ACCA COURSE NOTES
DECEMBER 2014 EXAMINATIONS
Paper
F4
CORPORATE AND
BUSINESS LAW
(ENGLISH)
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December 2014 Examinations
Paper F4
Paper F4
CONTENTS
1
Structure of The Legal System
1
2
Courts
7
3
Statute Law
11
4
Contract Law
17
5
Common Law
35
6
Law of Tort
37
7
Employment Law
43
8
Agency Law
51
9
Partnership
53
10
Company Law
59
11
Company Law: Directors and Officers
77
12
Company Law: Meetings and Resolutions
91
13
Company Law: Loan Capital
99
14
Company Law: Liquidations
103
15
Company Law: Illegalities
109
16
Capital Maintenance
117
17
Cases
123
Practice Questions
135
Practice Answers
137
Test Questions
145
Test Answers
161
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1
Chapter 1
STRUCTURE OF THE LEGAL SYSTEM
Civil Law
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2
December 2014 Examinations
STRUCTURE OF THE LEGAL SYSTEM
Criminal Law
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Paper F4
Chapter 1
December 2014 Examinations
STRUCTURE OF THE LEGAL SYSTEM
Common Law
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Paper F4
Chapter 1
3
4
December 2014 Examinations
STRUCTURE OF THE LEGAL SYSTEM
Equity Law
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Paper F4
Chapter 1
December 2014 Examinations
STRUCTURE OF THE LEGAL SYSTEM
Ratio Decidendi
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Paper F4
Chapter 1
5
6
December 2014 Examinations
STRUCTURE OF THE LEGAL SYSTEM
Human Rights Act
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Paper F4
Chapter 1
7
Chapter 2
COURTS
Hierarchy of the Courts
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8
December 2014 Examinations
COURTS
Chapter 2
Hierarchy of the Courts continued
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December 2014 Examinations
COURTS
Chapter 2
Hierarchy of the Courts continued
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9
10
December 2014 Examinations
COURTS
Paper F4
Chapter 2
Tracking
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11
Chapter 3
STATUTE LAW
Statute Law
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12
December 2014 Examinations
STATUTE LAW
Statutory Interpretation Rules
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Paper F4
Chapter 3
December 2014 Examinations
STATUTE LAW
Statutory Interpretation Presumptions
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Paper F4
Chapter 3
13
14
December 2014 Examinations
STATUTE LAW
Aids to Interpretation
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Paper F4
Chapter 3
Paper F4
December 2014 Examinations
STATUTE LAW
Chapter 3
Delegated Legislation
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15
16
December 2014 Examinations
STATUTE LAW
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Paper F4
Chapter 3
17
Chapter 4
CONTRACT LAW
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Invitations, offers and acceptance
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18
December 2014 Examinations
CONTRACT LAW
Termination of Offer
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Paper F4
Chapter 4
December 2014 Examinations
CONTRACT LAW
Offers
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Paper F4
Chapter 4
19
20
December 2014 Examinations
CONTRACT LAW
Paper F4
Chapter 4
Acceptance
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December 2014 Examinations
CONTRACT LAW
Paper F4
Chapter 4
Consideration
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December 2014 Examinations
CONTRACT LAW
Consideration – Sufficient Not Necessarily Adequate
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Paper F4
Chapter 4
December 2014 Examinations
CONTRACT LAW
Paper F4
Chapter 4
Privity of Contract
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December 2014 Examinations
CONTRACT LAW
Pinnell and its Exceptions
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Paper F4
Chapter 4
December 2014 Examinations
CONTRACT LAW
Intention to Create Legal Relations
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Paper F4
Chapter 4
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CONTRACT LAW
Paper F4
Chapter 4
Representations
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December 2014 Examinations
CONTRACT LAW
Paper F4
Chapter 4
Contractual Terms
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December 2014 Examinations
CONTRACT LAW
Paper F4
Chapter 4
Contractual Terms
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December 2014 Examinations
CONTRACT LAW
Paper F4
Chapter 4
Exclusion Clauses
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December 2014 Examinations
CONTRACT LAW
Paper F4
Chapter 4
Unfair Terms Legislation
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Paper F4
December 2014 Examinations
CONTRACT LAW
Chapter 4
Breach of Contract
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December 2014 Examinations
CONTRACT LAW
Paper F4
Chapter 4
Damages
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December 2014 Examinations
CONTRACT LAW
Paper F4
Chapter 4
Damages – Measurement
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December 2014 Examinations
CONTRACT LAW
Free ACCA course notes • Free ACCA lectures • Free tests • Free tutor support • StudyBuddy • Largest ACCA forums
Paper F4
Chapter 4
35
Chapter 5
COMMON LAW
Remedies for Breach
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36
Paper F4
December 2014 Examinations
COMMON LAW
Chapter 5
Remedies – Sundry Points
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37
Chapter 6
LAW OF TORT
Types of Tort
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38
December 2014 Examinations
LAW OF TORT
Paper F4
Chapter 6
Negligence Generally
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December 2014 Examinations
LAW OF TORT
Negligence Generally continued
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Paper F4
Chapter 6
39
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December 2014 Examinations
LAW OF TORT
Negligence Generally continued
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Paper F4
Chapter 6
December 2014 Examinations
LAW OF TORT
Negligence – Accountants
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Chapter 6
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December 2014 Examinations
LAW OF TORT
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Paper F4
Chapter 6
43
Chapter 7
EMPLOYMENT LAW
Employment Law
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December 2014 Examinations
EMPLOYMENT LAW
Paper F4
Chapter 7
Employment Law
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December 2014 Examinations
EMPLOYMENT LAW
Dismissal
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Chapter 7
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December 2014 Examinations
EMPLOYMENT LAW
Wrongful Dismissal
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Chapter 7
December 2014 Examinations
EMPLOYMENT LAW
Unfair Dismissal
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Paper F4
Chapter 7
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December 2014 Examinations
EMPLOYMENT LAW
Unfair Dismissal
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Paper F4
Chapter 7
Paper F4
December 2014 Examinations
EMPLOYMENT LAW
Chapter 7
Redundancy
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December 2014 Examinations
EMPLOYMENT LAW
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Paper F4
Chapter 7
51
Chapter 8
AGENCY LAW
Formation and Authority
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52
December 2014 Examinations
AGENCY LAW
Paper F4
Chapter 8
Termination and Liability
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53
Chapter 9
PARTNERSHIP
Partnership Law
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December 2014 Examinations
PARTNERSHIP
Paper F4
Chapter 9
The Agreement
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December 2014 Examinations
PARTNERSHIP
Paper F4
Chapter 9
1890 Act
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Dissolution Grounds – Automatic and By Court Order
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December 2014 Examinations
PARTNERSHIP
Paper F4
Chapter 9
LPA 1907 and LLPA 2000
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December 2014 Examinations
PARTNERSHIP
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Paper F4
Chapter 9
59
Chapter 10
COMPANY LAW
Types of Corporation and Ways of Formation
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Paper F4
December 2014 Examinations
COMPANY LAW
Chapter 10
Types of Company
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December 2014 Examinations
COMPANY LAW
Paper F4
Chapter 10
Public Companies
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December 2014 Examinations
COMPANY LAW
Chapter 10
Trading Certificates
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December 2014 Examinations
COMPANY LAW
Advantages of Being a Company as Distinct From a Partnership
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Chapter 10
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December 2014 Examinations
COMPANY LAW
Chapter 10
Disadvantages ( Expanded )
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December 2014 Examinations
COMPANY LAW
Paper F4
Chapter 10
Lifting the Veil
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December 2014 Examinations
COMPANY LAW
Chapter 10
Formation
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December 2014 Examinations
COMPANY LAW
Paper F4
Chapter 10
Formation - role and duties of promoters
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COMPANY LAW
Chapter 10
Formation ( continued )
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December 2014 Examinations
COMPANY LAW
Memorandum and the Constitution
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Paper F4
Chapter 10
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December 2014 Examinations
COMPANY LAW
Chapter 10
Articles – Contractual Force
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December 2014 Examinations
COMPANY LAW
Paper F4
Chapter 10
Articles – Alterability
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December 2014 Examinations
COMPANY LAW
Chapter 10
Articles – Procedure for Alteration
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December 2014 Examinations
COMPANY LAW
Company Names
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Paper F4
Chapter 10
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December 2014 Examinations
COMPANY LAW
Chapter 10
Name Change
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Paper F4
December 2014 Examinations
COMPANY LAW
Chapter 10
Objects
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December 2014 Examinations
COMPANY LAW
Chapter 10
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77
Chapter 11
COMPANY LAW: DIRECTORS AND OFFICERS
General Points
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Paper F4
December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Chapter 11
Number and Eligibility
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Paper F4
Chapter 11
Company Directors Disqualification Act
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Chapter 11
Directors Appointment
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Paper F4
December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Chapter 11
Directors Removal
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Chapter 11
Directors - Statutory Duties
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Directors’ Duties – Common Law Cases
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Paper F4
Chapter 11
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Chapter 11
Directors – Promoting Success
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Paper F4
Chapter 11
Directors – Controls
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Chapter 11
Directors – Remedies
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Paper F4
Chapter 11
Company Secretary
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Chapter 11
Company Secretary: Statutory books
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Auditors
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Paper F4
Chapter 11
89
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December 2014 Examinations
COMPANY LAW: DIRECTORS AND OFFICERS
Chapter 11
Auditors – Rights and Duties
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Chapter 12
COMPANY LAW: MEETINGS
AND RESOLUTIONS
Annual General Meeting
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December 2014 Examinations
COMPANY LAW: MEETINGS AND RESOLUTIONS
Chapter 12
Resolutions
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December 2014 Examinations
COMPANY LAW: MEETINGS AND RESOLUTIONS
Paper F4
Chapter 12
Resolutions – Special Notice
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December 2014 Examinations
COMPANY LAW: MEETINGS AND RESOLUTIONS
Chapter 12
Resolutions
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December 2014 Examinations
COMPANY LAW: MEETINGS AND RESOLUTIONS
Paper F4
Chapter 12
Proxies
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96
Paper F4
December 2014 Examinations
COMPANY LAW: MEETINGS AND RESOLUTIONS
Chapter 12
Quorum
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Paper F4
December 2014 Examinations
COMPANY LAW: MEETINGS AND RESOLUTIONS
Chapter 12
Voting
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December 2014 Examinations
COMPANY LAW: MEETINGS AND RESOLUTIONS
Chapter 12
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99
Chapter 13
COMPANY LAW: LOAN CAPITAL
Loan Capital
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Paper F4
December 2014 Examinations
COMPANY LAW: LOAN CAPITAL
Chapter 13
Fixed Charges
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December 2014 Examinations
COMPANY LAW: LOAN CAPITAL
Paper F4
Chapter 13
Floating Charges
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December 2014 Examinations
COMPANY LAW: LOAN CAPITAL
Chapter 13
Debentures Compared with Shares
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Chapter 14
COMPANY LAW: LIQUIDATIONS
Liquidation
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Paper F4
December 2014 Examinations
COMPANY LAW: LIQUIDATIONS
Chapter 14
Compulsory Liquidation
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December 2014 Examinations
COMPANY LAW: LIQUIDATIONS
Administrator Appointed by the Court
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Paper F4
Chapter 14
105
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Paper F4
December 2014 Examinations
COMPANY LAW: LIQUIDATIONS
Chapter 14
Duties of an Administrator
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Paper F4
December 2014 Examinations
COMPANY LAW: LIQUIDATIONS
Chapter 14
Advantages of Administration Compared with Liquidation
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December 2014 Examinations
COMPANY LAW: LIQUIDATIONS
Chapter 14
End of Administration Period
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109
Chapter 15
COMPANY LAW: ILLEGALITIES
Wrongful Trading
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Paper F4
December 2014 Examinations
COMPANY LAW: ILLEGALITIES
Chapter 15
Fraudulent Trading
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Paper F4
December 2014 Examinations
COMPANY LAW: ILLEGALITIES
Chapter 15
Money Laundering
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COMPANY LAW: ILLEGALITIES
Chapter 15
Insider Dealing
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December 2014 Examinations
COMPANY LAW: ILLEGALITIES
Paper F4
Chapter 15
Bribery
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COMPANY LAW: ILLEGALITIES
Chapter 15
Bribing an FPO
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December 2014 Examinations
COMPANY LAW: ILLEGALITIES
Paper F4
Chapter 15
The Six principles
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COMPANY LAW: ILLEGALITIES
Chapter 15
Penalties
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Chapter 16
CAPITAL MAINTENANCE
Capital Maintenance
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CAPITAL MAINTENANCE
Chapter 16
Capital Maintenance – Payment of Dividends
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December 2014 Examinations
CAPITAL MAINTENANCE
Paper F4
Chapter 16
Capital Maintenance – Reduction of Capital
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CAPITAL MAINTENANCE
Chapter 16
Share Capital
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December 2014 Examinations
CAPITAL MAINTENANCE
Paper F4
Chapter 16
Share Capital
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CAPITAL MAINTENANCE
Chapter 16
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Chapter 17
CASES
Cases – Same Names
Case name
Area of law
Principle
Errington v Errington
Thomas v Thomas
Beswick v Beswick
Combe v Combe
Balfour v Balfour
Merritt v Merritt
Spellman v Spellman
Salomon v Salomon
Bamford v Bamford
Daniels v Daniels
Clemens v Clemens
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December 2014 Examinations
CASES
Chapter 17
Cases – Horses
Case name
Area of law
Principle
Area of law
Principle
Gunthing v Lynn
Felthouse v Bindley
Roscorla v Thomas
Lampleigh v Braithwait
Cases – Directions
Case name
Northland Airlines v Dennis
Ferranti Meters
Central London Property Trust
v High Trees House
Universal Furniture Products v
Maple Flock Company
C & P Haulage v Middleton
Southern Foundries v Shirlaw
Allen v Gold Reefs of West
Africa
Ebrahimi v Westbourne
Galleries
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Paper F4
December 2014 Examinations
CASES
Chapter 17
Cases – Colours
Case name
Area of law
Principle
Whitely v Chappell
White v Bluett
Rose & Frank v Crompton
Express Newspapers v
Silverstone
White & Carter Councils v
MacGregor
Whaley Bridge v Green
Greenhalgh v Arderne
Cinemas
Allen v Gold Reefs of West
Africa
Peso Silver Mines v Cropper
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CASES
Chapter 17
Cases – Ships
Case name
Area of law
Principle
Stilk v Myrick
Hartley v Ponsonby
The Moorcock
Avery v Bowden
The Mikalis Angelos
The Wagon Mound
Mersey Docks v Coggins
R v Oll
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Paper F4
December 2014 Examinations
CASES
Chapter 17
Cases – Cars
Case name
Area of law
Principle
Carlill v Carbolic Smokeball
Williams v Carwardine
Thornton v Shoe Lane Parking
Hollier v Rambler Motors
Andrews v Singer
Lazenby Garages v Wright
Alexander v Rolls Royce
Dunlop v Selfridges
Dunlop v New Garage
Ford v Armstrong
Richley v Fould
Carslogie v Norway
Gilford Motor Co v Horne
Daimler v Continental Tyre
and Rubber
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CASES
Case name
Chapter 17
Area of law
Principle
Pavlides v Jensen
Merritt v Merritt
Evans v Cross
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Paper F4
December 2014 Examinations
CASES
Chapter 17
Cases – Forenames
Case name
Area of law
Principle
Gorris v Scott
Evans v Cross
R v Clark
Williams v Carwardine
Grainger v Gough
Ramsgate Victoria Hotel v
Montefiori
Bradbury v Morgan
Dickinson v Dodds
Gunthing v Lynn
Harris v Nickerson
Harvey v Facey
Stevenson v McLean
Northland Airlines v Dennis
Ferranti Meters
Powell v Lee
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CASES
Case name
Chapter 17
Area of law
Principle
Household Fire Insurance Co
v Grant
Roscorla v Thomas
Collins v Godefroy
Williams v Roffey
Ward v Byham
Thomas v Thomas
Donohue v Stevenson
Shanklin Pier v Detel Products
D & C Builders v Rees
Parker v Clark
Rose & Frank v Crompton
Jones v Vernon Pools
Bettini v Gye
Hutton v Warren
Olley v Marlborough Court
Hotel
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Paper F4
December 2014 Examinations
CASES
Case name
Chapter 17
Area of law
Principle
Chapeltown v Barry
Curtis v Chemical Cleaning
Company
Andrews v Singer
Victoria Laundry v Newman
Industries
Hadley v Baxendale
Lazenby Garages v Wright
Jarvis v Swan Tours
Alexander v Rolls Royce
Hoenig v Isaacs
Warner Bros v Nelson
Lynn v Bamber
Latimer v AEC
Hedley Byrne v Heller
Jeb Fasteners v Marks Bloom
Caparo v Dickman
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CASES
Case name
Chapter 17
Area of law
Principle
Evert v Williams
Adams v Cape Industries
Jubilee Cotton Mills v Lewes
Clarke v Dunraven
Allen v Gold Reefs of West
Africa
Bushel v Faith
Regal ( Hastings ) v Gulliver
Howard Smith v Ampol
Petroleum
Daniels v Daniels
Cases – Builders and Hotels
Case name
Area of law
Principle
Ramsgate Victoria Hotel v
Montefiori
Williams v Roffey
D & C Builders v Rees
Olley v Marlborough Court
Hotel
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Paper F4
December 2014 Examinations
CASES
Chapter 17
Cases – Superman List
Case name
Area of law
Principle
Area of law
Principle
R v Clark
Parker v Clark
Rescission
Hickman v Kent or Romney
Marsh Sheepbreeders
Association
Clarke v Dunraven
Household Fire Insurance Co
v Grant
Cases – Weapons List
Case name
Gunthing v Lynn
Central London Property Trust
v High Trees House
Poussard v Spiers and Pond
Express Newspapers v
Silverstone
Avery v Bowden
Thompson v Robinson
Planche v Colburn
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CASES
Chapter 17
Cases – Films List
Case name
Area of law
Principle
Gardner v Sevenoaks
Anglia TV v Reed
Warner Bros v Nelson
Photoproductions v Securicor
re F G Films
Greenhalgh v Arderne
Cinemas
Regal ( Hastings ) v Gulliver
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135
PRACTICE QUESTIONS
1
Legal terms
Explain the distinction between the following terms in relation to the doctrine of precedent in the
English legal system:
(a)
Ratio decendi and obiter dictum;
(b)
Reversing, overruling and distinguishing
2
Adam
Adam is a secondhand car dealer. He places an advertisement in the Saturday edition of his local paper
stating:
‘Once in a lifetime opportunity: a one year old, low mileage, Mota Special: £5,000 cash. This is a serious offer
- the car will go to the first person who accepts it - valid for one day only.’
When Ben sees the advert he immediately posts a letter of acceptance of Adam’s offer.
Carol also sees the advert and after inspecting the car offers Adam a cheque for £5,000, but he refuses to
accept the cheque and tells her she cannot have the car.
On Monday morning Ben’s letter arrives, but Adam now decides to keep his car and ignores it.
Consider the above situation with respect to the rules governing the creation of contracts.
In particular consider:
(a)
The precise nature of Adam’s advertisement
(b)
Whether Ben has entered into a binding contract with Adam.
(c)
Whether Carol has any right of action against Adam.
3
Emma and Sidney
Emma, an accountant, agreed with Sidney that Sidney would redecorate Emma’s business premises for
£2,000. The written contract provided that:
(a)
(a)
All woodwork would be properly prepared for painting prior to the application of paint.
No paint containing lead or lead compounds would be used. (Note that in this context it is not
illegal for paint to contain lead.)
The work was completed but, contrary to the terms of the contract, Sidney used paint containing lead in
one of Emma’s offices. As a consequence Emma suffers a serious allergic reaction and is off work for three
months, during which she loses £6,000 in income. Emma knew of her allergy to lead, and that was the reason
she had specified that no paint containing lead or lead compounds was to be used. She had not mentioned
this reason to Sidney.
Emma has also discovered that in three of her offices the woodwork was not prepared for painting before
paint was applied.
Emma now seeks your advice as to whether she is able to:
(a)
Sue successfully for damages for breach of contract in respect of her loss of earnings.
(b)
Obtain an order for specific performance to compel Sidney to prepare and repaint the woodwork
as agreed in the contract.
Advise Emma.
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December 2014 Examinations
Paper F4
Practice Questions
4
Employment
(a)
(b)
5
Why is it important to distinguish between contracts of service and contracts for services?
How do the courts decide whether someone is self employed or is an employee?
Company names
Explain the legal limitations there are on the names that may be adopted by companies, paying
particular regard to the tort of “passing off”.
6
Debentures and charges
In relation to companies’ loan capital explain the following terms.
(a)
Debenture
(b)
Fixed charge
(c)
Floating charge
7
Ken and Doris
Ken and Doris, a husband and wife, have traded as a private registered company, Kendor Ltd, of which they
were the sole shareholders and directors. The company has adopted model articles of association. Doris has
also acted as company secretary. Ken has died leaving all his estate to Doris. Although the company has
always been and still is profitable, Doris has decided that she no longer wishes to carry on the business or
sell it as a going concern but wishes to wind the company up.
As her accountant, advise Doris on the steps she must take and the procedures she must follow
to wind up the company as far as and including the appointment of a liquidator. Your attention is
particularly drawn to the fact that at the present moment she is the sole shareholder, director and
secretary of the company.
8
Money laundering
(a)
(b)
Explain the term ‘money laundering’ and how such activity is conducted.
Explain how the Proceeds of Crime Act 2002 seeks to control money laundering.
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137
PRACTICE ANSWERS
1
Legal terms
(a)
The doctrine of binding precedent, or stare decisis, provides that in determining any case, where the facts of
the case are materially the same as in a previous case heard by a superior (or sometimes equal) court, then
the court will be bound by any proposition of law which formed part of the ratio decidendi of that previous
case. For example, decisions of the Magistrates’ Courts and County Courts are not binding on anyone but the
courts are bound by decisions of the High Court, Court of Appeal and Supreme Court. The purpose of the
doctrine is to provide coherency, consistency and, therefore, predictability and fairness in the development
of case law. A comprehensive, consistent and objective system of reporting of cases is necessary for the
doctrine to operate, as this enables lawyers to have access to previous relevant cases.
Only a proposition of law, as opposed to a statement of fact, will be binding. The ratio decidendi of a case
has been defined as ‘any rule of law, express or implied, treated by a judge as a necessary step in reaching
his conclusion, having regard to the line of reasoning adopted by him, or a necessary part of his direction to
the .jury’ (Cross). The ratio decidendi is often difficult to identify and should be contrasted with obiter dicta
which might be propositions of law which do not form part of the basis for the decision or statements based
on hypothetical facts rather than the actual facts before the court. Obiter dicta are of persuasive authority
only and do not bind later courts. This means that they may be taken into account, but need not necessarily
be followed.
It is not always easy to distinguish between the ratio decidendi and the obiter dicta. Judges do not always
make clear in their comments whether a particular statement or conclusion is ‘ratio’ or ‘obiter’. Indeed, in
a case heard by more than one judge, each judge may provide a different ratio decidendi in support of a
common decision.
(b)
When a case is decided, the principle underlying that decision becomes a precedent. In later cases judges
will look to that precedent and may be bound to make their decisions in accordance with the doctrine of
judicial precedent. In certain circumstances, however, a judge may not wish to follow an earlier decision and
it may be open to him to reverse, overrule or distinguish the precedent.
(i)
Once a decision has been reached in a case by the court of first instance (the court where the case was
originally heard), the party against whom the court’s finding is reached may decide, or be given leave,
to appeal against the decision. If the appellate court decides that the original decision was incorrect, it
is said to ‘reverse’ the original decision. The original decision cannot subsequently form a precedent.
For example, where the Court of Appeal reverses a decision of the High Court, the first decision cannot
be a precedent but the reversed decision becomes a precedent.
(ii)
Following the example given above, if the first decision (that reached in the High Court) had been
reached by following precedent, then in reversing that decision, the Court of Appeal also ‘overrules’
that earlier precedent which formed the ratio decidendi. It can be seen that overruling involves an
earlier case, rather than a case which is the subject of an appeal. Higher courts may overrule the
decisions of lower courts, depriving those earlier decisions of their precedent status.
When a decision is overruled, the law is changed with retrospective effect. Judges are usually cautious
before overruling a long-standing precedent, but this is sometimes necessary, for example where what is
acceptable within a particular society changes.
For a precedent to be followed, the facts of the previous case and the case under consideration must be
materially the same. To the extent that there are significant differences in the material facts between the two
cases, the previous case may be ‘distinguished’ and therefore not followed.
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PRACTICE ANSWERS
2
Adam
(a)
Advertisement. In the law of contract an offer is a definite promise to another to be bound on specific terms.
Only an offer made with the intention that it shall become binding when accepted may be converted into
a contract by acceptance. An offer can be made to a particular person or persons or to the public at large.
An invitation to treat, by contrast, is an indication that someone is prepared to receive offers with the view
to forming a binding contract. An invitation to treat is not capable of being accepted so as to form a legally
binding contract.
Case law has established a number of accepted principles which apply to determine whether something is
an offer or merely an invitation to treat. As a general rule, an advertisement is not of itself an offer capable
of acceptance but is usually regarded as an attempt to induce offers and therefore is an invitation to treat
{Partridge v Crittenden). Similarly, the circulation of a price list also constitutes an invitation to treat. In limited
circumstances, an advertisement may constitute an offer as in Carlill v Carbolic Smoke Ball Co, where the
words of the advertisement were very clear and precise and were held to be an offer to the world at large,
capable of being accepted by anyone fulfilling the necessary conditions.
Adam’s advertisement may be regarded as an offer rather than an invitation to treat, owing to the very clear
and categorical language used (following Carlill’s case). His advertisement is ‘a serious offer’, clearly stating
the price and open to acceptance by the first person to respond.
(b)
There is a general rule in the law of contract that acceptance must be express (oral or written) or implied and
must be communicated to the offeror before it can be effective, unless the offeror expressly waives the need
for communication {Carlill’s case). The offeror may stipulate the exact means of communication in which
case only compliance with his or her terms will suffice.
The postal rule provides an exception to this. The postal rule provides that where the use of the post is in
the contemplation of both parties and the acceptance is correctly put in the post, then acceptance will be
valid once posted, whether or not the offeror actually receives the letter: Adams v Lindsell. Whether the use
of post was in the contemplation of the parties may be deduced from the circumstances, for example if the
offer was itself made by post {Household Fire and Carriage Accident Insurance Co v Grant).
In this case it is clearly not appropriate for acceptance to be made by post. The offer is valid for one day only
and the car will be sold to the ‘first person who accepts it’. It is implicit that a more immediate communication
of acceptance was required. Ben has not entered into a binding contract with Adam.
(c)
Acceptance must be unqualified agreement to the terms of the offer. Where the ‘acceptance’ actually
introduces some new term it constitutes a counter-offer. A counter-offer operates to reject the original offer
and is itself open to acceptance or rejection by the original offeror {Hyde v Wrench).
In purporting to accept Adam’s offer contained in the advertisement, Carol is altering the terms by seeking
to pay by cheque rather than cash. The offer clearly requires payment in cash therefore Carol has made a
counter-offer that Adam is free to accept or reject.
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December 2014 Examinations
Paper F4
PRACTICE ANSWERS
3
Emma and Sidney
(a)
There is a clear breach of contract by Sidney in his use of paint containing lead in some of Emma’s offices. As
a result, Emma may sue for and recover damages for breach from Sidney.
The type and measure of damages awarded by the court will be such as are intended to restore the party
who has suffered loss to the same position as he or she would have been in if the contract had been properly
performed and no breach had occurred. Damages will not be punitive nor put the injured party in a better
position than he or she would have been in the event of there being no breach.
It is a fundamental principle in the law relating to damages that damage or loss which is considered to be
too remote cannot be recovered. Furthermore, the court will also assess the measure of damages.
With regard to remoteness of damage, the case of Hadley v Baxendale established that damages may only
be awarded in respect of losses which arise naturally, in the usual course of things, from the breach and/or
losses which arise in a manner which would have been in the reasonable contemplation of the parties at
the time the contract was made as a probable consequence of the breach. In that case, the claimant was
not entitled to damages for loss of profits which arose as a result of a delay in the repair of some equipment
needed to operate his business.
In Victoria Laundry (Windsor) v Newman Industries, failure to deliver certain goods to the claimant meant
that he lost ordinary business profits and additional profits from another contract which, as a result, he
was prevented from entering into. The defendant was not aware of the second contract. The claimant was
entitled to recover for loss of normal earnings, but not the additional profits.
It follows that a loss outside the normal course of events may only be recovered if the exceptional
circumstances surrounding the loss are within the defaulting party’s actual or constructive knowledge.
Sidney and Emma
Emma is claiming financial loss, ie loss of earnings arising as a result of her illness caused by an allergic
reaction to lead. Sidney was not aware of her allergy, nor can it be said to be a probable consequence of
the breach which ought reasonably to have been in the contemplation of both parties at the time of the
contract was made. Clearly it was not something which would arise in the normal course of events either.
As a result, a court is liable to consider that Emma’s loss of earnings is too remote (for an award of damages
to be made in respect of it).
(b)
Specific performance is an equitable remedy, entirely within the discretion of the court, which may be
awarded where the common law remedy of damages is inadequate or inappropriate (such as where there
has been a breach of a contract to supply land or goods which are unique).
The court is unlikely to grant an order of specific performance where performance is required to be made
over a period of time and the court is unable to supervise or ensure that the defendant complies fully
with the order. A court is, therefore, unlikely to order specific performance of a contract of employment
or personal services or a contract for services such as building works. The court will make exceptions in
this latter instance where, for example, the redecoration work required is clearly defined, the claimant is in
possession of the relevant land and where damages would be inadequate.
Sidney and Emma
In this case there has been a clear breach of contract in Sidney’s failure to prepare the woodwork properly,
and Emma is entitled to claim for damages as a result of that breach. It does not appear that this remedy of
damages is in any way inappropriate or inadequate, those criteria applied by the courts. The court would be
unlikely to order specific performance because of its inability to supervise due performance. Consequently,
Emma would appear to be restricted to her remedy in damages which could include a sum in respect of her
losses in needing to contract with another decorator to re-do the work.
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PRACTICE ANSWERS
4
Employment
(a)
An employee is someone employed by his or her employer under the terms of a formal contract of service
(or ‘employment contract’). An ‘independent contractor’ is a self-employed person who contracts to provide
services for another party but who does not enter into a contract of employment as an employee of that
other party. Sometimes the distinction between the two is very obvious, but not always. A number of tests
may be applied in order to distinguish between the two types of worker.
There are several reasons why the distinction between a contract of service and a contract for services is
important:
(b)
(i)
Legislation may offer employment protection to employees under a contract of service. This provides
for minimum periods of notice, remedies for unfair dismissal and for redundancy payments and health
and safety protection;
(ii)
The contribution rates payable under social security legislation differ as between the employed and
the self-employed, and there are also differences in entitlement to benefits and statutory sick pay;
(iii)
Deductions must be made by an employer for income tax under Schedule E from salary paid to
employees under a contract of service, whereas the self-employed are taxed under Schedule D and
are directly responsible to HM Revenue and Customs for all tax due;
(iv)
The employer may be vicariously liable for tortious acts committed by his employees during the
course of their employment, but such liability is severely restricted in the case of a contract for services;
(v)
Should the employer go into liquidation or become bankrupt, the employee under a contract of
service has preferential rights as a creditor for payment of outstanding salary and redundancy
payments, up to certain limits; and
(vi)
The implied rights and duties which apply in the employer/employee relationship under a contract
of service would not apply to the same degree to a contract for services.
In determining the nature of the employment relationship, the expressed intentions of the parties will not
necessarily be conclusive ( Ferguson v John Dawson & Partners 1976 ). The courts will look at the reality of
the situation rather than at the expressed intentions of the parties. The courts have generally applied one or
more of three tests - of control, integration and economic reality.
The control test asks whether the employer has control over the way in which the employee performs
his duties. In Mersey Docks & Harbour Board v Coggins & Griffiths (Liverpool) Ltd, a driver of a crane could
be instructed by the employer what to do but not how to do his work and it was held that he was an
independent contractor since (inter alia) the ‘employer’ lacked sufficient control properly to be called an
employer.
The integration test applies where the employee has such a degree of skill that he cannot be ‘controlled’ in
the performance of his duties and considers whether he was appointed and assigned to his duties by the
employer, ie did he become an integral part of the employer’s business organisation or did his work remain
outside of and merely accessory to it? Thus in Cassidy v Ministry of Health, it was held that a skilled surgeon
was the employee of the Ministry of Health since, although the Ministry could not possibly control the doctor
in his medical work, it (and not the patient) had selected him and integrated him into the organisation.
The economic reality or ‘multiple’ test asks whether the employee is working on his own account. Here
the court will consider all relevant factors including the employer’s right to appoint and dismiss, the basis on
which payment is made, whether tax and social security contributions are deducted, who provides the tools
and equipment and the number of ‘employers’ (RMC (S.E.) v Ministry of Pensions and Nl 1968). The courts
will also consider whether the employee is entitled to delegate his obligations (in which case there is no
contract of employment), whether he is restricted in his place of work, obliged to work and whether holidays
and hours of work are agreed {O’Kelly v Trusthouse Forte pic 1983).
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December 2014 Examinations
Paper F4
PRACTICE ANSWERS
5
Company names
The name of a company must be specified in the company’s constitution and serves to identify the company,
distinguishing it from any other company. The registrar of companies has statutory powers of control over the
choice of names in order to ensure that they comply with both statutory and common law restrictions and
requirements. These apply both on the initial registration of a company by its promoters and on any subsequent
change of name by the company.
If the company is a public company, the name must end with the words ‘public limited company’ or ‘plc’. If it is
a private limited company, it must end with the word ‘limited’ or ‘ltd’ (except in the case of private companies
limited by guarantee and companies licensed to do so before 25 February 1982 where the word ‘limited’ may
be omitted if certain conditions are satisfied). Appropriate Welsh wording may be used by companies having a
registered office in Wales.
A company cannot share the name of any existing company which appears in the statutory index at the Companies
Registry. Nor can a company bear a name which, in the registrar’s opinion, is offensive, sensitive or if it constitutes
a criminal offence or if it suggests a connection with the government or a local authority. Words such as ‘British’ or
‘National’ will only be permitted if the nature and size of the company is appropriate. A name which suggests some
professional expertise will be permitted only if that expertise is in the company and appropriate professional
bodies have no objection.
Written application can be made to the Secretary of State to approve proposed names in advance. The Secretary
of State can compel a company to change its name if it is the same as or, in the registrar’s opinion, too like the
name of another company which is or should have been on the register at the time or if misleading information
was given to secure registration. Likewise he can require a change of name where the name gives so misleading
an indication of the company’s activities as to be likely to cause harm to the public. A company can elect to
change its name by passing a special resolution to that effect.
Under the Companies Act 2006, companies have the right to appeal to the Company Names Adjudicators if
they feel that another company’s name is too similar. The Adjudicators will look into the case and make a decision
which is binding on both parties. This decision may be to compel a name change (including in some cases the
determination of what the new name will be) or to do nothing. If a party is unhappy with the decision they may
appeal it in court.
At common law, a company can be prevented from using its registered name if the use of that name causes the
company’s goods or services to be confused with those of another company. The court may grant an injunction
in a ‘passing-off’ action brought by that other company and may also force the defendant company to change
its name (Ewing v Buttercup Margarine Co Ltd). In this case, a sole trader was prevented from using the business
name ‘The Buttercup Dairy Co’ in the north of England because of confusion with the business in the London area
of Buttercup Margarine Co Ltd. Similarity of name is not sufficient. There must be the likelihood of confusion based
on the company’s similar businesses.
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PRACTICE ANSWERS
6
Debentures and charges
(a)
A debenture is a written acknowledgement of debt, which may be any document which states the terms
on which a company has borrowed money. A debenture may create a charge over the company’s assets as
security for the loan.
A debenture is usually a formal printed legal document. A single debenture is issued to a single lender but
debentures may be issued as a series to different lenders. In this case each lender receives a debenture in
identical form in respect of his loan and the lenders’ rights rank pari passu in their right to repayment and in
any security given to them. Public companies only may issue debenture stock to members of the public by
means of a prospectus.
Secured debenture holders may enforce their security by taking possession of the charged assets and selling
them (in the case of a legal charge) or appointing a receiver. These rights will normally arise from the
express provisions of the relevant charge or, in certain circumstances, may be awarded by court order.
(b)
A fixed or specific charge attaches to the relevant asset as soon as the charge is created, for example a
charge over named property given as security for a loan to the owner of the property. If the company does
need to dispose of the charged asset, it will repay the secured debt out of the sale proceeds so that the
charge is discharged.
Any type of charge gives to the holder a priority claim to payment of what is owing to him out of the value
of the property which is subject to that charge. The ranking of that priority will depend on the types and
times of creation of all relevant charges.
A fixed charge may be legal or equitable and over land or other company assets, from buildings and
chattels to book debts. It is not appropriate to give a fixed charge against inventory in trade as the company
would then be legally prevented from dealing with it without approval. In the event of default, the lender
can appoint a receiver who may sell the asset charged in order to recover the debt. If the proceeds of sale
exceed the debt, the excess goes towards paying off other debts. If they are less, then the debenture holder
becomes an unsecured creditor in respect of the excess amount of debt outstanding.
The main advantage enjoyed by a holder of a fixed charge as opposed to a floating charge is that a fixed
charge confers immediate rights over identified assets. It is therefore more certain as to which of the
charged assets are subject to the charge and gives an immediate right of sale over them. A fixed charge
will rank in priority over the floating charge even if it was created after the floating charge since it attaches
to the property at the time of creation rather than at the time of crystallisation. (Once a floating charge
has crystallised it becomes a fixed charge and a fixed charge created subsequently will not rank in priority
to it.) The one exception to this general rule is where a floating charge contains an express prohibition on
the creation of subsequent fixed charges (a negative pledge clause) and a subsequent lender has actual
notice of such prohibition.
(c)
No particular form of wording is required to create a floating charge. Where a charge is created over certain
assets but the company retains the right to deal with those assets during the ordinary course of business
until the charge crystallises, then that charge is a floating charge. On crystallisation, a floating charge is
converted into a fixed charge on the assets owned by the company at the time of crystallisation.
Crystallisation will occur on the happening of any of the events specified in the charge, such as the
liquidation of the company or the cessation of its business
Whether or not the parties label a charge as ‘fixed’ or ‘floating’ will not be conclusive but the general rule will
be applied. For example a charge which covers present and future book debts, whatever it is called by the
parties, will be floating if the company is allowed to deal with money collected from accounts receivable
without notifying the lender and fixed if the money must be paid to the lender, for example in reduction of
an overdraft (Siebe Gorman & Co Ltd v Barclays Bank Ltd 1979).
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December 2014 Examinations
Paper F4
PRACTICE ANSWERS
7
Ken and Doris
The company will be put into liquidation as a members’ voluntary winding up, since it is apparently still solvent.
The procedure for this is outlined below, but before it can be adopted there are two specific issues which must
be dealt with.
Doris’ position in the company
Doris is currently the sole shareholder of the company. The company has become a single member private
company. The company does not need to re-register as a result of this, but the register of members should be
amended to just show her as the sole shareholder.
All private companies must have at least one director, and may have a company secretary. If there is one, that
person cannot also be the sole director. This is the position in which Doris finds herself after the death of her
husband. The solution, however, is relatively straightforward.
Doris must resign her post as secretary and either appoint another person to that position or, as private companies
are not required by law to have a company secretary, operate the company without one. She would thus become
a sole director who is not secretary, which is permissible.
Procedure for winding up
After these problems have been rectified, the procedure is as follows.
The company must either hold a general meeting at which a special resolution is passed resolving that it
should be wound up voluntarily, or pass a written resolution to the same effect.
Once the resolution to wind up has been passed, the company must, within 15 days, give notice of the resolution
to the registrar. The winding up is deemed to have commenced at the time of the passing of the resolution for
voluntary winding up.
In the five weeks before the passing of the resolution mentioned, the directors, or a majority of them, must make
a statutory declaration of solvency at a meeting of the directors.
The declaration is to the effect that they have made full inquiry into the company’s affairs and have formed the
opinion that the company will be able to pay its debts in full (together with interest) within a period of 12 months
from the commencement of winding up.
The declaration must be delivered to the registrar of companies within 15 days of the passing of the resolution.
If the declaration is not delivered within 15 days, the company and every officer in default are liable to a fine.
If a director makes a declaration without having reasonable grounds for his opinion that the company will be
able to pay its debts, he will be liable to imprisonment or a fine or both. If the company does not in fact pay its
debts within the period specified in the declaration it will be presumed that the declaration was made without
reasonable grounds.
In a members’ voluntary winding up, the company in general meeting can appoint one or more liquidators.
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PRACTICE ANSWERS
8
Money laundering
(a)
Money laundering is the term given to attempts to make the proceeds of crime appear respectable. It can
refer to any process by which criminals seek to hide the source and ownership of the proceeds of criminal
activities, enabling them to keep control over such proceeds and, ultimately, to provide an apparently
legitimate cover for their sources of income.
The money laundering process aims to disguise the source of the proceeds so that the criminal can remain
free from suspicion as to its source. The process usually involves three phases:
(i)
Placement: this is the actual disposal of the proceeds of the initial illegal activity, usually into an
apparently legitimate activity;
(ii)
Layering: this involves the transfer of money from business to business, or one geographical location
to another, in order to conceal the original source;
(iii)
Integration: having been layered, the money takes on the appearance of coming from a legitimate
source and, therefore, of being legitimate funds.
Money laundering was recognised as a criminal offence in the United Kingdom under the Drug Trafficking
Offences Act 1986. It is now regulated by the Proceeds of Crime Act 2002. Other relevant legislation includes
certain anti-terrorist legislation, in particular the Terrorism Act 2000 and the Anti-Terrorism, Crime and
Security Act 2001.
(b)
The Proceeds of Crime Act 2002 identifies three categories of criminal offence: laundering, failure to report,
and tipping off.
(i)
Laundering: this involves the acquisition, possession or use of the proceeds of criminal conduct, or
assisting another to retain the proceeds of criminal conduct, and concealing the proceeds of criminal
activity. Under the Act, it is an offence to conceal, disguise, convert, transfer or remove criminal
property from the United Kingdom. ‘Concealing or disguising criminal property includes concealing or
disguising its nature, source, location, disposition, movement or ownership or any rights with respect
to it.’
Criminal property is defined as property which the alleged offender knows (or suspects) to constitute
or represent benefit from any criminal conduct. It includes, by way of example, proceeds of tax evasion,
any benefit obtained through bribery and corruption and benefits obtained through the operation of
a criminal cartel.
The offence of knowingly assisting in the laundering of criminal funds is punishable by imprisonment
up to a maximum of fourteen years and/or a fine.
(ii)
Failure to report: this is failure to disclose knowledge or suspicion of money laundering. Under the
Act it is an offence for a person who ‘knows or suspects ... that another person is engaged in money
laundering, where the information or other matter on which his knowledge or suspicion is based ...
came to him in the course of a business in the regulated sector’ not to report the fact to the appropriate
authority. The offence only relates to individuals, such as accountants, who are acting in the course of
business. Any individual who is covered by the section is required to make disclosure to the nominated
money laundering reporting officer within their organisation. Alternatively, disclosure may be made
directly to the Serious Organised Crime Agency (SOCA).
The offence of failure to report is punishable by imprisonment up to a maximum of five years and/or
a fine.
(iii)
Tipping off: This involves disclosing information to any person if disclosure may prejudice an
investigation into drug trafficking, drug money laundering, terrorist-related activities or laundering the
proceeds of criminal conduct. It therefore covers the situation where an accountant informs a client
that a report has been submitted to the SOCA.
The offence of tipping off is punishable by imprisonment up to a maximum of five years and/or a fine.
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145
TEST QUESTIONS
Chapter 1
Q UESTION 1
The Human Rights Act of 1998 has had an affect on the application of English law. Where a judge is faced with an
incompatibility between English law and European law, which of the following would be the correct course of
action for the judge to take?
A
B
C
D
make a decision in accordance with the European law
ignore the European law and follow established English precedence
issue a declaration of incompatibility and refer the position back to the government
report the incompatibility to the European Parliament
(2 marks)
Q UESTION 2
There are three main sources of English law. Which of the following is not one of those three sources?
A
B
C
D
legislation / statute
case law
jude law
custom
(1 mark)
Q UESTION 3
Which part of a Court’s decision is binding on later similar cases?
A
B
C
D
obiter dicta
ratio decidendi
ultra vires
stare decisis
(1 mark)
Q UESTION 4
In a criminal case being tried in Court, what is the standard of proof required to be shown by the prosecution?
A
B
C
D
on the balance of certainty
beyond reasonable doubt
on the balance of probability
beyond all doubt
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Test Questions
Chapter 2
Q UESTION 1
In the context of the English Legal System, which of the following Courts has only criminal jurisdiction
A
B
C
D
High
Ecclesiastical
Crown
Magistrates
(1 mark)
Q UESTION 2
Coretta claims that Mubita owes her $1,000 as a result of breach of contract. In which Court will Coretta commence
her action against Mubita?
A
B
C
D
Magistrates
International Court of Justice
County
Supreme
(1 mark)
Q UESTION 3
In the context of judicial precedent, which of the following statements is correct when referring to obiter dictum
A
B
C
D
it is binding on all Courts hearing a similar case in the future
it is binding only on inferior Courts hearing a similar case in the future
it is binding on Courts of the same standing hearing a similar case in the future
it is not binding on any Courts in the future
(2 marks)
Q UESTION 4
Is the following statement true or is it false? “Magistrates must have a qualification in law”
A
B
true
false
(1 mark)
Q UESTION 5
Which of the following is not one of the three divisions of the High Court?
A
B
C
D
Third Division
Family Division
Queens Bench Division
Chancery Division
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(1 mark)
December 2014 Examinations
Paper F4
Test Questions
Chapter 3
Q UESTION 1
In the context of interpretation of statute, which of the following is not a rule?
A
B
C
D
mischief rule
golden rule
innocent-until-proved-guilty rule
purposive rule
(2 marks)
Q UESTION 2
The Courts will always follow the literal rule. Is that statement
A
B
true
false
(1 mark)
Q UESTION 3
In the context of the statutory rules of interpretation, which of the following is not seen to be part of the purposive
rule (also referred to as “the plain meaning rule”)?
A
B
C
D
in pari delicto
noscitur a sociis
expressio unius est exclusio alterius
ejusdem generis
(2 marks)
Q UESTION 4
In the context of interpretation of statute, which of the following rules requires judges to consider the wrong that
the statute was intending to prevent?
A
B
C
D
golden
mischief
majority
literal
(1 mark)
Q UESTION 5
Which of the following is not an example of delegated legislation?
A
B
C
D
statutory instruments
orders in council
bye-laws
case stated
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(2 marks)
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Test Questions
Chapter 4
Q UESTION 1
Which words most appropriately complete the following definition? “An exclusion clause is a clause in a contract
which purports to ….......... liability altogether or to …......... it by limiting damages”
A
B
C
D
negate, amend
restrict, amend
exclude, restrict
amend, exclude
(2 marks)
Q UESTION 2
Which of the following is not an offer capable of acceptance in English law?
A
B
C
D
an offer to pay an additional £100 for the purchase of a pet animal if the animal is lucky
an offer to no-one in particular to pay £100 for the safe return of your lost dog
an advert in a newspaper to pay £100 to the first person to swim across the Bosphorus
an offer made by a duly-appointed agent on behalf of a principal
(2 marks)
Q UESTION 3
A contract is a legally enforceable agreement.
Which of the following statements relating to contractual agreements is true?
A
B
C
D
they must be in writing
they may be created by the conduct of two parties
they must be evidenced in writing
adverts are never taken as being offers
(2 marks)
Q UESTION 4
With reference to the word “consideration” the Courts have established what principle?
A
B
C
D
it must be adequate but need not be sufficient
it must be sufficient but need not be adequate
it must be both adequate and sufficient
it must represent fair value
(2 marks)
Q UESTION 5
Of which of the following terms does breach not allow the possibility of the aggrieved party terminating the
contract?
A
B
C
warranty
innominate
condition
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(1 mark)
December 2014 Examinations
Paper F4
Test Questions
Chapter 5
Q UESTION 1
Which of the following remedies is a common law remedy?
A
B
C
D
damages
rescission
specific performance
injunction
(1 mark)
Q UESTION 2
The main objective of an award of damages in a case of breach of contract is which of the following?
A
B
C
D
to punish the breacher
to restore the contracting parties to their original positions
to compensate the innocent party
to demonstrate to others that it is wrong to breach a contract
(2 marks)
Q UESTION 3
Breach of which of the following terms in a contract will allow the injured party to claim damages, but the contract
will still survive?
A
B
C
D
condition
michaelmas
warranty
half
(1 mark)
Q UESTION 4
Which of the following is not a common law remedy in the event of breach of contract?
A
B
C
D
action for price
quantum meruit
damages
in pari delicto
(1 mark)
Q UESTION 5
The expression “remoteness of damage” is applied where a defendant is seeking to restrict the extent of damages
for which they may be liable. The Courts will limit an award of damages to an amount which “could have been in
the …........... of ... ….............. man”
Complete the sentence in the most appropriate way.
A
B
C
D
foresight, an ordinary
contemplation, a reasonable
contemplation, an ordinary
foresight, a reasonable
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(2 marks)
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December 2014 Examinations
Test Questions
Chapter 6
Q UESTION 1
In a situation of the Court establishing that a plaintiff has contributed by their actions to the damage which they
have suffered (contributory negligence) the maximum amount by which the Court may reduce the extent of the
award of damages is …..
A
B
C
D
10%
50%
75%
100%
(2 marks)
Q UESTION 2
In a case of alleged negligence, an auditor has been found to owe a duty of care to whom?
A
B
C
D
the client company
all the members of the company, individually and collectively
anybody relying on the auditors’ report
the creditors, including debenture holders, of the company
(2 marks)
Q UESTION 3
In relation to the law of negligence, a finding of volenti non fit injuria arises from the action of which of the
following?
A
B
C
D
the respondent
the Court
an unforeseen external event unrelated to the specific case
the claimant
(2 marks)
Q UESTION 4
When Annabel was trapped in a public toilet facility because the lock mechanism was faulty, rather than wait for
help to arrive instead she tried to climb out of the window. Unfortunately, she slipped and broke her leg. This injury
is cited as an example of which of the following?
A
B
C
D
mens rea
ejusdem generis
contributory negligence
gross incompetence
(2 marks)
Q UESTION 5
In an incident at work, an employee sustained an eye injury from a welding spark. He was not wearing safety
glasses even though this was required by his contract of employment. Which of the following best describes this
incident?
A
B
C
volenti non fit injuria
scienti fit injuria
res ipsa loquitur
D obiter dictum
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December 2014 Examinations
Paper F4
Test Questions
Chapter 7
Q UESTION 1
In the context of employment law, which of the following is an automatically fair ground for dismissing an
employee?
A
B
C
D
unofficial industrial action
redundancy
refusal to join a trade union
legal prohibition
(2 marks)
Q UESTION 2
If my contract of employment states that I am employed in Belfast and my employer tells me that I shall have to
relocate to London, I believe this to be an example of....
A
B
C
D
unfair dismissal
wrongful dismissal
constructive dismissal
summary dismissal
(1 mark)
Q UESTION 3
Which of the following is not used by the Courts as a test for establishing whether a person is an employee or an
independent contractor?
A
B
C
D
control test
integration test
subordination test
economic reality test
(2 marks)
Q UESTION 4
The Employment Rights Act (ERA) 1996 identifies various remedies in relation to unfair dismissals. Which of the
following is not a potential remedy for unfair dismissal under the Act?
A
B
C
re-instatement
re-engagement
re-employment
(1 mark)
Q UESTION 5
When determining whether a person is an employee or an independent sub-contractor, which factor will the
Court not take into account?
A
B
C
D
the person uses their own tools and equipment
the person regularly plays on the same 5-a-side football team as the chief executive
the person is under the control of the “employer”
the person is able to accept or reject work
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(1 mark)
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Test Questions
Chapter 8
Q UESTION 1
In the context of the law of agency, an agent will not be liable for a contract in which of the following situations?
A
B
C
D
where the agent fails to disclose that they are acting as agent
where the agent intends to take the benefit of the contract for himself and fails to disclose that they are
acting as agent
where the agent acts on his own behalf but does identify that he is an agent
where an agent’s authority has been terminated but the third party does not know of that termination
(2 marks)
Q UESTION 2
An agency relationship may be formed in which of the following ways?
A
B
C
D
remediation
ratification
reprobation
restitution
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December 2014 Examinations
Paper F4
Test Questions
Chapter 9
Q UESTION 1
In partnership with her civil partner Justina, Jasmine runs a shoe shop Jasmine’s Shoes. Which answer best describes
the extent of Jasmine’s liability in the event of the business having to close by reason of its debts?
A
B
C
D
limited to the extent of the fair value of the firm’s assets
limited to the extent of Jasmine’s personal guarantee to the bank
limited to the amount as yet unpaid by Justina
there is no limit to the extent of Jasmine’s liability
(2 marks)
Q UESTION 2
What words are missing from the following statement? “--- ----------- is the relationship that subsists between two
or more people carrying on business in common with a view of profit”
A
B
C
D
a marriage
an agency
a partnership
an agency
(1 mark)
Q UESTION 3
In a business carried on as a partnership, which of the following is an automatic ground for the dissolution of the
firm?
A
B
C
D
death
insanity
inability to continue at a profit
inability to perform a partner’s share of the duties
(2 marks)
Q UESTION 4
The expression “partnership at will” describes the situation where a partnership is dissolvable by
A
B
C
D
a partner declaring herself bankrupt
a partner indicating in their will that the partnership shall continue after that partner’s death
a partner giving notice to all the other partners that the firm is dissolved
a majority of the partners voting to remove another partner
(2 marks)
Q UESTION 5
In the context of a limited liability partnership, which of the following statements is false?
A
B
C
D
it must have at least two members
there is no need for the financial statements to be filed with the Registrar of Companies
there shall be at least one member with unlimited liability
“Limited” shall be the last word in the firm’s name
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(2 marks)
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Test Questions
Chapter 10
Q UESTION 1
Jasmine runs her own shoe shop Jasmine’s Shoes Limited. Which answer best describes the extent of Jasmine’s
liability in the event of the business having to close by reason of its debts?
A
B
C
D
limited to the extent of the fair value of the assets
limited to the extent of the business debts outstanding for more than 6 months
limited to the amount as yet unpaid on any shares held by Jasmine
there is no limit to the extent of Jasmine’s liability
(2 marks)
Q UESTION 2
The abbreviation Ltd at the end of a business name indicates that the business is which of the following types of
organisation?
A
B
C
D
a limited partnership
a limited liability partnership
a private company
a public company
(2 marks)
Q UESTION 3
Which of the following options is true? A public company is allowed to offer to the public for subscription or
purchase
A
B
C
D
only equity shares
only fixed charge debentures
only floating charge debentures
Both shares and debentures
(2 marks)
Q UESTION 4
When a company has in issue some partly paid equity shares, the amount unpaid is a reserve liability of which of
the following?
A
B
C
D
the debenture holders
the liquidator
the company
the directors
(2 marks)
Q UESTION 5
The case Salomon v Salomon & Co Ltd is the case that firmly established the principle of
A
B
C
D
a company is a separate legal entity distinct from its members
privity of contract whereby only a party to a contract can sue under that contract
promissory estoppel
the wishes of the majority shall prevail in a partnership dispute
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(2 marks)
Paper F4
December 2014 Examinations
Test Questions
Chapter 11
Q UESTION 1
Which expression describes the situation where the Courts declare that the actions of a director lie beyond that
director’s powers
A
in extremis deo
B
ultra vires
C
in pari delicto
D
quocunque jeceris stabit
(2 marks)
Q UESTION 2
Which of the following options is not an appropriate qualification for the secretary of a public company
A
B
C
D
anyone that the directors think can do the job
a person with an equivalent foreign qualification
a public limited company
none of the above
(2 marks)
Q UESTION 3
Which of the following is not a right enjoyed by a public company’s auditor?
A
B
C
D
right to automatic re-election each year unless a change of auditors is proposed
right to call a general meeting in the situation where the auditor has resigned “with circumstances”, has
asked the directors to convene a meeting, and the directors have failed to do so
right to attend, speak and be heard at all company general meetings
right to receive notice of all company general meetings
(2 marks)
Q UESTION 4
When fulfilling their statutory duty to promote the success of their company, directors should consider many
matters. Which in the following list is a matter not specifically referred to in legislation?
A
B
C
D
impact of the company on the local community
maintenance of high standards of business probity
preferential treatment of the institutional investors
impact of the company on the environment
(2 marks)
Q UESTION 5
The duties of a private company secretary are prescribed by which authority?
A
B
C
D
not applicable – a private company is not required to have a company secretary
the board of directors
the company’s constitution
law
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(2 marks)
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Test Questions
Chapter 12
Q UESTION 1
What type of resolution is required to remove an auditor from office between general meetings of a private
company?
A
B
C
D
special
written
ordinary with special notice
none of the above – private companies need neither auditors nor general meetings
(2 marks)
Q UESTION 2
An annual general meeting of a public company may be held with less than the required number of days notice
so long as the required percentage of members vote in favour of short notice. What percentage of members’ votes
shall be cast in favour in order that an annual general meeting shall be validly held even without the “normal”
notice period?
A
B
C
D
>50%
75%
95%
100%
(2 marks)
Q UESTION 3
In the context of a general meeting of a company, which of the following resolutions always needs a majority of
not less than 75% voting in favour to be passed?
A
B
C
D
a resolution concerning ordinary business
an ordinary resolution with special notice
a written resolution to remove a director from office
aa special resolution
(2 marks)
Q UESTION 4
What is the latest date that a public company, incorporated on 1 May 2010, could hold its second annual general
meeting?
A
B
C
D
31 October, 2011
31 January, 2013
31 December, 2012
30 April, 2012
(1 mark)
Q UESTION 5
Within what period of time must a public company hold an annual general meeting after the previous annual
general meeting
A
B
C
D
18 months
15 months
12 months
no time limit
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December 2014 Examinations
Paper F4
Test Questions
Chapter 13
Q UESTION 1
Which expression describes the fact that debentures in a series rank equally amongst themselves?
A
B
C
D
dieu et mon droit
honi soit qui mal y pense
pari passu inter se
quocunque jeceris stabit
(2 marks)
Q UESTION 2
A clause within an agreement to borrow money secured by way of floating charge is sometimes used and has the
effect of protecting the lender from the adverse effects of a subsequent debenture secured by way of fixed charge
gaining a preferential entitlement to the secured assets. Such a protective clause is called what?
A
B
C
D
negative liability clause
negative polish clause
negative promissory clause
negative pledge clause
(2 marks)
Q UESTION 3
In order of repayment in a liquidation situation, rank the following in sequence starting with the first in priority
down to the last. The liquidation commenced on 8 February, 2014
1
2
3
4
£0.50 ordinary shares issued on incorporation
3.75% fixed charge debentures issued on 1 January, 2010
4.25% cumulative redeemable preference shares issued on 10 January, 2014
3.9% floating charge debentures issued on 31 December, 2008
A
B
C
D
4, 2, 3, 1
2, 4, 3, 1
1, 4, 2, 3
1, 2, 4, 3
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(2 marks)
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Test Questions
Chapter 14
Q UESTION 1
A creditors’ voluntary winding-up is commenced typically because the company is unable to pay its debts. Which
type of resolution starts such a liquidation process for a public company?
A
B
C
D
a board resolution
an ordinary resolution passed by the members
a special resolution passed by the members
a resolution passed by the creditors
(2 marks)
Q UESTION 2
In a creditors’ voluntary winding-up, the liquidator is appointed by which of the following?
A
B
C
D
the debenture holders
the creditors
the Secretary of State
the Court
(2 marks)
Q UESTION 3
Which of the following is not a ground for the Court to grant a compulsory winding-up order of a private company?
A
B
C
D
the company is unable to pay its debts as they fall due
the number of members has fallen below the statutory minimum
the company has failed to obtain a trading certificate within 12 months of incorporation
the company has passed a special resolution
(2 marks)
Q UESTION 4
In a liquidation, the holder of partly paid shares will have to pay the amount as yet unpaid on those shares. To
whom is that money payable?
A
B
C
D
the Court
the liquidator
the company
the bank
(2 marks)
Q UESTION 5
There are many ways in which an investor can hold an interest in a company. Which of the following investments
in a company will normally participate in the surplus remaining in a liquidation?
A
B
C
D
the holders of debentures secured by fixed charge
the holders of unsecured debentures
the holders of cumulative redeemable preference shares
the holders of ordinary shares
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December 2014 Examinations
Paper F4
Test Questions
Chapter 15
Q UESTION 1
Under the Bribery Act 2010 which of the following is not an offence?
A
B
C
D
accepting a bribe
paying a bribe
failing to apply appropriate procedures to protect employees from temptation
failing to respond to an email offering a bribe
(2 marks)
Q UESTION 2
Which of the following is not an appropriate description of information used in the context of insider dealing?
A
B
C
D
it shall be less than 6 months old
it shall relate to shares and securities of all UK registered companies
it shall be of a specific not a general nature
it shall be not in the public domain
(2 marks)
Q UESTION 3
Which of the following is not an offence under the Proceeds of Crime Act 2002 in the context of money laundering?
A
B
C
D
laundering
placement
integration
layering
(2 marks)
Q UESTION 4
Money laundering involves a number of phases in the overall procedure. Which two of the following are recognised
as phases in the money laundering procedure?
1
repatriation
2
integration
3
distribution
4
layering
A
B
C
D
1 and 2
1 and 3
2 and 4
3 and 4
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(2 marks)
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Test Questions
Chapter 16
Q UESTION 1
Which of the following reserves is classed as non-distributable in English company law?
A
B
C
D
provision for obsolete stock
capital redemption reserve
reserve for replacement of capital assets
retained earnings
(2 marks)
Q UESTION 2
According to English company law, the amount as yet unpaid on shares issued by a company is called a “reserve
liability”. Is this liability a liability of
A
B
C
D
the shareholders
the company
the directors
none of the above
(1 mark)
Q UESTION 3
Which of the following reserves is classed as a distributable reserve in English company law?
A
B
C
D
share premium account
revaluation reserve
capital redemption reserve
capital plant replacement reserve
(2 marks)
Q UESTION 4
Which of the following is not an allowable use of the share premium account?
A
B
C
D
provide for the premium payable on the redemption of 3% cumulative redeemable participating
preference shares
provide for the premium payable on the redemption of 4% unsecured convertible debentures
write off the preliminary and formation expenses of a company
finance the issue of £1 bonus shares credited as 95 pence paid to existing shareholders
(2 marks)
Q UESTION 5
Which of the following statements is correct when discussing the declaration of dividends on cumulative
preference shares?
A
B
C
D
no preference dividend is payable until all ordinary dividends have been paid
cumulative dividends are paid when there are profits available for distribution
arrears of cumulative dividends are paid out of capital with only the dividend relating to this year paid out
of profits
no preference dividend is paid until profit after tax reaches a percentage as specified within the company’s
articles
(2 marks)
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December 2014 Examinations
Test Answers
TEST ANSWERS
Chapter 1
1
C
2
C
3
B
4
B
Chapter 2
1
C
2
C
3
D
4
B
5
A
Chapter 3
1
C
2
B
3
A
4
B
5
D
Chapter 4
1
C
2
A
3
B
4
B
5
A
Chapter 5
1
A
2
C
3
C
4
D
5
C
Chapter 6
1
D
2
A
3
D
4
C
5
A
Chapter 7
1
A
2
C
3
C
4
C
5
B
Chapter 8
1
A
2
B
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Paper F4
161
162
December 2014 Examinations
Test Answers
Chapter 9
1
D
2
C
3
A
4
C
5
D
Chapter 10
1
C
2
C
3
D
4
C
5
A
Chapter 11
1
B
2
D
3
A
4
C
5
B
Chapter 12
1
C
2
D
3
D
4
C
5
B
Chapter 13
1
C
2
D
3
B
Chapter 14
1
C
2
B
3
C
4
B
5
D
Chapter 15
1
D
2
B
3
A
4
C
Chapter 16
1
B
2
B
3
D
4
D
5
B
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Paper F4