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ASSOCIATION OF ACCOUNTING TECHNICIANS OF SRI LANKA
LEVEL II EXAMINATION - JANUARY 2021
(203) BUSINESS LAW
20-03-2021
• Instructions to candidates (Please Read Carefully):
Afternoon
(1) Time Allowed: Reading : 15 minutes. [01.45 – 05.00]
Writing : 03 hours. No. of Pages : 07
No. of Questions : 07
(2) All questions should be answered.
(3) Answers should be in one language, in the medium applied for, in the booklets provided.
(4) State clearly assumptions made by you, if any.
(5) Action Verb Check List with definitions is attached. Each question will begin with an action verb
excluding OTQ’s. Candidates should answer the questions based on the definition of the verb given
in the Action Verb Check List.
(6) 100 Marks.
SECTION A
Objective Test Questions (OTQs)
(Total 25 marks)
Question 01
Select the most correct answer for question No. 1.1 to 1.6. Write the number of the selected answer
in your answer booklet with the number assigned to the question.
1.1 Which court has the jurisdiction relating to Fundamental Rights?
(1) Magistrate’s Court. (2) District Court.
(3) Court of Appeal. (4) Supreme Court.
1.2 Which one of the following is the common law in Sri Lanka?
(1) Kandyan Law. (2) Roman Dutch Law.
(3) English Law. (4) Muslim Law.
1.3 Which one of the following is a document submitted by the seller to the buyer in a CIF
Agreement?
(1) Bill of lading. (2) Invoice.
(3) Insurance certificate. (4) All of the above.
1.4 Select the correct statement with reference to “Acceptance” as per the Contract Law:
(1) Acceptance is a conditional assent made by the offeree to the offeror.
(2) Acceptance is a conditional assent made by the offeror to the offeree.
(3) Acceptance is an unconditional assent made by the offeree to the offeror.
(4) Acceptance is an unconditional assent made by the offeror to the offeree.
1.5 According to the Companies Act No. 07 of 2007, a person is not qualified to be appointed as
a director, if that person is:
(a) Under 18 years old. (b) Adjudged to be of unsound mind.
(c) A Director of another company. (d) An undischarged insolvent.
Of the above, the correct statements are:
(1) (a), (b) and (c) only. (2) (a), (b) and (d) only.
(3) (b), (c) and (d) only. (4) (a), (c) and (d) only.
1.6 Which one of the following is not correct with reference to the “Bill of Lading”?
(1) It acts as a receipt for shipped goods.
(2) It is a method of payment used in international trade.
(3) It is used to prove the ownership of the goods.
(4) It includes quantity, size and weight of goods. (02 marks each, 12 marks)
State whether each of the following statements in question No.1.7 to 1.9 is TRUE or FALSE. Write
the answer (True/False) in your answer booklet with the number assigned to the question.
1.7 Contractual capacity of parties is an element of a valid contract.
1.8 Assisted contracts are generally not valid, and they are not binding on minors.
1.9 Any amount of money misappropriated by the workman during the course of
employment, could not be deducted from the gratuity payable amount.
(01 mark each, 03 marks)
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Write short answers for question Nos. 1.10 to 1.14 in your answer booklet with the number
assigned to the question.
1.10 State two(02) remedies available for a seller under the “Sale of Goods Ordinance”.
1.11 State two(02) fundamental elements of a contract for sale of goods.
1.12 State two(02) methods by which an offer gets rejected.
1.13 List two(02) rights which can be enjoyed by an owner of a registered Trademark.
1.14 State two(02) main dispute resolution methods that can be used to resolve an
international trade dispute. (02 marks each, 10 marks)
(Total 25marks)
End of Section A
SECTION B
(Total 50 marks)
Question 02
Following the outbreak of the COVID-19 pandemic, most people believe that Turmeric
(a traditional spice in Sri Lanka as well as in Asia) possesses antiviral properties. This
automatically increased the demand for authentic Sri Lankan Turmeric. Sanjaya, a Turmeric
farmer, agreed to sell Banda, a local seller, 500 bags of Turmeric described as “Sri Lankan grown
Turmeric”. When Banda visited Sanjaya’s Turmeric warehouse, Sanjaya showed him a sample
of the same Turmeric. After delivering the agreed 500 Turmeric bags, Banda discovered that
only 200 bags of total stock were similar to the sample shown and the remaining 300 bags were
imported from India and not Sri Lankan grown.
In the meantime, another buyer, Amaris contracted with Sanjaya via telephone and requested
1000 bags of Turmeric from him. In their telephone conversation, Sanjaya described that he
sells Turmeric as “Sri Lankan grown Turmeric”. Amaris was never shown a sample of the
Turmeric by Sanjaya. After the ordered Turmeric had been delivered, Amaris realised that all
the bags of Turmeric were originated in India.
You are required to:
(a) Explain the legal rights of Banda against Sanjaya. (06 marks)
(b) Explain the legal rights of Amaris against Sanjaya. (04 marks)
(Total 10 marks)
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Question 03
Siripala, a buffalo farmer who lives in Polonnaruwa, handed over 10,000 curd pots to the
Railway Department at Polonnaruwa Station in order to be transported to Colombo. On the way
to Colombo, the train which carried the curd pots was unfortunately derailed in a remote area on
the outskirts of Kekirawa. The train driver realized that it would take 4 to 6 days to repair the
rail road and he made all possible efforts to contact Siripala but it was unsuccessful in doing so.
Then, the train driver sold all 10,000 curd pots locally, below their actual value, because the curd
began to spoil due to the delay in transporting it. Later, train driver sent money received from
sale of 10,000 curd pots to Siripala. However, Siripala is planning to take legal action against
train driver claiming the losses incurred by him.
You are required to:
Discuss whether the train driver is liable to pay for the losses incurred by Siripala. (10 marks)
Question 04
A, B and C are in a partnership business, to plan and decorate events including weddings and
birthday parties. A proposed to buy a reception hall for the purpose of renting out for events
and parties by obtaining a loan from PQ Finance Ltd. B gave his consent for A’s proposal,
whereas C refused to give his consent. As discussed, A and B obtained the loan and bought the
reception hall. However, few months later, due to the COVID-19 pandemic, the demand for
events and related decorations have been reduced and the partnership went bankrupt.
PQ Finance Ltd. filed an action to recover the debt naming all three partners as defendants.
C is in the view that, as he has not signed the loan agreement, he is not liable to pay the loan
obtained by A and B.
You are required to:
(a) Discuss the validity of C’s view. (07 marks)
(b) State three(03) instances where the court can dissolve a partnership. (03 marks)
(Total 10 marks)
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Question 05
Consider the following Bill of Exchange:
03.06.2020
To: Sitha Ranawaka Perera,
No. 75, Nawala Road, Rajagiriya.
Pay to Rajiv Silva a sum of rupees eighty thousand (Rs.80,000/-) for value
received.
Ranjan Sivaganesh
You are required to:
(a) Identify the main parties involved in the above Bill of Exchange. (03 marks)
(b) State four(04) features of a valid bill of exchange. (04 marks)
(c) Identify three(03) differences between a bill of exchange and a cheque. (03 marks)
(Total 10 marks)
Question 06
Amidst COVID-19 global pandemic, the relevance of the electronic transactions has become more
prominent in the day to day life of general public in the country and simultaneously, the number
of reported cyber related offences has also been risen drastically. Law enforcement officials are
trying their level best to address the situation within the existing legal framework of Sri Lanka.
Electronic Transactions Act No.19 0f 2006 is one of the main legal act which helps to regulate
this field.
Further, due to the global pandemic, there were restrictions in importing certain products to Sri
Lanka. As a result, some traders have done various malpractices when selling goods.
You are required to:
(a) State three(03) objectives of Electronic Transactions Act in Sri Lanka. (03 marks)
(b) Identify two(02) articles/legal instruments which have been excluded from the scope of
application of Electronic Transactions Act No. 19 of 2006. (02 marks)
(c) Explain three(03) functions / duties of Consumer Affairs Authority Act No. 09 of 2003.
(05 marks)
(Total 10 marks)
End of Section B
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SECTION C
(Total 25 marks)
Question 07
(A) Dinu and Ram planned to have their wedding on 15th October 2020 and they booked a
beach hotel by paying half of the amount of the hotel in January 2020. There was nothing in
writing as to the terms and conditions of the agreement between both parties, but Dinu
kept the receipt of down payment safely in a file. However, due to the second wave of
COVID-19 outbreak in the country, the government imposed a ban on conducting any
private functions since 13th October 2020 until further notice. Dinu and Ram decided to
cancel the reception and just registered the marriage on the same date. When Dinu
informed the manager of the hotel regarding the cancellation on the same date, he refused
to return the money paid by the couple. Dinu’s brother Sam has gifted a car for wedded
couple.
Ram is an IT Engineer and he wanted to apply for a motor insurance cover for his new car,
from Janahitha Insurance Co. When filling the application, it was inquired “Have you or
any other person who will drive been ever convicted for any offence in connection with the
driving of a motor car?”. However, Ram answered the above question saying “No”, though
he was convicted for 5 years for a technical offence. Janahitha Insurance Co. rejected his
application.
In the meantime, he was obtained a full insurance cover for his car from Sahana Insurance
Co. However, after few months from obtaining the cover, his car was damaged by a protest
of people.
You are required to:
(a) Discuss the remedies available to Dinu and Ram regarding the down payments they
made. (07 marks)
(b) Explain whether Janahitha Insurance Co. can reject the application made by Ram.
(05 marks)
(c) Explain the legal rights of Ram regarding the car damage. (05 marks)
(B) Hameed is working for Foodmart, a medium scale supermarket as a cashier since 15th
November 2020. Foodmart has only 10 employees, including 2 Cashiers, 5 Sales Reps,
1 Security Officer, 1 Cleaning Staff and a Manager. On the 01st March 2021 the manager
noticed that the cash in hand balance of Hameed was less, when comparing with the
balance that should have been with him as per the accounting system. The manager of the
Foodmart suddenly blamed Hameed and terminated his employment and asked him to
leave the place immediately without conducting a proper internal disciplinary inquiry.
You are required to:
Discuss the legal rights of Hameed in terms of Termination of Employment of Employees
(special provisions) Act No. 19 of 1954. (08 marks)
(Total 25 marks)
End of Section C
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ACTION VERBS CHECK LIST
Level of
Description Action Verbs Verb Definitions
Competency
Draw Produce a picture or diagram.
Relate Establish logical or causal connections.
Recall Facts
Knowledge (1)
and Basic State Express details definitely or clearly.
Concepts.
Identify Recognize, establish or select after consideration.
List Write the connected items.
Level of
Description Action Verbs Verb Definitions
Competency
Show validity or otherwise, using knowledge or
Recognize
contextual experience.
Explain &
Comprehension Elucidates Interpret Translate into understandable or familiar terms.
(2) Ideas and Describe Write and communicate the key features.
Information.
Explain Make a clear description in detail using relevant facts.
Define Give the exact nature, scope or meaning.
Level of
Description Action Verbs Verb Definitions
Competency
Reconcile Make consistent / compatible with another.
Graph Represent by graphs.
Assess Determine the value, nature, ability or quality.
Use and Adapt
Application (3) Solve Find solutions through calculations and/or explanation.
Knowledge in
New Prepare Make or get ready for a particular purpose.
Situations.
Demonstrate Prove or exhibit with examples.
Calculate Ascertain or reckon with mathematical computation.
Apply Put to practical use.
Level of
Description Action Verbs Verb Definitions
Competency
Communicate Share or exchange information.
Outline Make a summary of significant features.
Draw Contrast Examine to show differences.
Analysis (4) Connections
Among Ideas Compare Examine to discover similarities.
and Solve
Problems. Discuss Examine in detail by arguments.
Differentiate Constitute a difference that distinguishes something.
Analyze Examine in details to find the solution or outcome.
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