Section 1

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Section 1

MULTIPLE CHOICE QUESTIONS

ESSENTIAL ELEMENTS OF THE LEGAL SYSTEM

1. Which of the following is the name used for the person who commences a civil
action?

A. Appellant

B. Plaintiff

C. Claimant

2. Which part of a legal judgement establishes the precedent that is to be followed by

lower courts?

A. The ratio decidendi

B. The facts that are considered important by the judge

C. The obiter dicta

3. Which is the final appeal court in Malaysia?

A. The High Court

B. The Federal Court

C. The Court of Appeal

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MULTIPLE CHOICE QUESTIONS

ESSENTIAL ELEMENTS OF THE LEGAL SYSTEM

1. Which of the following is the name used for the person who commences a civil
action?

A. Appellant

B. Plaintiff

C. Claimant

2. Which part of a legal judgement establishes the precedent that is to be followed by

lower courts?

A. The ratio decidendi

B. The facts that are considered important by the judge

C. The obiter dicta

3. Which is the final appeal court in Malaysia?

A. The High Court

B. The Federal Court

C. The Court of Appeal

4. Which of the following statements regarding the Federal Court is correct?

A. It is bound by its previous decisions, but it may depart if they are considered to be
wrong.

B. It is always bound by its previous decisions.

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 C. It is normally bound by its previous decisions, but may depart when it appears
right to do so.
5. Which of the following is NOT one of the stages for creating an Act of Parliament?

A. Third reading

B. Fourth reading

C. Committee stage

6. The standard of proof required in a criminal case is:

A. The balance of probabilities

B. Whether the defence establishes a reasonable defence to the allegations

C. Beyond any doubt

D. Beyond reasonable doubt

7. The term ‘private law’ refers to:

A. The body of laws that derive from the deciding of cases

B. The body of laws that seek to regulate the relationship between individuals

C. The legal principle that states that a person has the right to privacy

D. The body of laws that seeks to regulate the relationship between the State and its
citizens

8. In the context of case law which one of the following statements is correct?

A. Distinguishing occurs when a higher court changes the decision reached by a

lower court.

B. Distinguishing occurs when a court changes the law stated in a previous case.

C. Distinguishing occurs when a court indicates that the facts of a previous case are
different.

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 D. Distinguishing occurs when a court indicated that the material facts of a previous
case are different.

9. Which of the following is regarded as private law?

(i) Criminal law

(ii) Contract law

A. (i) only

B. (ii) only

C. Both (i) and (ii)

D. Neither (i) or (ii)

10. Which of the following statement/s regarding civil law is/are correct?

(i) It is the body of laws that does NOT relate to criminal offences

(ii) It is law created by judges through decision made in cases

A. (i) only

B. (ii) only

C. Both (i) and (ii)

D. Neither (i) or (ii)

11. What is the name of the process by which the courts can challenge delegated
legislation?

A. Judges renewal

B. Judicial renewal

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 C. Judges review

D. Judicial review

12. A Parliamentary Bill becomes an Act of Parliament:

A. When it passes through the committee stage

B. On receiving its third reading

C. When passed by both Houses of Parliament

D. On receiving the Royal Assent

13. What does the ‘literal rule’ of statutory interpretation mean?

A. Words should be given their ordinary meaning.

B. The meaning of the words can be gathered from their context.

C. Words should be given the meaning which is likely to give effect to the purpose
or reform which the statute intended.

D. Words should be given their ordinary grammatical meaning unless the meaning is
manifestly absurd.

14. Which of the following is a Malaysian court NORMALLY bound to follow?

A. An obiter statement of a higher court

B. A ratio of a lower court

C. A ratio of a court at the same level

D. An obiter statement of the Federal Court

15. Which TWO of the following are private law actions?

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 (1) Those between individuals

(2) Those between business organisations

(3) Those between individuals and the state

A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

16. Which of the following is an example of the purposive approach to statutory

interpretation?

A. The mischief rule

B. The literal rule

C. The golden rule

17. Which of the following correctly applies to the burden of proof in a criminal case?

A. It must be proved beyond reasonable doubt

B. It must be proved on the balance of probabilities

C. It lies with the prosecution

D. It lies with the defence

THE LAW OF OBLIGATIONS

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18. A display of goods in a shop window will generally constitute:

A. An offer

B. An invitation to treat

C. A statement of intention

19. Acceptance is not effective if through:

A. Conduct only

B. Express words only

C. The offeree’s non communicated intention

20. Where the post is a valid means of acceptance, at what point will the offeree have
been held to have accepted the offer?

A. When the letter of acceptance has been written

B. When the letter of acceptance has been correctly addressed, its postage paid, and
posted

C. When the letter of acceptance is received by the offeror

21. A warranty can be classified as:

A. A lesser term in a contract

B. The most important term in a contract

C. Not a term of a contract at all

22. What will be the effect where the nature of an exclusion clause is misrepresented by
the person wishing to rely on it?

A. It will fail to protect the party attempting to rely on it

B. The misrepresentation will reduce any award by the court by 50%

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 C. It will have no impact where the party has signed a document containing the
clause

23. Which of the following is NOT a type of term?

A. Warranty

B. Condition

C. Representation
24. Which of the following is NOT included in an assessment of damages in contract
law?

A. Remoteness of damage

B. Mitigation

C. The sum identified in a penalty clause

25. Which of the following is NOT an equitable remedy?

A. Damages

B. Specific performance

C. Injunction

26. Breach of which term would NOT entitle the innocent party to repudiate the
contract?

A. A warranty

B. A condition

C. An innominate term

27. What are the requirements for a valid and binding contract?

A. Offer and acceptance only

B. Offer, acceptance and consideration only

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 C. Offer, acceptance, consideration and intention to create legal relations

28. Which of the following statements is correct?

A. Executory consideration is consideration that is yet to be provided

B. Executory consideration is consideration that has already been provided

C. Executory consideration is consideration that is insufficient in the eyes of the law

29. Which of the following is NOT an essential element of a valid simple contract?

A. The contract must be in writing

B. The parties must be in agreement

C. Each party must provide consideration

30. An agreement to carry out an act which the law requires anyway amounts to:

A. Sufficient consideration

B. Insufficient consideration

C. Past consideration

31. What is an exclusion clause?

A. It is a clause excluding the rights of persons other than the contracting parties to
sue for breach of contract

B. It is a clause which limits the contractual capacity of one of the parties

C. It is a contractual clause which limits liability for breach of contract

32. What is it called when one party announces his intention NOT to honour his
agreement before the performance was due?

A. Anticipatory breach

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 B. Actual breach

C. Fundamental breach

33. Where there has been an anticipatory breach of contact the injured party is NOT
entitled to sue:

A. After a reasonable time

B. From the moment the other party indicates that he does not intend to be bound

C. From the moment the other party breaches a contractual condition

34. Which of the following types of contract must be in writing?

A. A partnership agreement

B. A contract for the sale of goods

C. An agreement for the transfer of land

35. 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 a reliable third party

36. In relation to social and domestic agreements the court:

A. Assumes the parties did intend to create a legally binding contract

B. Presumes that the parties did not intend to create a legally binding contract

C. Does not consider the intention of the parties

37. Which of the following statements correctly describes express terms?

A. They are regarded as conditions

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 B. They are always in writing

C. They are terms that the parties have specifically agreed

38. The principal effect of a counter-offer is:

A. It destroys the original offer and replaces it with a new offer

B. It creates a binding contract based on the terms of the counter-offer

C. It creates a binding contract based on the terms of the original offer

39. S offers to sell his car to B for RM10,000 cash. At what point in time does the
contract come into being?

A. When B accepts the offer

B. When B pays S the RM10,000

C. When the agreement is written down

D. When the agreement is signed

40. An offer was made by A to sell goods on the 1 st April for RM2,000. B the offeree
telephoned A on the 5th April offering to pay RM1,800 for the goods.

On the 8th April, A offered to sell the goods to C for RM1,900, and C accepted this offer
on the same day. On the 7 th April, B sent a letter to A which was received on the 10 th
April agreeing to pay the RM2,000 asking price for the goods.

Which one the following is correct?

A. There is a contract between A and B created on the 7th April

B. There is a contract between A and B created on the 10th April

C. There is a contract between A and C

D. There is no contract created

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41. A coat was displayed in a shop window with a price tag attached which read RM10. The
price tag should have read RM100. X who saw this went into the shop and demanded the
coat for RM10.

Which one of the following is correct?

A. As the window display is an offer X can demand the coat at RM10.

B. The window display is merely an invitation to treat and the shopkeeper does not
have to sell the coat to X.

C. The shopkeeper can refuse to sell the coat for RM10, but cannot refuse to sell the
coat to X for RM100 if X was prepared to pay this sum.

D. The shopkeeper would be bound to sell the coat to any customer prepared to pay
the RM100.

42. Which of the following is NOT correct?

A. A contract term can be implied by a court on the ground of business efficacy.

B. A contract term can be implied by statute.

C. A contract term can be implied by a court on the basis of fairness between the
parties.

D. A contract term can be implied by a court on the basis of trade custom.

43. Which of the following statements is NOT correct in relation to the determining of
damages payable on breach of contract?

A. The purpose of providing damages is to compensate the injured party.

B. Quantifying damages is determining the actual amount of the award to be made to

the injured party.

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 C. The remoteness of damage issue is determined by considering the amount of
damages the injured party reasonably expects on the basis of the contract breach
and damages suffered.

D. An innocent party has a duty to mitigate their loss.

44. The doctrine of privity of contract means:

A. A contract is not legally binding if it is a private agreement

B. Only the parties to a contract can enforce it

C. The terms of a contract are primarily the concern of the parties to it

D. An ambiguity in the contract will be interpreted against the party trying to avoid
liability

45. In the event of a breach of contract, the difference between a condition and a
warranty is important because it determines:

A. The measure of damages available to the innocent party

B. The type of damages available to the innocent party

C. The remedy available to the innocent party

D. Whether or not the court will exercise it discretion to grant specific performance

46. Robert’s wife Kate expressed the wish that Robert, if he survived her, should have the
use of her house. After Kate’s death her executor agreed to allow Robert to occupy the
house (i) because of Kate’s wishes and (ii) on the payment by Robert of RM24 per year.

Robert seeks to enforce this agreement and the executor wishes to avoid it in order
to sell the house. What is the legal position?

A. Robert can enforce the agreement on the basis of his deceased wife’s wishes.

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 B. Robert cannot enforce the agreement because the promise to pay is not
consideration.

C. Robert can enforce the agreement because the promise of RM24 per year provides
consideration for it.

D. Robert cannot enforce the agreement because RM24 per year is not sufficient
consideration.

47. In the context of contract law, which of the following is the correct limitation period
for contracts (other than those made by deed)?

A. 3 years

B. 6 years

C. 9 years

D. 15 years

48. Paul has just agreed to sell a piece of land to his friend Martin.

Which of the following statements is correct?

A. The contract is not enforceable as it is an agreement made between friends

B. For the contract to enforceable, it can be in any form

C. For the contract to be enforceable, the terms must be set out in writing

D. For the contract to be enforceable, the Paul and Martin must be over 21 years old

49. In the context of contract law, persons without capacity may have limitations on their
power to contract.

Which of the following do/does NOT have capacity to contract?

(1) Persons under the age of eighteen years

(2) Persons of unsound mind

(3) Persons who are over the age of sixty- five years

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 A. (1) and (2) only

B. (2) and (3) only

C. (2) only

D. (1), (2) and (3)

50. Nick verbally agrees to rob his friend’s neighbour in return for RM500.

In the context of contract law, which of the following statements is true?

A. The contract is illegal, and therefore not valid

B. The contract must be in writing for it to be enforceable

C. Contracts made between friends are never legally binding

D. The contract is enforceable if Nick is found not guilty of robbery

51. In the context of contract law, which of the following statements is/are true?

(1) An offer can be any form – oral, written or by conduct.

(2) An offer is not effective until it has been communicated to the offeree.

(3) An offer can be made to a particular person, to class of persons, or in certain

instances to the whole world.

A. (1) and (2) only

B. (2) and (3) only

C. (1) only

D. (1), (2) and (3)

52. George sees a television for sale in the window of a shop, with a sign attached stating
‘LIMITED OFFER PRICE RM50’

This is an example of which of the following?

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 A. An invitation to treat

B. A valid offer

C. A mere statement of selling price

53. Bobby sees a diamond ring in the display cabinet of a local jewellery shop, with a price
tag of RM25. When Bobby tried to buy the ring, the shop assistant informed him this was
an error and the correct price is RM2,500.

Which of the following statements is correct?

A. There is a binding contract for the ring at a price of RM25

B. There is a binding contract for the ring at a price of RM25,000

C. There is no contract since the ring on display is an invitation to treat

D. There is no contract because an honest mistake has been made

54. In contract law, once an offer has been terminated, it cannot be accepted.

Which of the following does NOT terminate an offer?

A. A request for further information

B. Revocation by the offeror

C. Lapse of reasonable time

D. Rejection by the offeree

55. In the context of contract law, which of the following statements is/are true?

(1) An offer can be any form – oral, written or by conduct.

(2) An offer is terminated by rejection.

(3) An offer can be terminated after acceptance.

A. (1) and (2) only

B. (2) and (3) only

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 C. (1) only

D. (1), (2) and (3)

56. In the context of contract law, an offer is terminated by revocation.

Which of the following statements is/are true?

(1) Revocation can be made at any time prior to acceptance, even if the there is an
agreement to keep the offer open.

(2) Revocation must be communicated to the offeree.

(3) Revocation can be communicated by ANY third party.

A. (1) and (2) only

B. (2) and (3) only

C. (1) only

D. (1), (2) and (3)

57. In the context of contract law, which one of the following statements is NOT
correct?

A. Acceptance must be unqualified and unconditional

B. Acceptance can be oral, written or by conduct

C. As a general principle, acceptance is not effective until it is communicated

D. Acceptance cannot be terminated by revocation

58. The postal rule is an exception to the principle that acceptance must be communicated.

Which of the following is/are requirements for the postal rule to apply?

(1) The letter must be received by the offeror

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 (2) The letter must be properly stamped, addressed and posted

(3) Accepting by post is a reasonable method of communication

A. (1) and (2) only

B. (2) and (3) only

C. (2) only

D. (1), (2) and (3)

59. Stephen posted a letter of acceptance to Martin on 3 rd December. On the 5th December
Martin emailed Stephen to withdraw the offer. On the 6 th December Martin received
Stephen’s letter of acceptance.

Which of the following statements best describes this situation?

A. There is NO contract. Martin has successfully revoked his offer by email prior to
acceptance

B. There is NO contract. Acceptance in writing is not a valid form of acceptance

C. There is a contract on 3rd December

D. There is a contract on 6th December

60. All simple contracts must be supported by consideration from each party.

Which of the following statements is/are correct?

(1) Consideration must be sufficient

(2) Consideration must be adequate

(3) Past consideration is valid consideration.

A. (1) and (2) only

B. (1) and (3) only

C. (1) only

D. (1), (2) and (3)

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61. An EXCLUSION CLAUSE can be incorporated into a contract in which of the
following ways?

(1) By signature of the contract

(2) By way of notice

(3) By way of previous dealings

A. (1) and (2) only

B. (1) and (3) only

C. (1) only

D. (1), (2) and (3)

62. In the context of contract law, which one of the following statements is FALSE?

A. A condition is an important term going to the root of the contract

B. Breach of a condition can result in damages, or discharge, or both

C. A warranty is less important term, merely incidental to main purpose of the

contract

D. Breach of a warranty can result in damages, or discharge, or both

63. Adam has a contract with Colin. Four weeks prior to the agreed completion date, Colin
telephone’s Adam out of courtesy to say he has double-booked and will be unable to
carry out the work as agreed.

Which of the following statements is true?

A. Colin has committed an actual breach of contract

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 B. Colin has committed an express anticipatory breach of contract

C. Colin has committed an implied anticipatory breach of contract

D. Colin has not committed a breach of contract

64. In the context of contract law, which of the following is a common law remedy for
breach of contract?

A. Damages

B. Specific performance

C. Injunction

D. Rescission

65. A judge orders a defendant to perform their contractual obligations as agreed.

In the context of contract law, which one of the following is this example of?

A. Damages

B. Rescission of contract

C. Injunction

D. Specific performance

66. A contract contains a term which states a fixed sum is payable in the event of breach. The
sum is a genuine pre-estimate of the expected loss.

Which of the following is this an example of?

A. Liquidated damages

B. Penalty clause

C. Unliquidated damages

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 D. Equitable remedy

67. Paul contracts with Green Sdn Bhd to landscape his garden for RM1,500. The nearest
alternative quote for the work was RM2,200 from Eden Sdn Bhd. Before the due date for
performance, Green Sdn Bhd contacted Paul to say they can no longer do the work.

Which of the following damages can Paul claim for this breach of contract?

(1) Financial compensation of RM2,200

(2) Financial compensation of RM700.

A. (1) only

B. (2) only

C. Both (1) and (2)

D. Neither (1) or (2)

68. Which of the following involves an offer which may only be accepted by performing
an action?

A. A collateral contract

B. A unilateral contract

C. A bilateral contract

69. Tan writes to Yun stating that he will sell his car to him for RM10,000. At the same time,
Yun writes to Tan stating that he will buy his car for RM10,000.

Which of the following statements applies to this situation?

A.
B. There is a binding agreement due to the postal rule

C. There is a collateral contract

D. There is neither an agreement nor a contract

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70. Which of the following statements as regards an acceptance of an offer ‘subject to
contract’ is true?

A. It binds the offeror

B. It binds neither party

C. It binds both parties

71. Jo promises to pay a reward for the return of her lost phone. Mia finds the phone and
returns it to Jo.

Which of the following types of consideration has Mia provided?

A. Executed consideration

B. Executory consideration

C. Past consideration

72. Which of the ‘following describes a pre-contractual statement which does NOT
form a term of a contract but induces the contract?

A. A condition

B. A warranty

C. A representation

D. An innominate term

73. A breach of a contractual warranty enables the injured party to do which of the
following?

A. To sue for damages only

B. To sue for damages or terminate the contract

C. To sue for damages and terminate the contract

D. To terminate the contract only

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74. Which of the following actions is open to a party who has only partly performed
work under a contract?

A. Quantum meruit

B. Action for the price

C. Damages

D. Restitution

75. Where a business includes a term in a contract which excludes liability for death
and personal injuries through negligence, which of the following states the effect of
the term?

A. It is invalid

B. It is invalid unless it is reasonable in the circumstances of the case

C. It is valid only if specifically brought to the attention of the other party

D. It is valid if it is clearly included in the contract terms

76. Which of the following is NOT a type of loss usually recoverable under the tort of
negligence?

A. Injury

B. Pure economic loss

C. Damage to property

77. What is pure economic loss?

A. Financial loss that is caused by physical injury

B. Financial loss that is not associated with physical injury or property damage

C. Financial loss that is caused by damage to property

78. Contributory negligence is a:

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 A. Partial defence

B. Complete defence

C. Not a defence at all

79. Which of the following is NOT a situation where the courts have established that a
duty of care exists?

A. Motorists owe a duty of care to pedestrians

B. Manufacturers of products owe a duty of care to the ultimate users of those

products

C. An auditor of a company’s accounts owes a duty of care to anyone who might

read his report based on those accounts

80. Which of the following does NOT need to be shown by the claimant in order to
succeed in an action 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 injury, damage or loss as a result of a breach of a duty
of care

D. That the damage was not too remote

81. Which of the following is NOT considered in determining whether a duty of care
exists?

A. Whether it is fair that the law should impose a duty on the defendant

B. Whether the defendant intended to cause injury to the claimant

C. Whether it was reasonably foreseeable that the claimant might suffer damage as a
result of the defendant’s actions

D. Whether there is sufficient proximity between the parties

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82. While taking driving lessons John drove negligently and injured his instructor.
John’s duty of care in this case will be:

A. The same as that owed by every driver

B. That of any unqualified driver

C. Assessed on the basis of John’s specific experience and skill

D. That which might reasonably be expected of a similarly inexperienced driver

83. In negligence, to prove that damage arose from a breach of duty it must be shown
that the breach caused the damage and:

A. The type of injury was reasonably foreseeable

B. The extent of injury was reasonably foreseeable

C. The particular injury was reasonably foreseeable

D. Both the extent and type of injury was reasonably foreseeable

84. Which of the following does not need to be shown in an action for the tort of
negligence?

A. That a duty of care was owed to the claimant by the defendant

B. That there was breach of that duty of care

C. That the defendant intended to harm the claimant

D. That injury or damage was caused by the failure to exercise reasonable care
85. In relation to establishing a claim of negligence, which one of the following is NOT
correct?

A. There must be sufficient proximity between the wrongdoer and the injured party.

B. The standard of care required is that expected by the reasonable person.

C. The same level of care is owed both to adults and children.

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 D. The level of care to be shown varies with the level of seriousness of the likely
consequences of breach of duty.

86. Which of the following is correct?

A. A professional adviser can be liable to both the client who employs them and any
other parties who they know will rely on information provided.

B. A professional adviser can be liable to anyone who relies on information they

provide.

C. A professional adviser will be liable in negligence but not contract for any
negligent advice provided

D. A professional adviser cannot be liable where the only form of damage resulting
from negligent advice given is financial loss.

87. When determining whether a breach of duty has taken place, the courts will take into
account a number of factors.

Which of the following is NOT a relevant factor?

A. The seriousness of the injury

B. The ease with which the damage sustained can be financially assessed

C. The likelihood of injury

D. The cost of precautions

88. In respect of audited accounts, to whom does an auditor owe a duty of care NOT to
act negligently?

A. The company only

B. The shareholders only

C. All stakeholders

D. Anyone who purchases more shares in the company as a result of the accounts.

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89. Trina, a trainee accountant, was approached by John, the husband of Trina’s colleague,
Julie, at an office party. John asked her for some professional advice and flattered that he
had asked her, Trina gave some advice. It later turned out her advice was flawed.

Is Trina liable of the resulting loss suffered by John?

A. Yes because she knows him and is responsible for the advice which she gives

B. Yes because she owes him a duty of care for which the standard is that of
reasonable qualified accountant

C. No because she is only a trainee

D. No because the advice was not given in a professional context

90. Which of the following statement/s are true in relation to the defence of
contributory negligence?

(1) The defendant must show that the claimant’s conduct contributed to the incident
that caused the damage he suffered

(2) The defendant must show that the claimant’s conduct contributed to the damage
which he suffered

A. (1) only

B. (2) only

C. Both (1) and (2)

D. Neither (1) or (2)

91. Which of the following is the consequence when a patient signs a medical consent
form before an operation?

A. The patient gives up any right if action for any injury suffered

B. Any action for any injury suffered during the operation is limited to negligence

C. The level of any potential payment for any injury suffered is reduced

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92. Su had just passed her driving test when she negligently drove into a pedestrian.

What standard of care will Su be judged by?

A. The objective standard of a newly qualified driver, lack of experience will be

taken into account

B. The objective standard of a competent driver, lack of experience will not be taken
into account

C. The subjective standard of actual ability

93. Which of the following are owed a duty of care by auditors when preparing a
company’s audit report?

A. A potential investor with no current holding

B. An existing shareholder looking to increase their holding

C. A company looking to make a takeover bid for the company

D. The company and the existing shareholders in the company as a body

THE FORMATION AND CONSTITUTION OF BUSINESS

ORGANISATIONS

94. What type of resolution is required to alter a company’s name?

A. Ordinary resolution

B. Special resolution

C. Ordinary resolution with special resolution

95. A public company limited by shares must have:

A. At least two directors and one shareholder

B. At least one director, one company secretary and two shareholders

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 C. At least two directors, one company secretary and one shareholder

96. The constitution of a company forms a contract between:

A. The shareholders and the directors in all respects

B. The shareholders and the company in all respects

C. The shareholders and the company in respect of shareholder rights only

97. Which of the following does NOT need to be submitted when registering a private
company limited by shares?

A. An application for registration

B. A declaration by the directors that he consents to act as a director

C. A statement of compliance

98. Which of the following is NOT an example of a business organization?

A. A sole trader

B. An employee

C. A limited company

99. Which of the following is NOT a feature of a general partnership?

A. The partners have unlimited liability

B. The partners have joint and severable liability

C. Only up to 25 partners are allowed

100. Which of the following is NOT a feature of a limited company?

A. Directors are always immune from criminal prosecution

B. The shareholders have limited liability

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 C. The company has a separate legal personality

101. The person on whose behalf an agent acts is known as the:

A. Promoter

B. Preparer

C. Principal

102. Which of the following is an alternative name for apparent authority?

A. Ostensible authority

B. Express authority

C. Disclosed authority

103. Karishma owns a newsagent, runs it as the manager and employs Tessa as part-time
help during the week. Karishma is fully liable for the business’ debts. What type of
business does Karishma own?

A. A partnership

B. A company limited by guarantee

C. A sole trader

104. To what extent is a member of a company limited by guarantee personally liable to

contribute towards the company’s debts?

A. He is liable to contribute towards all the company’s debts at any time

B. He is liable for all the company’s debts on a winding up only

C. His liability to contribute is limited to the amount he agreed to upon a winding up

31
105. Irene entered into a pre-incorporation contract on behalf of Cosmo Sdn Bhd. Which
one of the following options correctly identifies the person who may enforce the
contract and against whom it is enforceable?

A. By and against the company only

B. By and against Irene only

C. By the company and against Irene

106. Which of the following is NOT an example of how an agency relationship can come
into existence?

A. By express appointment

B. By ratification

C. Through an act of necessity

D. Through an act of a third party

107. P delivers exclusive handbags to A, her agent, with instructions that they are NOT to be
sold for less than RM5,000 each. A sells a handbag to B for RM5,000. B, believing that
she has obtained a bargain, gives A a gift of RM200.

What duty, if any, has A breached?

A. The duty to avoid a secret profit

B. The duty to act reasonably

C. The duty not to harm P’s interests

D. None of the above

108. The directors of a company are considering altering the company’s Constitution.
The alteration must be bona fide for the benefit of:

A. Members and creditors

B. All current and future members

32
 C. The company as a whole

D. The majority of the membership

109. Which of the following statements is/are correct?

(i) The partners in an ordinary partnership jointly own the firm’s assets

(ii) The shareholders in a company jointly own the company’s assets

A. (i) only

B. (ii) only

C. Both (i) and (ii)

D. Neither (i) nor (ii)

110. The Constitution of ABC Sdn Bhd provide that all disputes between ABC Sdn Bhd and
its directors must be referred to arbitration. Del is a director of ABC Sdn Bhd and is in
dispute with the company about later payment of his director’s fees.

Which of the following is/are correct?

(i) Del is obliged by the Constitution to refer the dispute to arbitration whether or not
he is a shareholder.

(ii) Del is obliged by the Constitution to refer the dispute to arbitration only if he is a
shareholder

A. (i) only

B. (ii) only

C. Both (i) and (ii)

D. Neither (i) nor (ii)

111. Immediately prior to the incorporation of Products Sdn Bhd, Roberts, one of its
promoters, bought property in his own name from Suppliers Sdn Bhd. He later sold the
property to Products Sdn Bhd at a large profit without disclosure.

33
 To whom is Roberts liable in relation to this secret profit?

A. Suppliers Sdn Bhd

B. Products Sdn Bhd

C. The promoters of Products Sdn Bhd

D. The shareholders of Products Sdn Bhd

112. Popeye is the promoter of Spinach Sdn Bhd. He and his wife Olive are the first
directors of the company. Popeye sold a plot of land he owned to the company
making a profit of £20,000. What is the legal position regarding the profit?

A. Popeye may keep the profit in any event

B. Popeye may keep the profit as long as it is disclosed to the chairman of the
company

C. Popeye may keep the profit as long as it is disclosed to the first shareholders of
the company

D. Popeye may not keep the profit under any circumstance

113. Which of the following are NOT bound to one another by the constitution?

A. The company to third parties

B. Members to the company

C. The company to members

114. In company law, what is meant by the term ‘veil of incorporation’?

A. A company is a separate legal entity to its shareholders and directors

B. A company has perpetual succession

C. A company pays corporation tax

D. A company owns its own property

34
115. A company is a separate legal entity to its shareholders and directors.

Which of the following are consequences of separate legal entity?

(1) A company is fully liable for its own debts

(2) A company owns its own property

(3) A company enters into contracts in its own name

A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

D. (1), (2) and (3)

116. A shareholder believes that one of the company directors has misapplied company assets
and wishes to take legal action against the director.

Which of the following statements is true?

A. The shareholder can personally take legal action against the director

B. A minimum of 5 shareholders is required to take legal action against the director

C. The shareholder cannot take legal action. Only the company is able to sue the
director as it is the company that has suffered harm

D. The shareholder is forbidden from disclosing this due to confidentiality

117. In the context of company law, in which of the following circumstances has it been
considered necessary to lift the veil of incorporation?

(1) Where a company is sham, establish to help a party evade contractual obligations.

(2) To identify the true nationality of a company.

(3) Where a disqualified director participates in the management of a company.

35
 A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

D. (1), (2) and (3)

118. There are a number of important legal differences between companies and partnerships.

Which of the following statements is FALSE?

A. There no formality required to create a partnership.

B. Partnership can create both fixed and floating charges as security for borrowing.

C. Partners in a partnership are personally liable for the debts of the firm.

D. Partnerships are not legally required to disclose their financial results to the
general public.

119. There are a number of important legal differences between companies and partnerships.

Which of the following statements is FALSE?

A. Companies are created by a formal registration procedure

B. Companies are owned by shareholders, and managed by directors

C. Companies must legally disclose certain financial information to the general

public

D. Companies may dissolve by agreement of the directors

120. In the context of company law, which of the following statements are true?

(1) A private company can be limited or unlimited.

(2) A private company can be limited by shares or by guarantee.

36
 (3) A public company can be limited by shares or by guarantee.

A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

D. (1), (2) and (3)

121. Which of the following is NOT a legal requirement of a public company?

A. Name must end with ‘Bhd’ or ‘berhad’

B. Must have a minimum of two directors

C. Must have a company secretary

D. In order to trade must be allotted shares of at least RM25000

122. Tom is in the process of forming a company for his new business venture. He is keen to
enter into pre-incorporation contracts but aware that he will be personally liable for any
such contracts.

What steps can Tom take to overcome the problem of pre-incorporation contracts?

(1) Postpone finalizing contracts until after the company is formed.

(2) Entering into an agreement of novation with all parties.

(3) Buying an ‘off-the-shelf’ company to trade with immediately.

A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

D. (1), (2) and (3)

123. In company law, the name of a company must comply with strict rules.

37
 Which of the following statements is FALSE?

A. A company cannot have the same name as another company

B. Permission is required from the Minister of Trade to use certain words such as
‘Royal’, ‘Chartered’, ‘National’ etc

C. A company’s name cannot include words that are illegal or offensive

D. All company names must end in ‘Limited’ or ‘Sdn Bhd’

124. The constitution forms a company’s internal constitution.

Which of the following statements is FALSE?

A. There are no mandatory contents

B. Constitution must be submitted as part of the company registration process

C. The constitution operates as a binding contract between individual members in

their capacity as members

D. Constitution can usually be altered by a special resolution of members

125. In company law, the constitution can usually be altered by a special resolution of
members.

In what circumstances can constitution NOT be altered by special resolution?

(1) Where the constitution is entrenched.

(2) Where the alteration seeks to increase a member’s liability to the company.

(3) Where the alteration is NOT in the bona fide interests of the company as a whole.

A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

D. (1), (2) and (3)

38
126. An agency relationship which is made retrospectively is referred to by which of the
following terms?

A. Agency by estoppel

B. Agency by ratification

C. Agency by necessity

127. Which TWO of the following apply to shares of companies whose names end in ‘Sdn
Bhd’?

(1) They may not be issued to non-members

(2) They may not be offered to the public

(3) They may not be transferred

(4) They may not be traded on the stock exchange

A. (1) and (2)

B. (2) and (3)

C. (1) and (4)

D. (2) and (4)

128. Which of the following must a private company ALWAYS have? (DELETED)

A. Shares

B. Limited liability

C. A company secretary

D. A Certificate of Incorporation

129. Which of the following exists as a separate legal entity from its members?

A. An ordinary partnership

39
 B. A limited liability partnership

130. In relation to agency law, ‘warrant of authority’ is provided by which of the

following?

A. The agent

B. The principal

C. The third party

CAPITAL AND THE FINANCIANG OF COMPANIES

131. The amount of the nominal share capital that has been paid for by the company
members is called:

A. Paid-up share capital

B. Issued share capital

C. Allotted share capital

132. Which of the following is NOT a type of share of a company?

A. Ordinary

B. Special

C. Preference

133. A floating charge is a charge:

A. On a class of current assets which can be identified

B. On a class of assets which may change in the ordinary course of business

C. On a class of assets, present or future, which may change in the ordinary course of
business

40
134. When a private company wishes to reduce its share capital it:

A. Must pass an ordinary resolution

B. Must pass a special resolution

C. Does not need to pass a resolution

135. Which of the following statements describes treasury shares?

A. Shares issues by a public company to a creditor

B. A company’s own shares that it legitimately purchased out of distributable profit

C. Shares held by a public company as an investment

136. Which of the following statements describes a debenture?

A. The registration document used to register a fixed or floating charge

B. A document that records the terms of any loan (can be unsecured also)

C. A document that records the terms of any secured loan

137. In relation to charges which of the following is correct? (limited liability can created
both charge)

A. A private company cannot create charges

B. A public company create floating charges

C. Both private and public companies may create fixed and floating charges

138. Where a company legitimately purchases 10% of its own shares out of profit, it may
hold them as:

A. Treasury shares

B. Ordinary shares

C. Preference shares

41
139. Which of the following sources of company finance typically carries NO fixed
entitlement to income?

A. Ordinary shares

B. Preference shares

C. Secured debentures

D. Unsecured debentures

140. Which of the following sources of company finance typically carries voting rights?

A. Ordinary shares

B. Preference shares

C. Secured debentures

D. Unsecured debentures

141. In the context of company finance, which of the following statements is true?

A. Fixed charges rank lower than floating charges on winding up

B. Fixed charges rank lower than preference shares on winding up

C. Fixed charges are security over a specific asset

D. Fixed charges are security over a class of assets

142. In the context of company finance, which of the following are advantages of
debentures?

(1) Debentures carry no voting rights and therefore do not dilute control of existing
shareholders.

(2) There are no restrictions on the company issuing debentures at a discount.

42
 (3) The board of directors do not usually require authority of shareholders to issue
debentures.

A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

D. (1), (2) and (3)

143. In the context of company finance, which of the following are disadvantages of
debentures?

(1) Debentures carry no voting rights and therefore do not dilute control of existing
shareholders.
(2) Interest must be paid to debenture holders irrespective of whether there are profits
available.
(3) High levels of debt will adversely affect a company’s share price.

A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

D. (1), (2) and (3)

144. A company wishes to raise finance by issuing new shares to existing shareholders for an
amount slightly less than their current market value?

This is an example of which of the following?

A. Bonus issue

B. Rights issue

C. Issue at a discount

D. Issue at nominal value

43
145. In company law, a company can only make a dividend payment out of distributable
reserves. (DELETED)

Which of the following are UNDISTRIBUTABLE reserves?

(1) Share premium reserve

(2) Revaluation reserve
(3) Share capital reserve

A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

D. (1), (2) and (3)

146. In the context of company finance, which of the following is usually repaid FIRST
on liquidation of a company?

A. Floating charge creditors

B. Ordinary shareholders

C. Fixed charge creditors

D. Preference shareholders

147. Profits available for distribution in a private company may be defined as:

A. Accumulated realized profits less accumulated realised losses

B. Accumulated realized profits less losses for the current year

C. Accumulated realized profits

D. Accumulated realized profits less accumulated realised and unrealised losses

44
148. On 1, April 20X9 Jabeen created a fixed charge for RM50,000 over the assets of Clogs
Sdn Bhd and it was registered on 1 June 20X9. On 1 May 20X9 a fixed charge for
RM100,000 was created over the same assets on behalf of Adeel. Adeel’s fixed charge
was registered on 13 May 20X9.

Which of the following statements describes the priority of the two fixed charges?

A. Jabeen’s fixed charge has priority as it was created first

B. Adeel’s fixed charge has priority as it was registered within 30 days of creation
before Jabeen’s fixed charge

C. Both charges rank equally in priority as they are both fixed

D. Adeel’s fixed charge has priority as it has a greater value

149. In relation to a debenture, which of the following is NOT true?

A. It may be issued at a discount

B. Interest on it may be paid from capital

C. It is paid after preference shares

D. It is freely transferable

150. Which of the following are ordinary partnerships UNABLE to create in relation to
their property?

A. Mortgages

B. Fixed charges

C. Floating charge

MANAGEMENT, ADMINISTRATION AND REGULATION OF

COMPANIES

151. For which of the following is an ordinary resolution of the shareholders sufficient
authority?

45
 A. To amend a private company’s constitution

B. To change a private company’s name

C. To give directors authority to issue new shares

152. Where a person is held out by a company as a director and performs the duties of a
director without being validly appointed, that person is deemed to be a:

A. De facto director

B. Shadow director

C. Executive director

153. Shorter notice than that required for an AGM of a public company is permitted
with a minimum member support of:

A. 75%

B. 90%

C. 100%

154. Shareholders in a private company can pass a written ordinary resolution with
support of:

A. 100%

B. 95%

C. 50%+

155. Which of the following is NOT a type of company director?

A. A supreme director

B. An executive director

C. A shadow director

46
156. What is the minimum age of a director as required by Companies Act 2016?

A. 16

B. 18

C. 21

157. A director owes their statutory duties to:

A. The members

B. The board of directors

C. The company as a whole

158. Which of the following describes a director with day to day responsibility for
running a company?

A. Chairman of the Board

B. President

C. Managing Director

159. Which of the following is NOT a type of meeting?

A. Annual general meeting

B. General meeting

C. Special meeting

160. Which of the following statements is correct?

A. An auditor must be a member of a recognized supervisory body

B. Only individuals and not firms can act as an auditor

C. An auditor cannot be removed until their term of office has expired

47
161. Gulliver Sdn Bhd has recently dismissed one of its directors. Gulliver Sdn Bhd
wishes to pay Joe compensation for loss of office. Who must approve this payment?

A. The board of directors

B. HMRC

C. The creditors

D. The shareholders in a general meeting

162. Which of the following statements are true?

(i) The statutory duty of a director to disclose any interest that he has in a proposed
transaction or arrangement with the company does not apply to shadow directors.

(ii) A director may not exercise his powers except for the purpose for which they
were conferred.

A. (i) only

B. (ii) only

C. Both (i) and (ii)

D. Neither (i) or (ii)

163. Steven and his fellow directors Marcus and Tom each own 100 of the 300 shares in
Simple Pies Sdn Bhd. Under the constitution, where a resolution is proposed to
remove a director, that director is entitled to three votes per share. Marcus and
Tom vote to remove Steven but when a poll is taken, Steven defeats the resolution
by 300 votes to 200. Which of the following best describes the legal position?
(DELETED)

A. Steven has not been removed because the weighted voting rights have been
validly given and validly exercised.

B. Steven has been removed because the article giving weighted voting rights
contravenes the Companies Act 2016 which enables a director to be removed on
the passing of an ordinary resolution with special notice.

48
 C. Steven has not been validly removed because the articles would effectively mean
that a director could never be removed.

D. Steven has been validly removed because voting should not have been conducted
by a poll on a resolution to remove a director.

164. Rebecca is appointed director of Blue Sdn Bhd, and given ultimate control over the day-
to-day management of the company.

In the context of company law, Rebecca is considered to be a:

A. Managing director

B. Shadow director

C. Non-executive director

D. De-facto director

165. Margaret is appointed by a director of Peach Sdn Bhd to attend and vote for them at
board meetings when they are personally unable to attend.

In the context of company law, which of the following types of director is Margaret
classified as?

A. Chief executive officer

B. Alternate director

C. Non-executive director

D. Shadow director

166. In company law, what period of notice is required by the use of the term special
notice when removing a director from office?

A. 14 days

B. 21 days

C. 28 days

49
 D. 31 days

167. In company law, which of the following is NOT a statutory duty of directors?

A. Duty to act within their powers

B. Duty to exercise independent judgement

C. Duty to avoid conflicts of interest

D. Duty to protect shareholder value

168. In relation to company secretaries, which of the following statements is FALSE?

A. All companies must have a company secretary.

B. There are no statutory duties of company secretary.

C. A company secretary has the apparent authority to bind the company in contracts
of an administrative nature.

D. A company secretary requires express (actual) authority from the board to bind
the company in commercial contracts.

169. Which of the following statements regarding the age limits for serving as a director
in a public limited company is true?

A. Minimum age 16 years and no maximum age

B. Minimum age 18 years and no maximum age

C. Minimum age 21 years and maximum age 75 years

D. Minimum age 16 years and maximum age 75 years

INSOLVENCY LAW

50
170. When a director makes a Declaration of Solvency before a members’ voluntary
liquidation, for how many months are they stating that the company will be able to
pay its debts?

A. 3 months

B. 6 months

C. 12 months

171. Which of the following persons or bodies can petition to the court for a compulsory
winding up?

A. The company itself

B. Any creditor

C. Any director

172. When a liquidator is appointed, he becomes the agent of which of the following?

A. The members

B. The creditors

C. The company

173. On a compulsory winding up of a company, who will the court usually appoint?

A. The auditor of the company

B. The Official Receiver

C. A qualified insolvency practitioner

174. When a company goes into a creditors’ voluntary winding up, who ultimately has
the right to appoint the liquidator?

A. Ordinary shareholders

51
 B. Preference shareholders

C. Creditors

D. Directors

175. Which of the following is a preferential creditor when a company goes into
liquidation?

A. Arrears of wages to employees

B. Money owed to the auditor in respect of his fees

C. Money owed to utilities providers

D. Money owed to a builder for a recent refurbishment

176. Which of the following ranks lowest in a liquidation?

A. Trade creditors （ordinary unsecured creditor）

B. Fixed charge holder

C. Floating charge holder

D. Employees for unpaid wages

CORPORATE FRAUDULENT AND CRIMINAL BEHAVIOUR

177. Fraudulent trading can give rise to:

A. Civil action only

B. Criminal action only

C. Both civil and criminal action

52
178. In relation to money laundering, when monies take on the appearance of coming
from a legitimate source this is known as:

A. Placement

B. Layering

C. Integration

179. Market abuse is a breach of:

A. Criminal law only

B. Civil law only

C. Criminal and civil law

180. What is it necessary to establish to convict someone of fraudulent trading?

A. That the directors had dishonest intent

B. That the directors were not shadow directors

C. That the shareholders suffered a loss

181. What are the phases of money laundering?

(i) Integration

(ii) Layering

(iii) Adjustment

(iv) Placement

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

B. (i) and (ii) only

C. (ii) and (iii)

D. (i), (ii) and (iv)

53
182. Which of the following are characteristics of inside information?

(i) The information relates to particular securities or issuer of securities

(ii) The information is specific or precise

(iii) The information is not public

(iv) If made public, the information would affect the price of the security

A. (i) and (iii)

B. (i) only

C. (ii) and (iii)

D. All of them

183. Which of the following statements is correct?

An action for wrongful trading can be brought:

(i) Regardless of whether the company is solvent or not

(ii) Against directors and shadow directors only

A. (i) only

B. (ii) only

C. Both (i) and (ii)

D. Neither (i) and (ii)

184. In relation to wrongful trading, the standard against which the conduct of directors
will be assessed is which of the following?

A. Purely subjective, depending on the actual skill of the director

B. Purely objective, depending on what is expected of a director in that position

C. A mixture of subjective and objective but only to increase potential liability

54
D. A mixture of subjective and objective but only to reduce potential liability

55