Corporate & Business Law:
Mock Exam 2:
Question#1:
Which of the following would NOT terminate an offer?
A. Acceptance
B. Death of the offeree
C. Revocation by the offeror
D. A counter-offer
Question#2:
Which of the following statements about limited liability partnerships is true?
(2 Marks)
(1 Marks)
A. A written partnership agreement must be registered with the Registrar of Companies
B. At least one general partner must be appointed with unlimited liability for the debts of the firm
C. A limited liability partnership is a corporate body which has a separate legal personality from its
members
Question#3:
Which of the following in relation to a government bill is NOT correct?
(1 Marks)
A. It may be introduced in the House of Lords
B. It needs to be passed by the Privy Council
C. It must be passed in the House of Commons and in the House of Lords
Question#4:
Which of the following is NOT an exception to the rule of privity in contract law?
(1 Marks)
A. Where there is a restrictive covenant in relation to land
B. Where an implied trust has been created
C. Where an assignment has been made either orally or in writing to a new beneficiary with the
consent of the other party
D. Where a person injured in a road accident may sue the driver's insurance company
Question#5:
Which of the following is NOT a feature of a members' voluntary liquidation?
A.
B.
C.
D.
Production of a declaration of solvency
Passing of a special resolution
Creation of a liquidation committee
Appointment of a liquidator
(2 Marks)
Question#6:
(1 Marks)
Within what period of starting work must an employee receive a written statement of prescribed
particulars outlining the main terms of their employment?
A. One month
B. Two months
C. Three months
Question#7:
Which of the following statements about revocation of an offer is true?
(1 Marks)
A. It can be revoked at any time before acceptance
B. The postal rule applies to revocation of an offer
C. Revocation must be communicated personally by the offeror
Question#8:
Which of the following is the correct order of payment on liquidation?
A.
B.
C.
D.
(2 Marks)
Preferential debts, unsecured creditors, floating charges, deferred debts
Floating charges, preferential debts, deferred debts, unsecured creditors
Preferential debts, floating charges, unsecured creditors, deferred debts
Floating charges, unsecured creditors, deferred debts, preferential debts
Question#9:
(2 Marks)
Wesley offered to sell his car to Harold for £700. Harold said he would pay £600. Wesley rejected the
£600. Later Harold telephoned to say "I agree with the original price and I'll transfer the £700 to your
bank account".
For each of the following statements, identify whether it is true or false.
.
True False
A. Harold has accepted Wesley's offer
B. Harold has made a counter-offer
Question#10:
(1 Marks)
Breach of which of the following types of term NEVER entitles the injured party to repudiate the
contract?
A. Innominate terms
B. Warranties
C. Conditions
Question#11:
Which TWO of the following statements about criminal law are true?
A.
B.
C.
D.
(2 Marks)
The standard of proof is on the balance of probabilities
The burden of proof rests with the prosecution
The state normally initiates the action
It is a form of private law
Question#12:
(2 Marks)
UTU Ltd agrees to build the stage set for a new play at the City Theatre Ltd for £10,000. One week
before the first performance, it is clear that it will not be ready due to the complexities of working in
an old building. City Theatre Ltd agrees to pay an extra £5,000 if UTU Ltd uses extra workers and
operates 24 hours per day in order to finish on time.
Which of the following about the payment of the £5,000 is true, and for what reason?
A. It is not enforceable because circumstances have put City Theatre Ltd under duress
B. It is not enforceable because UTU Ltd will do no more than its existing contractual duty in building
the stage set
C. It is enforceable because City Theatre Ltd gains a practical benefit from the extra consideration
D. It is not enforceable because City Theatre Ltd does not gain a practical benefit from the extra
consideration
Question#13:
(1 Marks)
What remedies are available to the injured party if a condition of the contract is broken?
A. Damages and repudiation of the contract
B. Repudiation only
C. Damages only
Question#14:
Which of the following statements about a pre-incorporation contract is true?
(1 Marks)
A. The company's promoter is always immune from liability
B. The company may ratify the contract once its incorporation is complete
C. Following incorporation, the company could enter into a new contract on identical terms via
novation
Question#15:
Which of the following is NOT a statutory duty of a director?
A. To exercise independent judgement
B. To promote the success of the company
C. To act in the best interests of the board
(1 Marks)
Question#16:
(2 Marks)
For each of the following statements regarding the limited liability of a partner for partnership debts,
indicate whether it is true or false.
True False
A. In a limited partnership, there must be at least one general partner who is personally liable for the
full amount of partnership debts
B. In a limited liability partnership, it is the partnership who is liable for partnership debts
Question#17:
(2 Marks)
Maria, a ballerina, was contracted to dance at a series of performances. The terms of the contract
required her to attend rehearsals for a week before the show opened. Due to illness, she missed the
first three rehearsals. The show's producer, Jason, refused to accept her services and treated the
contract as discharged.
What is the legal position regarding Jason's decision to discharge the contract with Maria?
A. Jason is entitled to treat the contract as discharged, as Maria breached a condition of the contract
by not attending all of the rehearsals
B. Failure by Maria to attend the rehearsals was a breach of a warranty which entitles Jason to claim
damages only
C. Maria cannot sue Jason because she is in breach of contract by not attending all of the rehearsals
D. The clause relating to the rehearsals is an innominate term entitling Jason to choose to treat it
either as a condition or as a warranty
Question#18:
(2 Marks)
Sally works for Scarecrow Ltd and wears a uniform in the workplace. At work Sally is largely
independent, rarely interacting with other workers. When Sally was ill last year she received statutory
sickness payments. At her last appraisal it was agreed that Sally would personally reimburse a
customer who lost money, due to negligent advice provided by Sally.
Which TWO of the following factors would support a claim that Sally is an employee of Scarecrow Ltd?
A.
B.
C.
D.
Working independently
Receipt of statutory sick pay
Compensating the customer
Wearing a uniform
Question#19:
(2 Marks)
Which of the following tests should be applied by an individual when considering whether to report
suspected money laundering activity?
A.
B.
C.
D.
The individual should be certain that an offence is being committed
There should be suspicion or reasonable grounds for suspicion
The individual should seek clarification from the client and make a report if appropriate
There should be reasonable certainty that laundering is taking place
Question#20:
Which of the following statements about the tort of passing off is correct?
(1 Marks)
A. The nature of the two businesses need not be similar
B. The tort only protects use of the business name
C. There must be a significant likelihood of public confusion
Question#21:
(1 Marks)
In the context of termination of employment by notice, which of the following is correct?
A. During the notice period, the employee is entitled to pay at no less than the lowest rate earned in
the previous 12 weeks
B. If dismissed with proper notice, the employee is entitled to no explanation from the employer
C. Either party may waive their entitlement to notice, or accept a payment in lieu of notice
Question#22:
(2 Marks)
What is the effect of applying the contra proferentem rule to an ambiguity in an exclusion clause?
A.
B.
C.
D.
The court will not allow extrinsic evidence to be introduced to explain the meaning of it
The court will uphold it provided it is fair and reasonable
The court will interpret any ambiguity to give effect to the main purpose of the contract
The court will interpret any ambiguity against the person relying on it
Question#23:
Which of the following statements relating to the Crown Court is NOT true?
(1 Marks)
A. Appeals from the Crown Court go directly to the Supreme Court
B. It has no civil jurisdiction
C. It deals with indictable offences with a jury
Question#24:
Which of the following reasons for dismissal is automatically unfair?
(1 Marks)
A. A spent conviction
B. Unofficial industrial action
C. Capability or qualifications
Question#25:
(2 Marks)
In the context of a company in financial difficulty, which TWO of the following are powers of the
administrator?
A.
B.
C.
D.
To make payments to unsecured creditors without court permission
To remove or appoint directors
To call a meeting of members
To report to the secretary of state if they consider that any director is unfit to be involved in the
management of a company
Question#26:
(2 Marks)
For each of the following legal terms, indicate whether or not it is a valid way of discharging a
contract.
Yes
No
A.
B.
C.
D.
Specific performance
Agreement
Performance
Damages
Question#27:
(1 Marks)
In relation to criminal law, what type of appeals cases will be heard in the Divisional Court of the
Queen's Bench?
A. Ordinary appeals
B. Leapfrog appeals
C. Case-stated appeals
Question#28:
Which of these people would always be classed as self-employed?
(1 Marks)
A. A lorry driver who is not allowed to arrange for his brother to cover his shifts during his holidays
B. An equity partner in a partnership
C. A surgeon working for the National Health Service
Question#29:
(2 Marks)
GGG Ltd intends to open a new shop in Arcadia, a country in which the company has not done
business before. The board of GGG Ltd has learned that it is customary for the planning permission
process for new premises to be accelerated by paying a substantial facilitation fee personally to the
Minister of Foreign Affairs of Arcadia.
What is the position in respect of any potential criminal offence being committed if the facilitation fee is
paid?
A.
B.
C.
D.
GGG Ltd may be liable for carrying out a fraudulent transaction
There is no potential criminal liability, as the recipient is not a UK citizen
GGG Ltd may be guilty of bribing a foreign public official
There is no potential criminal liability, as the transaction would take place outside the UK
Question#30:
(2 Marks)
If a public limited company wishes to reduce its capital, which of the following does it require?
A.
B.
C.
D.
Special resolution only
Ordinary resolution and consent from the court
Special resolution and consent from the court
Ordinary resolution with special notice and consent from the court
Question#31:
(1 Marks)
Which of the following statements concerning consideration in contract law is NOT true?
A. The performance must have taken place before the promise is made
B. The performance must be an act which is possible
C. The performance must be an act which is legal
Question#32:
(2 Marks)
For each of the types of legislation listed below, indicate the powers held by the UK courts if this
legislation is contrary to the European Convention on Human Rights.
.
Strike down the legislation
Make a declaration of incompatibility
A. Primary legislation
B. Secondary legislation
Question#33:
(2 Marks)
Which of the following is NOT contained in the statement of prescribed particulars to be provided by
an employer?
A.
B.
C.
D.
Information about pension schemes
The date on which the offer of employment was made
The date on which the employment commenced
The names of the employee and the employer
Question#34:
(2 Marks)
For each of the following statements in relation to the appointment of a company auditor, indicate
whether it is true or false.
.
True
False
A. The Secretary of State may appoint an auditor to a company if its members fail to do so
B. A private company may remove an auditor from office before the expiry of their appointment by
passing a written resolution
Question#35:
(2 Marks)
In the context of the tort of negligence, which of the following about 'novus actus interveniens' is
true?
A.
B.
C.
D.
A claimant will not be compensated for harm that would have happened anyway
If there are a number of possible causes, the courts must decide which caused the harm
A claimant will only be compensated for actual loss, damage or injury suffered
Defendants will not be liable where the chain of events is broken
Question#36:
When can separate personality be ignored?
(1 Marks)
A. When a company is set up with a risky investment strategy
B. When a company is a sham to evade liabilities
C. When a company is an agent of another company
Question#37:
(2 Marks)
For each of the following statements in relation to a company's powers to borrow money, indicate
whether it is true or false.
.
True
False
A. A company has an implied power to borrow money for whatever purpose it sees fit, including both
business and non-business activities
B. A lender can require the directors to personally guarantee to repay a loan made to the company in
the event of default by the company
Question#38:
(1 Marks)
Which of the following statements concerning civil law is true?
A. Once the judge has determined guilt, damages will be awarded
B. The state brings the case against the defendant
C. The burden of proof is on the claimant
Question#39:
(2 Marks)
Indicate whether the following statements regarding tort are true or false.
.
True
False
A. There must be a previous transaction or agreement between the parties
B. Conduct that is criminal can also be a tort
Question#40:
(1 Marks)
Which companies must appoint a company secretary?
A. Both public and private companies
B. Private companies only
C. Public companies only
Question#41:
(2 Marks)
For each of the following statements about judicial precedent, indicate whether it is true or false.
.
A. Decisions in the Crown Court are binding on the magistrates' court
B. Decisions in the magistrates' court are binding on itself only
True
False
Question#42:
(2 Marks)
Pigeon Ltd is a UK registered company and has a wholly owned subsidiary, Duck Ltd, in the USA, which
specialises in disposal of nuclear waste. Duck Ltd is being sued by residents in the USA, for personal
injuries following exposure to nuclear waste from its disposal plants. As Pigeon Ltd is the holding
company and is highly profitable, the residents feel that it is Pigeon Ltd that is liable for the personal
injuries suffered.
Is Pigeon Ltd liable to pay damages for personal injuries on behalf of Duck Ltd, and for what reason?
A. Yes, because it is head of the group and English law treats groups of companies as single economic
units
B. No, because Duck Ltd is a separate legal entity with all the rights and liabilities which would normally
be attached to a separate legal entity
C. Yes, because Duck Ltd is acting as an agent of Pigeon Ltd
D. No, because Pigeon Ltd has no direct presence in the USA
Question#43:
(1 Marks)
Which of the following statements about consideration is NOT correct?
A. It must move from the promisee
B. It must be adequate but need not be sufficient
C. It can be merely no minal
Question#44:
(2 Marks)
Indicate whether the following statements regarding unfair dismissal are true or false.
.
True
False
A. The employee must demonstrate to a tribunal that dismissal was not justified
B. The dismissal may be constructive rather than actual dismissal
Question#45:
What does 'corporate personality' mean?
A. That the board of directors as a whole is regarded by the law as a separate person
B. That the company as an entity is regarded by the law as a separate person
C. That the shareholders in the company are regarded by the law as a separate person
(1 Marks)
Question#46:
(6 Marks)
Background
SWS plc is a marketing consultancy company. AFA Ltd, a small retail company, has approached it for
marketing advice. As AFA Ltd was a new client, SWS plc contacted AFA Ltd's bankers, who confirmed
that the company was credit-worthy. As a result, SWS plc agreed to provide the consultancy services
requested. However, it is now clear that AFA Ltd's bankers negligently provided the positive credit
reference. AFA Ltd is unable for pay SWS plc for the consultancy services.
Task 1
2 marks
Which of the following statements regarding the credit reference provided by the bankers to SWS plc
is correct?
A. As no contract existed between SWS plc and the bankers, SWS plc cannot claim compensation for
the negligent credit reference
B. The bankers owed SWS plc a duty of care because they knew that SWS plc were relying on the credit
reference
C. As the loss suffered by SWS plc was purely financial, the bankers' negligence cannot amount to a
breach of their duty of care
D. The bankers cannot be held liable to SWS plc because it is AFA Ltd who is solely responsible for the
debt it incurred
Task 2
2 marks
SWS plc decided to acquire a local competitor, DFE Ltd. Prior to finalising its bid, SWS plc arranged a
meeting with DFE Ltd's auditors. SWS plc made it clear to the auditors that it was considering making
a takeover bid for DFE Ltd. The auditors confirmed that DFE Ltd's accounts showed a true and fair
view. Following the meeting, SWS plc made a bid for DFE Ltd which was accepted. It has since come to
light that the accounts overstated DFE Ltd's assets, and that SWS plc paid too much for DFE Ltd's
shares.
For each of the following statements regarding the advice SWS plc received from DFE Ltd's auditors,
indicate whether it is true or false.
.
True False
A. SWS plc will not be able to recover from the auditors the amount it overpaid for DFE Ltd's shares,
because DFE Ltd's accounts were prepared for its shareholders as a body and not for the purposes of
SWS plc's takeover
B. DFE Ltd's auditors owe a duty of care to their client, DFE Ltd, but they do not owe a duty of care to
SWS plc in respect of its takeover bid for their client
Task 3
2 marks
Which of the following statements regarding establishing liability for negligence is NOT true?
A. Where the most likely cause of an accident is negligence, the burden of proof can be reversed such
that the defendant must prove they were not negligent
B. To establish a duty of care, a claimant must show a relationship of proximity between the claimant
and the defendant
C. A duty of care can only arise if a contractual relationship exists between the parties
D. In order to establish liability, the claimant must show that harm was foreseeable
Question#47:
(6 Marks)
Background
Alex, Sunil and George are in partnership running a small office supply business. Their partnership
agreement states that the firm will only supply items of stationery. The partners have specifically agreed
not to purchase large items, such as printers and photocopiers, for resale.
One evening George met Omar, a photocopier salesman, at a charity dinner. Omar had previously tried,
unsuccessfully, to sell photocopiers to the firm. The partners told Omar that their business did not
involve selling photocopiers. However, at the charity dinner, Omar persuaded George to buy two
photocopiers.
Alex and Sunil have now found out about the purchase of the photocopiers and are refusing to pay the
balance due.
Task 1
2 marks
Which of the following types of authority does George have to buy the photocopiers?
A. Ostensible
B. Implied
C. None
D. Express
Task 2
2 marks
Which of the following statements regarding the liability to pay for the photocopiers is correct?
A. The firm is liable to pay Omar for the photocopiers George ordered
B. George is personally liable to pay Omar for the photocopiers
C. Omar can claim the full cost of the photocopiers from any partner
D. The firm must pay for the photocopiers and then recover the money from George
Task 3
2 marks
For each of the following statements regarding a partner's authority, identify whether the statement
is true or false.
.
True
False
A. All partners can bind the firm and no restriction can be placed on any one partner's authority
B. A partner is personally liable where, without specific authority, they pledge the firm's credit for a
purpose not connected with the firm's ordinary business
Question#48:
(6 Marks)
Background
In May 20X7, Djimi considers making a long-term investment in Goga plc. He has the option of
purchasing ordinary shares or debentures but he is struggling to decide what would be the most
appropriate for him.
Task 1
2 marks
For each of the characteristics listed below, indicate whether it is true of debentures or ordinary
shares.
.
Debentures
Ordinary shares
A. Can be priced at a level below their nominal value
B. Will be repaid first upon liquidation
C. Allows participation in general meetings
D. Provides a regular income regardless of Goga plc's profitability
Task 2
2 marks
In June 20X8, Goga plc needs to secure a substantial loan in order to continue trading. It is negotiating
with ABC bank, which has suggested a fixed charge over the company's premises for the debt.
Which of the following statements about the proposed fixed charge is NOT true?
A. It will rank after a fixed charge created last month in terms of repayment priority
B. If the premises were to be sold to a third party, then the third party can never be liable for the debt
C. It provides good long-term security because Goga plc will always need somewhere from which to
trade
D. It will rank before a floating charge created on the following day in terms of repayment priority
Task 3
2 marks
On 3 July 20X8, ABC bank lends £100,000 to Goga plc. It takes a floating charge over Goga's entire
assets. The bank included a clause as part of the charge prohibiting Goga plc from creating any
subsequent fixed charge over its assets.
Which charges will take priority over ABC bank's floating charge?
A. Fixed or floating charges made before 3 July 20X8
B. Only fixed charges made before 3 July 20X8
C. Only floating charges made after 3 July 20X8
D. Only fixed charges made after 3 July 20X8
Question#49:
(6 Marks)
Background
Edward is the majority shareholder in CTF plc, controlling 80% of the company's shares. Although
Edward has not been appointed to the board of directors of CTF plc, he regularly gives instructions to
the company's board which they are accustomed to follow.
One member of the CTF plc board of directors is Ahmed. Ahmed needs hospital treatment and knows
that he will be absent over the coming months. Ahmed wants to appoint his friend David to act as his
alternate during his absence.
Task 1
2 marks
Which TWO of the following statements regarding company directors are correct?
A. A person expressly appointed as a director is known as a de jure director
B. All companies must appoint at least one non-executive director to its board of directors
C. A person may be both a director and an employee of the same company
D. Both public and private companies must appoint at least two directors
Task 2
2 marks
For each of the following statements regarding Edward's position in the company, indicate whether it
is true or false.
.
True False
A. Edward is a shadow director of CTF plc
B. Edward is a de facto director of CTF plc
Task 3
2 marks
Which TWO of the following statements describe David's position as an alternate director?
A. He would be entitled to attend and vote at board meetings on Ahmed's behalf
B. He can only be appointed as Ahmed's alternate if the articles of association allow for such an
appointment
C. While acting as Ahmed's alternate, David cannot accept appointment as a director of any other
company
D. He must be at least 18 years old and a UK resident to be eligible for appointment as an alternate
director
Question#50:
(6 Marks)
Background
Arlene is the finance director of TTT plc, whose shares are listed on the London Stock Exchange. She
attended a board meeting at which a decision was taken to make a takeover bid for VVV plc, which was
also listed. It was agreed that the bid would be announced in one week's time.
Arlene attended a family function on the evening following the board meeting. Danny, her brother who
works as a financial journalist, was at the function. Arlene and Danny talked about their respective jobs,
and in the course of the conversation Arlene said, 'keep it to yourself, but there is big news coming next
week. We are making a bid for VVV plc.'
The conversation was overheard by Susan, a distant family member who Arlene had never met.
Both Danny and Susan then bought shares in VVV plc, and both made a substantial profit by selling the
shares when the takeover was completed.
Task 1
2 marks
Which offences relating to insider dealing has Arlene potentially committed?
(1) Disclosing price sensitive information
(2) Dealing in price-affected securities
(3) Encouraging another to deal
A. 1 and 3 only
B. 1 only
C. 3 only
D. 1, 2 and 3
Task 2
2 marks
For each of the people below, indicate whether, by acting on the information received at the function,
they have potentially committed offences under insider dealing legislation.
.
Yes
No
Danny
Susan
Task 3
2 marks
Which TWO of the following are defences that can be offered by an individual accused of dealing
contrary to the Criminal Justice Act 1993?
A. The individual did not make a profit (or avoid a loss)
B. The transaction in the shares would have been made without having access to the information
C. Belief that the information had been disclosed publicly
D. The information related to debentures and not shares