Law:Mock exam corrections

Question 1

In the context of the English legal system, which of the following are examples of delegated legislation?

1) Statutory instruments.

2) Acts of Parliament.

3) Bye Laws.

Answer 1

Feedback:
Acts of Parliament are primary legislation.

Available Answers
(1) and (3). (2 Marks)

Question 2

XYZ Co, a firm of accountants, negligently audits the annual accounts of Zrow plc and reports that the accounts show a true and fair view when subsequently it is shown that they are not.

Who can sue XYZ Co?

Answer 2

Feedback:
It is for the company to bring the action.

Available Answers
Zrow plc (1 Mark)

Question 3

Which of the following statements about company charges is incorrect?

-Charges must be registered at Companies House within 21 days of creation.
-Charges must be registered at the company’s registered office.
-Fixed charges take priority over floating charges.
-Later fixed charges take priority over earlier fixed charges.

Answer 3

Feedback:
The correct answer is later fixed charges take priority over earlier fixed charges.

Available Answers
Later fixed charges take priority over earlier fixed charges. (1 Mark)

Question 4

Which of the following is not a situation in which the court will ‘lift the veil of incorporation’?

-Where the members of directors are using the veil to evade their legal obligations.
-Where the directors are in breach of the regulations governing the giving of financial assistance for the purchase of the company’s own shares.
-Where the corporate structure is being used as a sham.
-Where it is in the public interest.

Answer 4

Feedback:
The other options are all situations of where a court will ‘lift the veil’.

Available Answers
Where the directors are in breach of the regulations governing the giving of financial assistance for the purchase of the company’s own shares. (1 Mark)

Question 5

Which of the following would be a valid method for a promoter to ensure that the expenses they incur in setting up a company will be recoverable?

-By making it clear that in all transactions that they are acting as agent for the company.
-By entering into a contract with the company after its incorporation for reimbursement of expenses by the company.
-They have no automatic right, but by drafting the articles of the company, they can provide for the reimbursement of expenses.
-By declaring in all transactions that they are a trustee for the company.

Answer 5

Feedback:
The first, second and final options all relate to the period prior to incorporation, when the company does not exist and therefore cannot be party to an agreement.

Available Answers
By entering into a contract with the company after its incorporation for reimbursement of expenses by the company. (1 Mark)

Question 6

Anna, Bella and Cara set up an ordinary partnership without a partnership agreement some years ago. Their trade was to sell party supplies but Bella and Cara are now wanting to expand into catering services. Anna doesn’t think this a good idea. Bella and Cara have been introduced to Doreen, who is an experienced caterer and they would like Doreen to become a partner in the partnership.

Are the following statements true or false?

1. A change in business requires a simple majority consent of the partners.
2. New partners can only be introduced with the unanimous consent of existing partners.

Answer 6

New partners can only be introduced with the unanimous consent of existing partners.:
A change in business requires a unanimous decision.

New partners can only be introduced with the unanimous consent of the existing partners.

A change in business requires a simple majority consent of the partners.
Available Answers
False (Correct)
New partners can only be introduced with the unanimous consent of existing partners.
Available Answers
True (Correct)

Question 7

Which of the following is not a requirement of a Limited Liability Partnership?

-Sign and file accounts
-Appoint auditors if appropriate
-Notify the Registrar when a member leaves
-Submit a copy of the partnership agreement to the Registrar

Answer 7

Feedback:
There is no requirement to submit a copy of the partnership agreement to the Registrar.

Available Answers
Submit a copy of the partnership agreement to the Registrar (1 Mark)

Question 8

Are the following characteristics of a general partnership?

1. There must be an intention to trade.
2. Partners are only liable for contracts they personally signed.

Answer 8

Partners are only liable for contracts they personally signed:
There must be an intention to make a profit rather than the intention to trade.

All partners are jointly liable for the firm’s debts.

There must be an intention to trade
Available Answers
No (Correct)
Partners are only liable for contracts they personally signed
Available Answers
No (Correct)

Question 9

Nit is involved in legal activity, from which he makes a large amount of money. He also owns a legitimate taxi company and passes off his illegally gained money as profits of that company. Pat is Nit’s accountant, and although he has no actual knowledge of the illegal activity, he is growing increasingly suspicious.

Are the following statements true or false?

1. The maximum period of imprisonment for Nit if he was found to be guilty of money laundering would be 10 years.
2. Pat has no legal duty to disclose his suspicions of money laundering until he acquires actual proof it is taking place.

Answer 9

False-its 14 years
False

Question 10

Mick has been employed by Deck Line Ltd for four years. He was aware that the company was experiencing trading difficulties but is still shocked to be sent home without notice when Deck Line Ltd is compulsorily wound up. He sues for wrongful dismissal but at the hearing the liquidator proves that he has discovered that Mick embezzled £20,000 from the company.

Will Mick succeed in his claim?

Answer 10

Feedback:
Although summary dismissal on liquidation is a breach of contract which can be treated as wrongful dismissal, Deck Line Ltd’s liquidator is allowed to justify his action by reliance on evidence uncovered after the event (which is not the situation with unfair dismissal). Hence, Mick’s dishonesty justifies Deck Line Ltd’s action.

Available Answers
No. Deck Line Ltd was justified in its dismissal of Mick. (1 Mark)

Question 11

How long does film protection last, wb trademark?

Answer 11

15 for trademark, 70 years after death of composer screen-write or director of a film

Question 12

Information commissioner cap on fines

Answer 12

17m or 4% of global turnover

Question 13

Brian wrote to Amber offering to buy her tandem for £100 and, sure that she would accept his offer, said ‘If I don’t hear from you, I’ll consider it mine’. Amber meant to write back to Brian to say that she was willing to accept his offer but never got round to it.

Which of the following is not true?

-Silence cannot constitute acceptance.
-There is an implied acceptance because Amber does not reject Brian’s offer.
-Acceptance may be inferred from conduct.
-Acceptance may be made by the offeree or his authorised agent.

Answer 13

Feedback:
There must be some positive act which can be construed as acceptance.

Available Answers
There is an implied acceptance because Amber does not reject Brian’s offer. (1 Mark)

Question 14

Pamela appears on ‘Crimewatch’ and offers £10,000 as a reward for anyone who can provide information leading to the conviction of the thief who stole her family jewels.

Not having seen or heard about this particular episode of ‘Crimewatch’, Felicity contacted the police and gave evidence about having seen someone leaving Pamela’s house through a back window. She later identifies this man at an identity parade and he is subsequently convicted.

Can Felicity claim the reward?

Answer 14

Feedback:
There can be no acceptance, and thus no agreement, where the person who accepts an offer is not even aware of the offer.

Available Answers
No because she did not know about the reward. (1 Mark)

Question 15

Nadeem owns a boat yard and is appointed to sell Martin’s yacht for him. In carrying out this task, Nadeem buys a half page of advertising in Yachts’ Monthly at a cost of £400.

Martin did not tell him to advertise in magazines and had rather expected that Nadeem would simply sell it to one of his regular customers, although the matter had never been discussed. Martin refuses to pay the bill for the advertisement when it is forwarded by Nadeem.

Which of the following best describes the legal position?

Answer 15

Feedback:
Reasonable advertising is usually seen as incidental to an appointment to sell goods.

Available Answers
Martin is liable to pay because Nadeem had implied incidental authority. (1 Mark)

Question 16

A trainee doctor, Zak, was treating a patient, Lily, for depression. In January,200X, Zak changed her drug treatment but Lily became even more depressed and in August 200X unsuccessfully tried to commit suicide.

Lily sued Zak, alleging that he was in breach of his duty of care in failing to introduce the new treatment at a much slower rate, in accordance with guidelines published by the British Medical Association (BMA) in July 200X.

1. Is the standard of care owed by Zak that of a reasonable trainee doctor?
2. Will Zak be judged by the standards of the BMA’s published guidelines?

Answer 16

Feedback: Is the standard of care owed by Zak that of a reasonable trainee doctor?:
1. No. The standard is that of a reasonable qualified doctor.

Will Zak be judged by the standards of the BMA’s published guidelines?
Available Answers
No (Correct)

Question 17

Harold decided to take over Bloggs Ltd because he wished to acquire the use of certain property owned by Bloggs Ltd. Harold’s bid price reflected his desire to take over the company but also took into account the profitability of Bloggs Ltd as set out in its most recent accounts.

It later turned out that the accounts of Bloggs Ltd had been prepared negligently and should have shown a smaller profit than they did. Harold sues the accountants who prepared the accounts (and who knew that a take over bid was possible).

Will Harold succeed in an action for negligence against the firm?

Answer 17

Feedback:
The facts are similar to JEB Fasteners Ltd v Marks Bloom & Co 1982, where the action failed on grounds of causation. The claimant took over the company in order to secure the directors’ expertise.

Available Answers
No. Harold’s loss was not caused by the accounts since he was going to take over the company in any event. (1 Mark)

Question 18

Jack was a skilled worker in leather and ran a business as a sole trader making bridles, saddles and other leather goods.

He was advised by his solicitor to incorporate his business as a private limited company. He took this advice, buying 98 of the 100 shares in Lush Leather Ltd. The company’s liabilities quickly exceeded its assets and the company became insolvent, owing £87,000.

Is Jack liable to indemnify Lush Leather Ltd against its debts?

Answer 18

Feedback:
Lush Leather Ltd is a separate legal person, liable without limit for its own debts. Jack’s shares are fully paid up and he has no further liability. The company does not appear to be a sham.

Available Answers
No. The debts belong to the company alone. (1 Mark)

Question 19

Oliver has just been appointed as liquidator for Darnitt Ltd.

He has discovered that 18 months previously, the company gave preferences to one of its directors, Harold, and also to Jemma, a person not connected with the company.

Can Oliver treat as void:

1. the preference to Harold?
2. the preference to Jemma?

Answer 19

Yes, since it was made within the two years prior to liquidation (the relevant time period where a connected person is involved).

No. Only preferences made within the six months prior to liquidation can be set aside in the case of a person not connected with the company.

Question 20

Which of the following can appoint an administrator out of court?

-The company itself
-The directors
-A secured creditor with a fixed charge
-A secured creditor with a qualifying floating charge (QFC)

Answer 20

Feedback:
Creditors cannot appoint an administrator out of court unless they are also a ‘qualifying floating charge holder’.

Available Answers
I, II and IV only (1 Mark)

Question 21

Elizabeth decides to sell her string of pearls to Mary and writes to her on 24 February, offering her the string of pearls for £250. At the same time, Mary decided that she wants the pearls and writes to her on 24 February, offering to buy them for £250.

Before either of these letters are received, Mary sees a similar necklace in a shop for £20 and decides to buy that instead.

What is Mary’s legal position?

Answer 21

Feedback:
Two offers do not constitute an agreement, even if they say the same thing. Therefore Option one is wrong. Option four is nearly right. She must revoke her offer before Elizabeth accepts the offer, not before Elizabeth receives the letter. Option two is not right because the lack of agreement comes before the issue of consideration. If there had been agreement, consideration would have been in place.

Available Answers
She is not contracted to buy Elizabeth’s necklace as her offer does not constitute acceptance of Elizabeth’s offer of sale. (1 Mark)

Question 22

Adam wants to buy a house from Steve. Steve’s neighbour is Simon. Steve has regularly had to ask Simon to moderate the noise coming from his house and has recently even involved the police on the grounds of noise pollution. While Adam was looking around the house, he asked Steve what the neighbours were like. Steve replied that he didn’t see much of them.

Adam buys the house and discovers when he moves in that Simon is a difficult and noisy neighbour. Adam proposes to sue Steve for misrepresentation.

What is the legal position?

Answer 22

Feedback:
Generally in contract there is no rule that you must say what you know, but you must give a complete enough picture so as not to be misleading. Steve’s answer may be true, but it is misleading because he hears his neighbour a lot and has had issues.

Available Answers
Steve is liable for misrepresentation as he had a duty to give an answer to Adam’s question which was complete enough not to give a misleading impression. (1 Mark)

Question 23

Albie is an electrician. When working in the kitchens of Bob’s restaurant his negligence caused an electrical fire. Due to this fire Bob suffered the following losses.

1) Damage to two ovens

2) Meals cooking in the two ovens were damaged

3) Due to the ovens being out of order for a week an estimated £5,000 profits were lost.

Which of these damages is or are recoverable?

Answer 23

Feedback:
The lost profits are purely financial losses. Damages for such losses will not be awarded unless in the case of negligent misstatement when there is a special relationship between the parties.

Available Answers
(1) and (2) only (1 Mark)

Question 24

A private company has an issued share capital (fully paid) of £90,000, £10,000 on its share premium account and a negative balance of £5,000 on its revaluation reserve. Its net assets are £112,500.

What is the maximum amount that it can distribute as a dividend?

Answer 24

Feedback:
112,500 - 90,000 - 10,000 + 5,000

The first option is the maximum amount that a public company could distribute.

The share premium account is an undistributable reserve, so the third option is wrong.

Available Answers
£17,500 (1 Mark)

Question 25

A company has five members who are also directors. Each holds 10 shares. Normally the shares carry one vote each, but the articles state that on a resolution for a director’s removal, the director to be removed should have five votes per share. On a resolution for the removal of Pamela, a director, Pamela cast 50 votes against the resolution and the other members cast 40 votes for the resolution.

Has Pamela validly defeated the resolution?

Answer 25

Feedback:
This was the situation in Bushell v Faith. A director can vote on their removal if they are a member, and can use their voting rights as they see fit.

Available Answers
Yes. The proceedings in the articles are valid. (1 Mark)

Question 26

Bruce has worked for SCD Limited for twenty years. His manager, Tess, calls him into her office and tells him that she is giving him his three months’ notice of termination of contract as required by his employment contract. She does not tell him why though Bruce believes his dismissal may be due to his age.

Are the following statements true or false?

1. Bruce will be able to bring a claim for wrongful dismissal but not unfair dismissal.
2. Specific performance is the most likely remedy in these circumstances.

Answer 26

Bruce will be able to bring a claim for wrongful dismissal but not unfair dismissal.
Available Answers
False (Correct)
Specific performance is the most likely remedy in these circumstances.
Available Answers
False (Correct)

Question 27

Christian places an advert in his local newspaper ‘For sale Black Ford Focus. Will sell to first person willing to pay £5,000’. Sayed calls stating he will pay £5,000 for the car. There have been no other interested parties at this point.

What is the status of the negotiations between Christian and Sayed?

Christian has made an offer; Sayed has accepted.
Christian has made a supply of information, Sayed has made an offer
Christian has made an invitation to treat, Sayed has made an offer.
Christian has made an invitation to treat, Sayed has accepted.

Answer 27

Feedback:
Although adverts are usually invitations to treat and not offers Christian has made it clear in his advert that no further negotiations are required and as such he has made an offer. Sayed has accepted his offer.

Available Answers
Christian has made an offer; Sayed has accepted. (1 Mark)

Question 28

1. In the English legal system, there are a number of important distinctions between civil law and criminal law.

Which of the following statements are features of the civil law system?

1) It is a form of private law.

2) The burden of proof is beyond all reasonable doubt.

3) The aim is to settle a dispute between two parties.

Answer 28

Feedback:
The burden of proof in civil cases is based on a balance of probabilities.

Available Answers
(1) and (3). (2 Marks)

Question 29

Which of the following is not a duty of the principal?

To give notice of termination
To provide indemnity or compensation on termination
To provide the agent with necessary information and documentation
To comply with the agent’s reasonable requests

Answer 29

Feedback:
This is not a duty of a principal.

Available Answers
To comply with the agent’s reasonable requests (1 Mark)

Question 30

Morag is the managing director of Spoofs Ltd, a company that supplies camping equipment and gadgets to expedition forces. Her co-directors, Niel and Scott, agree that she should buy some army knives, up to the value of £500. Morag discovers a new and innovative model of army knife being offered by Sharps Ltd and orders £750 worth. Niel and Scott refuse to pay the invoice when it arrives because, they say, Morag has exceeded her authority.

Which of the following best describes the legal position?

Sharps Ltd cannot enforce the contract, although it acted in good faith. Morag’s authority was limited and Sharps Ltd should have asked for evidence of her authority.
Spoofs Ltd is not bound by the contract because Morag acted beyond her authority.
Sharps Ltd can enforce the contract because it dealt with Morag and Spoofs Ltd in good faith.
Spoofs Ltd is bound because Morag had implied authority to enter into the contract with Sharps Ltd.

Answer 30

Feedback:
The contract was within the implied usual authority of a director.

Available Answers
Spoofs Ltd is bound because Morag had implied authority to enter into the contract with Sharps Ltd. (1 Mark)

Question 31

A company may change its name by

agreement of all directors.
agreement of all members.
passing an ordinary resolution.
passing a special resolution.

Answer 31

Feedback:
A special resolution must be passed.

Available Answers
passing a special resolution. (1 Mark)

Question 32

Which of the following is normally implied into a contract of employment?

A duty on the employer to provide work.

A duty on the employer to indemnify the employee for properly incurred expenses.

A duty on the employer to pay wages.

Answer 32

Feedback:
At common law there is no general duty to provide work.

Available Answers
II and III only (1 Mark)

Question 33

On 30 April, Nigella is given written notice that her employment is to terminate six weeks later, on 11 June.

By what date must she submit a claim for unfair dismissal to an employment tribunal?

30 July
30 October
11 September
1 July

Answer 33

Feedback:
Under the Employment Rights Act 1996 her effective date of termination will be three months from when the notice expires.

Available Answers
11 September (1 Mark)

Question 34

Which of the following is not one of the data protection principles?

Accuracy
Storage exclusion
Data minimisation
Purpose limitation

Answer 34

Storage exclusion (1 Mark)

Question 35

Jefferson is a member of Low Lines LLP. He is authorised by the other members to buy office supplies, subject to a maximum of £10,000 for any one contract. Without seeking the approval of the other members, Jefferson orders £13,000 worth of supplies, using his personal stationery account and arranging to pick up the goods and the invoice, which is made out in his name. When Jefferson presents the invoice for the £13,000 worth of supplies to the other members of Low Lines LLP, they refuse to pay it.

Is Low Lines LLP bound by the contract?

Yes, an LLP member has authority to bind the LLP on all business-related transactions.
Yes, an LLP member is an agent of the LLP with full power to bind.
No, Jefferson had been instructed not to enter into contracts of this value so the LLP cannot be bound.
No, Jefferson lacked authority and the supplier did not know or believe him to be a partner.

Answer 35

Feedback:
In such cases, the member (who is an agent of the LLP) will not bind the LLP.

Available Answers
No, Jefferson lacked authority and the supplier did not know or believe him to be a partner. (1 Mark)

Question 36

Who may appoint a receiver?

A secured creditor
An unsecured creditor
The court

Answer 36

Feedback:
An unsecured creditor cannot, the court can although it is rare.

Available Answers
I and III only (1 Mark)

Question 37

Under company law, there are several ways in which the members can exercise control over the directors.

Which of the following is not one of those ways?

Members can remove directors from office by ordinary resolution.
Members are required to give approval of directors’ service contracts guaranteed for over two years.
Members are required to give approval of any borrowing by directors.
Members may re-allocate powers by altering the articles.

Answer 37

Feedback:
Directors have the implied authority to borrow money on behalf of the company and do not need to gain a resolution of the members to do so.

Available Answers
Members are required to give approval of any borrowing by directors. (1 Mark)

Question 38

Tim offered to sell a music system to Neil for £200 on 2 September saying that the offer would stay open for a week. Neil told his brother that he would like to accept Tim’s offer and, unknown to Neil, his brother told Tim of this on 3 September. On 4 September Tim, with his lodger present, sold the music system to Ingrid. The lodger informed Neil of this fact on the same day. On 5 September Neil delivered a letter of acceptance to Tim.

Is Tim in breach of contract?

Answer 38

Feedback:
Revocation of an offer may be communicated by a reliable informant but communication of acceptance of an offer may only be made by a person actually authorised to do so. Hence, Neil’s brother’s purported acceptance for Neil is invalid, but the lodger’s communication of revocation to Neil is valid since his presence at the deal makes him a reliable informant.

Available Answers
No. Neil was told by a reliable informant of Tim’s effective revocation before Neil accepted the offer. (1 Mark)

Question 39

In which of the following circumstances will a decree for specific performance not be available?

In a contract for the sale of land
In a contract made by deed for land
In a contract of employment
In a contract to pay money to a third party

Answer 39

Feedback:
An order for specific performance is never used for contracts of employment as they are personal service contracts.

Available Answers
In a contract of employment (1 Mark)

Question 40

There are numerous limitations and conditions regarding when agency by ratification can arise.

Which one of the following is not a valid limitation or condition?

In order to ratify, the agent must have contractual capacity to enter into the contract on the date which he entered into the contract on the principal’s behalf.
Only the principal may ratify the actions of the purported agent.
Ratification must take place within a reasonable time.
The agent must purport to act as agent for a disclosed principal.

Answer 40

Feedback:
The agent’s capacity is irrelevant. However, in order for ratification to arise, the principal must have contractual capacity to enter into the contract on the date which the agent entered into the contract and at the time when ratification takes place.

Available Answers
In order to ratify, the agent must have contractual capacity to enter into the contract on the date which he entered into the contract on the principal’s behalf. (1 Mark)

Question 41

An agent is subject to a number of duties.

Which one of the following statements regarding the duties of an agent is not correct?

An agent cannot accept commission from both parties to a transaction without his principal’s consent.
Where an agent’s interests conflict with those of his principal, he must disclose the conflict.
An agent can only disobey his principal’s instructions if he honestly believes that disobeying those instructions is in his principal’s best interests.
An agent who is a professional is required to display such skill as may reasonably be expected from a member of his profession.

Answer 41

Feedback:
An agent cannot disobey his principal’s lawful instructions, even if he believes that disobeying them is in the principal’s best interests.

Available Answers
An agent can only disobey his principal’s instructions if he honestly believes that disobeying those instructions is in his principal’s best interests. (1 Mark)

Question 42

Which of the following is not required for a duty of care to exist?

The claimant must have acted in good faith.
There must be a sufficient relationship of proximity between defendant and claimant.
It must be reasonable that the defendant should foresee that damage might arise from his carelessness.
It must be just and reasonable for the law to impose liability.

Answer 42

Feedback:
In order to establish a duty of care there is no requirement that the claimant must have acted in good faith.

Available Answers
The claimant must have acted in good faith. (1 Mark)

Question 43

Which of the following is correct concerning partnerships and legal charges?

Partnerships can grant fixed charges only
Partnerships can grant floating charges only
Partnerships can grant both fixed and floating charges
Partnerships cannot grant fixed or floating charges

Answer 43

Feedback:
Partnerships can only grant fixed charges.

Available Answers
Partnerships can grant fixed charges only (1 Mark)

Question 44

Which of the following statements regarding retiring partners is correct?

Retiring partners are not liable for any partnership debts after they leave.
Retiring partners are responsible for existing partnership debts when they leave and partnership debts incurred after their retirement, unless third parties are notified of their retirement.
Retiring partners are liable only for existing partnership debts when they leave, unless third parties are notified that they have retired.
Retiring partners are only liable for partnership debts incurred after they leave.

Answer 44

Feedback:
Retiring partners are liable for existing partnership debts, and those incurred after their retirement, unless third parties are notified of their retirement. This is because as far as third parties are aware, a partner is a partner until they are told they are no longer so.

Available Answers
Retiring partners are responsible for existing partnership debts when they leave and partnership debts incurred after their retirement, unless third parties are notified of their retirement. (1 Mark)

Question 45

Which of the following statements about the liability of a new partner in an ordinary partnership is correct?

New partners automatically assume liability for existing partnership debts when they join the firm and for new debts incurred after they join.
New partners are only liable for partnership debts that they personally authorise.
New partners are not liable for existing partnership debts when they join but are liable for new partnership debts after they join.
New partners become liable for new partnership debts when they meet the creditors personally.

Answer 45

Feedback:
New partners are only liable for partnership debts incurred after they join the firm unless an agreement of novation is entered into.

Available Answers
New partners are not liable for existing partnership debts when they join but are liable for new partnership debts after they join. (1 Mark)

Question 46

The directors of A Ltd issue and then allot 100,000 £1 new shares to a third party for £2 a share, in order to defeat a takeover bid. The company only hasin issue £1 shares and the statutory pre-emption rights under CA2006 have been disapplied.

A general meeting is called one month later, at which an ordinary resolution is passed, with the support of the votes of the newly issued shares, ratifying the allotment. A group of minority shareholders challenge the validity of the ratification.

Which of the following is correct?

The ratification is valid.
The ratification is invalid because a special resolution is required.
The ratification is invalid because the general meeting was called outside the required period of allotment.
The ratification is invalid because the holder of the new shares should have been excluded from voting.

Answer 46

Feedback:
A Ltd is a private company with one class of shares. In such a company there is general authority to issue shares, however this authority must be used for the purpose given (to raise capital).

If the directors use their powers irregularly to sell shares, the votes attached to the new shares may not be used in reaching a decision in general meeting to sanction it.

Available Answers
The ratification is invalid because the holder of the new shares should have been excluded from voting. (1 Mark)

Question 47

Which of the following statements concerning wrongful trading is correct?

Wrongful trading is a criminal offence.
Only a director can be liable for wrongful trading.
Selling company shares in the knowledge that the share price is about to fall is wrongful trading.
Intent to defraud is required to prove a case of wrongful trading.

Answer 47

Feedback:
Wrongful trading is a civil offence and intent to defraud is required for fraudulent trading.

Available Answers
Only a director can be liable for wrongful trading. (1 Mark)

Question 48

When an ordinary partnership is terminated, which of the following is paid off last out of funds realised from the partnership assets?

Partners’ share of partnership profits
Partners’ capital contribution
Partnership loans
External debts

Answer 48

Feedback:
Any surplus profit after all the debts are repaid is distributed to the partners in the profit sharing ratio.

Available Answers
Partners’ share of partnership profits (1 Mark)

Question 49

Which of the following could be registered as a trademark?

A mark which is an image

A mark which is made up of letters and numbers

A mark which represents the technical shape of goods.

Answer 49

Feedback:
A trade mark can consist of either one, or a combination of logos, words, letters, numbers, colours, images, sounds and jingles.

Available Answers
1 and 2 (1 Mark)

Question 50

Which of following would not gain copyright protection?

A DVD
An unrecorded speech
Written lyrics of a song
A hand knitted jumper

Answer 50

Feedback:
Under the Copyright, Designs and Patents Act 1988 copyright exists in original literary, dramatic, musical or artistic works; sound recordings, films or broadcasts. It must be in permanent form by being recorded in some way therefore an unrecorded speech would not gain protection.

Available Answers
An unrecorded speech (1 Mark)

Question 51

Chow, a suitable qualified person, has been appointed as the company secretary of Dug plc. Since his appointment he has entered into a number of contracts of behalf of Dug plc.

Which of the following TWO contracts will be binding on Dug plc?

✓A long term contract with Exe plc for the maintenance of Dug’s photocopier.
✓An agreement to hire a car from Far Ltd which Chow used for his own private use.
✓An agreement to borrow £1 million to finance the expansion of the business.
✓An agreement to buy a new office block for the company’s use.

Answer 51

Feedback:
Company secretary has implied authority to enter into contracts of an administrative nature, but not commercial contracts.

Available Answers
A long term contract with Exe plc for the maintenance of Dug’s photocopier. (Correct)
An agreement to hire a car from Far Ltd which Chow used for his own private use. (Correct)

Question 52

Ailsa owns 100% of the share capital in A Ltd, a highly profitable trading company. She is the sole director. She had an idea for a new business venture that was potentially profitable but carried a high level of risk. She set up a new company, B Ltd, which was 100% owned by A Ltd, and operated the new venture through B Ltd.

Unfortunately the new venture was not successful and B Ltd has gone into insolvent liquidation with no assets.

What is the legal position of the creditors of B Ltd?

As A Ltd owns 100% of B Ltd the veil of incorporation is lifted and A Ltd is liable for the debts of B Ltd
As Ailsa is the sole shareholder and director of both companies, she is personally liable for B Ltd’s debts
B Ltd is a separate legal entity. The veil of incorporation will not be lifted
Creditors will only be able to sue A Ltd if they were aware of the group structure when they entered into a contract with B Ltd

Answer 52

Feedback:
In a commercial situation such as this, the veil of incorporation is not lifted. B Ltd is a separate legal entity and neither Ailsa nor A Ltd are liable for its debts.

Available Answers
B Ltd is a separate legal entity. The veil of incorporation will not be lifted (1 Mark)

Question 53

Aleem has given negligent advice to Dan causing Dan to lose a substantial amount of money. Dan is considering suing Aleem for negligence.

How long does Dan have to bring his action?

Answer 53

Feedback:
The limitation period for an action in tort is 6 years

Available Answers
6 years (1 Mark)

Question 54

In an action for negligence, what is the legal effect if volenti non fit injuria applies?

It is a defence to the action which means that the defendant is not liable
It is a partial defence to the action which means that any damages will be reduced
It changes the burden of proof so the defendant must prove they are not liable
It is conclusive evidence that the defendant is fully liable

Answer 54

Feedback:
Volenti non fit injuria loosely translates as “no harm is done to one who consents”.

If someone willingly and freely puts themselves into a dangerous situation and consents to a risk, they cannot then sue for damage caused by that risk.

Available Answers
It is a defence to the action which means that the defendant is not liable (1 Mark)

Question 55

Gordon runs a training company. He arranges for some building work on his business premises to expand two of his lecture rooms. The total cost of the work is £15,000. The contract includes a provision stating that the work must be completed by 31 March. It states that if there is a delay in completing the work beyond 31 March, damages of £20,000 will be payable by the builder to compensate for disruption to Gordon’s business.

Which of the following statements are correct?

The contract provision stating the amount of damages payable is a liquidated damages clause
If the building work is delayed beyond 31 March the builder will have to pay damages of £20,000
Contracts cannot pre-determine levels of damage in the event of a breach
The clause regarding the level of damages will be unenforceable as it is a penalty clause

Answer 55

Feedback:
Clauses in a contract that try to estimate the likely loss caused by a breach of contract are enforceable as liquidated damages clauses.

Round sum figures which bear no relation to the loss caused are unenforceable as penalty clauses

Available Answers
The clause regarding the level of damages will be unenforceable as it is a penalty clause (1 Mark)

Question 56

Harriet enters into a contract with Brian, a taxi driver, for a journey from Liverpool to Birmingham. They agree a contract for this journey with an agreed fixed price of £150. Due to an accident on the date of the journey, parts of the motorway are closed and the journey will take much longer than expected and will involve driving many more miles. Brian refuses to fulfill the contract as he realises that he will lose money on the contract.

What is the legal position?

Answer 56

Feedback:
A contract is only frustrated if it is impossible to complete. The contract is still possible so Brian must fulfil his contractual obligation at the agreed price.

Available Answers
Harriet can sue for breach of contract. (1 Mark)

Question 57

Feedback:
A contract is only frustrated if it is impossible to complete. The contract is still possible so Brian must fulfil his contractual obligation at the agreed price.

Available Answers
Harriet can sue for breach of contract. (1 Mark)

Answer 57

Feedback:
Partners are jointly liable for all partnership debts. The partnership agreement cannot exclude this liability

Available Answers
(i) only (1 Mark)

Question 58

Franki has written and recorded a new piece of music . She is keen to ensure it is protected under copyright law and she has two questions relating to this.

1. Does copyright protection need to be claimed or is it automatic?
2. How long will copyright protection of her song last?

Answer 58

Copyright duration:
Protection for a sound or music recording is 70 years from when it was first published

Claim or automatic
Available Answers
It is automatic (Correct)
Copyright duration
Available Answers
70 years (Correct)

Question 59

Philip has worked for B Ltd for 5 years. He has a contract of employment that entitles him to 3 months notice. Although Philip’s work has always been satisfactory, Philip’s manager, Brian, has never liked Philip as he supports a rival football team. At the end of his annual performance review Brian tells Philip that he is dismissed and must leave in 3 months time

Are the following statements true or false?

1. Philip will be able to bring a claim for wrongful dismissal.
2. Philip will be able to bring a claim for unfair dismissal.

Answer 59

Feedback: Wrongful dismissal:
As Philip has been given the notice period required under his contract there is no breach of the employment contract. He therefore cannot sue for wrongful dismissal

Unfair dismissal:
Although there is no breach of contract Philip has worked for his employer for at least 2 years and appears to have been dismissed without good reason. He can sue for unfair dismissal

Question 60

Employers have a duty not to discriminate against staff on the grounds of a protected characteristic.

Which of the following is not a protected characteristic?

Age
Religion or belief
Disability
Family care responsibilities

Answer 60

Available Answers
Family care responsibilities (1 Mark)

Question 61

Which of the following need not be included in an employee’s written statement of prescribed particulars?

Whether service with a previous employer counts towards the employee’s continuous period of employment
Job title or brief job description
Hours of work
Normal place of work

Answer 61

Feedback:
There is no requirement to include the normal place of work in the written particulars

Available Answers
Normal place of work (1 Mark)

Question 62

Broke Ltd has just gone into liquidation. The liquidator discovers that the company has assets valued at £2m after allowing for the cost of the liquidation. Broke Ltd owes £3m to Enid which is secured by a floating charge. They also owe £4m to a wide range of unsecured creditors.

How much, in total, will the unsecured creditors receive?

Answer 62

Feedback:
Before paying the floating chargeholder, the liquidator must put aside a ring-fenced fund (prescribed part) for the unsecured creditors.

This fund is calculated as:

(50% x £10,000) + (20% x £1,990,000) = £403,000

Available Answers
£403,000 (1 Mark)

Question 63

Hopeless Ltd have been trading at a loss for the last two years and the directors have decided that the company must close down as their debts greatly exceed their assets. They call a shareholder meeting and the shareholders pass a special resolution which approves this decision.

What process will now commence?

Compulsory liquidation
Members voluntary liquidation
Creditors voluntary liquidation
Administration

Answer 63

Feedback:
As the members have voted to put the company into liquidation it is a voluntary liquidation. If the company was solvent it would be a members’ voluntary liquidation. However, as it is insolvent it is a creditors’ voluntary liquidation.

Available Answers
Creditors voluntary liquidation (1 Mark)

Question 64

Imran lent £400,000 to Z plc in 2009. The debt was secured by a fixed charge over Z plc’s premises. The company has just defaulted on the terms of the loan and Imran is looking to recover his £400,000

What is the most likely procedure that Imran will use to try to recover the debt?

Administrative receivership
LPA receivership
Liquidation
Company Voluntary Arrangement

Answer 64

Feedback:
As the debt is secured by a fixed charge, Imran is able to appoint an LPA (fixed charge) receiver. The date of creation of the charge does not matter. The receiver will then take ownership of the premises and look to sell them to pay the debt owed to Imran

Available Answers
LPA receivership (1 Mark)

Question 65

Imran lent £400,000 to Z plc in 2009. The debt was secured by a fixed charge over Z plc’s premises. The company has just defaulted on the terms of the loan and Imran is looking to recover his £400,000

What is the most likely procedure that Imran will use to try to recover the debt?

Administrative receivership
LPA receivership
Liquidation
Company Voluntary Arrangement

Answer 65

Feedback:
As the debt is secured by a fixed charge, Imran is able to appoint an LPA (fixed charge) receiver. The date of creation of the charge does not matter. The receiver will then take ownership of the premises and look to sell them to pay the debt owed to Imran

Available Answers
LPA receivership (1 Mark)

Question 66

Megan lent £200,000 to Q Ltd in 1998. The debt was secured by a floating charge over all the assets of Q Ltd. The company has just defaulted on the terms of the loan and Megan is looking to recover her £200,000.

What is the most likely procedure that Megan will use to try to recover the debt?

Administrative receivership
LPA receivership
Liquidation
Company Voluntary Arrangement

Answer 66

Feedback:
As the floating charge was created before 15 September 2003 Megan is able to appoint an administrative receiver to take over the running of the company and realise assets to pay Megan’s debt.

Available Answers
Administrative receivership (1 Mark)

Question 67

Kim was in the process of setting up her new company (Kim Ltd). Before the incorporation process was completed, a fantastic business opportunity arose so Kim bought £10,000 of goods on credit in the company’s name to take advantage of the opportunity. Unfortunately the venture was not as lucrative as Kim had hoped and the supplier is now chasing the £10,000 owed.

Which of the following statements is correct?

Kim and Kim Ltd are jointly liable for the debt
If Kim Ltd ratifies the contract after incorporation, only Kim Ltd is liable
Kim is personally liable for the debt
As Kim Ltd did no exist when the contract was made, the contract is void

Answer 67

Feedback:
If a promoter signs a contract on behalf of a company before it exists, the promoter is personally liable on the contract.

The company cannot later ratify as it did not exist when the contract was made.

Available Answers
Kim is personally liable for the debt (1 Mark)

Question 68

Zander is an experienced art dealer. He is visiting a car boot sale when he recognises a masterpiece offered for sale for £80 by Juan. Realising that this is a bargain Zander agrees to pay £80 for the painting which Juan gladly accepts. As he doesn’t have the cash with him, Zander agrees to return with the cash one hour later to pick up the painting. Before Zander returns, another art dealer sees the painting and tells Juan it is worth £50,000. When Zander returns with the cash, Juan refuses to hand over the painting.

Can Zander insist on buying the painting for £80?

Yes. The contract was made when Juan accepted Zander’s offer. He must sell for £80
No. As Zander did not have cash with him he was unable to offer consideration
No. As Juan did not realise the value of the painting the contract is void as a mistake
There is a binding contract but the court would insist that Zander pays a fair price for the painting

Answer 68

Feedback:
Juan does supply consideration as he is promising to pay £80

Courts will not get involved in the value of consideration. It must be sufficient, it need not be adequate.

The contract is not void as a mistake as Juan was aware he was selling the painting. Lack of knowledge of the value will not void the contract as a mistake

Available Answers
Yes. The contract was made when Juan accepted Zander’s offer. He must sell for £80 (1 Mark)

Question 69

Arthur and Felix are sole directors and shareholders of AF Ltd. They have decided that they need to finance the business and have agreed a loan to the company from Batwest bank of £10,000.

Which one of the following statements about the loan is incorrect?

The loan can be secured by a fixed charge if AF Ltd owns a suitable asset
The loan can be secured by a floating charge over the assets of AF Ltd generally
Batwest bank may ask Arthur and Felix to personally guarantee the loan
As sole shareholder / directors, Arthur and Felix are automatically jointly liable for the loan

Answer 69

Feedback:
Companies can secure loans with either fixed or floating charges.

Directors / shareholders are not liable for company debts unless they have personally guaranteed the debt.

Available Answers
As sole shareholder / directors, Arthur and Felix are automatically jointly liable for the loan (1 Mark)

Question 70

If the designated member of a Limited Liability Partnership(LLP) enters into a contract on behalf of the firm, who is liable on the contract?

The LLP only
The LLP and the designated member are jointly liable
The LLP and all members are jointly liable
The designated member only

Answer 70

Feedback:
An LLP is a separate legal person. The firm is liable for contracts made on its behalf. Members benefit from limited liability

Available Answers
The LLP only (1 Mark)

Question 71

Which one of the following statements about company written resolutions is incorrect?

Written resolutions can never be made by public companies
Articles can override a private company’s power to pass written resolutions
A written resolution can never be used to remove an auditor or director
Written resolutions can be in soft (electronic) form

Answer 71

Feedback:
Articles of association can never override a private company’s power to pass written resolutions

Available Answers
Articles can override a private company’s power to pass written resolutions (1 Mark)

Question 72

Adam is a shareholder in AQ Ltd. The company has not held a shareholder meeting in several years and Adam is keen for a meeting to be held so he can raise concerns about the company with the directors.

What is the minimum shareholding that Adam needs to require the directors to call a shareholder meeting?

There is no minimum required holding
At least 5% of the voting shares
At least 10% of the voting shares
At least 15% of the voting shares

Answer 72

Feedback:
A public company must hold an AGM but there is no legal requirement for a private company.

Available Answers
At least 5% of the voting shares (1 Mark)

Question 73

The promoters of Z Ltd are deciding on the composition of the board of directors. They are considering candidates with a wide range of ages and are concerned that there may be age restrictions that could limit their choice.

1. What is the minimum age for a company director?
2. What is the maximum age for a company director

Answer 73

16 minimum no max

Question 74

Companies must keep minutes of members and directors meetings.

For how long must a company keep these records?

One year
Three years
Six years
Ten years

Answer 74

Ten years

Question 75

The directors of Z Ltd want to change the company’s articles of association. They are aware that a shareholder resolution is required to approve this.

1. What type of resolution is needed?
2. Within what time limit must a copy of the amended articles be filed with the Registrar of companies?

Answer 75

Time limit to file:
The amended article must be sent to the registrar of companies within 15 days.

Type of resolution
Available Answers
Special (Correct)
Time limit to file
Available Answers
15 days (Correct)

Question 76

A public company issues 10,000 new 50p Nominal Value shares at £1.80 per share.

What is the minimum amount that must be paid up on this share issue?

Answer 76

Feedback:
When a plc issues shares, the minimum amount that must be paid up is 25% of the nominal value plus all of any share premium

25% of the NV is 12.5p

Share premium is £1.30

So minimum paid up is 10,000 x (£1.30 + £0.125) = £14,250

Available Answers
£14,250 (1 Mark)

Question 77

Ali needs to file accounts for his clients. Some operate through private companies and others through public companies. Ali needs to know when the accounts must be filed.

How soon after the year end must accounts be filed for:

1. A private company?
2. A public company?

Answer 77

Feedback: Private company filing:
Private companies must file their accounts < 9 months of the year end

Public company filing:
Public companies must file accounts < 6 months of the year end

Private company filing
Available Answers
9 months (Correct)
Public company filing
Available Answers
6 months (Correct)

Question 78

Sybil and Basil are planning to set up a new private company to operate their hotel business. They expect to turnover around £100,000 per year.

They ask your advice on two matters:

1. Will they have to file annual accounts with Companies House?
2. Will their accounts have to be independently audited?

Answer 78

Feedback: Mock 3 Q11 Accounts filing:
All limited companies have to file annual accounts with Companies House.

Mock 3 Q11 audit:
Private companies do not require an audit if they satisfy at least 2 of:

• turnover < £10.2m
• assets < £5.1m
• staff < 50

Mock 3 Q11 Accounts filing
Available Answers
Yes (Correct)
Mock 3 Q11 audit
Available Answers
No (Correct)

Question 79

To which of the following contracts does the UN Convention on Contracts for the International Sale of Goods apply to?

Between Company A and Company B who are of the same nationality but have their places of business in different states.
Between Company A and Company B who have different nationalities but have their places of business in the same state.
Between Company A and Company B who are of the same nationality and have their places of business in the same state.
None of the above.

Answer 79

Feedback:
The place of business of the parties must be in different states.

Available Answers
Between Company A and Company B who are of the same nationality but have their places of business in different states. (1 Mark)

Question 80

1. Which of the following is not a principle enacted by the Data protection Act 2018?

Purpose limitation
Data minimisation
Storage limitation
State protection
(1 Mark)

Answer 80

Feedback:
The Data Protection Act 2018 enacts the following principles from the GDPR

Lawfulness, fairness and transparency

Purpose limitation

Data minimisation

Accuracy

Storage limitation

Integrity and confidentiality (security)

Available Answers
State protection (1 Mark)

Question 81

Zak owes Eve £100. Finding that he has insufficient cash, Zak offers Eve his bicycle worth £90 instead. Eve accepts.

Which of the following statements best describes the legal position as to whether there is valid consideration?

Yes, Eve was not already entitled to the bicycle so it is sufficient consideration for waiver of the debt
No, the bicycle is not sufficient as it does not match or exceed the value of the debt
No, consideration must be in money or money’s worth
Yes, a bicycle constitutes sufficient consideration because it has an identifiable value

Answer 81

Feedback:
B The ISSB will initially focus on climate-related disclosures.

The ISSB will initially focus on climate-related disclosures due to the urgent need for information on climate-related matters.

There is currently no legal requirement for UK companies to disclose information relating to sustainability, however many choose to disclose such information. The IFRS Sustainability Disclosure Standards will complement rather than replace IFRS Standards. Several other organisations have issued guidance relating to the disclosure of sustainability information and the ISSB will build on the work done by some of these organisations.

LO 1a

Available Answers
Yes, Eve was not already entitled to the bicycle so it is sufficient consideration for waiver of the debt (2 Marks)

Question 82

Siegfried employs Marij to plan and build a go-kart course on his field which he intends to open to the public on 1 May. His viability and market research studies lead him to expect that he will earn £300 per day in the first three months of business. Marij contracts to construct the course and surrounding areas according to certain plans and specifications and to complete the work by no later than 30 March for a contract price of £10,000. The contract provides that Marij will be liable to pay Siegfried £150 for every day work overruns the scheduled completion date.

Which of the following best describes the legal position?

The provision is for unliquidated damages and is valid because it is less than the anticipated loss
The provision is for liquidated damages and is valid because the figure is not penal in nature and protects Siegfried’s legitimate interest
The provision is void because it states a sum in excess of 1% of the total contract price
The provision is likely to be void because the same amount is payable regardless of the actual loss

Answer 82

A The offer is terminated.

If the event or circumstances on which an offer is conditional does or do not transpire, the offer is no longer capable of acceptance and is terminated.

LO 1b

Available Answers
The provision is for liquidated damages and is valid because the figure is not penal in nature and protects Siegfried’s legitimate interest (2 Marks)

Question 83

Arthur worked for Lady Grey and part of his job was to buy plants, ornaments and furniture for the gardens of her country manor house. When her son, Harry, was due to retire from the services, she advised Arthur that Harry would be taking on his responsibilities. A few weeks later, Arthur ordered some very expensive roses and marble statues from Lady Grey’s main supplier and collected the goods the next day for his own garden. The invoice was delivered to Lady Grey.

Is there an agency relationship between Arthur and Lady Grey in respect of the contract for the roses and statues?

Yes
No
Is Lady Grey bound to settle the invoice?

Yes
No

Answer 83

Sub 1
Available Answers
Yes (Correct)
Sub 2
Available Answers
Yes (Correct)

Question 84

Kit and Lin are partners in a takeaway pizza business. One of their employees, Jeff, decides to try to improve the businesses’s profits by setting up a parcel delivery operation, using the same business name, that uses the pizza delivery vehicles to deliver the parcels. Kit and Lin do not prevent Jeff doing this and are happy with the extra money the parcel delivery service is making.

Which type of authority does Jeff have in regards to the parcel delivery service?

Actual express authority
Implied usual authority
Ostensible authority
Actual implied authority

Answer 84

Available Answers
Ostensible authority (2 Marks)

Also known as apparent authority. For example, an independent contractor physician can be “ostensible agent” of hospital if patient looks to hospital for care and not individual physician, and hospital holds physician out as its employee

Question 85

All of the following statements, except one, were established by, or relevant to, the landmark case of Donoghue v Stevenson, which involved an allegation that there had been a decomposing snail in a bottle of ginger beer?

Which is the exception?

No contractual relationship is necessary to found an action for negligence
There must be a sufficient degree of proximity or neighbourhood between the parties
A manufacturer could owe a duty of care to a person who did not actually buy its goods
There should be a special relationship of some sort between the parties

Answer 85

Available Answers
There should be a special relationship of some sort between the parties (2 Marks)

Question 86

Brown & Cameron, a firm of accountants, prepares accounts for Target plc, showing a profit of £800,000 when they should, in fact, have shown a loss of £8,000. Marnie owned 300 shares in the company and, after reading the accounts that were sent to her (as to all shareholders), she purchased an additional 500 shares. When it came to light that the accounts had been prepared negligently (and the share price tumbled as a result of that negligence), Marnie sued the accountants for negligence. There was no disclaimer of liability in the audit report.

Which of the following best describes the legal position in respect of the potential liability of the firm, Brown & Cameron to Marnie?

It is liable because the partners in the firm knew that the accounts would be sent to all shareholders
It is liable because it was reasonably foreseeable that existing shareholders would rely on the accounts for the purpose of reviewing their investments
It is not liable because Marnie bought her shares on the Stock Exchange and not from the company
It is not liable because the firm did not owe a duty to existing shareholders who rely on the accounts for a purpose other than that for which they were intended

Answer 86

Feedback:
D It is not liable because the firm did not owe a duty to existing shareholders who rely on the accounts for a purpose other than that for which they were intended.

The facts are similar to the Caparo case. The basic view is that the accounts are intended to enable shareholders to exercise their rights regarding the management of the company and not to make investment decisions. (Special circumstances may apply, of course, so that a different conclusion is reached, but there are none in this case.)

LO1e

Available Answers
It is not liable because the firm did not owe a duty to existing shareholders who rely on the accounts for a purpose other than that for which they were intended (2 Marks)

Question 87

Within what time period following the end of the relevant accounting reference period must a public limited company file its accounts and reports?

Five months
Six months
Seven months
Nine months

Answer 87

Available Answers
Six months (2 Marks)

Question 88

Minimus plc is a public company but is not listed on a stock exchange. It is the parent company of a number of subsidiaries and produces group accounts.

Are the following statements true or false?

Minimus plc is required to produce a consolidated directors’ report.

True
False

Minimus plc is required to produce a directors’ remuneration report.
True
False

Answer 88

A True. Because Minimus plc produces group accounts it must produce a consolidated directors’ report.

D False. Only quoted companies are required to produce a directors’ remuneration report. Minimus plc is not quoted because it is not listed on a stock exchange.

LO2c

Sub 1
Available Answers
True (Correct)
Sub 2
Available Answers
False (Correct)

Question 89

Are the following statements true or false?

A company must state its objects in its constitution, because directors can only exercise their powers in pursuance of those objects.

True
False
Directors are agents of the members of the company for the purposes of managing the company’s business.

True
False

Answer 89

B False. The Companies Act 2006 changed the previous law to provide that companies have unrestricted objects unless specifically restricted by the articles.

D False. Directors are not agents of the members and, therefore, are not subject to their instruction as to how to act.

LO2m

Sub 1
Available Answers
False (Correct)
Sub 2
Available Answers
False (Correct)

Question 90

Kim, Tamsin and Anna are directors of Teen Tunes Ltd. Kim and Tamsin have recently sold some of the company’s assets to Top Trumps Ltd, a company in which they are the only directors and shareholders. They sold the assets, secretly, at less than their market value. Anna was not a party to the arrangements and is not in breach of any of the duties she owes as director.

Which of the following best describes the legal position?

Kim and Tamsin are jointly and severally liable to make good the loss suffered by Teen Tunes Ltd
Kim, Tamsin and Anna are jointly liable to make good the loss suffered by Teen Tunes Ltd
Kim, Tamsin and Anna are jointly and severally liable to make good the loss suffered by Teen Tunes Ltd
Anna may avoid the contract between Teen Tunes Ltd and Top Trumps Ltd

Answer 90

Available Answers
Kim and Tamsin are jointly and severally liable to make good the loss suffered by Teen Tunes Ltd (2 Marks)

Question 91

Miles and Elizabeth are both directors of a private company selling organic food. Miles has been found guilty of a number of breaches of competition law. Elizabeth was also a director and company secretary of Big Beans Ltd, a company that has just gone into insolvent liquidation. The court is considering an application for their disqualification.

Will Miles face certain disqualification?

Yes
No
Will disqualification be automatic for Elizabeth?

Yes
No

Answer 91

B No. A disqualification order (of up to 15 years) may be made in the discretion of the court.

D No. The court would also need to be satisfied that Elizabeth is unfit to be concerned in the management of a company (the court may take into account her conduct as a director of Big Beans Ltd) in order for a disqualification to be mandatory.

LO2k, 2l

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
No (Correct)

Question 92

Where someone is successful in applying for relief on the grounds of unfairly prejudicial conduct, which of the following orders might a court make?

(1) An order not to make any alteration of its articles of association without obtaining the permission of the court first

(2) An order regulating the future conduct of the company’s affairs

(3) An order authorising legal proceedings to be brought on behalf of the company

None
All
(1) and/or (2) only
(2) and/or (3) only

Answer 92

Available Answers
All (2 Marks)

Question 93

In the absence of a court order that directs otherwise, in what circumstances must a public limited company re-register as a private company as a result of a reduction in its share capital?

When the directors are unable to issue a solvency statement in respect of the company’s liabilities
When the company’s net assets fall below half of its called up share capital
When 20% or more of the company’s creditors object to the reduction
When the nominal value of the allotted share capital falls below the authorised minimum

Answer 93

Available Answers
When the nominal value of the allotted share capital falls below the authorised minimum (2 Marks)

Question 94

Which of the following best defines a debenture?

A charge over a company’s goodwill
The registration document used to register a fixed or floating charge
A document that records the terms of any loan
A document that records the terms of any secured loan

Answer 94

Available Answers
A document that records the terms of any loan (2 Marks)

Question 95

Lionel is appointed liquidator of Laburnum Ltd.

Do the company’s assets automatically vest in Lionel?

Yes
No
Are the employees of Laburnum Ltd automatically dismissed when Lionel is appointed as liquidator?

Yes
No

Answer 95

B No. The company’s assets remain the legal property of the company, but under Lionel’s control, unless the court orders them to be vested in him as liquidator.

C Yes.

LO2o

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
Yes (Correct)

Question 96

Are the following statements true or false in relation to a limited liability partnership (LLP)?

A member of an LLP is an agent of the LLP as well as its members.

True
False
A member cannot bind the LLP by their actions unless they act within their actual express or implied authority.

True
False

Answer 96

Sub 1
Available Answers
False (Correct)
Sub 2
Available Answers
False (Correct)

Question 97

In order to receive the protection conferred by the whistleblowing provisions of the Public Interest Disclosure Act 1998:

Does a person need to be an ‘employee’?

True
False
Does the person need to be of a minimum age?

True
False

Answer 97

Available Answers
False (Correct)
Sub2
Available Answers
False (Correct)

Question 98

With regard to the offence of fraud under the Fraud Act 2006, is it necessary to show that the defendant intended to make a gain for themselves or another person?

Yes
No
If a director of a company is found guilty of fraudulent trading, will they automatically be disqualified from acting as a director?

Yes
No

Answer 98

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
No (Correct)

Question 99

Fraudulent card payments may be prevented by cardholders keeping their bank cards in a safe location at all times.

True
False
In ‘spear phishing’, an individual is targeted for fraud by the fraudster building up a relationship with them over time and then persuading them to give them either their personal details or money.

True
False

Answer 99

Sub 1
Available Answers
False (Correct)
Sub 2
Available Answers
False (Correct)

Question 100

Are the following statements true or false in relation to determining whether a working arrangement is between an employer and employee or between an employer and an independent contractor?

Provided there is an element of control and personal service and mutuality of obligations present, then the arrangement is a contract of employment.

True
False

Where a person is only offered work on an as-and-when required basis by their employer, the working arrangement cannot be a contract of service.
True
False

Answer 100

B, C

B False. Although the existence of these elements is absolutely essential in order for a contract to be held to be a contract of service rather than a contract for services, their existence does not necessarily mean that this will be the case. The application of the multiple test may still result in the arrangement being a contract for services.

C True. In such cases there is an absence of mutuality of obligations, which is an essential ingredient for the existence of a contract of service.

LO 4c

Sub 1
Available Answers
False (Correct)
Sub 2
Available Answers
True (Correct)

Question 101

In the event that an employer fails to comply with the requirement under the Employment Rights Act 1996 to provide a written statement of employment particulars: Does the employer face potential criminal liability, for example a fine or period of imprisonment?

Yes
No
Does the employer face potential civil liability in cases even where there is a written contract of employment covering the matters which should be contained within the written statement of employment particulars?

Yes
No

Answer 101

B No. There are no criminal sanctions. Rather, the employee may apply for a declaration of rights stating what the particulars of their employment should be and the employer may be liable to pay compensation to the employee in certain circumstances.

D No. This will be sufficient to replace the need for a written statement.

LO4d

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
No (Correct)

Question 102

On 28 May, Abigail writes to Gill and offers to sell all her old accountancy workbooks for £50. Gill posts a letter together with a cheque for £50 on 1 June saying that she’ll pick them up on 3 June. However, on 2 June, Abigail discovers that she has failed two of her papers and so sends a letter to Gill saying that the books are no longer for sale. On 3 June, each receives the other’s letter.

Does the letter of revocation take effect on 2 June?

Yes
No
Does Gill’s acceptance take effect on 3 June?

Yes
No

Answer 102

B No. The ‘postal rule’ does not apply to revocation.

D No. The acceptance takes effect when it is posted on 1 June (assuming postal acceptance was within the contemplation of the parties) with the result that there is a binding contract at that point.

LO1a

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
No (Correct)

Question 103

Mr and Mrs Higgins own two flats in Bristol which they let to students. When their eldest son, Crispin, was offered a place at Bristol University to read Law, he and his parents entered into a tenancy agreement allowing him to reside at one of the flats during his university studies for a rent of £190 per month. He was allowed to sublet the second bedroom for a rent of £200 per month. In the light of the rebuttable presumption that no intention to create legal relations exists in the case of a family, social or domestic arrangement, which of the following statements best describes the legal position as to whether the necessary intention to create legal relations exists in this instance?

No, because it is a family or domestic arrangement and so no such intention is presumed
No, because the fact that Crispin pays a reduced rent is evidence that no such intention exists
Yes, the normal presumption in family arrangements is rebutted by the fact that the parties enter into a written agreement and rent is payable
Yes, because the normal presumption does not apply where the arrangement relates to property

Answer 103

Feedback:
D There is no contract because there is no positive act to indicate acceptance.

There must be some act on the part of the offeree to indicate their acceptance.

LO 1a

Available Answers
Yes, the normal presumption in family arrangements is rebutted by the fact that the parties enter into a written agreement and rent is payable (2 Marks)

Question 103

Mr and Mrs Higgins own two flats in Bristol which they let to students. When their eldest son, Crispin, was offered a place at Bristol University to read Law, he and his parents entered into a tenancy agreement allowing him to reside at one of the flats during his university studies for a rent of £190 per month. He was allowed to sublet the second bedroom for a rent of £200 per month. In the light of the rebuttable presumption that no intention to create legal relations exists in the case of a family, social or domestic arrangement, which of the following statements best describes the legal position as to whether the necessary intention to create legal relations exists in this instance?

No, because it is a family or domestic arrangement and so no such intention is presumed
No, because the fact that Crispin pays a reduced rent is evidence that no such intention exists
Yes, the normal presumption in family arrangements is rebutted by the fact that the parties enter into a written agreement and rent is payable
Yes, because the normal presumption does not apply where the arrangement relates to property

Answer 103

Feedback:
D There is no contract because there is no positive act to indicate acceptance.

There must be some act on the part of the offeree to indicate their acceptance.

LO 1a

Available Answers
Yes, the normal presumption in family arrangements is rebutted by the fact that the parties enter into a written agreement and rent is payable (2 Marks)

Question 104

Mr and Mrs Higgins own two flats in Bristol which they let to students. When their eldest son, Crispin, was offered a place at Bristol University to read Law, he and his parents entered into a tenancy agreement allowing him to reside at one of the flats during his university studies for a rent of £190 per month. He was allowed to sublet the second bedroom for a rent of £200 per month. In the light of the rebuttable presumption that no intention to create legal relations exists in the case of a family, social or domestic arrangement, which of the following statements best describes the legal position as to whether the necessary intention to create legal relations exists in this instance?

No, because it is a family or domestic arrangement and so no such intention is presumed
No, because the fact that Crispin pays a reduced rent is evidence that no such intention exists
Yes, the normal presumption in family arrangements is rebutted by the fact that the parties enter into a written agreement and rent is payable
Yes, because the normal presumption does not apply where the arrangement relates to property

Answer 104

Feedback:
D There is no contract because there is no positive act to indicate acceptance.

There must be some act on the part of the offeree to indicate their acceptance.

LO 1a

Available Answers
Yes, the normal presumption in family arrangements is rebutted by the fact that the parties enter into a written agreement and rent is payable (2 Marks)

Question 105

Are the following statements true or false?

To be effective, a revocation of an offer must be made in writing.

True
False
To be effective, a revocation can be made by an authorised agent of the offeror.

True
False

Answer 105

B False. Revocation does not have to be in writing, it may also be express or implied.

C True. Revocation must be communicated to the offeree before acceptance, either by the offeror or their agent.

LO1a

Sub 1
Available Answers
False (Correct)
Sub 2
Available Answers
True (Correct)

Question 106

Monster Mowers Ltd agrees to sell one of its ride-on mowers to Geoff in the knowledge that Geoff is taking on new customers from Percy, a commercial gardener, who is retiring and that Geoff is unable to cope with the increased workload with his present mower. The company fails to deliver the mower until 10 days after the due date for delivery and Geoff is forced to continue working with his old mower as best he can. As a result he is unable to complete all the contracts he has agreed with Percy’s old customers. He is also unable to accept an offer from the local botanical gardens to be their grass-cutting contractor for the next 12 months because he cannot begin work immediately.

Which of the following statements best describes the legal position of Monster Mowers Ltd?

The company would be entitled to assume that Geoff could perform his contracts without the new mower and will not be liable for damages as a result
The company will be liable for damages in respect of breaches of Geoff’s contracts with existing customers but not the new customers from Percy’s business
The company will be liable for damages in respect of breaches of Geoff’s contracts with all his customers but not in respect of the botanical gardens’ potential contract as this was not a normal loss and the company was not aware of it
The company will be liable for damages in respect of breaches of contract with all his customers and for the lost contract with the botanical gardens since this was a reasonably foreseeable part of Geoff’s business plans with his new mower

Answer 106

Available Answers
The company will be liable for damages in respect of breaches of Geoff’s contracts with all his customers but not in respect of the botanical gardens’ potential contract as this was not a normal loss and the company was not aware of it (2 Marks)

Question 107

Stephen lives near an isolated headland in Cornwall. One day, he sees a Rolls Royce parked on the beach. No one is in sight but the tide is coming in rapidly. Stephen calls his neighbour and arranges for him to come and tow the Rolls Royce up the beach to safety. The neighbour is happy to oblige but wants payment for what he has done. When the owner, Anthony, returns, he refuses to pay because he says the action was not necessary.

Which of the following best describes the legal position?

An agency of necessity has arisen because Stephen is unable to contact Anthony
An agency of necessity has arisen because there is an emergency situation and a pressing need for action
No agency of necessity has arisen because the Rolls Royce is not a perishable good and Stephen’s action was not reasonable
No agency of necessity has arisen because there is no pre-existing contractual relationship between Stephen and Anthony

Answer 107

Available Answers
No agency of necessity has arisen because there is no pre-existing contractual relationship between Stephen and Anthony (2 Marks)

Question 108

Roz works in the accounts department of Bizzy Lizzy, a successful florist’s business. The principal owner of the business, Vincent, was due to visit a specialist rose grower on the Isles of Scilly but was unable to go due to illness. Vincent asked Roz to go along instead. He telephoned the rose grower to say that his buying partner would be taking his place. Roz ordered 500 roses for Bizzy Lizzy.

Which of the following best describes the legal position?

Roz had ostensible authority to order the roses
Roz had implied authority to order the roses
Roz had express authority to order the roses
Roz had no authority to order the roses

Answer 108

By calling her his ‘buying partner’, Vincent has given the impression that Roz was his agent and that she had the authority to purchase goods on behalf of the company.

LO1c

Available Answers
Roz had ostensible authority to order the roses (2 Marks)

Question 109

Annabel is Phil’s agent. She enters into a contract with Tim, within her authority, expressly describing herself as an agent for Phil.

Can Annabel be liable on this contract with Tim?

Yes
No
If Annabel enters into a contract, saying that she is acting as agent but without actually naming Phil as her principal, does that mean that Phil will not be liable on the contract?

Yes
No

Answer 109

A, D

A Yes. If it appears that the parties intended this to be the case, she may be liable.

D No. It means that it is more likely that she will be personally liable but, again, it is subject to the intentions of the parties.

LO1c

Sub 1
Available Answers
Yes (Correct)
Sub 2
Available Answers
No (Correct)

Question 110

Tim, an accountant, prepares financial statements for MarkUp plc, knowing that the company was considering three takeover bids, including one from Growth plc. There was no disclaimer of liability in the accounts. In the event that Tim prepares the statements negligently, indicating that the company is financially secure when it is not, and Growth plc takes over MarkUp plc on the basis of those accounts:

Can Growth plc recover any resulting losses it makes on the takeover?

Yes
No
Will Tim be liable to pay damages to the other takeover bidders where they were also identified to him as potential takeover bidders who would be relying on the accounts?

Yes
No

Answer 110

Feedback: s1:
A Yes.

D No. They will not have suffered any loss.

LO 1e

s1
Available Answers
Yes (Correct)
s2
Available Answers
No (Correct)

Question 111

Mark is the company secretary of Top Tents Ltd, a private company limited by shares. He seeks your advice on the following matters:

Must the company provide a directors’ remuneration report?

Yes
No
Must he file accounts and reports within nine months after the end of the relevant accounting reference period?

Yes
No

Answer 111

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
Yes (Correct)

Question 112

Under the Companies Act 2006 essential requirements for registration as a private company limited by shares by the Registrar of Companies include the submission of:

The memorandum of association

Yes
No
A section 761 trading certificate

Yes
No

Answer 112

Sub 1
Available Answers
Yes (Correct)
Sub 2
Available Answers
No (Correct)

Question 113

Whimsome Ltd has a turnover of £10 million, a balance sheet total of £5 million and employs 100 people. Within how many months of its year end must the company file its annual accounts with the Registrar?

3 months
6 months
9 months
12 months

Answer 113

C

As with all private companies, Whimsome Ltd must file its accounts within nine months of its year end.

LO2e

Available Answers
9 months (2 Marks)

Question 114

Are the following statements true or false?

From the time when a director vacates office, they cease to be subject to any statutory duties as a company director.

True
False
Where a director enters into a contract with the company, in breach of their duties, the contract is rendered voidable at the option of the company.

True
False

Answer 114

Sub 1
Available Answers
False (Correct)
Sub 2
Available Answers
True (Correct)

Question 115

Andrew is a shareholder in Star Buys Ltd and is preparing to pursue a derivative claim in the court for breach of duty by Arthur and Edgar, two of the company’s directors.

Must Andrew show that Arthur and Edgar control the majority of the company’s shares?

Yes
No
Can Andrew pursue the claim where the relevant act or omission is authorised by the company beforehand or ratified by it subsequently?

Yes
No

Answer 115

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
No (Correct)

Question 116

Fernline plc is in liquidation and Gerald is the liquidator. He has discovered that Fernline plc sold one of its principal offices for significantly less than its market value 18 months ago. It is quite clear that the directors knew that the company was heading for insolvency when it agreed the sale.

Is the sale of the office a transaction at an undervalue that is liable to be avoided by Gerald within the provisions of the Insolvency Act 1986?

Yes
No
Where a liquidator can avoid a transaction at an undervalue, can they order the return of the property in order to restore the position to what it would have been if no such transaction had taken place?

Yes
No

Answer 116

Sub 1
Available Answers
Yes (Correct)
Sub 2
Available Answers
No (Correct)

Question 117

Matt, Gemma and James are in partnership running a business organising conferences. Gemma and James nominate Matt to advertise their business and they all agree a total budget of £3,000 for this purpose. Matt feels that they should advertise in some glossy magazines as well as newspapers but knows that Gemma and James will not agree. Nevertheless, Matt places an advertisement with Upmarket Businesses, a high quality monthly glossy magazine. This incurs an additional cost of £2,000 (resulting in a total cost of £5,000), to be paid within 30 days. When Gemma and James hear about it, they are angry that Matt has exceeded the authority that they gave him and refuse to pay the publisher of Upmarket Businesses for the advertisement. Which of the following best describes whether Upmarket Businesses can enforce the contract?

No. Matt had no authority to enter into the contract
Yes. Matt had implied usual authority to advertise the firm’s business
Yes. Matt had no authority but Upmarket Businesses was not aware of that fact
Yes. Matt had no authority but Upmarket Businesses was not aware of that fact but knew that he was a partner

Answer 117

Available Answers
Yes. Matt had no authority but Upmarket Businesses was not aware of that fact but knew that he was a partner (2 Marks)

Question 118

Ashad and Michael plan to set up a limited liability partnership (LLP) to continue the business, Jenkins & Co, that they have conducted for the past 15 years as an ordinary partnership. They particularly do not want to change the name because it is a successful business.

Can they register the LLP under the name Jenkins & Co?

Yes
No

Do they need to have a formal partnership agreement?
Yes
No

Answer 118

B No. They may be able to use this name as a business name, but the name of an LLP must end with the words ‘limited liability partnership’ or the abbreviation ‘LLP’.

D No. An LLP will normally have one but it is not essential.

LO2b, 2c

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
No (Correct)

Question 119

Janet and Carol have, helped by their solicitor, drawn up a formal partnership agreement for their new partnership, Bloomin Flowers LLP. They would like answers to the following questions.

Can they file their partnership agreement as a means of applying to register their LLP, since it contains all the information required on incorporation?

Yes
No
When their business is up and running, will they need to submit confirmation statements to the Registrar of Companies?

Yes
No

Answer 119

Available Answers
No (Correct)
Sub 2
Available Answers
Yes (Correct)

Question 120

Martin proposes to disclose information to the police about his employer’s criminal acts but he has been told that he will need to satisfy certain criteria in order for such a disclosure to be protected by the Public Interest Disclosure Act 1998. For instance:

Does it matter if Martin’s proposed disclosure is made, principally, for personal gain?

Yes
No
Does Martin need to have raised the matter already internally or with a prescribed regulator?

Yes
No

Answer 120

Available Answers
Yes (Correct)
Sub 2
Available Answers
No (Correct)

Question 121

Employees owe a number of duties towards their employer under the common law.

Do employees have a duty to maintain trust and confidence?

Yes
No
Do employees have a duty to obey all orders given to them by their employer?

Yes
No

Answer 121

Feedback: Sub 1:
A,D

A Yes. Maintaining trust and confidence is a duty that employees owe to their employer.

D No. Employees are only under an obligation to obey orders which are lawful and reasonable.

LO4c

Sub 1
Available Answers
Yes (Correct)
Sub 2
Available Answers
No (Correct)

Question 122

Amran is employed on a part-time basis by Lord Noble, to manage his portfolio of property and equities. He is paid on a commission only basis. The parties have agreed that Amran will be paid an agreed commission every time he makes a profit on a sale transaction for Lord Noble. Last year, Amran was very happy with his earnings but in the past eight months, he has earned very little because Lord Noble has been planning a new business project and has failed to give Amram instructions when requested.

Might Lord Noble be liable for breach of his common law duty to pay Amran remuneration?

Yes
No
Might Lord Noble be liable for breach of his common law duty to provide Amran with work?

Yes
No

Answer 122

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
Yes (Correct)

Question 123

With regard to the EU’s General Data Protection Regulation’s (GDPR) rights and principles, as enacted by the Data Protection Act 2018, are the following statements true or false?

The data controller is obliged to take all necessary steps to ensure that data held about an individual is accurate.

True
False
The data controller must keep the data subject informed (and supply copies) of all personal data held or processed in respect of that data subject.

True
False

Answer 123

Feedback: Sub 1:
B,D

B False. The data controller is only required to take reasonable steps to ensure accuracy.

D False. There is no such obligation on the data controller. The data subject must request the information in accordance with their right of access.

LO4a

Sub 1
Available Answers
False (Correct)
Sub 2
Available Answers
False (Correct)

Question 124

Loren is a sole trader who recently designed a new product that she created a distinctive name and logo for.

Which of the following methods of protection could Loren use to protect the product’s name and logo?

Patent
Registered design
Design right
Trademark

Answer 124

Feedback:
D

Trademarks are used to protect product names and logos.

LO4b

Available Answers
Trademark (2 Marks)

Question 125

Which of the following terms describes a contract where one party may set it aside, but property transferred before avoidance is usually irrecoverable from a third party?

Void
Voidable
Uneforceable
Valid

Answer 125

Feedback:
Correct answer(s):

B Voidable

For example, where a party enters a contract as a result of undue influence, they may elect to avoid the contract.

LO 1a

Available Answers
Voidable (2 Marks)

Question 126

Abigail agrees to let her flat to Xavier for one day for the purpose of viewing a carnival. Xavier pays her a £50 deposit with £80 due to be paid at the end of the carnival. Due to civil unrest, the government prohibits all street entertainment and the carnival is cancelled just before Xavier is due to travel to the flat. Neither party has incurred any costs (save for payment of the deposit) in performance of the contract.

Requirement

Applying the Law Reform (Frustrated Contracts) Act 1943, which of the following statements is correct?

Abigail can keep the deposit but cannot claim the balance.
Abigail can keep the deposit and Xavier is liable to pay the balance.
Abigail must pay back the deposit and Xavier need not pay the balance.
Abigail can keep the deposit and Xavier must pay an additional £15 so that each party bears an equal loss.

Answer 126

Feedback:
Correct answer(s):

C Abigail must pay back the deposit and Xavier need not pay the balance.

The Act aims to reflect the fact that neither party is to blame for the contract coming to an end.

LO 1b

Available Answers
Abigail must pay back the deposit and Xavier need not pay the balance. (2 Marks)

Question 127

Are the following statements true or false?

Requirements

Anticipatory breach may be implied from conduct and need not be explicit.

True
False
Where an innocent party elects to treat a contract as discharged, they waive the right to claim damages from the party in default.

True
False

Answer 127

Feedback: S1:
Correct answer(s):

A True

Correct answer(s):

D False

They may treat the contract as discharged and sue for damages.

LO 1b

S1
Available Answers
True (Correct)
S2
Available Answers
False (Correct)

Question 128

Are the following statements true or false?

Requirements

On ratification of an agent’s contract by a principal, the third party may then choose whether to enforce the contract against the agent or the principal.

True
False
Ratification can only validate an agent’s past acts and will not endow any future authority.

True
False

Answer 128

Feedback: Sub 1:
Correct answer(s):

B False

Ratification has retrospective effect as if the principal were the original contracting party and the agent no longer has any liability on the contract. The third party must, therefore, sue the principal.

Correct answer(s):

C True

LO 1c

Sub 1
Available Answers
False (Correct)
Sub 2
Available Answers
True (Correct)

Question 129

Brian has just terminated his appointment of Livvi, who has been his agent for the past six months.

The written contract of agency did not mention anything about remuneration and Brian relies on this when he refuses to pay her in respect of her services. He does, however, accept that he must reimburse her for £5,000 expenses that she has paid along the way.

Requirements

Can Brian rely on the written contract to claim that no remuneration is payable to Livvi?

Yes
No
Is Livvi entitled to retain the goods belonging to Brian that she has in her possession until he pays her the sums owed to her?

Yes
No

Answer 129

Feedback: Sub 1:
Correct answer(s):

B No

In the absence of express provision, a reasonable amount of remuneration is payable.

Correct answer(s):

C Yes

An agent has the right to exercise a lien over property of the principal pending payment of sums owed.

LO 1c

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
Yes (Correct)

Question 130

Ahmed, Breda and Conway wish to form the ‘ABC’ partnership. The purpose of the partnership is to test out some business ideas and gain experience in running a business organisation.

Requirement

Will the ABC partnership be recognised in law as a partnership?

Yes
No
Derek, Edith and Frankie are planning to open a bookshop. They have signed a contract to lease a business property and have already acquired a stock of books to sell. The bookshop is not due to open for two months and the shop is not expected to be profitable for six months.

Requirement

Have Derek, Edith and Frankie formed a partnership?

Yes
No

Answer 130

Feedback: S1:
Correct answer(s):

B No

For a partnership to be recognised in law as such, it must be formed with a view to making profit. This is not the case with the ABC partnership, where the objective is to gain experience and test out ideas.

Correct answer(s):

C Yes

A partnership begins when the partners agree to conduct their business activity together, which may well be before the business actually begins to trade.

LO 1d

S1
Available Answers
No (Correct)
S2
Available Answers
Yes (Correct)

Question 131

Ahmed, Breda and Conway wish to form the ‘ABC’ partnership. The purpose of the partnership is to test out some business ideas and gain experience in running a business organisation.

Requirement

Will the ABC partnership be recognised in law as a partnership?

Yes
No
Derek, Edith and Frankie are planning to open a bookshop. They have signed a contract to lease a business property and have already acquired a stock of books to sell. The bookshop is not due to open for two months and the shop is not expected to be profitable for six months.

Requirement

Have Derek, Edith and Frankie formed a partnership?

Yes
No

Answer 131

Feedback: S1:
Correct answer(s):

B No

For a partnership to be recognised in law as such, it must be formed with a view to making profit. This is not the case with the ABC partnership, where the objective is to gain experience and test out ideas.

Correct answer(s):

C Yes

A partnership begins when the partners agree to conduct their business activity together, which may well be before the business actually begins to trade.

LO 1d

S1
Available Answers
No (Correct)
S2
Available Answers
Yes (Correct)

Question 132

All of the following statements are examples of lawful excuses for not performing under a contract except one. Which is the exception?

Performance by one party is rejected by the other
Non-performance occurs but it is agreed by the parties
One party makes it impossible for the other to perform
Performance is impossible when the contract is made

Answer 132

Feedback:
Correct answer(s):

D Performance is impossible when the contract is made

If performance is impossible when the contract is made, there is usually no contract at all. The other options are examples of lawful excuses for not performing under a contract.

LO 1b

Available Answers
Performance is impossible when the contract is made (2 Marks)

Question 133

In an action for negligence:

Requirements

Does there need to be some sort of pre-existing relationship between the claimant and defendant at the time of the act complained of, although not necessarily a contractual relationship?

Yes
No
Does the court need to be satisfied that public policy would allow a duty of care to exist?

Yes
No

Answer 133

eedback: Sub 1:
Correct answer(s):

B No

There does not need to be any relationship at all. Indeed, the parties to a tort case are often complete strangers.

Correct answer(s):

C Yes

The question of public policy is one of several tests applied, but if public policy dictates that no duty should exist, then none shall exist.

LO 1e

Sub 1
Available Answers
No (Correct)
Sub 2
Available Answers
Yes (Correct)

Question 134

Which of the following statements is incorrect?

If the defendant succeeds in arguing res ipsa loquitur, the burden of proof is then on the claimant to show negligence.
In arguing res ipsa loquitur, it must be shown that the thing that caused the damage was under the management and control of the defendant.
Res ipsa loquitur is relevant where the reason for the damage is not known.
Whether a breach of the duty of care has occurred is a matter of fact.

Answer 134

Feedback:
Correct answer(s):

A If the defendant succeeds in arguing res ipsa loquitur, the burden of proof is then on the claimant to show negligence.

Res ipsa loquitur is an argument by the claimant that ‘the facts speak for themselves’ in pointing to a breach on the part of the defendant. The burden of proof then shifts to the defendant to show that they were not negligent.

LO 1e

Available Answers
If the defendant succeeds in arguing res ipsa loquitur, the burden of proof is then on the claimant to show negligence. (2 Marks)

Question 135

Leo and Seamus are planning to set up a public company selling electrical goods at discounted rates. They ask for your advice on the following matters:

Requirements

Can it be an unlimited company?

Yes
No
Can the company commence trading once it is incorporated, provided they obtain a trading certificate within the first 12 months following incorporation?

Yes
No

Answer 135

Feedback: S1:
Correct answer(s):

B No

A public company must be a limited company.

Correct answer(s):

D No

The company should not commence trading until a trading certificate has been obtained.

LO 2b, 2c

S1
Available Answers
No (Correct)
S2
Available Answers
No (Correct)

Question 136

Micro-entities do not have to file a profit and loss account with the Registrar.

True
False

Micro-entities do not have to file notes to the accounts with the Registrar.
True
False

Answer 136

Feedback: Sub 1:
Correct answer(s):

A True

Micro-entities have the option not to file a profit and loss account but must file a balance sheet.

Correct answer(s):

D False

There are two compulsory notes for micro-entities which must be included in the accounts if relevant (advances to directors and financial commitments).

LO 2e

Sub 1
Available Answers
True (Correct)
Sub 2
Available Answers
False (Correct)

Question 137

With regard to company directors and directors’ powers, are the following statements true or false?

Requirements

The duties owed by a de facto director are the same as those of a properly appointed director.

True
False
If a director’s appointment is subsequently found to have been defective, their actions are invalidated as a result.

True
False

Answer 137

Feedback: Sub 1:
Correct answer(s):

A True

Correct answer(s):

D False

The director’s actions remain valid notwithstanding a defective or void appointment.

LO 2k, 2l

Sub 1
Available Answers
True (Correct)
Sub 2
Available Answers
False (Correct)

Question 138

Are the following statements true or false in relation to the exercise of director’s powers?

Requirements

A director of a company is required to exercise their powers subject to any directions given by ordinary resolution.

True
False
A director of a company can restrict the exercise of their power by agreeing in advance to support any resolution proposed by the majority shareholder.

True
False

Answer 138

Feedback: S1:
Correct answer(s):

B False

A director is not an agent of the shareholders and is not liable to act as instructed by them.

Correct answer(s):

D False

A director owes a duty to exercise independent judgement. Such an agreement would constitute a breach of this duty. He may, however, act in accordance with an agreement duly entered into by the company restricting the future exercise of discretion by its directors or in any way authorised by the company’s constitution.

LO 2m

S1
Available Answers
False (Correct)
S2
Available Answers
False (Correct)

Question 139

Which, if any, of the following requirements must be met if an action for unfairly prejudicial conduct is to be successful?

(1) The company must be a public limited company

(2) There must be unfairly prejudicial conduct which affects all shareholders

(3) The conduct alleged to be unfairly prejudicial must relate to actions which are continuing at the time the action is brought

None of the above
All of the above
(1) and (2) only
(2) and (3) only

Answer 139

Feedback:
Correct answer(s):

A None of the above

Relief for unfairly prejudicial conduct applies to public and private companies where the company’s affairs are being, or have been, conducted in a manner that is unfairly prejudicial to the interests of members generally or some part of its members.

LO 2i

Available Answers
None of the above (2 Marks)

Question 140

Are the following statements true or false?

Requirements

Directors can be found guilty of fraudulent trading even if their company has not been wound up.

True
False

Directors can only be found to have committed wrongful trading if their company has been wound up.
True
False

Answer 140

Feedback: Sub 1:
Correct answer(s):

A True

Criminal liability may arise (but civil liability only arises on a winding up).

Correct answer(s):

C True

Wrongful trading only applies when a company is wound up.

LO 2i

Sub 1
Available Answers
True (Correct)
Sub 2
Available Answers
True (Correct)

Question 141

Unico Ltd is a private company limited by shares with 100 shares of 50p each and 100 shares of £1 each.

Is Unico Ltd able to:

Requirements

subdivide each of its £1 shares into 10 10p shares?

Yes
No
consolidate pairs of 50p shares into £1 shares?

Yes
No

Answer 141

Feedback: S1:
Correct answer(s):

A Yes

A company does this by passing an ordinary resolution to that effect (and subject to any restrictions in its articles).

Correct answer(s):

C Yes

A company does this by passing an ordinary resolution to that effect (and subject to any restrictions in its articles).

LO 2f

S1
Available Answers
Yes (Correct)
S2
Available Answers
Yes (Correct)

Question 142

A characteristic of a floating charge is that:

Requirements

It is a charge over a class of assets present and future.

Yes
No
It is a charge over a class of assets, which, in the ordinary course of the business of the company, will change.

Yes
No

Answer 142

Feedback: Sub 1:
Correct answer(s):

A Yes

A floating charge is typically over a class of assets of a company present and future with which the company may continue to deal before crystallisation of the charge.

Correct answer(s):

C Yes

A floating charge typically covers assets that change in the ordinary course of business and only fixes to those assets at the time of crystallisation.

LO 2n

Sub 1
Available Answers
Yes (Correct)
Sub 2
Available Answers
Yes (Correct)

Question 143

Alan has been appointed administrator of Desktop Ltd. He wishes to obtain statements from a number of the company’s officers and employees.

Requirements

Within how many days must he make his requirements for statements known to them?

7 days
14 days
How many days do the officers and employees have to comply with his request?

11 days
21 days

Answer 143

Feedback: Sub 1:
Correct answer(s):

A 7 days

Correct answer(s):

C 11 days

LO 2o

Sub 1
Available Answers
7 days (Correct)
Sub 2
Available Answers
11 days (Correct)

Question 144

Which of the following parties may apply online for a debtor’s bankruptcy?

(1) The individual debtor themselves

(2) Any creditor of a debtor who is owed at least £750

(3) A supervisor of an approved individual voluntary arrangement (IVA) in respect of that debtor

(1) only
(2) and (3) only
(3) only
(1), (2) or (3)

Answer 144

Feedback:
Correct answer(s):

A (1) only

Only an individual debtor may apply online for their bankruptcy. Third parties must petition the court.

LO 2p

Available Answers
(1) only (2 Marks)

Question 145

Mark, Nathan and Oliver are in partnership together running a cattle market, under the name Cattle Galore & Co. Mark enters into a contract, using the firm’s headed writing paper, to purchase 10 bulls from Farmer Giles for the firm. When Nathan and Oliver hear about it, they refuse to honour the contract because they had all agreed at the previous partnership meeting, that they would not purchase any more livestock for the next six months due to the firm’s financial situation. Mark insists that the contract was too good an opportunity to miss.

Requirement

Which of the following best describes the legal position?

Mark alone is liable on the contract because he acted without the other partners’ authority.
Mark, Nathan and Oliver are personally liable, since partners are agents of each other.
Cattle Galore & Co is liable as it was a contract entered into for the purposes of the partnership business.
The firm and, therefore, all of its partners are liable on the contract to purchase 10 bulls from Farmer Giles.

Answer 145

Feedback:
D The firm and, therefore, all of its partners are liable on the contract to purchase 10 bulls from Farmer Giles.

There is nothing to suggest that Farmer Giles is aware that Mark was acting without authority or believed him not to be a partner. Partners’ acts in the usual course of business bind the firm and the partners, unless the third party knows that the partner does not have authority or does not know or believe him to be a partner.

LO 1e

Available Answers
The firm and, therefore, all of its partners are liable on the contract to purchase 10 bulls from Farmer Giles. (2 Marks)

Question 146

Arthur, Peter and William are members of Money Matters LLP.

Requirement

Which of the following statements is incorrect (assuming no other express provisions in the agreement are relevant)?

Arthur, Peter and William each have the right to take part in the management of the partnership business.
Arthur, Peter and William are each entitled to receive remuneration in respect of the part they each play in the business.
Arthur can give reasonable notice to the other partners that he intends to cease to be a member.
A change in the membership of an LLP must be notified to the Registrar of Companies within 14 days.

Answer 146

Feedback:
Correct answer(s):

B Arthur, Peter and William are each entitled to receive remuneration in respect of the part they each play in the business.

As with an ordinary partnership, there is no implied entitlement to remuneration.

LO 2j

Available Answers
Arthur, Peter and William are each entitled to receive remuneration in respect of the part they each play in the business. (2 Marks)

Question 147

Roger is guilty of dealing and encouraging another to deal in price affected securities, contrary to the Criminal Justice Act 1993 and has four possible arguments in defence of his guilt. All except one of these defences are valid.

Requirement

Which is the exception?

He did not expect there to be a profit.
He had reasonable grounds to believe that the information had been disclosed widely.
He would have done what he did even without the information.
He passed the information on in the course of his employment.

Answer 147

Feedback:
Correct answer(s):

D He passed the information on in the course of his employment.

Passing on information in the course of employment is only relevant (and means that no offence has been committed) to the offence of disclosing inside information. The other options are all valid defences.

LO 3f

Available Answers
He passed the information on in the course of his employment. (2 Marks)

Question 148

If a director is found guilty of fraudulent trading, what is the maximum period that they may be disqualified from acting as a director or being involved in the management of companies?

5 years
10 years
15 years
Unlimited period, they may be permanently disqualified

Answer 148

Feedback:
Correct answer(s):

C 15 years

The maximum period of disqualification is 15 years.

LO 3d

Available Answers
15 years (2 Marks)

Question 149

Are the following statements true or false?

Requirements

The penalty for failing to prevent bribery is a fine.

True
False
Bribing a public official whilst outside of the UK is an offence under the Bribery Act 2010.

True
False

Answer 149

Feedback: S1:
Correct answer(s):

A True

This is an offence which is committed by commercial organisations such as companies and partnerships. The penalty is a fine.

Correct answer(s):

C True

It is an offence to bribe foreign public officials as well as those in the UK.

LO 3d

S1
Available Answers
True (Correct)
S2
Available Answers
True (Correct)

Question 150

The Data Protection Act 2018 enacts the data protection principles of the EU’s General Data Protection Regulation (GDPR). All of the following except one are such principles.

Requirement

Which is the exception?

Personal data shall be adequate, relevant and not excessive.
Personal data shall be accurate and kept up to date where necessary.
Personal data shall not be kept for longer than is agreed between the data controller and the data subject.
Personal data shall not be kept unless the purpose of holding the data is recorded and made known to the data subject.

Answer 150

Feedback:
Correct answer(s):

C Personal data shall not be kept for longer than is agreed between the data controller and the data subject.

There is no applicable concept of agreement between the parties. The data shall not be held for longer than is necessary for the purpose for which they are processed.

LO 4a

Available Answers
Personal data shall not be kept for longer than is agreed between the data controller and the data subject. (2 Marks)

Question 151

Which of the following can be included as a separate document, rather than as part of the written statement of prescribed particulars as given to an employee?

The names of the employer and the employee
Whether any service with a previous employer forms part of the employee’s period of continuous employment
A brief job description
The notice period for termination of the employment

Answer 151

Feedback:
Correct answer(s):

D The notice period for termination of the employment

Notice periods do not have to be included in prescribed particulars.

LO 4c

Available Answers
The notice period for termination of the employment (2 Marks)

Question 152

All except one of the following are grounds for an employment tribunal reducing the amount of a basic award for unfair dismissal.

Requirement

Which is the exception?

Where the employee has unreasonably refused an offer of reinstatement
Where the employee has received a redundancy payment
Where it is just and equitable having regard to the employee’s conduct
Where the loss suffered by the employee was less than the value of the award

Answer 152

All except one of the following are grounds for an employment tribunal reducing the amount of a basic award for unfair dismissal.

Requirement

Which is the exception?

Where the employee has unreasonably refused an offer of reinstatement
Where the employee has received a redundancy payment
Where it is just and equitable having regard to the employee’s conduct
Where the loss suffered by the employee was less than the value of the award

Question 153

Sources of contractual terms which can come together to form an employment contract include the following:

Requirements

Terms implied by the common law.

Yes
No
Terms contained in a written statement of employment particulars where the employee has signed the statement itself.

Yes
No

Answer 153

Feedback: Sub 1:
Correct answer(s):

A Yes

Terms may be implied into a contract of employment by common law and by statute where no express provision is made.

Correct answer(s):

D No

The prescribed particulars may provide evidence of the terms of a contract of employment, but the written statement does not actually form part of that contract.

LO 4d

Sub 1
Available Answers
Yes (Correct)
Sub 2
Available Answers
No (Correct)

Question 154

When determining the fairness of a dismissal on the grounds of capability or qualifications:

Requirements

It is sufficient that the employer honestly believes on reasonable grounds that an employee is incapable of carrying out the job that they are employed to do.

True
False
It is not necessary for there to be a contractual obligation (express or implied) to hold the relevant qualification in order to be dismissed fairly on the grounds of lack of ‘qualifications’.

True
False

Answer 154

Feedback: Sub 1:
Correct answer(s):

A True

Correct answer(s):

D False

In order to be fairly dismissed on the grounds of lack of qualification, there must be a contractual obligation to hold that qualification.

LO 4e

Sub 1
Available Answers
True (Correct)
Sub 2
Available Answers
False (Correct)