Chapter 1 - Legal principles and international law

Question 1

What are the 2 types of law?

Answer 1

Criminal (public)
Civil (private)

Question 2

What is the primary purpose of civil law?

Answer 2

To resolve disputes between private individuals or organizations, usually resulting in compensation.

Claimant and defendant
Defendant found liable (or not)

Question 3

What is the terminology used for the people involved in a civil law case?

Answer 3

Claimant and defendant
Defendant found liable (or not)

Question 4

What’s the aim of legal action in a civil law case?
Can it be settled and where?
Who brings the action?
Who decides the outcome?
Examples of a case

Answer 4

What’s the aim of legal action in a civil law case?
Compensation (usually financial redress)

Can it be settled and where?
Could be reached without court action (even once court action has started it can be settled ‘out of court’)

Who brings the action?
Claimant

Who decides the outcome?
Judge but as noted can be settled out of court by agreement between the parties.

Examples of a case
Negligence

Question 5

What’s the standard of proof in a civil case? Who has the burden of proof (who need to prove it)?

Answer 5

On the balance of probability (ie the claimant’s claims are more likely than the defendant’s or vice versa)

Claimant must prove.

Question 6

What’s the main remedies (outcomes/solutions) of a civil law case?

Answer 6

Damages, specific performance, injunction

specific performance - make them do something
injunction - stop

Question 7

What is the primary purpose of criminal law?

Answer 7

To punish conduct prohibited by law and protect society.

Prosecution (state) and accused The accused found guilty (or not)

Question 8

Who brings an action in criminal law? What is there terminology for the people involved?

Answer 8

The State (or prosecution) brings the action.

Prosecution (state) and accused
The accused found guilty (or not)

Prosecution can aka as CPS (Crown Prosecution Service)

Question 9

What’s the aim of legal action in a criminal law case?
Can it be settled and where?
Who brings the action?
Who decides the outcome?
Examples of a case

Answer 9

What’s the aim of legal action in a criminal law case?
Punishment

Can it be settled and where?
Court must be used

Who brings the action?
The State (as it is society that is impacted) unless it is a private prosecution (very rare)

Who decides the outcome?
Jury

Examples of a case
Insider dealing

Question 10

What’s the standard of proof in a criminal case? Who has the burden of proof (who need to prove it)?

Answer 10

Beyond reasonable doubt

Prosecution must prove.

Question 11

What’s the main remedies (outcomes/solutions) of a criminal law case?

Answer 11

Fine, and/or imprisonment
No direct remedy to the injured
party – but these may also be available under civil law

Question 12

What type of case can a road traffic accident lead to?

Answer 12

The same event (for example a road traffic accident) may give rise to both criminal (prosecution for dangerous driving) and civil (claim for negligence) actions.

This demonstrates the relationship between the types of law. An act of dangerous driving may lead to punishment of the responsible individual by the state (to protect citizens from further bad driving) and compensation of the injured party (by that party claiming against the responsible individual).

Criminal law does not give redress to individuals and civil law does not punish.

Question 13

What are the two main sources of law?

Answer 13

Legislation and case law.

Question 14

What is Legislation? Who created it? What 4 things can they do?

Answer 14

Legislation is law created by Parliament. It is sometimes called ‘statute law’.

Parliament can:
 Repeal earlier legislation - remove old law and replace with new law
 Overrule case law
 Make new law
 Codify case law - convert and consolidate case law not one statute law

Question 15

What is primary legislation?

Answer 15

This is created by Acts of Parliament.

Question 16

What is secondary legislation? What is an example?

Answer 16

Also known as delegated legislation, it is created by specialists under the direction of an Act of Parliament.

e.g. statutory instruments (SI) - Example of an SI = annual Finance Act, the purpose and objectives of which are set out in the Budget

Question 17

What is case law?

Answer 17

Case law = Judge made law = Common law

Law that has evolved through time as disputes are heard between parties in courts.
Based on concept of judicial precedent, which says decisions of judges must not become inoperative through lapse of time.

Question 18

What happens when there is a conflict between case law and legislation?

Answer 18

Legislation overrides case law. Parliament may override case law by issuing primary legislation that overrides it, but otherwise historic legal decisions will continue to apply in the future.

Question 19

What is judicial precedent?

Answer 19

The principle that previous judicial decisions are binding on future similar cases unless overturned by legislation.

Question 20

What is Economic Crime? What are some examples?

Answer 20

Economic crime is anything that allows criminals to benefit from the proceeds of their crime

Example: fraud, money laundering, intellectual property crime

Question 21

What is the primary aim of the Economic Crime and Transparency Bill?
A. To promote corporate social responsibility.
B. To enhance environmental protections.
C. To tackle economic crime and improve corporate transparency.
D. To regulate international trade agreements.

Answer 21

C. To tackle economic crime and improve corporate transparency.

Question 22

The Economic Crime and Transparency Bill
How does the Bill aim to reform Companies House?
A. By abolishing the registration of partnerships.
B. By increasing its powers to verify and oversee company information.
C. By privatizing its operations.
D. By transferring its responsibilities to local authorities.

Answer 22

B. By increasing its powers to verify and oversee company information.

Question 23

The Economic Crime and Transparency Bill
What reforms are proposed to address the abuse of limited partnerships?
A. Introducing stricter formation requirements and monitoring mechanisms.
B. Abolishing limited partnerships entirely.
C. Increasing the financial liabilities of limited partners.
D. Merging limited partnerships with sole proprietorships.

Answer 23

A. Introducing stricter formation requirements and monitoring mechanisms.

Question 24

The Economic Crime and Transparency Bill
What additional powers does the Bill propose concerning criminal cryptoassets?
A. Allowing private citizens to confiscate them.
B. Creating additional powers to seize and recover suspected criminal cryptoassets.
C. Eliminating all regulatory oversight of cryptocurrencies.
D. Mandating the use of cryptoassets for financial reporting.

Answer 24

B. Creating additional powers to seize and recover suspected criminal cryptoassets.

Question 25

The Economic Crime and Transparency Bill
How does the Bill encourage businesses to share information to combat economic crime?
A. By providing financial incentives for whistleblowers.
B. By disapplying civil liability for breaches of confidentiality when sharing information to tackle economic crime.
C. By mandating businesses to report all transactions to law enforcement agencies.
D. By requiring businesses to share information directly with the public.

Answer 25

B. By disapplying civil liability for breaches of confidentiality when sharing information to tackle economic crime.

Question 26

The Economic Crime and Transparency Bill

What change does the Bill propose regarding Suspicious Activity Reports (SARs)?
A. Eliminating SARs entirely.
B. Allowing law enforcement agencies to investigate without needing to have received an SAR.
C. Making SARs mandatory for all financial transactions.
D. Outsourcing SAR review processes to private companies.

Answer 26

B. Allowing law enforcement agencies to investigate without needing to have received an SAR.

Question 27

The Economic Crime and Transparency Bill

How does the Bill aim to reduce burdens on businesses regarding documentation?
A. By eliminating all reporting requirements.
B. By reducing the number of documents that businesses need to file.
C. By centralizing all reporting to an international regulatory body.
D. By exempting small businesses from reporting entirely.

Answer 27

B. By reducing the number of documents that businesses need to file.

Question 28

The Economic Crime and Transparency Bill

How does the Bill propose to enhance the efficiency of law enforcement in tackling money laundering?
A. By increasing penalties for non-compliance.
B. By narrowing the circumstances in which pre-authorization documents must be submitted to the National Crime Agency.
C. By outsourcing investigations to private firms.
D. By requiring international cooperation on all cases.

Answer 28

B. By narrowing the circumstances in which pre-authorization documents must be submitted to the National Crime Agency.

Question 29

The Economic Crime and Transparency Bill

Why are the changes to money laundering laws particularly relevant to accountants?
A. Because accountants are responsible for filing SARs.
B. Because accountants often manage suspicious transactions.
C. Because the changes allow businesses to share financial information without civil liability, which involves accountants’ oversight.
D. Because accountants are exempt from reporting requirements.

Answer 29

C. Because the changes allow businesses to share financial information without civil liability, which involves accountants’ oversight.

Question 30

The Economic Crime and Transparency Bill

What key intelligence-gathering power is included in the Bill?
A. Granting law enforcement agencies access to all private banking records without a warrant.
B. Providing law enforcement agencies with new powers to gather intelligence to combat economic crime.
C. Allowing private entities to conduct criminal investigations.
D. Creating a public registry of suspicious financial activitie

Answer 30

B. Providing law enforcement agencies with new powers to gather intelligence to combat economic crime.

Question 31

When parties are trading with each other internationally what law should they follow?

Answer 31

Most legal systems are national. This can result in confusion when parties are trading with each other internationally.

 Choice of laws – parties can agree in advance which laws will apply in the case of dispute

 International law – parties can choose to adopt international rules developed by United Nations
(UN) and International Chamber of Commerce (ICC)

Question 32

What is the purpose of United Nations Convention on Contracts for the International Sales of Goods 1980 (UNCISG)?

Answer 32

To provide a uniform legal framework for the sale of goods between parties in contracting states.

UNCISG is a source of contract law parties in different countries (which contract to the UN Convention) can choose to apply to their dealings.

ONLY COMMERCIAL GOODS NOT SERVICES NOT PERSONAL GOODS

Question 33

What is the the scope of the United Nations Convention on Contracts for the International Sales of Goods 1980 (UNCISG) convention? (2)

Answer 33

It governs formation and rights and obligations of buyers and sellers
It sets out rules relating to the passing of risk of loss or damage of the goods

Question 34

In the below contracts do UNCISG apply?

Sale of goods between parties in contracting states

Sale of goods between parties who refer to CISG in the contract

Sale of labour/services

Sale of goods where buyer supplies most of the materials for the goods

Sale of goods for personal or household use

Sale of goods by auction

Sale of certain restricted goods including electricity, aircraft, investments

Answer 34

Sale of goods between parties in contracting states
YES
Sale of goods between parties who refer to CISG in the contract
YES
Sale of labour/services
NO
Sale of goods where buyer supplies most of the materials for the goods
NO
Sale of goods for personal or household use
NO
Sale of goods by auction
NO
Sale of certain restricted goods including electricity, aircraft, investments
NO

Question 35

What is the obligation of the buyer in respect to UNCISG convention?

Answer 35

Obligations of the buyer
To pay the price for the goods and comply with any formalities to enable payments to be made

Question 36

What is the obligations of the seller in respect to UNCISG convention? (5)

Answer 36

To deliver the goods to the place and at the time agreed in the contract

If the contract does not set out the place of delivery, to follow the rules regarding place set out in the convention

If the contract does not set out the time of delivery, to deliver the goods within a reasonable time of the contract being formed

To deliver goods of the quantity, quality and description set out in the contract and to package them in the agreed manner

If the contract does not set out the quantity, quality and packaging requirements, to follow the conformity requirements set out in the convention

Question 37

In the UNCISG convention if the buyer or seller fails to meet obligations what can happen?

Answer 37

If either party fails to meet their obligations, the other party can claim damages for loss suffered.

Question 38

Passage of Risk under UNCISG

Why is determining the passage of risk important in international sales contracts?
A. It determines who is responsible for shipping delays.
B. It allows parties to buy appropriate insurance for the goods.
C. It ensures the buyer pays the correct amount for transportation.
D. It specifies who owns the goods during transport.

Answer 38

B. It allows parties to buy appropriate insurance for the goods.

Question 39

Passage of Risk under UNCISG

In a contract where carriage of goods is not included, when does the risk pass to the buyer?
A. When the goods are inspected by the buyer.
B. When the goods are passed to the first carrier.
C. When the buyer takes possession of the goods or they are made available by the seller.
D. When the goods arrive at the buyer’s premises.

Answer 39

C. When the buyer takes possession of the goods or they are made available by the seller.

Question 40

Passage of Risk under UNCISG

If goods are sold while in transit, when does the risk pass to the buyer?
A. When the goods reach the buyer’s country.
B. When the goods are inspected by the buyer at their destination.
C. When the contract is made, regardless of the goods’ location.
D. When the buyer takes physical delivery of the goods.

Answer 40

C. When the contract is made, regardless of the goods’ location.

Question 41

Passage of Risk under UNCISG

How can parties clarify the passage of risk in their contract?
A. By specifying payment terms clearly.
B. By using Incoterms to define the obligations of the buyer and seller.
C. By agreeing to waive the passage of risk.
D. By allowing the courts to decide the point of passage.

Answer 41

B. By using Incoterms to define the obligations of the buyer and seller.

Question 42

Passage of Risk under UNCISG

Which rule applies to risk when goods are handed over to a carrier in the absence of specific terms?
A. Risk passes only after the goods are delivered to the buyer.
B. Risk passes when the goods are handed to the first carrier.
C. Risk passes when the goods are loaded onto the buyer’s vehicle.
D. Risk remains with the seller until the goods are paid for.

Answer 42

B. Risk passes when the goods are handed to the first carrier.

Question 43

Passage of Risk under UNCISG

When does the risk pass to the buyer if carriage of goods is included in the contract but no specific time is mentioned?
A. When the buyer takes physical possession of the goods.
B. When the goods are delivered to the first carrier.
C. When the contract is signed.
D. When the goods are paid for

Answer 43

B. When the goods are delivered to the first carrier.

Question 44

Passage of Risk under UNCISG

What happens if the contract specifies a time for risk transfer but it is not followed?
A. The risk passes based on UNCISG default rules.
B. The seller retains the risk indefinitely.
C. The buyer must renegotiate the contract.
D. The buyer can refuse delivery.

Answer 44

A. The risk passes based on UNCISG default rules.

Question 45

What are ICC Incoterms?

Answer 45

Incoterms is the abbreviation of International Contract Terms. These are the standard terms used to form international contracts to promote uniformity. There are 11 standard terms.

Standardized international contract terms defining the obligations of buyers and sellers, especially regarding risk and delivery.

Question 46

The terms run from the minimum obligations of the seller (at his place of business) to the maximum obligations of the seller (at the buyer’s place of business, essentially the exact opposite of the first one). The first apply to any form of transport.
 EXW – Ex works (goods available at seller’s place of business)
 FCA – Free carrier (seller clears the goods for export and delivers to a named carrier)
 CIP – Carriage and Insurance Paid to (seller pays for carriage, clears the goods for export, and
insures the goods)
 CPT – Carriage Paid to (seller pays for carriage and is responsible for clearing the goods for export. The risk passes to the buyer once the goods arrive at the named destination)
 DAP – Delivered At Place (seller bears all of the risks in delivering the goods ready to be unloaded at a named place)
 DPU – Delivered at Place Unloaded (seller bears all of the risks of delivering and unloading goods at a named terminal)
 DDP – Delivered Duty Paid (seller bears all costs and risks from clearing goods for export, delivery, and clearing goods for import at a named destination. In effect the seller must discharge all of the delivery and customs responsibilities)
Incoterms specific to goods travelling by ship (again, ranked from least of seller’s obligations to most):
 FAS – Free Alongside Ship (seller delivers the goods to the ship and bears the export charges only)
 FOB - Free On Board (seller has ‘delivered’ the goods when they are cleared for export and pass the ship’s rail at the named port of shipment)
 CFR – Cost and Freight (seller pays for delivery, however, the risk transfers to the seller once the goods are loaded onto the ship, the buyer must arrange their own insurance)
 CIF – Cost Insurance Freight (seller pays for delivery of the goods, and must insure them (though only at the most basic level of cover) during transit.

Answer 46

The terms run from the minimum obligations of the seller (at his place of business) to the maximum obligations of the seller (at the buyer’s place of business, essentially the exact opposite of the first one). The first apply to any form of transport.
 EXW – Ex works (goods available at seller’s place of business)
 FCA – Free carrier (seller clears the goods for export and delivers to a named carrier)
 CIP – Carriage and Insurance Paid to (seller pays for carriage, clears the goods for export, and
insures the goods)
 CPT – Carriage Paid to (seller pays for carriage and is responsible for clearing the goods for export. The risk passes to the buyer once the goods arrive at the named destination)
 DAP – Delivered At Place (seller bears all of the risks in delivering the goods ready to be unloaded at a named place)
 DPU – Delivered at Place Unloaded (seller bears all of the risks of delivering and unloading goods at a named terminal)
 DDP – Delivered Duty Paid (seller bears all costs and risks from clearing goods for export, delivery, and clearing goods for import at a named destination. In effect the seller must discharge all of the delivery and customs responsibilities)
Incoterms specific to goods travelling by ship (again, ranked from least of seller’s obligations to most):
 FAS – Free Alongside Ship (seller delivers the goods to the ship and bears the export charges only)
 FOB - Free On Board (seller has ‘delivered’ the goods when they are cleared for export and pass the ship’s rail at the named port of shipment)
 CFR – Cost and Freight (seller pays for delivery, however, the risk transfers to the seller once the goods are loaded onto the ship, the buyer must arrange their own insurance)
 CIF – Cost Insurance Freight (seller pays for delivery of the goods, and must insure them (though only at the most basic level of cover) during transit.

Question 47

What incoterms are specific to goods travelling by ship (again, ranked from least of seller’s obligations to most)?

Answer 47

 FAS – Free Alongside Ship (seller delivers the goods to the ship and bears the export charges only)
 FOB - Free On Board (seller has ‘delivered’ the goods when they are cleared for export and pass the ship’s rail at the named port of shipment)
 CFR – Cost and Freight (seller pays for delivery, however, the risk transfers to the seller once the goods are loaded onto the ship, the buyer must arrange their own insurance)
 CIF – Cost Insurance Freight (seller pays for delivery of the goods, and must insure them (though only at the most basic level of cover) during transit.

Question 48

What is Islamic finance?

Answer 48

 Islamic finance is governed by Sharia law
 Sharia law is law bound up with the religion of Islam
 Some countries have adopted Sharia law as national law
 It is increasingly common for financial systems in other countries to provide lending methods consistent with Sharia law principles

Question 49

What is Riba (usury)?

Answer 49

Riba (usury) is the concept of unlawful gain in Sharia law. It is usually translated as interest.

Question 50

What is the primary difference between conventional finance and Islamic finance?

Answer 50

Islamic finance forbids charging or paying interest (riba) and focuses on profit-sharing and investments.

Question 51

How are mortgages structured under Islamic finance?

Answer 51

The bank buys the property, sells it to the borrower at a higher price, and retains ownership until the loan is repaid.

Loan: a loan to purchase an asset (eg a mortgage on a house) is structured so that the bank buys the asset, then seller it to the borrower at a higher price (making a profit). The borrower then pays the price of the loan over a period of time. The bank owns the asset until the final payment is made.

Question 52

How do investments work under Islamic finance?

Answer 52

Deposit: in effect, when a person deposits money in a bank, they are making a loan to the bank, and their interest payments are interest on that loan. In Islamic finance, such a deposit is seen as an investment, which the bank manages on behalf of the depositor.

When the money is returned, it is return with the profit from the investment, LESS a management fee for the bank.

Question 53

What legislation governs sustainability reporting for UK companies? What are quoted companies required to do?

Answer 53

The Companies Act 2006 (Strategic Report and Directors Report) Regulations 2013.

Requires quoted companies to report on environmental matters within the Strategic Report section of their Annual Report so far as to promote the success of the company.

Question 54

Define Sustainability

Answer 54

Sustainability describes a world of thriving economies and just societies based on what nature can afford. Must consider both the impacts and dependencies of an organisation.

Question 55

What is the purpose of the Environment Act 2021?

Answer 55

To set binding environmental targets for air quality, biodiversity, and waste reduction.

Question 56

What does ESG stand for?

Answer 56

Environmental, Social, and Governance, a framework for assessing corporate sustainability risks and values.

ESG looks at sustainability through a corporate lens. ESG considers the impact of these risks on business and enterprise values.

Question 57

What legislations protect social sustainability?

Answer 57

Equality Act 2010, unlawful to discriminate against a person because they have one of the protected characteristics (age, disability, sex (including sexual orientation and gender reassignment), marriage and civil partnership, race, religion or belief, pregnancy and maternity.
Employment rights Act 1996, eg flexible working and family-friendly policies
National Minimum Wage Act 1998
Bribery Act 2010
Proceeds of Crime Act (POCA) 2002
Money Laundering Regulations 2017

Question 58

What legislation protect governance?

Answer 58

Data Protection 2018

Question 59

What are ‘dependencies’ in the context of ESG?

Examples

Who is this info useful for?

Answer 59

How environmental, social, and governance issues impact an organization’s ability to create and maintain value.

e.g worker health, workplace diversity, climatic conditions, resource availability, regulation, consumer expectations, other stakeholder expectations, and risks to organisational reputation

This information is generally useful for investors

Question 60

6 Which of the following describes, in full, the obligations of the seller under the UN Convention on Contracts for the International Sale of Goods (UNCISG)?
A To deliver goods of the quality and description set out in the contract and to package them in the agreed manner
B To deliver goods of the quantity and quality set out in the contract
C To deliver goods of the quantity, quality and description set out in the contract
D To deliver goods of the quantity, quality and description set out in the contract and to package them in the agreed manner

Answer 60

D To deliver goods of the quantity, quality and description set out in the contract and to package them in the agreed manner
Under the UNCISG, the seller must deliver goods of the quantity, quality and description set out in the contract and to package them in the agreed manner.

Question 61

7 Unless otherwise stated in the contract, under the UN Convention on Contracts for the International Sale of Goods (UNCISG), where does risk to the goods pass from the seller to the buyer in contracts where carriage is included?
A When the contract is concluded
B When the goods are passed to the first carrier
C When the goods are passed to the final carrier
D When the goods have been delivered to the buyer

Answer 61

B When the goods are passed to the first carrier
Where carriage is included in the contract, risk passes when the goods have been passed to the first carrier.

Question 62

8 Which of the following ICC Incoterms places the maximum obligations on the seller? A DAP
B DDP C CPT D CFR

Answer 62

B DDP
The ICC Incoterm DDP (Delivered Duty Paid) places the maximum obligations on the seller.

Question 63

10 ID Bank plc is developing a range of Islamic finance products.
The first is a savings product. The customer will deposit their money with the bank who will invest it on their behalf. At the end of the savings period, the bank will return the customer’s money, plus the interest due on the savings, less a management fee.
The second is a mortgage product. Once the customer has identified a property that they wish to buy, the bank will buy it from the seller and sell it onto the customer for a fixed price at a profit. Once the bank has been repaid in full, ownership of the property will be transferred to the customer.
Requirements
Is the savings product compliant with Sharia law?
A Yes
B No
Is the mortgage product compliant with Sharia law? C Yes
D No

Answer 63

B No
The savings product is earning interest for the customer which prevents it from being compliant with Sharia law. If the customer’s investment earned a profit instead, then the product would be compliant.
Correct answer(s): C Yes
The product is compliant because no interest is being charged for the loan. Instead, the bank is making a profit by reselling the property to the customer.