first annual general meeting before the end of 2012
but their requests were ignored by the company. The first annual general meeting of DEF was not
held until 15 April 2013.
Fong could not attend the meeting as he was in London at that time. He appointed his son, Halsbury
Tan, an advocate and solicitor, as his proxy. Halsbury Tan is not a member of DEF. The articles of
association of DEF are silent on the issue of whether a non-member may be appointed as a proxy.
When the meeting commenced, the chairman ruled that the appointment of Halsbury Tan as a proxy
was invalid because he was not a member of DEF. The chairman rejected Halsbury Tan’s arguments
that he was validly appointed and told him to leave the meeting hall.
Immediately afterwards, Chow and Halsbury Tan left the meeting saying that they intended to bring
legal action against DEF.
Required:
Advise DEF Bhd on each of the following:
Whether it contravened the Companies Act 2016 by not holding its first annual general meeting in
2011 or 2012?
A. DEF Bhd (DEF) has not contravened the Companies Act by holding its first annual general
meeting on 15 April 2013. DEF was incorporated on 1 November 2011. It need not hold its
annual general meeting in 2011 or 2012. It must hold its meeting within 18 months of its
incorporation (i.e. by the end of April 2013), which in fact it did by holding it on 15 April 2013
B. DEF Bhd (DEF) has contravened the Companies Act by holding its first annual general
meeting on 15 April 2013. DEF was incorporated on 1 November 2011. It need not hold its
annual general meeting in 2011 or 2012. It must hold its meeting within 15 months of its
incorporation
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1. United Systems Sdn Bhd is a company dealing in computers and software. It has 10 shareholders.
Aladin, Ban Hing and Chandran are its directors. Each of them holds I5% of the company's issued
shares. Aladin is the chairman of the board of directors.
Recently, the board of directors decided that the company should widen its objects clause to enable
the company to venture into the tourism industry. In order to effect the necessary alteration as well
as to transact several other matters, the directors decided to call an extraordinary general meeting.
Due notice in the proper form was sent by the company to all the shareholders by post.
Your advice is required on the following matters which have arisen:
(a) A member, Rubini, who holds 5% of the issued shares, claims that she had not received notice of
the meeting. She has threatened to institute legal proceedings to invalidate all decisions taken at the
meeting. Advise the board of directors as to the legality of the meeting. (2 marks)
(b) James who also holds 5% of the shares was unable to attend the meeting and appointed Ah Meng
(a non-member) as his proxy. Some of the members object to his appointment as proxy a he is a non-
member.
Advise Ah Meng as to the validity of his appointment as proxy. (2 marks)
(c) The chairman of the board, Aladin, was ten minutes late for the meeting. Meanwhile Chandran
was elected to preside as chairman of the meeting. Aladin believes that he has the legal right to preside
as the chairman of the meeting. Advise him as to the legal position. (2 marks)
(d) During the meeting, the chairman proposed that voting on the matters to be transacted be done
by a show of hands. Advise the chairman whether Ah Meng may vote on a show of hands.(2 marks)
(e) The resolution to alter the objects clause was approved by a majority of 70% of the votes of those
present and voting. The chairman declared that the resolution was valid. However, Ah Meng contends
that the resolution is invalid and cannot be relied on to proceed with the alteration of the objects
clause.
Advise the chairman. (2 marks)

(10 marks)
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PART G - INSOLVENCY AND CORPORATE RESTRUCTURING
1. What is the difference between a scheme of arrangement and a reconstruction?
A. A scheme of arrangement is a scheme under which the rights of the creditors and or members
is varied for the benefit of the company and its member/creditors; while a reconstruction
refers to a scheme of arrangement which involves the transfer of assets and liabilities by one
company to another within a group of companies.
B. A scheme of arrangement is a scheme under which the rights of the creditors and or members
is varied for the benefit of the company and its member/creditors; while a reconstruction
refers to a scheme of arrangement which involves the transfer of assets and liabilities by one
company to another within the respective company.
C. A scheme of arrangement is a scheme under the rights of the creditors is varied for the benefit
of the company and its creditors; while a reconstruction refers to a scheme of arrangement
which involves the transfer of assets and liabilities by one company to another within a group
of companies.
D. A scheme of arrangement is a scheme under which the rights of the parties are affected; while
a reconstruction refers to a scheme of arrangement which involves the transfer of assets and
liabilities by one company to another within a group of companies.
2. What is the importance of a scheme of arrangement?
A. The importance of a scheme of arrangement is that companies which are ailing but which are
capable of being rescued get an opportunity of being saved resulting ultimately in a benefit to
the creditors as well. Through the scheme of arrangement they may be able to seek a
‘moratorium’ with creditors whereby the creditors agree not to pursue their claims against
the company for a certain period to allow the company to recover.
B. The importance of a scheme of arrangement is that companies which are ailing but which are
capable of being rescued get an opportunity of being saved resulting ultimately in a benefit to
the creditors as well. Alternatively through the scheme of arrangement the company may be
able to reach a compromise with members whereby the members agree to accept less than the
amounts owed to them
C. The importance of a scheme of arrangement is that it is a scheme under which the rights of
the creditors and or members is varied for the benefit of the company and its
member/creditors
D. The importance of a scheme of arrangement is that they may be able to seek a ‘moratorium’
with creditors whereby the creditors agree not to pursue their claims against the company for
a certain period to allow the company to recover
3. Section 370(2) of the Companies Act states that the courts can provide for any order to facilitate
the compromise or arrangement. Which of the following are some of the orders that may be given by
the court?
(1) It may provide for the transfer of the undertaking and property of one company (the transferor
company) to another (transferee company). It may also provide for the transfer of liabilities of the
transferor company to the transferee company.
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(2) It may provide for the allotting or appropriation by the transferee company of any shares,
debentures or other similar interests in that company to or for any other person in compliance with
the terms of the compromise or arrangement.
(3) It may also provide that legal proceedings which are pending by or against the transferor company
be continued by or against the transferee company.
(4) The order may provide that the transferor company be dissolved without the need for a winding
up of it.
A. All of them
B. 1, 2 and 3
C. 2, 3 and 4
D. 1, 3 and 4
4. What is a reconstruction?
A. A reconstruction usually refers to a scheme of arrangement which involves the transfer of

assets and liabilities by one company to another within a group of companies. A reconstruction
may involve a merger where one company takes over another company and the operations are
merged.
B. A reconstruction is a scheme under which the rights of the creditors and or members is varied
for the benefit of the company and its member/creditors
C. A reconstruction may involve a merger where one company takes over another company and
the operations are merged
D. A reconstruction usually refers to a scheme of arrangement which involves the transfer of

assets and liabilities by one company to another within the same company.
5. The security of the debenture holder is secured by the appointment of a receiver. How may the
receiver be appointed?
(1) By the debenture holder under a statutory power

(2) By the debenture holder under a debenture deed
(3) By the approval of the High Court
(4) By the approval of the receiver
A. All of them
B. 1, 2 and 3
C. 2, 3 and 4
D. 1, 3 and 4
6. The court may appoint a receiver on the basis that it has the power to protect the debenture holders
if their position is in ‘jeopardy’. What are the circumstances where the property maybe classified to be
in jeopardy?
(1) The company is insolvent and there is a threat that the business will be forced to cease
(2) A threat to dissipate the company’s assets by distribution of them to the members
(3) A threat that a judgment creditor may levy execution upon assets covered by the charge and
danger of further executions
(4) The company is solvent but there is a threat that there is a presentation of a member’s
voluntary winding up
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A. All of them
B. 1, 2 and 3
C. 2, 3 and 4
D. 1, 3 and 4
7. Section 373 of the Companies Act 1965 stipulates that some of the following parties are not qualified
to be appointed and shall not act as receiver of the property of a company; Which of the following
satisfy the provision?
(1) corporation (unless agreed and adhered by any written law)

(2) an ‘undischarged’ bankrupt
(3) a mortgagee of any property of the company
(4) an auditor of the company
(5) any person who is not an approved liquidator or official receiver
A. All of them
B. 1, 2 and 3
C. 2, 3 and 4
D. 1, 3 and 4
8. What is the primary role of a receiver as opposed to a ‘receiver and manager’?
A. A receiver does not have any power to manage the business of the company. This is because
a receiver’s primary duty is merely to get in the assets subject to the charge and realise them
for the benefit of the chargee. If it is necessary to run the business for some time in order to
realise it as a going concern, a receiver and manager has to be appointed
B. A receiver has the power to manage the business of the company, if it is necessary to run the
business for some time in order to realise it as a going concern. A receiver and manager’s duty
is merely to get in the assets subject to the charge and realise them for the benefit of the
chargee.
C. A receiver does not have any power to manage the business of the company. This is because
a receiver’s primary duty is to take of the creditors only. If it is necessary to run the business
for some time in order to realise it as a going concern, a receiver and manager has to be
appointed
D. . A receiver does not have any power to manage the business of the company. This is because
a receiver’s primary duty is to take of the members only. If it is necessary to run the business
for some time in order to realise it as a going concern, a receiver and manager has to be
appointed
9. Some of the duties of the receiver/manager under the Companies Act 1965 may be summarised as
follows; which of the following satisfy the legal rules?
(i) By CA 2016 - when a receiver or manager of the property of the company is appointed he
must forthwith send notice of his appointment to the company.
(ii) By CA 2016 - upon the appointment of a receiver/manager every business document of the
company must contain a statement immediately following the name of the corporation that
such appointment has been made.
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(iii) By CA 2016 - the company is required to send to the receiver a statement of the affairs of the
company. Upon receipt of the statement the receiver must lodge a copy with the Registrar together
with any comments he considers necessary. A copy of such comments, if any, must be sent to the
trustees for debenture holders, if any.
(iv) By CA 2016 - requires that the receiver/manager must prepare accounts of the receipts and
payments and an estimate of the total value of the property in respect of which he was appointed
receiver/manager. Such accounts and estimates must be submitted to the Registrar every six months
during the course of the receivership and within one month after the receiver/manager ceases to act.
A. All of them
B. i, ii and iii
C. ii, iii and iv
D. i, iii and iv
10. By virtue of the Companies Act, where a receiver is appointed on behalf of the holders of any
debentures of a company secured by a floating charge or possession is taken by or on behalf of
debenture holders of any property comprised in or subject to a floating charge, then if the company is
not at the time in the course of being wound up, debts which in every winding up are preferential
debts and are due by way of wages, salary, vacation leave etc shall be paid out of any assets coming to
the hands of the receiver in priority to claims of the debenture holders.
What is the figure for salaries or wages mentioned under the Act for employees?
A. wages or salary of employees will constitute a preferential debt subject to a maximum of fifteen
thousand ringgit per employee or lesser
B. wages or salary of employees will constitute a preferential debt subject to a maximum of two
thousand five hundred ringgit per employee or four months wages, whichever is less
C. wages or salary of employees will constitute a preferential debt subject to a maximum of two
thousand ringgit per employee or four months wages, whichever is less
D. wages or salary of employees will constitute a preferential debt subject to a maximum of fifteen
thousand ringgit per employee or four months wages whichever is lesser
11. How does receivership differ from liquidation in the legal context?
A. Receivership differs from liquidation in that at the end of liquidation the company is dissolved,
while at the end of a receivership the company may be an existing entity and may continue
business.
B. Receivership differs from liquidation in that at the end of liquidation the company must be
dissolved, while at the end of a receivership the company may be an existing entity and may
continue business
C. Receivership differs from liquidation in that at the end of liquidation the company is dissolved,
while at the end of a receivership the company will be an existing entity and will continue
business
D. Receivership differs from liquidation in that at the end of liquidation the company is striked
off, while at the end of a receivership the company is an existing entity and continues business
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12. What is meant by the term ‘liquidation in the context of company law?
A. It means the dissolution of a company and its affairs have been brought to an end
B. It means the insolvency of a company and its affairs have been brought to an end
C. It means the dissolution of a company and its affairs may be brought to an end
D. It means the winding up of a company.
13. The persons who may petition the court to wind up a company are stated in the Companies Act
2016. Among them are:
I. the company;
II. any creditor;
III. a contributory;
IV. the liquidator;
V. the Minister, for example, where the membership of the company falls below two;
VI. the Registrar, for example, where the company is being used for unlawful purposes.
A. All of them
B. I, II and III
C. II, III and IV
D. I, V and VI
14. Section 466 Companies Act 2016 deals with the circumstances in which a company may be wound
up by the court. One of the circumstances is that the company is unable to pay its debts. Section 466
provides that a company shall be deemed to be unable to pay its debts in three circumstances:
Which of the following are the three circumstances?
(i) if a creditor to whom the company owes RM10,000 or more has served on the company a written
demand by leaving the same at the company’s registered office requiring the company to pay the debt
and the company has neglected for three weeks thereafter either to pay or secure or compound it to
the reasonable satisfaction of the creditor; or
(ii) if a creditor has obtained from the court an execution or other process and this is returned
unsatisfied in whole or in part; or
(iii) if it is proved to the satisfaction of the court that the company is unable to pay its debts as they
fall due and this includes the situation where it is proved to the satisfaction of the court that the value
of the company’s assets is less than the amount of its liabilities, including its contingent and
prospective liabilities.
(iv) if a creditor has obtained from the court an execution or other process and this is returned satisfied
in whole.
A. All of them
C. (ii), (iii) and (iv)
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15. In relation to winding up by the court; state 3 circumstances under Section 466 of the Companies
Act in which it may occur;
I. if the company has, by special resolution, resolved that it be wound up by the court;
II. if the company does not commence business within a year from its incorporation or suspends
its business for a whole year;
III. the number of members is reduced below 1
IV. If the company has resolved that it be wound up
A. All of them
B. I, 11 and III
C. II, III and IV
D. I, III and IV
16. State when a winding up by the court is deemed to have commenced under the provisions of the
Companies Act?
(i) By s.467 where before the presentation of the petition, a resolution has been passed by the
company for voluntary winding up, the winding up shall be deemed to have commenced at
the time of the passing of the resolution.
(ii) By s.467 in any other case the winding up shall be deemed to have commenced at the time of
the when the court order is issued to wind up the company
(iii) By s.416, in any other case the winding up shall be deemed to have commenced at the time of
the presentation of the petition for the winding up in the court
A. All of them
B. I and II
C. I and III
D. II and III
17. State the effects of the commencement under the Companies Act?
(i) By CA 2016, any disposition of the property of the company including things in action and any
transfer of shares or alteration in the status of the members of the company made after the
commencement of the winding up by the court shall, unless the court otherwise orders, be void.
(ii) By CA 2016, any attachment, sequestration, distress or execution put in force against the estate
or effects of the company after the commencement of the winding up by the court shall be void.
(iii) By CA 2016, any acquisition of the property of the company including things in action and
any transfer of shares or alteration in the status of the members of the company made after the
commencement of the winding up by the court shall, unless the court otherwise orders, be valid
A. All of them
B. (i) and (ii)
C. (ii) and (iii)
D. (i) and (iii)
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18. Name the situations where the company may be wound up voluntarily under the Companies Act
2016?
(i) when the period, if any, fixed for the duration of the company by the memorandum or articles
expires, or
(ii) the event, if any, occurs, on the occurrence of which the memorandum or articles provide that the
company is to be dissolved, and the company in general meeting has passed a resolution requiring the
company to be wound up voluntarily; or
(iii) if the company so resolves by special resolution.
(iv) if the creditors resolve by an ordinary resolution
A. All of them
19. The Companies Act 2016 highlights the disqualifications of the Liquidator. Which of the following
denote some of them?
(i) If he is an officer of the company

(ii) If he becomes an undischarged bankrupt
(iii) If he is not an approved company liquidator
(iv) If he is a partner, employer or employee of an officer of a company
A. All of them
D. (i), (ii) and (iv)

The creditors initiate a creditor’s voluntary winding up, while the members initiate a member’s
voluntary winding up;
A. True
B. False
A member’s voluntary winding up may be converted to a creditor’s voluntary winding up if the

company is found to be insolvent, as the company must be solvent for a voluntary liquidation to take
place.
C. True
D. False
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1. In relation to insolvency and the Companies Act 2016:
(a) list any FOUR persons who may petition for the winding up of a company by the court.
(4 marks)
(b) explain when a company may be deemed unable to pay its debts. (6 marks)
(10 marks)
2(a) State TWO circumstances in which a company may be voluntarily wound up.
(2 marks)
(b) In relation to winding up by the court:

(i) State THREE circumstances in which it may occur; (3 marks)
(ii) State when winding up by the court is deemed to have commenced; (2 marks)
(iii) State the effects of the commencement. (3 marks)
(10 marks)
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PART H – ETHICAL ISSUES RELATING TO BUSINESS
1. Liability for fraudulent trading is governed by s.540 of the Companies Act 2016. Fraudulent trading
as envisaged by the section encompasses which of the following:
(i) carrying on business with intent to defraud creditors of the company

(ii) carrying on business with intent to defraud creditors of any other person and
(iii) carrying on business for any fraudulent purpose.
(iv) carrying on business for any general wrongful purpose
A. All of them
2. Section 540 imposes both civil as well as criminal consequences for fraudulent trading. By this the
court can declare any person who was knowingly a party to the carrying on of the business in that
manner to be personally liable for all the debts or other liabilities of the company as the court directs.
The section therefore would not only apply to directors but also to other persons as the section refers
to ‘any person’.
What does the term ‘any person’ mean?
A. Thus senior managers and other employees and even outsiders such as customers of the
company who were parties to the fraudulent trading may incur personal liability
B. Thus senior managers and other employees who were knowingly parties to the fraudulent
trading may incur personal liability
C. Thus even outsiders such as customers of the company who were parties to the fraudulent
trading may incur personal liability
D. Thus senior managers and other employees and even outsiders such as customers of the
company who were knowingly parties to the fraudulent trading may incur personal liability.
3. Section 540 also states who may make an application to the court to make someone personally liable
for fraudulent trading. These are ____
(i) the liquidator

(ii) any creditor; and
(iii) any contributory.
(iv) any person
A. All of them
4. In addition to civil liability, there is also criminal liability. By s.540 where any business of a company
is carried on with intent to defraud creditors of the company or creditors of any other person, or for
any fraudulent purpose, every person who was knowingly a party to it, shall be guilty of an offence.
What is the penalty in law?
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A. The penalty is imprisonment for ten years or a fine of RM1,000,000.00 or both
B. The penalty is imprisonment for two years or a fine of RM10,000 or both
C. The penalty is imprisonment for one year or a fine of RM10,000.
D. The penalty is imprisonment for one year or a fine of RM3,000.
5. Which of the following statements is true? [A or B]
A. By s.540 if in the course of the winding up of a company or in any proceedings against a

company it appears that the business of the company has been carried on with intent to defraud
creditors of the company or creditors of any other person or for any fraudulent purpose, the
court on the application of the liquidator or any creditor or any contributory of the company
may, if it thinks proper so to do, declare that any person who was knowingly a party to the
carrying on of the business in that manner shall be personally responsible, without any
limitation of liability, for all or any of the debts or other liabilities of the company as the court
directs.
B. By s.540 if in the course of the winding up of a company or in any proceedings against a

company it appears that the business of the company has been carried on with intent to defraud
creditors of the company or creditors of any other person or for any fraudulent purpose, the
court on the application of the liquidator or any creditor or any contributory of the company
may, if it thinks proper so to do, declare that any person who was knowingly a party to the
carrying on of the business in that manner shall be personally responsible, with some
limitation of liability, for all or part of the debts or other liabilities of the company as the court
directs.
Which of the following statements is true? [C or D]
C. Under s.540 where a person has been convicted of an offence under s.539 the court may, on
the application of the liquidator, creditor or contributory of the company, declare that the
person shall be personally responsible without any limitation of liability for the payment of
the whole or any part of that debt.
D. Under s.540 where a person has been convicted of an offence under s.539 the court may, on
the application of the liquidator, creditor or contributory of the company, declare that the
person shall be personally responsible with some limitation of liability for the payment of the
whole of that debt.
6. There are many types of offences created under the Capital Market and Services Act 2007; they are
as follows;
I. Short selling,
II. Market rigging,
III. Stock market manipulation
IV. Insider dealing
A. All of them
B. I, II and III
C. II, III and IV
D. I, III and IV
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7. Define ‘insider dealing’ under Section 188 of The Capital Markets and Services Act 2007.
A. Insider trading or dealing is the purchase or sale of a company’s securities effected by or on

behalf of a person with knowledge of relevant but non-public material information regarding
the company that may affect the price of the company’s securities (price sensitive information)
if made public.
B. Insider trading or dealing is the purchase of a company’s securities effected by or on behalf of

a person with knowledge of relevant but non-public material information regarding the
company that may affect the price of the company’s securities (price sensitive information) if
made public.
C. Insider trading or dealing is the sale of a company’s securities effected by or on behalf of a

person with knowledge of relevant but non-public material information regarding the
made public.
D. Insider trading or dealing is the purchase or sale of a company’s securities effected by or on

behalf of a person with knowledge of relevant but public material information regarding the
made public.
8. What is penalty under the Capital Markets and Services Act 2007 for an infringement of the law
under Section 188?
A. A person who contravenes section 188 commits an offence and shall be punished on conviction
to imprisonment for a term not exceeding ten years and to a fine of not less than one million
ringgit
B. A person who contravenes section 188 commits an offence and shall be punished on conviction
to imprisonment for a term not exceeding twenty years and to a fine of not less than one
million ringgit
C. A person who contravenes section 188 commits an offence and shall be punished on conviction
to imprisonment for a term not exceeding five years and to a fine of not less than one million
ringgit
D. A person who contravenes section 188 commits an offence and shall be punished on conviction
to imprisonment for a term not exceeding fifteen years and to a fine of not less than one million
ringgit
9. What are the main offences stipulated in the Malaysian Anti Corruption Commission Act 2009?
I. Soliciting/Receiving Gratification (Bribe)

II. Offering/Giving Gratification (Bribe)
III. Intending to Deceive (False Claim)
IV. Using Office or Position for Gratification (Bribe) (Abuse of Power/Position)
A. All of them
B. I, II and III
C. I, II and IV
D. II, III and IV
153
10. What is the penalty for corruption related offences under Malaysian Anti Corruption Commission
Act 2009?
A. The general penalty for any corruption related offences is a Maximum 20 years imprisonment;
and a minimum fine of RM10,000 or 5 times the value of the bribe (whichever is higher)
B. The general penalty for any corruption related offences is a Maximum 20 years imprisonment;
C. The general penalty for any corruption related offences is a Maximum 20 years imprisonment;
D. The general penalty for any corruption related offences is a Maximum 20 years imprisonment;
11. Money Laundering is a process by which the proceeds of crime, either money or other property,
are converted into assets, which appear to have a legitimate rather than an illegal origin. It is a term
given to attempt to make the proceeds of crime appear respectable. The aim of the process is to
distinguish the source of the property, in order to allow the holder to enjoy it free from suspicion as
to its source; however it involves some process for it to take place. What are the processes that are
involved?
(i) Placement – is the initial deposit of the proceeds of criminal activity into apparently
legitimate business activity or property;
(ii) Layering – involves the transfer of money from business to business or place to place in
order to conceal its initial source; and
(iii) Integration – is the culmination of the previous procedures through which the money
takes on the appearance of coming from a legitimate source
A. All of them
B. None of them
C. I and II
D. II and III
12. The Anti Money Laundering Act 2001, seeks to control money laundering by creating some
categories of criminal offences in relation to the activity.
Which of the following are the offences created by the Act?
(i) Relates to laundering the proceeds of crime or assisting in that process and is contained
in S 3
(ii) It makes it an offence for a person who knows or suspects that another person is engaged
in money laundering not to report the fact to the appropriate authority
(iii) Relates to tipping off which makes it an offence to make a disclosure, which is likely to
prejudice any investigation under the Act.
A. All of them
B. (i) and (ii)
C. (ii) and (iii)
D. (i) and (iii)
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13. What is the maximum penalty under the Anti Money Laundering Act 2001 for an infringement
of Section 4?
A. A person who engages in such an activity commits an offence and shall on conviction be liable
to a fine not exceeding 3 million ringgit or to imprisonment for a term not exceeding 5 years
or to both
B. A person who engages in such an activity commits an offence and shall on conviction be liable
or to both
C. A person who engages in such an activity commits an offence and shall on conviction be liable
or to both
D. A person who engages in such an activity commits an offence and shall on conviction be liable
to a fine not exceeding 5 times the sum or value of the proceeds of an unlawful activity or
imprisonment for a term not exceeding 15 years or both
14. How is corruption defined under the Malaysian Anti Corruption Commission Act?
A. Corruption is the act of giving or receiving of any gratification or reward in the form of cash
or in-kind of high value for performing a task in relation to his/her job description.
B. Corruption is the act of giving any gratification or reward in the form of cash or in-kind of
high value for performing a task in relation to his/her job description.
C. Corruption is the act of receiving of any gratification or reward in the form of cash or in-kind
of high value for performing a task in relation to his/her job description.
D. Corruption is the act of giving or receiving of any gratification or reward in the form of cash.
155
SUBJECTIVE QUESTIONS
1. Miskin Sdn Bhd (Miskin) is a company which specialises in the trading of electronic spare parts.
Ali, Badri and Cindy are its directors. Although the company was prosperous in the past it has suffered
serious losses over the past three years and is now insolvent.
Six months ago, Ali and Badri, pursuant to a decision taken at a board meeting at which Cindy was
not present, ordered, on credit, RM2 million worth of electronic spare parts from EZ Manufacturing
Sdn Bhd (EZ). When Cindy later learned of this transaction, she questioned Ali and Badri as to how
Miskin was going to pay for the goods when it was totally insolvent. They replied that they did not
have any intention of paying EZ.
Last week Miskin was put into insolvent liquidation and a liquidator was appointed.
The liquidator seeks your legal advice on the following matters:
(a) whether Ali and Badri have committed any specific criminal offence under the Companies Act 1965
in respect of ordering goods on credit from EZ; (2 marks)
(b) whether Ali, Badri or any other person can be made personally liable for the debts and liabilities
of Miskin; and (2 marks)
(c) If Ali and Badri did not have the intention to defraud EZ but instead they ordered the goods on
credit in the hope that the prospects of Miskin would soon improve, whether:
(i) they have committed any criminal offence; and

(ii) they, or any other person, can be made personally liable for the debts and liabilities of Miskin.
(2 marks)
Required:
Advise the liquidator. [6 marks]
2. In relation to insider trading, and with reference to the CAPITAL MARKETS AND SERVICES ACT
2007:
(a) define ‘insider’; and (2 marks)
(b) (i) state the matters which the insider is prohibited from doing; and (2 marks)
(ii) state the consequences of conducting prohibited matters. (2 marks)
[6 marks]
3. James received a parcel in the mail from an unknown source, containing $100,000. Without
conducting any investigation as to its origin or source, he deposited the money into his bank account
with the help of his friend Jack, an officer of the bank who is aware of the facts. It is now discovered
that this money was stolen from an individual in Singapore.
Required:
(a) Explain whether James has committed any offence under the ANTI-MONEY LAUNDERING AND
ANTI-TERRORISM FINANCING ACT 2001.
(3 marks)
(b) Explain whether Jack has committed any offence under the Anti-Money Laundering and Anti-
Terrorism Financing Act 2001. (3 marks)
(6 marks)
156
157
PT2
1. What is the effect of contracts entered into by minors?
a. They are void
b. They are voidable
c. They are unenforceable until the minor attains the age of majority
2. What is the length of notice of termination of service of service required to be given under the
Employment Act 1955 by an employer to its employee who has been in service for less than 2 years?
a. 2 weeks
b. 4 weeks
c. 8 weeks
3. In which of the following circumstances is an employer deemed to have broken the contract of
service with the employee under the Employment Act 1955?
a. Where the employer has failed to pay the employee their wages within 7 days of the last day
of the wage period
b. Where the employer finals to grant the employee 18 days of paid annual leave
c. Where the employer fails to provide the employee with medical facilities
4. Which of the following is NOT a way in which a contract may be discharged?

a. Performance
b. Impossibility of performance
c. Breach
d. Rescission
5. In the context of remedies for breach of contract, which of the following is NOT an equitable
remedy?
a. Specific performance
b. Damages
c. Quantum meruit
6. In relation to contract law, which of the following describes an invitation to treat?

a. It is an invitation by one party to others to make an offer to that party
b. It is an invitation by one party to others to enter into a contract with that party
c. It is a general offer to the public which binds the offeror to any member of the public who
accepts the offer
7. Alicia has been an employee of Goodco Sdn Bhd for the last 5 years. She is now pregnant. What is
Alicia’s entitlement for maternity leave under the Employment Act 1955?
a. 45 days
b. 60 days
c. 90 days
d. 120 days
8. Chandran bought a ticket for his first ever river cruise. At the back of the ticket is a clause which
reads, ‘The river cruise operator is not liable for any loss or damage caused to passengers arising out
of the negligence or other fault of the cruise operator or its agents’. Which of the following describes
the effect of the clause correctly?
a. It is void because liability cannot be excluded
b. It is valid to exclude liability of the cruise operator
c. It is valid only if the clause was brought to Chandran’s attention before he bought the ticket
d. It is valid only if the clause is considered to be reasonable by the court
9. Which of the following is NOT a rule of statutory interpretation?

a. Esjudem general rule
b. Contra proferentem rule
c. Mischief rule
10. Which of the following statements with regard to the doctrine of judicial precedent is NOT
correct?
a. It is important to understand the hierarchy of the courts in order to determine whether a
particular court decision is binding on another court
b. The decision of one High Court does not bind another High Court
c. The obiter dicta in a particular case must be taken into account to understand the reason
behind the decision of the court
d. It is the ratio decidendi of a judgement of a higher court that binds the lower courts
11. Which of the following refers to the effect of a breach of warranty in a contract?
a. The contract becomes void and the aggrieved party is entitled to rescind the contract
b. The contract remains valid but the aggrieved party is entitled to claim for damages
c. The contract is voidable and the aggrieved party may choose either to rescind the contract
or claim for damages
12. In which of the following situations will a contract be voidable?

a. Where the object of the contract is illegal
b. Where there is no consideration
c. Where the consent to a contract is induced by fraud
d. Where a party to the contract is under a mistake as to a material fact
13. With regard to business law, which of the following is an effect of pre-incorporation contract?
a. It is binding on the company after its corporation
b. It is personally binding on the person who acted on behalf of the future company
c. It is void
14. Which of the following statements explains the meaning of an intention to create legal relations
as an element of a valid contract in relation to parties to a contract?
a. They must have the intention to enter into the contract
b. They must have the intention to enter into a business relationship
c. They must have the intention to carry out the terms of the contract
d. They must have the intention that the contract would have legal consequences if breached
15. Which of the following is NOT part of the structure of the Malaysian court system?
a. High Court
b. Sessions Court
c. Magistrate’s Court
d. Penghulu’s Court
16. Which of the following is NOT a tort?
a. Defamation
b. Coercion
c. Nuisance
17. Which of the following is an element of a valid contract?

a. Unconditional offer
b. Unconditional acceptance
c. Unconditional consent
18. Which of the following is a defence to the tort of negligence?

1) Contributory negligence
2) Act of God
3) Voluntary assumption of risk
a. 1 and 2 only
b. 1 and 3 only
c. 2 and 3 only
d. 1, 2 and 3
19. Joe is an auditor. Recently, he audited a company’s accounts by applying an auditing method
which is less used by other auditors today. Which of the following statements explains the standard
of care required to exercised by Joe to determine whether he was negligent?
a. That of a reasonable man
b. That of another auditor having similar responsibilities
c. To apply the latest method of auditing
d. To apply the method of auditing which is used by the majority of audit firms
20.With regard to employment law, in which of the following situations will a lay-off occur?
a. Where the employee has been suspended from work pending an enquiry into their
misconduct
b. Where the employee has been asked to take leave to facilitate investigation into a complaint
made against them
c. Where the employer has been unable to provide the employee with sufficient work
21.Which of the following is the title of the head of the Court of Appeal?
a. Chief Justice
b. Chief Judge
c. President
22. Which of the following is an appropriate remedy for an employee who has been unjustifiably
dismissed?
1) Reinstatement
2) Damages
3) Injunction
a. 1 only
b. 1, 2 and 3
c. 2 and 3 only
d. 1 and 2 only
23. Which of the following is a condition for the application of English law in Malaysia?
a. The English law must have been in existence before Malaysia obtained its independence
b. Only English law as decided by the superior courts of England may be applied in Malaysia
c. Only English law which is suitable to local circumstances may be applied in Malaysia
24. Which of the following are characteristics of a limited liability partnership?

1) IT is regarded in law as a legal person
2) It has limited capacity
3) It can have an unlimited number of partners
a. 1, 2 and 3
b. 1 only
c. 2 and 3 only
d. 1 and 3 only
25.Which of the following is NOT a source of written law in Malaysia?

a. Case law
b. Statutes
c. State constitutions
26. With regard to employment law, which of the following are test which may be applied to
determine the existence of a contract of service?
1) Control test
2) Integration test
3) Multiple test
a. 1 and 2 only
b. 1, 2 and 3
c. 2 and 3
d. 1 and 3
27. What is the MAXIMUM number of partners a professional partnership can have?
a. 20
b. 50
c. Unlimited
28. Which of the following is delegated legislation?

a. Legislation passed by the State Legislative Assemblies
b. Law passed by tribunals
c. Bye-laws passed by ministers or other persons as permitted by a statute
d. Rules & regulations passed by departments for the efficient administration of those
departments
29. Ah Tan wrote a letter to Jim offering to sell a painting to Jim for RM 1 million. Jim replied that he
was willing to buy the painting of the price was reduced to RM 800,000. Which of the following
describes Jim’s reply?
a. An acceptance
b. A counter -offer
c. A conditional acceptance
30. Which of the following refer to a classification of terms of a contract?
1) Conditions
2) Warranties
3) Representations
a. 1 and 2 only
b. 1, 2 and 3
c. 2 and 3 only
d. 1 and 3 only
31. Which of the following business entities uses the abbreviation ‘PLT’ after the name of its
business?
a. Private limited company
b. Limited liability partnership
c. Limited partnership
32.Which of the following is NOT an example of public law?

a. Administrative law
b. Criminal law
c. Employment law
33. With regard to employment law which of the following statements correctly describes a
constructive dismissal?
a. Where an employer has committed a serious breach of contract, entitling the employee to
resign in response to the employer’s conduct
b. When an employer terminates a person’s employment because the position is no longer
required
c. When an employer terminates a person’s employment without a good reason or in an unjust
or unreasonable manner
34. In relation to contract law, how may an offer be revoked?

1) By lapse of time prescribed for acceptance of the offer
2) By notice of revocation by the offeror to the offeree before acceptance
3) By failure of the acceptor to fulfil a condition precedent to the acceptance
a. 1 only
b. 2 only
c. 1 and 2 only
d. 1, 2 and 3
35. Which of the following rules of statutory interpretation adheres to the principle that of the
words of a statute are in themselves precise and unambiguous, they ought to be interpreted in their
natural and ordinary sense?
a. The golden rule
b. The mischief rule
c. The literal rule
36. Which of the following is NOT an element of conventional partnership?

a. There must be a written partnership agreement
b. It must have a profit motive
c. It must be carried on by two or more partners
d. There must be a business being carried out
37. Which of the following correctly describes a contract for services?

a. XY Sdn Bhd engaged Rani as a cleaner. She is paid a weekly salary of RM 300 for her services
b. Farah engaged Stephanie as her wedding planner. She will be paid the sum of RM 50,000 for
her services
c. Ron works as a dispatch clerk for a legal firm. He earns RM 500 a week for his services to the
firm
d. Alexi is the manager for ABC Bank. He is paid RM 20,000 per month for his services
38. In relation to contract law, which of the following may entitle a contracting party to avoid a
contract?
1) Coercion
2) Misrepresentation
3) Necssity
4) Fraud
a. 1 and 2 only
b. 3 and 4 only
c. 1, 2 and 4 only
d. 1, 2, 3 and 4
39. Which of the following is NOT a way by which an agency is terminated?

a. By insolvency or bankruptcy of the principal
b. By implied revocation by the principal
c. By death of the third party with whom the agent contracted on behalf of the principal
d. By death of the principal
40. Which of the following is a defence to the tort of negligence?

1) Volenti non fit injuria
2) Contributory negligence
3) Illegality
a. 1 and 2 only
b. 2 and 3 only
c. 1 and 3 only
d. 1, 2 and 3
41. In the context of contract law, what is the meaning of consideration?

a. The value of services performed under a contract
b. The amount of money paid by a contracting party to the other
c. The price paid by one party to a contract in return for the other’s promise
d. It is always calculated in money
42. Which of the following is NOT a way in which a contract may be discharged?
a. Performance
b. Breach
c. Necessity
d. Agreement
43. Sunil issued an invitation requesting tenders for a contract for the supply of cement. Babu
responded to Sunil’s tender with his (babu’s) terms. Which of the following statements is correct?
a. Suni made an offer and Babu accepted an offer
b. Sunil made an invitation to treat and Babu made an offer
c. Sunil made and offer and Babu made a conditional offer
d. Sunil made an offer and Babu made a conditional acceptance
44.James promises his daughter, Jemima a new car for her next birthday, if she performs well in her
Bachelor of Accounting examinations. He fails to keep his promise. On which of the following
grounds may James rely on to argue that there is no valid contract between himself and Jemima?
a. Lack of acceptance
b. Lack of consideration
c. Lack of capacity
d. Lack of intention to create legal
45. In relation to the doctrine of binding judicial precedent, which of the following explains the
meaning of obiter dicta?
a. The legal reasoning or legal principal used by the judges in arriving at their decision in case
b. The main cases cited by the judges in arriving at their decision in a case
c. The judges incidental expression of opinion which is not essential to the legal reasoning of
the case
d. It is what judges love to follow in court decisions
Answers:
1. A. They are void
2. B. 4 weeks
3. A. Where the employer has failed to pay the employee their wages within 7 days of the last day of
the wage period
4. D. Recession
5. B. Damages
6. A. It is an invitation by one party to others to make an offer to that party
7. C. 90 days
8. C. It is valid only if the clause was brought to Chandran’s attention before he bought the ticket
9. B. Contra proferentum rule
10. C. The obiter dicta in a articular case must be taken into account to understand the reason
behind the decision of the court
11. B. The contract remains valid but the aggrieved party is entitled to claim for damages
12. C. Where the consent to a contract is induced by fraud
13. B. It is personally binding on the person who acted on behalf of the future company
14. D. They must have the intention that the contract would have legal consequences if breached
15. D. Penghulu’s Court
16. B. Coercion
17. B. Unconditional acceptance
18. D. 1, 2 and 3
19. That of another auditor having similar responsibilities
20. C. Where the employer has been unable to provide the employee with sufficient work
21. C. President
22. D. 1 and 2 only
23. C. Only English law which is suitable to local circumstances may be applied in Malaysia
24. 1 and 3 only
25. A. Case law
26. B. 1, 2 and 3
27. C. Unlimited
28. C. Nye-law passed by ministers or other persons as permitted by a statute
29. B. counter offer
30. A. 1 and 2 only
31. B. Limited liability partnership
32. C Employment law
33. A. Where an employer has committed a serious breach of contract, entitling the employee to
resign in response to the employer’s conduct
34. D. 1, 2 and 3
35. C. The literal rule
36. A. There must be a written partnership agreement
37.B. Farah engaged Stephanie as her wedding planner. She will be paid the sum of Rm 50,000 for
her services
38. C. 1, 2 and 4 only
39. C. By death of the third party with whom the agent contracted on behalf of the principal
40. D. 1, 2 and 3
41.C. The price paid by one party to contract in return for the other’s promise
42.C. Necessity
43.B. Sunil made an invitation to treat and Babu made an offer
44.D. Lack of intention to create legal relations
45. C. The judges incidental expression of opinion which is not essential to the legal reasoning of the
case
PT[2] Section B
Qn. 46.
1. Danny, Devi, Darul and Din are the partners of 4D & Co, a firm of hair stylists. Din is a dormant
partner and is expressly prohibited from rendering any hair styling services to clients.
On one occasion, in the absence of the other partners, Din attended to a client, Maniam, who wanted
his hair styled. Unfortunately, Din negligently applied an inappropriate hair lotion which resulted in
Maniam’s black hair turning white.
(a) Explain whether the other partners, Danny, Devi and Darul, could be held liable to Maniam for
the damages suffered by him as a result of Din’s negligence. (3 marks)
(b) Explain whether the other partners, Danny, Devi and Darul can avoid liability, if any, on the basis
that Din was expressly prohibited from rendering hair styling services to clients. (3 marks)
(6 marks)
As for the other offer, Sophia replied that she would be willing to take the car for RM50,000 but Nancy
refused.
A day later, Sophia wrote to Nancy and said that she will accept Nancy’s original offer at RM60,000.
However, Nancy now refuses to grant the lease as well as to sell the car to Sophia.
car. (3 marks)
(6 marks)
3. Jenny asked Ken to act as her agent to purchase a house for her. Ken agreed to do so for free. Jenny’s
instructions were that the house should be located in Petaling Jaya, it should have at least four
bedrooms and should not cost more than RM350,000. Ken found a suitable house in Petaling Jaya but
the owner was only willing to sell it at the price of RM370,000. Ken decided to purchase the house
and entered into a contract with the owner on behalf of Jenny.
Required:
(a) As there is no written agreement between them, and there is no consideration given by Jenny,
explain whether a valid agency exists between Jenny and Ken. (2 marks)
(b) Explain whether the contract made by Ken on behalf of Jenny is binding upon Jenny. (2 marks)
(c) In the event that the contract is not legally binding upon Jenny, state whether or not she can
choose to accept it. (2 marks)
(6 marks)
4. Zul, the auditor of Sunshine Bhd, certified the accuracy of the accounts of the company for inclusion
in its latest annual report. The accounts, prepared by the accounts manager, showed that the company
had made substantial profits. However, Zul had failed to examine certain relevant documents which
would have shown that the company had made a small loss.
Jin Seng, a member of the company, bought more shares on the stock exchange relying on the latest
annual report. He suffered a loss due to a fall in the price of the shares on the stock market after the
public became aware of the accounting inaccuracy.
(a) Explain whether Zul may be liable to the company in the tort of negligence. (4 marks)
(b) Explain whether Jin Seng could successfully sue Zul in negligence for the losses suffered by him
due to the fall in price of the shares. (2 marks)
(6 marks)
5. Amin who has been employed since 1991 by Kerja Selalu Sdn Bhd, a private limited company, was
involved in a minor accident while on his way to work. He was taken to a nearby private clinic where
he received treatment and given medical leave for five days.
On his return to work on the sixth day, his employer refused to listen to his explanation. He also did
not accept the sick certificate issued by the doctor and told him that five days leave would be deducted
from his wages. Further he was told that disciplinary action would be taken against him for being
absent without reasonable excuse. Ali seeks your advice on the following matters:
(i) Whether an employee is entitled to any paid sick leave under the Employment Act 1955 and the
limitations, if any, upon such entitlement. [3 marks]
(ii) Whether the employer is entitled to terminate his contract of service without notice or impose any
other punishment upon him and in particular, whether five days wages may be deducted from his
wages. [3 marks]
[6 marks]
PT[2] Answers
Qn 46.
1. (a) This question relates to the liability of partners for acts done by any partner on behalf of the
firm. By virtue of the {Sec 7} Partnership Act 1961, every partner is an agent of the firm and the other
partners and any act done by any partner in the ordinary course of the business of the firm and in the
usual way will bind the firm and the other partners. Further, partners will also be liable to third parties
for torts and other wrongs committed by any partner in the course of carrying on the business of the
firm. The Partnership Act also stipulates that in the absence of an agreement to the contrary, all
partners will have an equal right to be involved in the management of the business of the firm.
Thus, as Danny, Devi and Darul are partners of Din and Din had performed the work of a hair stylist
which is the ordinary business of the firm, prima facie, they could be held liable to Maniam for the
damage he suffered through Din’s negligence.
(b) The Partnership Act 1961 {Sec 7} also states that partners will not be liable for the acts of a
partner if that partner has no authority to act on behalf of the firm, and the third party either knows
of the lack of authority or does not know or believe him to be a partner.
Applying the law to the present situation, although Din has been expressly prohibited from rendering
hair styling services, there is no indication that Maniam knows of this prohibition or that he does not
know or believe Din to be a partner. Thus it is unlikely that they (Danny, Devi and Darul) will be able
to avoid liability towards Maniam solely on the basis of the prohibition placed on Din.[Watteau v
Fenwick]
2. refer to PT[1]
3. (a) Under the law of agency there is no requirement for there to be a written agreement to create
an agency. Furthermore, there is no requirement for consideration in order for a valid agency
agreement to arise. Thus, a valid agency exists between Jenny and Ken. [Sec 138 – no need for
consideration; Sec 139 and 140 can be considered; S135 CA]
(b) In this case, Ken is the agent and Jenny is the principal. The law is that principals are bound by
the acts of their agents done within the scope of their authority. Where the agents have exceeded their
authority, the principals will not be bound by the acts of the agents. In this case, as Ken exceeded his
authority by contracting for the house at a higher price than that which was authorised by Jenny, the
contract will not be binding upon her. [breach of warranty of authority – 3rd party can bring the action
against the agent but the principal is not bound as a general rule]
(c) Although a contract may not be legally binding on the principals when the agents exceed their
authority, the principal may choose to ratify the contract. Upon ratification, the contract will become
binding between the principal and the third party. Thus, Jenny may choose to ratify the contract for
the purchase of the house at RM370,000. [Sec 149 – ratification. Principal has the option to accept or
reject. If principal accepts – ratification – retrospective effect – Boulton’s case]
4. (a) In order to make a person liable in the tort of negligence, three elements have to be shown:
(i) that the defendant owed a duty of care to the plaintiff, {Donoghe v Stevenson}
(ii) that the defendant breached their duty of care, and {Wilsher}
(iii) that the plaintiff suffered damages as a consequence of that breach. A duty of care would be owed
where the defendant could reasonably foresee that their acts or omissions would be likely to affect the
plaintiff. {Wagon Mound}[Go into some details]
In the given scenario, Zul was engaged as the auditor of Sunshine Bhd. Hence it is clear that Zul owed
a duty of care to Sunshine Bhd. A defendant would breach the duty of care where they fall below the
standard of care expected to be exercised by them. Usually the standard of care is measured by the
reasonable man test, i.e. whether the defendant had acted as a reasonable man would. However, in the
case of professionals, the standard is higher. A professional is expected to display the standard which
may be expected of another similar professional.
In the present case, Zul, as an auditor, had failed to examine certain relevant documents. This indicates
that he has not acted as a reasonable auditor should have. Thus he has breached his duty of care. If it
could be shown that Sunshine Bhd has suffered loss or damage as a result of Zul’s breach, he would be
liable to it for negligence.
(b) Jin Seng is unlikely to be successful in a claim in negligence against Zul. This is because courts
have consistently held that an auditor owes a duty of care only to the company in general meeting and
not to outsiders such as persons who rely on the auditor’s report to invest in the stock market. This
can be illustrated by the case of Caparo Industries Ltd v Dickman Plc (1990).
5.
(i) By s.60F of the Employment Act 1955 an employee is entitled to paid sick leave as follows, if no
hospitalisation is necessary:
(i) 14 days per year if the employee has been employed for less than two years.
(ii) 18 days per year if the employee has been employed for two years or more but less than
five years.
(iii) 22 days per year if the employee has been employed for five years or more
If hospitalisation is necessary the employee is entitled to paid sick leave of 60 days per year.
The employee will be entitled to paid sick leave as stated above only after examination, at the
employers expense, by a registered medical practitioner duly appointed by the employer, or, if no such
medical practitioner is appointed, or, if having regard to the nature or circumstances of the illness, the
services of the medical practitioner so appointed are not obtainable within a reasonable time or
distance, by any other registered medical practitioner or medical officer.
Further, the amount of days of sick leave taken by the employee where no hospitalisation is necessary
will be deducted from his annual eligibility of 60 days paid sick leave if hospitalisation is necessary.
(ii) As Amin is deemed to have broken his contract of service by reason of not informing the
employer within two consecutive working days of his being on sick leave, it appears that the employer
may by virtue of s.14 take disciplinary action against him. By the section an employer may, on the
grounds of misconduct inconsistent with the fulfilment of the express or implied conditions of his
service,
(a) dismiss the employee without notice,

(b) downgrade the employee, or
(c) impose any other lesser punishment as he deems just and fit.
However, the employer may only do any of these after due inquiry.[KJJ CLEETUS…]
As such. Amin may be advised that unless he can justify his not informing the employer within the
stipulated period, of his being on sick leave for five days, the employer would, after due inquiry, have
the option of deducting five days leave from his annual leave, as it is certainly a lesser punishment
than dismissing him altogether.

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ACCA

CORPORATE AND BUSINESS LAW [LW]

EDC – Jan - June 2023

Prepared by Ms Pushpa ACIS [U.K.);LLB [Hons][U.K.];

SUNWAY UNIVERSITY COLLEGE

1. How is ‘law defined legally? [ State any two answers]

3. Which of the following statements is legally inaccurate?

A. The Judiciary is responsible for the creation of common law

5. Which one of the following is not a characteristic of public law?

A. It is mainly concerned with the government [councils and local authorities]

(i) A crime is conduct prohibited by the law True/False

7. Are the following statements legally accurate in a civil case?

(i) It regulates disputes over the rights and obligations of persons

A. The employee may be guilty of reckless driving

11. Which of the following statements is accurate?

15. Which of the following is an example of public law?

1. What is the DEFINITION OF LAW?

A. The High Court, The Court of Appeal and Sessions Court

2. What constitutes superior courts?

A. The High Court, The Court of Appeal and Sessions Court

A. (i), (ii) and (iii)

A. Life imprisonment; 200,000

8. The Court of Appeal deals only with ____________ jurisdiction.

9. The Federal Court has the following jurisdiction;

A. Original, appellate, advisory and referral

A. 2nd class Magistrate; legal

3. What are some of the advantages of delegated legislation?

I. Speed and flexibility

A. All of the above

4. The disadvantages of delegated legislation override the advantages of delegated legislation;

A. All of the above

A. Legislative; primary legislation

Do you agree with the above statement?

9. Do you agree/disagree with the following statements? [Delegated Legislation]

A. Ultra vires; void

2. In Malaysia human rights is basically enshrined in ____________ as well as by the ______

A. Federal Constitution; State Constitution

A. Yes, because the Federal Constitution is the supreme power in Malaysia

A. All of the above

I. To issue public statements on human rights as and when necessary

8. Match the following with the respective Article;

A. 3 and Non Muslims

1. What is the composition of Parliament ?

A. Dewan Rakyat, Dewan Negara and the Prime Minister

3. Ordinance may refer to which of the following;

I. Laws promulgated by the Yang di Pertuan Agung

A. 75%; 3rd stage

5. A draft of a proposed legislation is known as ___________ .

A. Monarch, Royal Assent

A. The committee stage ends and a motion is passed

9. Why may an Act of Parliament be passed?

I. To create new law

A. All of the above

1. What is common law or case law?

3. In simple words, a binding precedent means ____________

A. That judges follow as per the intentions of the legislature

5. The main advantages of precedents are as follows;

A. Certainty, predictability and uniformity

I. If the law was decided based on a Malaysian appeal case

2. In Malaysia human rights is basically enshrined in ______ as well as by the