Unit 3 - UK Contract & Trust Legislation (2 of 80)

Question 1

Capacity to contract?

Answer 1

legal term which means that someone has the power in law to enter into a contract

Question 2

Who can lack capacity to contract?

Answer 2

1) Under 18s

2) Bankrupt

3) Mentally incapable

4) Drunk

5) Companies - if not provided in their powers

Question 3

Natural vs Legal Person?

Answer 3

‘natural person’ = describe individuals

‘legal person’ = only exist because of the way the law works

Question 4

What is a partnership?

Answer 4

the relationship that exists between two or more parties carrying on a business together with a view to making a profit

Question 5

What is an LLP?

Answer 5

a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities - each partner is not responsible or liable for another partner’s misconduct or negligence.

Question 6

Who must sign a POA?

Answer 6

the donor; or if not signed by them, signed at their direction and in their presence, and in the presence of two witnesses.

Question 7

Specific (limited) POA?

Answer 7

only lets the donee (recipient) act on specific occasions or in respect of specific property

Question 8

General POA?

Answer 8

gives the donee a general power to act on behalf of the donor

Question 9

Lasting (durable) POA?

Answer 9

permits decisions to be made about your financial affairs, health and care – it comes into effect if the donor loses mental capacity or if they no longer wish to make decisions themselves

Question 10

Why should unmarried/same-sex partners write a will?

Answer 10

those who have not registered a civil partnership under the Civil Partnership Act 2004, will not automatically inherit from each other unless there is a will

Question 11

Executors vs Administrators of wills?

Answer 11

executors – if the deceased died testate, the executors will obtain a grant of probate which allows them to manage and distribute the deceased’s assets according to the will

administrators – if the deceased died intestate, the administrators will obtain letters of administration

Question 12

Real vs personal property?

Answer 12

Real property = land & buildings

Personal property = any other property (movable propety and chattels = personal possessions)

Question 13

Joint tenancy vs tenancy in common?

Answer 13

joint tenancy = all the joint owners have an identical interest in the property. On the death of one owner, their interest passes to the remaining surviving owner(s)

tenancy in common = each joint tenant owns a separate share in the property. On the death of one of the joint owners, their share passes to their beneficiaries

Question 14

What is an individual voluntary arrangement?

Answer 14

a scheme available to individuals, allowing for them to make arrangements with their creditors without becoming bankrupt

Question 15

What is liquidation and the two forms?

Answer 15

the process of closing a business and distributing its assets to claimants, can be either

creditor’s voluntary liquidation = the shareholders decide to put the company in liquidation themselves

compulsory liquidation = whenn the courts order that the company should be wound up

Question 16

What is an informal arrangement?

Answer 16

when a company writes to all its creditors to see if some mutually agreeable timetable for repayments can be found

Question 17

What is administration?

Answer 17

when the courts grant an order designed to give the company some breathing space to try and put its affairs back on a firmer financial footing

Question 18

What is receivership?

Answer 18

the process in which a ‘receiver’ is appointed by the creditor, typically a bank, to administer and ‘receive’ (ie, liquidate) the company’s assets so the secured creditors can recoup their money.

Question 19

Difference between administration and receivership?

Answer 19

The result of receivership is the shutdown of the company/business, whereas administration provides breathing space for an insolvency practitioner to assess the company’s affairs

Question 20

What is a settlor?

Answer 20

the person who sets up the trust by transferring money or other property to trustees

Question 21

How many trustees if the trust contains land?

Answer 21

in order to give a valid receipt for the proceeds of sale, there must be at least two trustees (unless one is a trust corporation) and no more than four

Question 22

What power did the Trustee Act 2000 give to trustees?

Answer 22

statutory power to delegate day-to-day duties to an agent, including the powers of investment

Question 23

Life interest vs Remaindermen?

Answer 23

Life interest where the beneficiary (life tenant) entitled to the income

Remaindermen where the beneficiary is entitled to the capital

Question 24

What is the role of a protector of a trust?

Answer 24

their most usual role is to veto the proposals of trustees

Question 25

What is a Power of Appointment (Flexible) Trust?

Answer 25

where the trustees are given a power of appointment to appoint or vary beneficiaries or vary the terms of the trust (commonly used for life assurance policies written in trust)