Wrong MCQ's Flashcards
A man approaches a welder and asks the welder if he would be willing to build the man a still to produce alcoholic spirits. Although it is illegal to brew alcoholic spirits without a license, the welder agrees to do the work for £400 since it is not illegal to build a still. The man tells the welder that he will pay the welder out of the proceeds from selling the spirits (better known as ‘moonshine’).
The welder builds the still and it works perfectly. The man produces three batches of moonshine and sells them for a total of £500 but refuses to pay the welder. The welder then brings a claim against the man for breach of contract.
Is the welder likely to succeed in his claim?
No, because the contract was void for illegality of performance.A contract entered for an illegal purpose is void (and not merely voidable, which makes (B) incorrect).
Question
A woman seeking life insurance sends a proposal form to an insurance company. The insurance company sends her a quote. The woman is seriously injured in a car accident. She then accepts the insurance company’s quote
No, because the offer contained in the quote has lapsed by operation of law.
The offer contained in the insurance company’s quote will be subject to an implied condition that the woman’s state of health is unchanged. This condition has now failed, and so the offer has lapsed by operation of law.
Question
A director of a company in financial difficulties asks a junior employee to mortgage her flat to the company’s bank as security for the company’s debts to the bank. The company goes into liquidation.
What is the status of the mortgage granted by the employee to the bank?
It is voidable unless the bank took steps to ensure that the employee made the decision of her own free will, because of presumed undue influence by the director (as employer).
A solicitor is working on a divorce litigation case with a client. Whilst discussing assets, the client informs the solicitor that he has bought several properties using cash, so they will be hard for his wife to find. The solicitor suspects the purchases are part of a money laundering scheme.
What is the solicitor’s best course of action regarding the client’s suspicious financial activities?
Maintain client confidentiality and not report the matter.
A painter and an art dealer have asked a solicitor to act for them in the sale of a painting. The parties have differing views on the painting’s value, and the solicitor has explained that she cannot act for both of them in this matter because there is a conflict of interest. The parties reply that they believe the solicitor will treat them both fairly in the negotiations and that they both consent to the solicitor acting.
Which of the following statements best describes whether the solicitor should act for both parties?
Regardless of the fact that the parties gave consent to the solicitor acting, there is still a conflict of interest and the solicitor should not act for both parties.
A solicitor concluded a house purchase for a client which was financed by a mortgage and an inheritance from the client’s grandmother. The solicitor billed the client for the conveyancing work and the client paid the bill within a few days. A week later, the client is arrested. The police inform the solicitor that the client’s bill was paid from an account which they believe contained the proceeds of an insurance fraud perpetrated by the client.
Which of the following best describes whether the solicitor has committed an offence under the Proceeds of Crime Act 2002 (‘POCA’)?
The solicitor may have committed the offence of acquisition, use, or possession but could rely on the adequate consideration defence.
A firm of solicitors is not authorised by the Financial Conduct Authority to carry on a ‘regulated activity’ as defined in the Financial Services and Markets Act 2000 (‘FSMA’) and related secondary legislation.
Which of the following activities would the firm be able to conduct in its business if no FSMA exclusion or exemption applies?
Advising a client on purchasing Premium Bonds.
nder the general prohibition of FSMA, a firm of solicitors may not carry on regulated activity in the UK unless they are authorised or exempt from authorisation. A regulated activity is defined as an activity specified in the Regulated Activities Order relating to an investment specified in the Order, which is carried out in the course of business, and to which no exclusions apply. The specified activities and investments might be remembered with the mnemonic device ‘ADAMS F.M.DIPS’. Activities = Advising, Dealing as an agent, Arranging, Managing, and Safeguarding. The specified investments most relevant to a solicitor = Funeral plans, Mortgage contracts, Debentures, Insurance contracts, Pension schemes, and Shares in a company. The firm would be able to advise a client on the purchase of Premium Bonds because while advising is a specified activity, Premium Bonds are not specified investments.
Two businessmen enter into a contract for the sale of a quantity of goods. After the contract has been concluded, it turns out that one of the businessmen is a rogue, and the goods he was selling were stolen.
What rights (if any) does the buyer have under contract law?
The buyer can sue the seller for breach of contract as the Sale of Goods Act 1979 will imply a term into the contract that the seller has title to the goods.
A UK importer agrees to buy a consignment of sugar from a dealer in Brazil. The importer’s bank promises the Brazilian dealer that it will pay for the consignment if the importer fails to pay.
What requirements must be met so that the promise by the bank will become a binding contract?
The bank’s promise must be made in writing, because this is a guarantee.
A freelance solicitor with four years’ post-qualification experience is drafting a set of standard terms and conditions of trading for a client. The freelance solicitor only carries on this type of work for clients.
Which statement best describes the professional indemnity insurance coverage which the Solicitors Regulation Authority requires the freelance solicitor to have?
The freelance solicitor is not required by the SRA to have professional indemnity insurance because the solicitor is not carrying out a reserved legal activity.
A woman owes her friend £250 under a contract they have entered into, but is unable to pay and asks her friend if he will take her designer watch, worth £200, as payment for the debt instead. The friend agrees. The friend later changes his mind and sues the woman for the £50 he claims is still owing to him.
Will the friend be successful in his claim?
No, because payment by another method is sufficient consideration for the promise to forego the balance of an outstanding debt.
There is a general rule that an agreement to accept part payment in full and final settlement of a debt is not supported by consideration and so does not preclude the debtor from subsequently claiming the balance. However, the common law has established a number of exceptions to this general rule, usually where some additional benefit is conferred on the debtor in consideration for their promise to forego the balance of their debt. An example of this is payment by another method, so (D) is correct. (A) is incorrect because it is irrelevant that the value of the outstanding debt and the value of the watch are not the same if the friend has agreed to the deal in full and final settlement of the debt.
The manager of a clothes factory promises his workforce an additional £100 in their pay packet at the end of the month to complete a large order on time for an important wholesaler client. If the order was not completed on time, the factory would incur a penalty under their contract with the wholesaler so that the price of that contract would be reduced. After the workers have completed the contract, the manager refuses to add the additional £100 to their pay at the end of the month.
Could the workers sue the factory for the promised money?
Yes. The order being completed on time has conferred a practical benefit on the factory as they will not incur a penalty under the contract with the wholesaler.
A solicitor plans to begin working for a charity. She will be advising tenants on lease-related issues and will occasionally conduct litigation.
Do the SRA Standards and Regulations require the solicitor to ensure that the charity takes out professional indemnity insurance in respect of her services?
Yes, in respect of all services she provides.
A yacht broker and a buyer enter into a contract for the sale of a 100-ft. yacht for £750,000. After the contract has been formed, the yacht broker discovers that the manufacturer of the yacht is unable to supply him with the model the buyer requires. Following the yacht broker’s breach of contract, the buyer looks elsewhere and manages to obtain the yacht he requires for £725,000.
What legal remedy would the buyer be entitled to as a result of the yacht broker’s breach of contract?
Damages are awarded to the innocent party to compensate them for their loss, by putting them back into the position they would have been in had the contract been properly performed. In this scenario, the buyer has obtained the model of yacht that was the subject matter of the contract with the yacht broker, for £25,000 less than they were originally going to pay. Therefore, there is no financial loss suffered, so (C) is the correct answer, as the most the buyer could expect in this situation is nominal damages, that is, a small sum of money to reflect the fact that the buyer has suffered a legal wrong even though there is no actual financial loss.
Question
A solicitor works for a conveyancing firm that is a member of the Solicitors Regulation Authority (‘SRA’). The solicitor is acting for a client in the sale and purchase of a family home. The solicitor discovers a problem with the title of one of the properties and advises the client to take out defective title insurance to cover any risk. Neither the solicitor nor her firm is authorised by the Financial Conduct Authority to carry on a “regulated activity” as defined in the Financial Services and Markets Act 2000 (‘FSMA’) and related secondary legislation.
Which of the following statements is most accurate regarding the advice to take out defective title insurance under the FSMA?
The solicitor’s firm needs to appoint an insurance distribution officer before carrying on the regulated activity.
