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Saraswati Vidya Niketan

Ramnavmi End of Term Examination

Principle of Business
Name: ____________________________ Date:

Class: Form 4____ Time: 2 ½ hrs

Good Luck 

1. David displayed a ‘for sale’ sign on his second hand Toyota motor car. A telephone contact number was
also included. Luton saw the sign and called David.

Luton: Do you have a Toyota car for sale?

David: Yes I do.
Luton: What is the lowest price you will accept for it?
David: $30,000.

The next day Luton brought $30, 000 to David and demanded the keys to the Toyota car. David refused to
take the $30, 000 or to hand over the car to Luton. Luton threatened to sue David for breach of contract.

(a) Define the term ‘contract’. (2 marks)

(b) State FIVE features of a valid contract. (5 marks)
(c) (i) Did David make a firm offer by saying that the lowest amount he will accept for the car is $30, 000?
(1 mark)
(ii) Give ONE reason for your answer. (2 marks)
(d) (i) Explain the term ‘breach of contract’. (2 marks)
(ii) Give ONE remedy for breach of contract. (1 mark)
(e) State FOUR ways by which a contract can be terminated or discharged. (4 marks)
(f) (i) Advise Luton whether he will succeed in court against David. (1 mark)
(ii) Give ONE reason for your advice. (2 marks). (20 marks)

2. Mickey Bee wants to export fruits and vegetables to North America. He has been told that this will require
the preparation and use of a number of business documents which will include either a bill of lading or an
airway bill.

(a) Outline TWO differences between a bill of lading and an airway bill. (4 marks)
(b) List TWO documents, other than those mentioned in part (a) above, that Mickey Bee will need in
order to export goods to North America. (2 marks)
(c) Dicuss TWO problems that can result from Mickey Bee NOT having the documents you listed in 3 (b)
above. (6 marks)
(d) State TWO reasons why a supplier may issue a credit note. (2 marks)
(e) The following documents can be used to make payment for goods supplied by Mickey Bee:
- Documentary Credit
- Standing Order
- Letter of Credit
- Credit Card

Select TWO of the above methods of payment, and for EACH, discuss ONE way in which customers
may benefit from using that method. (6 marks).
(20 MARKS)
3. Jane Steel has a small shop in the rural town of Mavis Hill. She buys and sells a wide range of items. Some
of these items are imported by Jane Steel. In recent times there have been increased levels of crime in the
community, with several businesses in the area being the target of robberies and arson.

(a) Distinguish between ‘insurance’ and ‘assurance’. ( 2marks)

(b) State THREE principles upon which insurance is based. (3 marks)
(c) Identify THREE types of insurance risks which businesses in Mavis Hill could insure against and state
how businesses in the community can benefit by insuring against those risks. (6 marks)
(d) (i) Identify THREE trade documents that Jane Steel may use when importing goods. (3 marks)
(ii) State the purpose of EACH of the THREE trade documents you identified in (d) (i) above. (6 marks)
(20 marks)

Saraswati Vidya Niketan
Ramnavmi End of Term Examination
Principle of Business
Name: ____________________________ Date:

Class: Form 4 ____ Time: 1 ½ hr

Good Luck 

1. Patricia’s employer fired her after only three months in the job, in breach of a twelve-month
employment contract. Patricia is entitled to recover as damages

(A) her salary for twelve months.

(B) her salary for nine months.
(C) her salary for nine months, less what she could have earned in another job had she made
reasonable efforts to find another suitable job.
(D) nothing, because employment contracts must provide for liquidated damages.

2. Which business document ensures that a copy is sent to the stock controller?

(a) Order Form (b) Quotation (c) Advice Note (d) Invoice

3. Which of these cheques are not payable ‘over the counter’?

(a) Certified Cheque (b) Manager’s Cheque (c) Crossed Cheque (d) Open Cheque

4. Which document is used when a specific sum of money has to be paid?

(a) Bill of Exchange (b) Banker’s Draft (c) Money Order (d) Cheque

5. The collection of small premiums from owners is called

(a) Indemnity (b) Pooling Risks (c) Insurance (d) Assurance

6. The paying of small and regular contributions to an insurance company is known as?

(a) Premiums (b) Underinsurance (c) Pooling Risks (d) Overinsurance

7. The person that is receiving the payment is called a?

(a) Broker (b) Payee (c) Supplier (d) Stock Manager

8. Which document changes the amount that the customer owes the supplier?

(a) Debit notes (b) Discounts (c) Delivery Note (d) Invoice
9. In order for a contract to be legally binding it should have?

(a) Competence (b) Breaches (c) Counter offer (d) Written notice

10. An example of a specialty contract is?

(a) Hire Purchase (b) Conduct (c) Insurance (d) Voidable

11. Which of the following signifies which bank the cheque is drawn on?

(a) Account number (b) Branch number (c) Signature of person (d) Serial number

12. Which of these documents is commonly used by a gas and electricity company?

(a) Direct Debit (b) Standing Order (c) Internet Banking (d) Debit Card

13. When the seller introduced a new term to the contract, it is termed

(a) Acceptance (b) Consideration (c) Counter Offer (d) Offer

14. Which is a key characteristic of an acceptance?

(a) Unqualified (b) Uncertain (c) Qualified (d) Illegal

15. An advice note is a document that

(a) Advise the buyer that the goods are on their way
(b) Sent to a buyer when the buyer is not well known to the supplier
(c) Giving precise details of the product
(d) To check that the goods are being received

16. A difference between credit note and debit note is

(a) Credit note charges for transport while debit note does not include any charges.
(b) Credit note discounts are left out while debit note has an incorrect higher price
(c) Debit note sample goods kept by customer while credit note includes discounts.
(d) Debit note returns faulty goods while credit note undercharge the buyer.

17. In a credit note, the red writing tells one that

(a) Increases the amount owed by the customer

(b) Reduces the amount owed by the customer
(c) Increases the amount owed to the customer
(d) Reduces the amount owed to the customer

18. Who will have to show the Bill of Lading in order for goods to be collected?

(a) Captain (b) Exporter (c) Supplier (d) Importer

19. Which of the following persons will be competent enough to sign a contract?

(a) An insane person (b) A housewife (c) An intoxicated man (d) A drug addict

20. Which of the following ways can a contract be discharged?

(a) By parties being unable to meet their obligations

(b) If the contract is not completed within a specific time
(c) If one party if bankrupt
(d) If either of the parties dies.

Label the given parts of the Cheque and chart of business documents.

(a) 22.


25. 24.


27. Covering 28. Invoice 29. Receipt