Test of Competence
Business Law
Sample Paper
2014/2015
Time: 1.5 hours
This paper consists of Objective Test Questions
Students must attempt all questions in this paper.
©ICAS 2014
ICAS 2014
SAMPLE PAPER
Objective Test Questions
Each question carries 1 mark. There are 40 questions.
Question 1
Which TWO of the following statements relating to a limited partnership (LP) are
CORRECT?
A)
B)
C)
D)
the general partner has unlimited liability for the debts of the business
the limited partner is an agent of the business
the LP is created when it registers with the Registrar of Limited Partnerships
the LP is a separate legal person
Question 2
In relation to company law and the granting of security for a debt, which TWO of the
following statements are CORRECT?
A)
B)
C)
D)
all business organisations can create fixed and floating charges
assets subject to a floating charge cannot be identified until the charge crystallises
a fixed charge applies from the date of registration
all floating charges must be registered within 21 days of creation
Question 3
For each of the following statements regarding the requirements for a contract to be in
writing, is the statement true or false?
1.
2.
A contract with a minor must be in writing
A contract of employment must be in writing
Question 4
Identify in which of the following circumstances an employer must allow an employee
reasonable time off work with pay:
1.
2.
3.
4.
to attend a trade union branch meeting where the employee is a member of a trade
union
to attend an interview for another job where the employee is subject to a notice of
redundancy
to attend marriage counselling sessions where the employee is having marital
difficulties
to attend official duties where the employee is a Justice of the Peace
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ICAS 2014
A)
B)
C)
D)
2 only
1 and 3 only
2 and 4 only
1, 2 and 4 only
Question 5
In relation to legislation, indicate which of the following statements is/are FALSE:
1.
2.
3.
4.
the final stage of the legislative process is Royal Assent
a local authority by-law has the same force of law as an Act of Parliament
it is at the committee stage of a public bill’s passage through Parliament that the
detailed scrutiny of the bill takes place
the most common form of delegated legislation is the statutory instrument
A)
B)
C)
D)
1 only
4 only
2 and 3 only
none of the above
Question 6
A ship contracted to carry perishable goods is unavoidably delayed through no fault of its
own. The captain tries very hard to contact the owner of the goods but he cannot be
reached at any of the contact numbers that he gave. Realising that the goods would have
perished by the time the ship reached the home port, the captain makes the decision to
accept an offer he has received for the goods at a port en route home.
This is an example of an agency agreement constituted by:
A)
B)
C)
D)
ratification
necessity
implication
law
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Question 7
In relation to the novation of a contract, identify which of the following statements apply:
1.
2.
3.
4.
there must be mutual agreement to novate a contract
a new obligation is substituted for a prior obligation
the novated contract must be in writing
all obligations under the first contract are extinguished
A)
B)
C)
D)
2 only
1 and 4 only
2 and 3 only
1, 2 and 4 only
Question 8
Identify which of the following statements apply to trading certificates required by public
companies:
1.
2.
3.
an application for a trading certificate must state the amount of the company’s
preliminary expenses
a public company must have obtained at least one-quarter of the nominal value of the
shares it has issued and the whole of any premium, in order to obtain a trading
certificate
a trading certificate has effect from the date on which the company’s certificate of
incorporation is issued
A)
B)
C)
D)
1 only
1 and 2 only
2 and 3 only
none of the above
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Question 9
Identify which ONE of the following statements regarding fraudulent misrepresentation is
INCORRECT:
A)
B)
C)
D)
a fraudulent misrepresentation is one made recklessly not caring if it is true
a fraudulent misrepresentation is one made believing it to be false
a fraudulent misrepresentation requires an intention to deceive
a fraudulent misrepresentation is one made knowing it to be false
Question 10
Identify which of the following cases did NOT involve a successful passing-off action:
1.
2.
3.
4.
Macaura v Northern Assurance Company
Ewing v Buttercup Margarine Co Ltd
HFC Bank plc v Midland Bank plc
Aerators Ltd v Tollit
A)
B)
C)
D)
1 only
4 only
1 and 2 only
1, 3 and 4 only
Question 11
Identify which of the following statements apply/applies to the Unfair Terms in Consumer
Contract Regulations 1999 (‘the Regulations’):
1.
2.
3.
4.
the aim of the Regulations is to encourage plain language in all business contracts
the Regulations apply to all unfair terms in contracts
the Regulations apply to employment contracts
the Regulations seek to ensure that traders act honestly towards their customers
A)
B)
C)
D)
2 only
1 and 2 only
all of the above
none of the above
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Question 12
In relation to the minutes of general meetings, identify which ONE of the following is
CORRECT:
A)
B)
C)
D)
members and creditors may inspect the minutes
members and customers may inspect the minutes
members may inspect the minutes
members and creditors paying a reasonable fee may inspect the minutes
Question 13
With reference to the Company Directors Disqualification Act 1986 identify which ONE of
the following periods of time is the maximum period for which a director may be
disqualified:
A)
B)
C)
D)
2 years
5 years
10 years
15 years
Question 14
The authority given to the directors of a public company to allot shares must not exceed
which ONE of the following:
A)
B)
C)
D)
one year
two years
five years
ten years
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Question 15
In relation to the relationship between the partners identify which of the following
statements is/are CORRECT:
1.
2.
3.
4.
the relationship between the partners is based on contract
a contract of co-partnery may be formed verbally
consent of all the partners is required to vary the terms of the partnership
the default provisions of the Partnership Act 1890 provide that all partners are
entitled to share equally in capital and profits
A)
B)
C)
D)
3 only
1 and 3 only
2, 3 and 4 only
all of the above
Question 16
Identify which ONE of the following does NOT amount to an implied revocation of an offer:
A)
B)
C)
D)
a counter offer is made by the offeree
the offeror tells the offeree the offer is withdrawn
the offer is not accepted within a reasonable time
either party dies before acceptance
Question 17
Which TWO of the following statements regarding a company’s auditor are CORRECT?
A)
B)
C)
D)
the company’s first auditors are normally appointed by the directors
a auditor has the right to attend but not speak at company general meetings
a cap may be placed on auditor’s liability by passing a special resolution
the auditor has a right to receive notice of company general meetings
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Question 18
In relation to an unfair prejudice petition under section 994 Companies Act 2006 identify
which of the following requirements must be met:
1.
2.
3.
the company must be a public limited company
the unfair prejudice which is being complained about must be happening at the time
the petition is presented
10% or more of the members must be affected by the company’s unfairly prejudicial
actions
A)
B)
C)
D)
1 and 2 only
2 and 3 only
all of the above
none of the above
Question 19
Identify to which ONE of the following types of contract the Unfair Contract Terms Act
1977 does NOT apply:
A)
B)
C)
D)
a contract relating to occupier liability
an insurance contract
a contract of employment
a contract for services
Question 20
In relation to the English Civil Court structure, identify which ONE of the following is NOT a
division of the High Court:
A)
B)
C)
D)
the Queen’s Bench Division
the Chancery Division
the Family Division
the Company Division
Question 21
For each of the following statements regarding a company seeking a premium listing on
the London Stock Exchange, is the statement true or false?
1.
2.
The company must have at least a three year trading record
Once listed, at least 25% of its shares must be in public hands
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Question 22
Under the law of contract, the general rule with regard to the communication of an
acceptance is that:
A)
B)
C)
D)
it will be effective as soon as it is sent to the offeror
it will only be effective if it is in writing
it will be effective as soon as it is received by the offeror
it will be effective as soon as the offeree is informed
Question 23
In relation to employment law, identify in which ONE of the following situations there has
NOT been a ‘dismissal’ in terms of the statutory rules:
A) an employment contract is frustrated by reason of the employee being put in prison
B) an employer unilaterally changes the nature of the employee’s job as a result of
which the employee resigns
C) a fixed term contact comes to an end and is not renewed
D) an employer asks an employee to leave the premises immediately and not to return
Question 24
Identify which ONE of the following correctly describes the number of days within which
the company names adjudicator must publish his decision:
A)
B)
C)
D)
21 days
28 days
60 days
90 days
Question 25
For each of the following statements regarding the law of negligence and the rules relating
to vicarious liability, is the statement true or false?
1.
2.
An employer will be vicariously liable where an employee is doing his job in an
unauthorised manner
An employer will be vicariously liable where an employee uses his employer’s tools
during working hours to do private work for a customer
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Question 26
Which TWO of the following statements regarding the reasons why a term may be implied
into a contract are CORRECT?
A)
B)
C)
D)
to promote fairness between the parties
to resolve an ambiguity in the contract
for the purposes of business efficacy
to include extrinsic evidence as to the meaning of the contract terms
Question 27
Identify which of the following remedies are available to a principal where his agent enters
a contract with a third party in breach of his fiduciary duty and makes a secret profit:
1.
2.
3.
4.
refuse to implement the contract with the third party
terminate the agency agreement and dismiss the agent
sue the agent to recover the secret profit
refuse to pay the agent in respect of the transaction which was in breach of his
fiduciary duty
A)
B)
C)
D)
1 and 2 only
1 and 3 only
2, 3 and 4 only
all of the above
Question 28
Identify which ONE of the following statements is CORRECT in relation to anticipatory
breach of a contract:
A) the innocent party may sue for breach of contract only after a reasonable time
B) the innocent party may sue from the moment the other party indicates that he does
not intend to fulfil his contractual obligations
C) the innocent party may sue only from the moment the other party actually breaches
a condition of the contract
D) the innocent party may sue from the moment he has fulfilled his obligations but the
other party indicates that he no longer intends to be bound by the contract
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Question 29
Which TWO of the following statements regarding contract law and the rules on
consideration are CORRECT?
A) anything done before a promise in return is given is past consideration
B) consideration need not be sufficient but it must be adequate
C) the return of a lost pet in return for a promise to pay a reward is an example of
executed consideration
D) consideration must be provided by either the offeror or the offeree
Question 30
Mr Rush, a sole trader, runs a business supplying ceramic tiles to the building trade. On
the advice of his accountant he decides to incorporate. He sells the tile business and all
its assets to Trendy Tiles Limited, a newly formed company in which he is the sole
shareholder but, for convenience, keeps the insurance policy for the tiles in his own name.
Unfortunately, a large number of the tiles were broken when a section of the company’s
warehouse roof was blown off in recent storms.
Identify which ONE of the following statements is CORRECT:
A) Mr Rush can claim for the cost of replacing the tiles as he holds the insurance
policy covering the tiles
B) Trendy Tiles Limited can claim for the cost of replacing the tiles as the tiles were in
its warehouse
C) Mr Rush, as the owner of Trendy Tiles Limited, can claim on the insurance policy
D) Mr Rush cannot claim on the insurance policy as he no longer has an insurable
interest in the tiles since they belong to the company and not to him
Question 31
Which TWO of the following statements regarding debentures are CORRECT?
A) a debenture holder does not have voting rights at company meetings
B) a debenture may not be issued at a premium to nominal value but may be issued at
a discount
C) only a public company may issue a debenture
D) a debenture holder may be paid interest out of company capital
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Question 32
For each of the following statements regarding restrictive covenants, is the statement true
or false?
1.
2.
A restrictive covenant may be found in a partnership agreement
A restrictive covenant is void if it disadvantages an employee
Question 33
In relation to the operation of a company and with reference to the
Companies Act 2006, identify which of the following statements is/are CORRECT in
relation to written resolutions:
1.
2.
3.
unless the articles of association specify otherwise a company must obtain members’
consent to a written resolution within 28 days
unanimous consent is required by members to a written resolution relating to the
removal of a director from office
a written resolution cannot be used to remove an auditor from office before the expiry
of his term in office
A)
B)
C)
D)
1 only
1 and 3 only
2 and 3 only
all of the above
Question 34
The removal of a director from office before the expiry of his period in office requires which
ONE of the following resolutions to be passed at a general meeting:
A)
B)
C)
D)
an ordinary resolution with a minimum of 14 days’ notice to the shareholders
a special resolution with a minimum of 21 days’ notice to the shareholders
an ordinary resolution with a minimum of 28 days’ notice to the shareholders
ordinary resolution with a minimum of 21 days’ notice to the shareholders
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Question 35
With reference to the law of negligence identify which ONE of the following provides a
complete defence to a defender/defendant:
A)
B)
C)
D)
jus quaesitum tertio
volenti non fit injuria
delectus personae
vicarious liability
Question 36
In relation to the formation of a contract identify which ONE of the following statements is
CORRECT:
A) under no circumstances can a minor enter into a contract with an adult in either
England and Wales or in Scotland
B) in certain social or domestic agreements the parties may be able to argue that there
was an intention to create legally binding obligations
C) in order to be binding the terms of a contract must be recorded in writing
D) an advertisement will always be an invitation to treat
Question 37
Identify which ONE of the following is NOT a matter to which a director must have regard
when discharging his duty to promote the success of the company:
A) the interest of the creditors of the company
B) the desirability of the company maintaining a reputation for high standards of
business and conduct
C) the impact of the company’s operations on the community
D) the need to act fairly as between members of the company
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Question 38
In relation to minority protection and the statutory derivative claim introduced by the
Companies Act 2006, identify which of the following statements is/are CORRECT:
1.
2.
3.
the statutory derivative claim does not require that the shareholder shows that the
directors who carried out the wrongdoing control the majority of the company’s
shares
the statutory derivative claim can be brought even if a director has not personally
benefited from his breach of duty
in deciding whether or not to allow a statutory derivative claim to proceed the court
may consider whether the claimant is acting in good faith
A)
B)
C)
D)
2 only
1 and 2 only
1 and 3 only
all of the above
Question 39
Identify which ONE of the following types of company may give unrestricted financial
assistance to a third party in order to purchase its own shares:
A)
B)
C)
D)
both public and private companies
a private company only
a public company only
a public company provided assistance is given only to a private subsidiary
Question 40
For each of the following statements regarding statutory pre-emption rights, is the
statement true or false?
1.
2.
New shares must be offered to existing members pro rata to their existing
shareholding in the case of a public company but not in the case of a private
company
Where shares are issued in accordance with pre-emption rights, the may be offered
to outsiders if they are not taken up by existing shareholders within 21 days
End of Paper
TC – Business Law – Sample Paper
15
Test of Competence
Business Law
Sample paper – Solutions
2014/2015
©ICAS 2014
ICAS 2014
SOLUTIONS TO SAMPLE PAPER
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40.
Statements A and C are correct.
Statements B and D are correct.
Both statements are false.
The correct answer is A.
The correct answer is D.
The correct answer is B.
The correct answer is D.
The correct answer is B.
The correct answer is C.
The correct answer is D.
The correct answer is D.
The correct answer is C.
The correct answer is D.
The correct answer is C.
The correct answer is D.
The correct answer is B.
Statements A and D are correct.
The correct answer is D.
The correct answer is B.
The correct answer is D.
Both statements are true.
The correct answer is C.
The correct answer is A.
The correct answer is D.
Statement 1 is true; statement 2 is false.
Statements A and C are correct.
The correct answer is C.
The correct answer is B.
Statements A and C are correct.
The correct answer is D.
Statements A and D are correct.
Statement 1 is true; statement 2 is false.
The correct answer is B.
The correct answer is A.
The correct answer is B.
The correct answer is B.
The correct answer is A.
The correct answer is D.
The correct answer is B.
Statement 1 is false; statement 2 is true.
2
Module 7
Module 16
Module 2
Module 5
Module 1
Module 6
Module 4
Module 10
Module 2
Module 11
Module 3
Module 12
Module 13
Module 15
Module 7
Module 2
Module 13
Module 14
Module 3
Module 1
Module 16
Module 2
Module 5
Module 11
Module 8
Module 3
Module 6
Module 4
Module 2
Module 9
Module 16
Module 3
Module 12
Module 13
Module 8
Module 2
Module 13
Module 14
Module 15
Module 15
TC – Business Law –Sample Paper Solutions