JUNE 2013

PART - A
Question No. 01
(a) The Chair Company engages in the business of hiring deckchairs to visitors to the beach nearby.

Roxy, a visitor to this beach, paid in full and hired a deckchair from The Chair Company.When he was about to push the
deckchair to the beach nearby, he was given the receipt for the payment he made for it. Roxy without reading the receipt, put it in
his pocket. This receipt contained a clause stating that, The Chair Company will not be liable for accidents or damages caused as a
result of using the companys chairs.
Then Roxy took the deckchair to the beach, and sat on the chair.
Suddenly the chair collapsed, and Roxy injured himself in the fall.
Explain whether, The Chair Company is liable to pay damages to Roxy, for the injury caused to him.
(5 marks)
(b) In all domestic and social agreements, there is a presumption that the parties do not intend to create legal relations.
Explain this statement with reference to relevant case law.
(5 marks) (Total 10 marks)

Question No. 02
(a) Sepala and Gunapala were partners who operated an IOC petrol station in Kegalle. They later dissolved the partnership.

But before the date of dissolution, partner Sepala without informing the other, negotiated a new agreement with IOC for him to
operate and continue this same petrol service station as a sole trader.
When partner Gunapala discovered the new agreement, he claimed a share of the profits of the new operation, from Sepala.
Advise Gunapala whether he could file action against Sepala, to claim a share of the profits of the new operation.
(5 marks)
(b) Arun has been appointed recently as a partner to A & B Enterprises, a duly constituted partnership.

He was told by Barbara, the other partner of the business that sharing gross returns will not create a partnership.
Advise Arun on the statement made by Barbara, as he was new to the partnership.
(5 marks) (Total 10 marks)

Question No. 03
(a) In 1980, Amal and Amali got married.

In 2010, they entered into a contract of insurance with A Ltd. Under this contract, the policy money was payable, on the death of
either of them, to the survivor.
The premiums were paid by Amal and Amali, jointly.
In 2012, Amali died of natural causes. Subsequently Amal claimed the policy money from A Ltd..
Discuss with reference to case law, the insurable interest that Amal has, in the life of his wife Amali.
(5 marks)
(b)Describe, insurance as a contract of uberrimae fidei.

(5 marks) (Total 10 marks)
Question No. 04
Write brief notes on any Two (2) of the following-
(a) Money Laundering and its application in Sri Lanka.

(b) A Bill of Lading.

(c) The main features of Agency by Ratification.

(d) The warranties implied in sale of goods under the Sale of Goods Ordinance.

(5 marks each) (Total 10 marks)

PART B
Question No. 05
(a) Mr. Sharp, is one of the directors of T&T (Pvt) Ltd. He believes that the company is unable to pay its debts as they fall due.

(i) Advise Mr. Sharp on the steps that should be taken immediately by him, in such a situation, under the provisions of the
Companies Act, No. 7 of 2007.
(3 marks)
(ii) Briefly explain the consequences, if Mr. Sharp fails to take immediate action.
(2 marks)
(b) Kitchen Suppliers (Pvt) Ltd sells and hires heavy kitchen equipment.

Miss. Kusum, the Secretary of Kitchen Suppliers (Pvt) Ltd., hired some heavy bottom kitchen equipment in the companys name,
unknown to the Board of the company.
Miss. Kusum took the hired equipment home for her personal use.
One week after the hiring of the equipment she submitted her resignation from the post of Secretary of Kitchen Suppliers (Pvt) Ltd.
The supplier is now seeking payment for the hired equipment from Kitchen Suppliers (Pvt) Ltd.
Explain whether the company is liable to pay the hiring charges to the supplier.
Justify your answer by referring to the landmark judgment in the case of Panaroma Developments (Guildford) Ltd. vs Fidelis
Furnishing Fabrics Ltd.
[ (1971) 2 Q.B. 711 ]
(5 marks) (Total 10 marks)
Question No. 06
(a) Ambitious (Pvt) Ltd., is carrying on the business of sending students abroad for higher studies.

The company wishes to alter its Article of Association, to include sending people for employment to foreign countries.
Discuss the steps that the Company should follow, in order to alter its Articles under the Companies Act, No. 7 of 2007.
(5 marks)
(b) Publication of a public notice is a mandatory requirement under the Companies Act, No. 7 of 2007, at the point of incorporation
of a company.

State the requirements to be followed by a company, for such publication as per the Companies Act No. 7 of 2007.
(5 marks) (Total 10 marks)

Question No. 07

(a) In the Articles of Association of Bat & Ball (Pvt) Ltd, it was stated that the companys business shall be terminated after four years
from the date of registration of the company.
Bat & Ball (Pvt) Ltd. is now almost four years old.
Advise the company on how it can wind up its business.
(5 marks)
(b) Banu, has been appointed as a Liquidator by the courts, to undertake the winding up procedure of Company ABC.

Banu wishes to know, what powers are given to a liquidator under the Companies Act No. 7 of 2007.
State five (5) such powers conferred on the liquidator by the Companies Act.
(5 marks) (Total 10 marks)
Question No. 08
(a) Senaka is the external auditor of H&H Company (Pvt) Ltd.

The company is now planning to replace its present external auditor Senaka, with a new auditor.
Briefly explain the procedure that should be followed by H & H Company (Pvt) Ltd when changing its external auditor, as laid down
in the Companies Act No. 7 of 2007.
(5 marks)
(b) Describe, what Good Corporate Governance is, and why Good Governance is so important for a company.

You are required to provide one (01) example on corporate governance collapses either locally or overseas to support your answer.
(5 marks) (Total 10 marks)
Question No. 09
(a) State the essential characteristics of a floating charge.
(5 marks)

(b) State

(i) The duty of a Receiver, in selling company property; and (3 marks)
(ii) The duty of a Receiver, in relation to company money. (2 marks)
(Total 10 marks)
Question No. 10
(a) Discuss the method of reduction, of stated capital under the provisions of the Companies Act, No. 7 of 2007.
(5 marks)

(b) Examine the provisions of the Companies Act, with respect to the manner in which a company can give financial assistance
for the purchase of its own shares.
(5 marks) (Total 10 marks)