BUSINESS LAWS
FORMATION 1 EXAMINATION - APRIL 2012
NOTES:
You are required to answer Five Questions. (If you provide answers to more than five questions, you must
draw a clearly distinguishable line through the answer(s) not to be marked. Otherwise, only the first five
answers to hand will be marked).
TIME ALLOWED:
3 hours, plus 10 minutes to read the paper.
INSTRUCTIONS:
During the reading time you may write notes on the examination paper but you may not commence
writing in your answer book.
Marks for each question are shown. The pass mark required is 50% in total over the whole paper.
Start your answer to each question on a new page.
You are reminded to pay particular attention to your communication skills and care must be taken
regarding the format and literacy of the solutions. The marking system will take into account the content
of your answers and the extent to which answers are supported with relevant legislation, case law or
examples where appropriate.
List on the cover of each answer booklet, in the space provided, the number of each question(s)
attempted.
The Institute of Certified Public Accountants in Ireland, 17 Harcourt Street, Dublin 2.
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
BUSINESS LAWS
FORMATION I EXAMINATION – APRIL 2012
Time Allowed: 3 hours, plus 10 minutes to read the paper.
Number of Questions to be answered: FIVE
(Only the first five questions answered will be marked).
All questions carry equal marks.
1.
Describe each of these aspects of judicial precedent in Irish Courts.
(a)
(b)
(c)
Stare Decisis.
Ratio Decidendi.
Obiter Dictum.
[8 marks]
[6 marks]
[6 marks]
[Total: 20 marks]
2.
Discuss the distinction between legal and equitable interests in the law of real property with particular
emphasis on the impact of unregistered land.
[Total: 20 marks]
3.
John’s interior design business collapsed at the beginning of the recent recession and he was becoming
increasingly frustrated with being out of work. He is a keen fan of popular cookery programmes shown on
television which provided the inspiration for his latest business venture. He had identified a gap in the market
where people now wish to entertain friends at home rather than dining out and they therefore wish to develop
their culinary skills. His new business venture is giving cookery classes and demonstrations, although he
has never had professional training or experience in this field.
Mary hired John to provide, on the evening of her 30th birthday, a cookery class for herself and a number of
her friends. She asked John if he would demonstrate to them how to make curry and he said that he should
be able to do so but that he would not commit himself to an exact dish. On the morning of Mary’s party John
went online for ideas for that evening’s class with Mary and her friends. He decided that he would
demonstrate to them how to make cupcakes. John then gathered together his cooking ingredients and
equipment and travelled to Mary’s house.
Upon arrival at Mary’s he unpacked and laid out the ingredients and equipment. Mary saw that there were
no ingredients for a curry and raised this as a concern with John. He said that he only agreed to give the
class but had not committed to any particular cuisine. Mary then also noticed that the ingredients appeared
to be out of date. John began the demonstration and soon realised that he brought the incorrect baking tin
for the cupcakes. With this in mind, instead of baking cupcakes, he decided to bake one larger cake. During
and after the class John refused to talk or explain what he was doing. When the cake was baked, Mary
tasted it and realised that it was inedible, laying the blame on the out of date ingredients.
Advise Mary with reference to the Sale of Goods and Supply of Services Act 1980 including any possible
remedies available to her.
[Total: 20 marks]
4.
Outline the doctrine of misrepresentation in Irish contract law.
[Total: 20 marks]
5.
Discuss the tort of negligence under Irish law.
[Total: 20 marks]
Page 1
6.
Explain the nature of:
(a)
(b)
(c)
(d)
7.
bills of exchange,
cheques,
promissory notes, and
banks drafts
[5
[6
[4
[5
marks]
marks]
marks]
marks]
as negotiable instruments in Irish law.
[Total: 20 marks]
Give a brief account of the following business organisations under Irish law:
(a)
(b)
(c)
Companies.
Sole Traders.
Partnerships.
[10 marks]
[4 marks]
[6 marks]
[Total: 20 marks]
END OF PAPER
Page 2
SUGGESTED SOLUTIONS
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
BUSINESS LAWS
FORMATION I EXAMINATION – APRIL 2012
SOLUTION 1
General Comments
This question is designed to test the students’ knowledge and understand of the doctrine of precedent in Irish law.
Their knowledge should extend to an understanding of the hierarchy of the courts, how this impacts upon stare
decisis, ratio decidendi and obiter dictum. The question is asked in a straightforward manner, which should not lead
to confusion. Extra marks will be given to students who include information on any relevant cases or statutes.
Solution
Stare decisis is the expectation that prior cases will be followed in subsequent cases and is closely connected to
the hierarchical structure of Irish Courts and the system of precedent in all common law systems. There are two
important aspects of this; the first is that a lower court is bound by decisions of higher courts but also the degree to
which courts on the same level are bound by each other where the facts are very similar, which is vertical and
horizontal stare decisis. Therefore the High Court must follow the Supreme Court when the facts are highly similar,
this was re-affirmed in The State (Harkin) v O’Malley. This may lead to a situation where a lower court, for example
the Circuit Court, must follow the reasoning of a higher court, for example the High Court, which it believes is
incorrect and may anticipate a future overruling by the Supreme Court. The Supreme Court stated in O’B v Patwell
that the High Court was bound to follow the Court of Criminal Appeal even though the Supreme Court in that same
case later overruled the point of law. In the State (Quinn) v Ryan the Supreme Court applied a relaxed interpretation
of stare decisis with regard to constitutional interpretation and, at times, wider points of law. This means that the
Supreme Court may at times depart from its own decisions as per McNamara v ESB though the Court has always
reiterated the need for judicial order and clarity. The High Court is somewhat more complicated as it may sit in
different divisions, though generally it does follow courts of co-ordinate jurisdiction. Therefore Irish Courts generally
apply state decisis, although the Supreme Court has shown some flexibility with regard to its own ability to depart.
(8 marks)
Not every element of previous decisions of a higher court must be followed by subsequent courts as parts of the
judgment may not deal with the issue before the Court. Generally in decisions, judges will discuss various aspects
of the law which pertain to the issue at hand, including various interpretations and arguments before drawing a
conclusion. The reasoning that justifies the decision and establishes that the decision was based upon pre-existing
law becomes binding and authoritative and is called ratio decidendi. The application of law within a judgment that
is not binding is obiter dictum. It is unusual for a court to strictly set out what is the ratio decidendi and what it is the
obiter dicta and the identification of the ratio decidendi can be a matter of interpretation by later courts to identify
the principle established in the earlier decision. The ratio decidendi of a case is based upon the facts of the case,
however this does not require every detail of subsequent cases to be same, as to apply such a rule would mean
that no case can ever be followed. Courts therefore identify similarities and variations to establish if a prior case is
a relevant authority. When an earlier case is relied upon by a subsequent court it is also establishing the ratio
decidendi and refashioning it. Courts, such as the Supreme Court, may also issue several judgments which may pose
difficulties for establishing the ratio decidendi, though the majority decision or the rationale which most of the judges
followed is normally considered the ratio decidendi.
(6 marks)
Dictum and obiter dictum are not strictly the same thing, though they are often used interchangeably. When the
issue is related to a point in the case it is dictum while obiter dicta relate to matters which are more marginal. While
these points are not binding on a Court they remain important aspects of the judgments. Comments made obiter
dictum may have persuasive authority in subsequent cases. The weight which will be placed on these statements
depends on issues such as the court it was delivered in, the judge, whether it has been cited in subsequent cases
and how close it is to the case at hand. A statement which was obiter in one case may go on to become the ratio
decidendi in a subsequent case depending on how relevant the statement was to the facts of the following case.
Deciding what is obiter and what is ratio is often contentious, however the rationale of later courts regarding the
decision are a good guide to what aspects of the decision must be followed and which are not binding upon the
courts.
(6 marks)
[Total: 20 marks]
Page 4
SOLUTION 2
General Comments
The aim of this question is to examine the students’ knowledge of the different forms of ownership of real property
and their ability to distinguish between legal and equitable interests and also to consider the importance of
unregistered land. The question requires a largely descriptive answer but the students should be able to distinguish
between the forms of interest. Marks will be given for students who incorporate statutes or case law into their
answers.
Solution
The distinction between the two forms of ownership originates from the historical divide between the courts of
Chancery and the common law Courts, with the former concentrating on equitable interests and the latter focusing
on legal interests. While these courts were eventually merged, the two forms of law and interest remain a central
aspect of real property. If real property has not as yet been recorded in the land registry and proof of ownership is
only proved by the production of deeds, this land is considered unregistered. Uncertainties emerge when there are
competing legal and equitable interests particularly where there are disputes regarding unregistered lands where
the effect of legal or equitable interests may have an effect on the rights of third parties who purchase the land for
value. The Land and Conveyancing Law Reform Act 2009 has reformed some of the older aspects of real property
law in Ireland however the division of legal and equitable interests in Irish law remains as does the prevalence of
unregistered land.
(6 marks)
Section 11 (7) of the Land and Conveyancing Law Reform Act 2009 recognises that interests other than legal estates
or interests may be recognised by the Courts. Originally the courts of the common law only recognised legal rights
while equitable rights were enforced by the courts of equity. Once a legal estate or interest is created, these interests
can be enforced against any and all persons who later acquire rights in the land, irrespective of whether those
subsequent rights were granted in return for valuable consideration and also irrespective of whether the person
who acquired them had any knowledge as to the existence of the prior legal estate or interest. Under the common
law to settle priority between two competing legal interests, the one first created prevails. When land (or an interest
in land) is transferred to a third party, legal rights that previously attached to the land remain attached to it and are
as a result binding on the third party under Section 11(4) of the Land and Conveyancing Law Reform Act 2009. The
purchaser therefore has notice that ownership of the property is subject to any other legal rights established by
others. The fact that there is unregistered and registered land in Ireland further complicates the legal and equitable
ownership of land.
(8 marks)
The strongest claim of enforcement lies with legal estate or interests which have already been successfully
established. In contrast equitable ownership initially only confers rights in personam or in person, which compels
trustees to personally perform the trust. Equity has also developed the notion of the bona fide purchaser for value
as well as the doctrine of notice. This will grant some rights to subsequent purchasers of land who have given
consideration for the property but are unaware of the existence of the legal interest. However, in contrast to the
holder of the legal interest the equitable owner never holds an absolutely indefeasible title, therefore the equitable
owner’s claim to the title is never as strong as the legal owner. If the property is registered, equitable and legal
interests can, though they are not always, registered on the title and therefore it is more likely that a third party will
have notice, however if the land is unregistered such interests are less obvious to third parties.
(6 marks)
[Total: 20 marks]
Page 5
SOLUTION 3
General Comments
This problem question requires the students to apply the services elements of the Sale of Goods and Supply of
Services Act 1980 to the scenario. Students should be able to pick out the relevant facts and apply the relevant
pieces of legislation from the perspective of advising Mary. The fact scenario is straightforward and students should
aim to give a descriptive answer. References to any relevant case law will gain extra marks.
Solution
The Sale of Goods and Supply of Services Act 1980 applies to contracts for the supply of services where the supplier
is acting in the course of his or her business. Under section 2 of the 1980 Act, a business includes profession and
the activities of any State authority or local authority. As John has set up a business giving cookery courses it
appears that he fulfils these criteria and therefore comes under the Act. Under the Sale of Goods and Supply of
Services Act 1980 a supplier of services should have the requisite skills necessary to render the service under
section 39 (a). As John has not had any cookery training nor worked in a professional capacity as a chef it is possible
that he does not possess the skills necessary. The fact the cake was inedible also implies that John did not fulfil this
criteria. The fact that John was silent during the demonstration might also suggest that he did not have the skills
necessary to demonstrate how to cook.
(8 marks)
A supplier of a service should also supply the service with due skill, care and diligence. Several elements of John’s
approach are problematic. For example the fact he did not plan until the morning of the course and therefore did not
plan what he would do, nor did he bring the all the correct materials would suggest a lack of care and diligence. Under
section 39 (c) of the 1980 Act where materials are used, they will be sound and reasonably fit for the purpose for
which they are required. The fact he brought his own materials from home and that they were out of date suggests
that they were not reasonably fit for purpose. John might claim that as he said he would not commit to a particular
dish that he could rely on this as a disclaimer clause under section 46 of the 1980 Act however Mary could argue
that it was term of the contract that he would demonstrate how to make a curry and that the fact he did not bring
the correct materials even to do this, meant he was not covered by this section.
(6 marks)
Under section 39(d) of the Act where goods are supplied under the contract, they will be of merchantable quality
within the meaning of section 14 (3) of the Act of 1893, arguably since the cake is inedible they have not met the
standard of merchantable quality. Under section 14 of the 1980 Act goods are of merchantable quality if they are as
fit for the purpose or purposes for which goods of that kind are commonly bought and as durable as it is reasonable
to expect having regard to any description applied to them, the price (if relevant) and all the other relevant
circumstances. Mary could argue that as its cookery course the cake being edible would be reasonable to expect.
There are a number of remedies available to Mary. In an instance where a seller is in breach of a condition of a
contract, a buyer is entitled to reject the goods and rescind the contract. However as Mary allowed John to make
the cupcake she may have accepted the change. Mary would be entitled to damages if John is found to be in breach
of the contract.
[6 marks]
[Total: 20 marks]
Page 6
SOLUTION 4
General Comments
This question aims to examine the students’ knowledge of misrepresentation under contract law in Ireland. Students
should be able to give a broad description of misrepresentation including the requirements necessary to establish.
The question requires a largely descriptive answer but the students should be able to demonstrate the different
forms of misrepresentation. Marks will be given for students who incorporate statutes or case law into their answers.
Solution
Misrepresentation deals with situations where a person is induced into a contract by a misleading statement. There
is no general duty of good faith in the negotiation of contracts, though there is a duty not to make false statements.
To be misrepresentation there must be an unambiguous false statement of existing fact which is made to the
complainant and induces the complainant to enter into the contract, and the statement must be material to the
contract. Misrepresentation will not occur if the representor’s statement was not heard or read by the complainant
party. Disclaimer clauses can limit liability particularly if they state that an individual should check all facts themselves
as per Pearson v Dublin Corporation. Generally silence or failure to disclose is not misrepresentation. There are
exceptions to this, a failure to disclose a change of material fact will be misrepresentation, in fiduciary relationships
and in contracts of utmost good faith such as insurance contracts.
(5 marks)
There are can be difficulties distinguishing between fact and law. Traditionally misrepresentation of law was not
operative, though there were always exceptions to this rule, as a statement of law could also arguably be a statement
of opinion. Misrepresentation of private rights is operative as per Doolan v Murray. A statement of opinion is not a
statement of fact and therefore may be outside misrepresentation, as an honest statement of opinion is not
misrepresentation, a statement of opinion may also be so vague as to have no effect whatsoever. However there
are circumstances where an opinion may be misrepresentation, where the opinion was dishonest or unreasonable
such as in Jendwine v Slade.
(5 marks)
Reliance is essential; unless the complainant relied on the statement they cannot use misrepresentation as a cause
of action as in Sargent v Irish Multiwheel. The misrepresentation must be of the kind that a reasonable person would
rely on the statement when entering into the contract, if there has been no reliance, than the misrepresentation
cannot be a cause of action. There must also be actual notice of the misrepresentation, constructive notice is not
adequate. Therefore if a representee is aware of the misrepresentation before entering into the contract there is no
remedy as there is not reliance as in Phelps v White.
(5 marks)
There are different causes of action for misrepresentation. Fraudulent Misrepresentation is the absence of honest
belief and is actionable as a tort. The fraudulent misrepresentation must be made knowingly or without belief in its
truth or recklessly careless whether it is true or false. As such carelessness in and of itself does not mean dishonesty
but where a person acts recklessly it is open for the court to find fraud. There may also be negligent misrepresentation
in cases where one party owes another a duty of care. Innocent misrepresentation results in a very limited form of
redress. There are two types of equitable remedies available for misrepresentation, an equitable right of indemnity
and rescission as well as the common law remedy for the tort of deceit, being damages.
(5 marks)
[Total: 20 marks]
Page 7
SOLUTION 5
General Comments
The aim of this question is to examine the students’ knowledge of the tort of negligence under Irish law. Students
should be able to give a broad description of the duty of care and damage. The question is asked in a straightforward
manner and students must give a descriptive answer. Marks will be given for students who incorporate statutes or
case law into their answers.
Solution
Negligence is the most common tort action. A tort is a civil wrong which normally results in unliquidated damages
for the party that the court finds in favour of in a case. Courts and not the parties decide the amount of unliquidated
damages that the successful claimant receives. All tort claims are dependent on certain factors. First, that there is
a right recognised by the law that has been infringed upon by the defendant and that some damage has been
caused to the plaintiff by this action. Negligence occurs when there is failure by the defendant to exercise the level
of care which the law states is due to the plaintiff, if this causes a loss to the person to whom the care is owed this
will result in court finding against the defendant. The duty of care can arise in a variety of situations. However, this
does not mean that everyone owes some duty of care at all times; it is only if a person could reasonably foresee
that their actions would cause injury or loss due that a duty of care will be owed. This was established in Donoghue
v Stevenson, where the court stated that a duty of care could be owed outside of contractual relationship. In this case,
Donoghue purchased a bottle of ginger beer and after drinking some its contents discovered a snail in the bottle.
Even though there was no contractual relationship between Donoghue and the drink maker the Court found for
Donoghue stating that the drink maker did owe her a duty of care.
(8 marks)
For negligence, a plaintiff must prove four things; that the defendant owed the plaintiff a legal duty of care, the
defendant has breached this duty of care, the plaintiff must have suffered a loss and the damage or injury must be
due to the defendant’s breach. A court must accept that a duty of care is established and that there has been a
breach of duty. To do this a court must examine whether a defendant took reasonable care in the circumstances as
such whether the defendant act as a reasonable person would have done in the same circumstances. Generally the
burden of proof rests upon the plaintiff except when the res ipsa loquitur rule applies. Under res ipsa loquitur, a
presumption of negligence maybe asserted as there is no other obvious cause of the incident. In these situations it
is then up to the defendant to prove that reasonable care had been taken. Res ipsa loquitur may arise in three
circumstances; where the defendant is the only person in control of the situation, the damage is of a nature that it
could only have been caused by some negligence of the defendant and the defendant has some knowledge which
the plaintiff does not.
(6 marks)
In order to establish negligence a plaintiff must show damage, loss or injury. The law requires that the damage, loss
or injury be caused largely by the defendant and be foreseeable, the harm be closely related to the negligent act
and that the plaintiff has suffered some physical injury to their property, their person or suffered an economic loss.
If the Court finds that the plaintiff is also guilty of negligence which contributed to the harm, then the defendant will
not be found liable for all of the loss. Under the Civil Liability Act 1961 the damages recoverable will be reduced in
proportion to the plaintiff’s contribution. In circumstances where it is a professional or a skilled person undertaking
the action, the question is whether the care and skill expected from a member of that profession or trade has been
taken. Therefore the standard applied to a doctor, plumber or accountant is the standard that a member of the same
profession who is a defendant will be expected to exercise. This was recently reinforced in the case of Flynn v
O’Reilly (1999).
(6 marks)
[Total: 20 marks]
Page 8
SOLUTION 6
General Comments
This question is designed to test students’ knowledge in the area of negotiable interests. The question requires a
descriptive answer. Students are expected to set out any general issues regarding negotiable instruments before
going on to explain and describe the content of bills of exchange, cheques, bank drafts and promissory notes. Extra
marks will also be awarded if students can refer to any relevant secondary legislation.
Solution
A bill of exchange is defined in s. 3(1) of the Bills of Exchange Act 1882 as ‘an unconditional order in writing,
addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed
to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified
person, or to bearer’. Originally the most important aspect of the bill of exchange was its negotiability. A bill of
exchange can be transferred once it has been endorsed without the need for formal assignment or transfer and the
holder of the bill of exchange is entitled to bring an action before the courts on the basis of the instrument. This is
an exception to the law of privity of contract. Once the new holder of the bill of exchange has taken the bill in good
faith and for value or some worth and without notice of any defects in the title or ownership of the person who
negotiated the bill then they become known as a holder in due course and may have better title than the original
holder. In ordinary usage cheques have generally taken the place of bills of exchange; however their use is still
important as cheques are generally not intended to be negotiated, though there are instances where cheques may
be.
(5 marks)
The Bills of Exchange Act 1882 is still the foundation on the law of surrounding the use of cheques and other
negotiable instruments. The Cheques Act 1959 is also relevant in relation to banks and their liabilities with regard
to cheques. Under the Act a cheque is defined in section 73 of the Act as ‘a bill of exchange drawn on a banker
payable on demand.’ Generally cheques are not used as negotiable instruments that often, but are instead used as
a direct method of payment and lodged to the payee's account. A bank may become what is known as a holder in
due course if the bank has taken a cheque in good faith and for value and without notice of any defects in the title
of the person who negotiated the cheque originally and may have better title than the original cheque holder. Under
the Cheques Act 1959 the balance of liability generally lies in favour of the bank. The use of cheques as negotiable
instruments does open up the possibility of fraud. The Bills of Exchange Act under Section 76 provides for the
crossing of cheques to increase the security of the cheque as a method of payment. Cheques can be crossed by
simply drawing two parallel lines. The phrase “not negotiable” on the face of the cheque which is accompanied by
the general crossing provides for further security. Another form of crossing, an account payee crossing has the
effect of rendering the cheque non-transferable and valid only as between the parties.
(6 marks)
A promissory note is defined under the Bills of Exchange Act 1882 as, ‘an unconditional promise in writing made
by one person to another signed by the maker, engaging to pay, on demand or at a fixed or determinable future time,
a sum certain in money, to, or to the order of, a specified person or to bearer.’ A promissory note therefore has two
parties to it, the promissory and the promise; this is in contrast to for example a bill of exchange which has three. It
is a promise to pay not an order for someone else to pay. A promissory note is complete when it is delivered to the
promisee.
(4 marks)
A bank draft is an order to pay money drawn by one branch of a bank on another. They are not cheques since there
is no distinct drawer and drawee as defined under S.3 of the Bills of Exchange Act, 1882. The holder of a draft may,
however by virtue of S.5 (2) of the Act treat the draft as either a promissory note or as bill of exchange and use them
in the same manner as they would one of those documents. Drafts fall within the various protections afforded to banks
under the Cheques Act 1959 in order that Banks avoid being the victims of fraud. Bank drafts have some advantages
over cheques. A bank draft is in some circumstances more creditworthy than a cheque as the bank is regarded by
the payee as a more substantial and reliable creditor than the drawer of a cheque. In both commercial and private
transactions where there are substantial debts bank drafts have become the most common method of discharging
those debts.
(5 marks)
[Total: 20 marks]
Page 9
SOLUTION 7
General Comments
This question tests the students understanding and knowledge of the different forms of business organisation under
Irish law. The question asks the students to describe three forms of business organisation in brief, companies, sole
traders and partnerships. The answer required is descriptive. Students who are able to quote relevant statutes and
case law will gain extra marks.
Solution
The Companies Acts 1963-2009 regulate companies' operation under Irish law. A private company restricts the
right of transfer of shares so that they cannot be issued to the public and has between two and ninety-nine members.
It is also possible to have a single member private limited company. A public company is any registered company
that is not private and has seven or more members. All companies are limited by guarantee, by shares or are
unlimited. Limited by guarantee means that members are liable for the amount they have promised to contribute
where the assets of the company are insufficient to discharge the debts of the company. A company limited by
shares means that members are liable to the nominal value of the shares held by them. If the shares are not fully
paid up and the company goes into liquidation the members are liable only for the outstanding amount to be paid
up. In unlimited liability members are personally liable for all the debts of the company. In limited companies members
are not personally liable for company debts. A company's distinguishing feature is its separate legal personality.
Separate legal personality allows a company to make contracts, own property, sue and be sued as legal persons.
This was confirmed by the Court in Saloman v Saloman & Co. (1897). The Companies Act 1963-2009 details
occasions when this may occur but the Court may also lift the veil if it decides that the company is being used to
escape legal obligations and liabilities or is acting for another company. The memorandum and articles of association
are the core documents setting out how companies, both externally and internally, operate and are unique to a
particular company. All companies are managed by persons appointed by shareholders known as the Board of
Directors. Directors act as agents of the company and since they are fiduciaries owe a special duty of care to the
company and must avoid conflicts of interest or personal gain from their position.
(10 marks)
Sole traders are the most straightforward group of business organisations under Irish law and, as such, are fairly
lightly regulated. In contrast to the other forms of business sole traders are not incorporated nor do they posses
limited liability and thus are personally liable for debts. As they are not incorporated their tax regimes are also
different to companies, for instance they do not pay corporation tax, though they are bound by employment law,
environmental law as well as health and safety regulations. The Registration of Business Names Act 1963 requires
sole traders to register their business name if it is different from the sole trader's given name with the Companies
Registration Office and they must also register with the Revenue Commissioners as self-employed. A sole trader
ceases to operate on the decision of the sole trader, although they remain liable for any liabilities that have been
incurred when operating.
(4 marks)
Partnerships are a very common form of business relationship in Ireland based around two pieces of legislation, the
Partnership Act 1890 and the Limited Partnership Act 1907. Section 1 of the Partnership Act 1890 defines a
partnership as ‘a relationship which subsists between persons carrying on a business in common with a view to profit.’
There are no formal arrangements to establish a partnership; it can be formed expressly through a contract, or
impliedly through the conduct of the parties, although the former is the most common. Each partner is an agent of
the partnership and of the other partners. Under section 5 of the Partnership Act 1890 a partner can bind all the other
partners unless they are acting outside of their authority in the partner relationship and the third party are unaware
of this. Under section 24 of the 1890 Act all partners are equally entitled to capital and profits and equally liable for
any losses or liabilities. Each partner is jointly liable for all the debts and obligations of the firm. All the partners are
jointly personally liable for any action taken against the partnership. The Limited Partnership Act 1907 enables one
or more general partners to be liable however a partner who initially contributes a capital sum to the partnership
liability is limited to that sum which must remain with the firm as long as it is operating, at least one partner remains
personally liable while at least one other partner has limited liability. Such a limited partnership must be registered
with the Register of Companies. Partnerships come in many variations and are a very fluid form of business
organisation.
(6 marks)
[Total: 20 marks]
Page 10