Law and Ethics
Northern Ireland
Sample Paper 3
Questions and Suggested Solutions
NOTES TO USERS ABOUT SAMPLE PAPERS
Sample papers are published by Accounting Technicians Ireland. They are intended to provide guidance
to students and their teachers regarding the style and type of question, and their suggested solutions, in
our examinations. They are not intended to provide an exhaustive list of all possible questions that may
be asked and both students and teachers alike are reminded to consult our published syllabus (see
www.AccountingTechniciansIreland.ie) for a comprehensive list of examinable topics.
There are often many possible approaches to the solution of questions in professional examinations. It
should not be assumed that the approach adopted in these solutions is the only correct approach,
particularly with discursive answers. Alternative answers will be marked on their own merits.
This publication is copyright 2014 and may not be reproduced without permission of Accounting
Technicians Ireland.
© Accounting Technicians Ireland, 2014.
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EXAM DURATION: THREE HOURS
INSTRUCTIONS TO CANDIDATES
Candidates must indicate clearly whether they are answering the paper in
accordance with the law and practice of Northern Ireland or the Republic of
Ireland.
In this examination paper the £ symbol may be understood and used by candidates
in Northern Ireland to indicate the UK pound sterling and the € symbol may be
understood by candidates in the Republic of Ireland to indicate the Euro.
Section A is a compulsory question and must be attempted.
Section B: answer ANY FOUR of the SIX questions.
Section C: answer ANY FOUR of the SIX questions.
If more than the required questions are answered in Section A and Section B, then
only the correct number of questions, in the order filed, will be corrected.
Candidates should allocate their time carefully.
Marks will be awarded for specific reference to sections of the Acts/Orders and
decided cases. Candidates are expected to answer the questions in their own
words in order to demonstrate their understanding of the points at issue. The
mere transcription of sections of the Acts/Orders, or the citing of references
therein, by itself, will not be regarded by the Examiner as a sufficient answer.
Answers should be illustrated with examples, where appropriate. Cite any relevant
authorities and/or statutory provisions to support your answers.
Question 1 begins on Page 2 overleaf.
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SECTION A
Compulsory Question
Cite any relevant authorities and/or statutory provisions to support your
answers
QUESTION 1
A. Discuss any FIVE provisions of the Combined Code on Corporate Governance.
(10 marks)
B. List any FOUR other sources of corporate governance in Northern Ireland.
(2 marks)
C. Define the offence of fraudulent trading and provide examples. Outline both the
civil actions and criminal penalties that may be imposed where the offence is
proven.
(8 marks)
Total 20 Marks
SECTION B
Answer ANY FOUR of the FIVE questions in this Section
Cite any relevant authorities and/or statutory provisions to support
your answers
QUESTION 2: DIRECTORS
A. Alex is one of the executive directors of Hamilton Hotels Ltd. Hamilton Hotels
recently acquired a property in Belfast that it plans to renovate and then
operate as their flagship hotel in Northern Ireland. At a recent shareholder
meeting it was discovered that the Belfast property was in fact owned by Alex’s
wife Kath, although he never mentioned his personal interest in the property to
any person involved in the company. Outline whether Alex has breached any of
his statutory duties as a company director, and the steps that he should have
been taken to ensure the validity of the contract.
(6.5 marks)
B. Outline any age requirements to become a company director and the
circumstances in which a director may be disqualified from office.
(3.5 marks)
Total 10 Marks
4
QUESTION 3: AUDITORS
Matt has been the auditor to Lyndon Construction Ltd for the past 15 years, and in
the past five years has failed to attend the company’s stock take, although he has
continued to sign-off on the company’s accounts. It has recently been discovered
that the directors have been falsifying the stock figures to make the company
appear more profitable and that Matt has been inadvertently signing-off on these
falsified account.
In relation to the auditor’s report:
A. What must the auditor state in their report?
(2 marks)
B. The auditor must carry out investigations for the preparation of their report in
order to form an opinion in relation to what?
(3 marks)
C. What rights does an auditor have for preparation of their report?
(2 marks)
D. In what circumstances can an auditor be convicted of a criminal offence?
(1 mark)
E. Determine whether Matt is liable for any loss sustained by the company.
(2 marks)
Total 10 Marks
QUESTION 4: CORPORATE FINANCE
A. Define what is meant by ‘share premium capital’
(2 marks)
B. Discuss the function of the share premium account and explain the purposes for
which monies in this account can be utilised.
(5 marks)
C. Assuming that a company incurred some financial loss after trading for a
number of years, and wanted to issue 500,000 £1 shares at a discount price of
£0.75 in order to increase their working capital, advise them (in brief) on the
feasibly of this transaction, and determine whether it is in accordance with
company law.
(3 marks)
Total 10 Marks
5
QUESTION 5: LIQUIDATION
State the function of the liquidator (2 marks) and discuss the powers of a company
liquidator (8 marks)
Total 10 Marks
QUESTION 6: PARTNERSHIP LAW
A. Ann and Patrick have operated an interior design business in partnership for the
past six years. Ann has recently decided to retire from the business due to ill
health and Brian has agreed to take over her share of the partnership. Explain
to Ann the steps that she is required to take on retirement to ensure that she is
no longer liable for the future debts of the partnership.
(8 marks)
B. List the order in which partnership debts are paid upon the dissolution of the
partnership.
(2 marks)
Total 10 Marks
QUESTION 7: VARIOUS TOPICS
A. Discuss the procedure that should be followed to effect an alteration of the
Articles of Association.
B. Explain the meaning of the term “issued share capital”.
(2.5 marks)
(2 marks)
C. List any THREE pieces of information that must be included in a company’s
annual return.
(3 marks)
D. List the different types of liquidation and outline the main differences.
(2.5 marks)
Total 10 Marks
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SECTION C
Answer ANY FOUR of the SIX questions in this Section
Cite any relevant authorities and/or statutory provisions to support your
answers
QUESTION 8: THE COURTS
Detail the original jurisdiction of the main civil courts in Northern Ireland (a
discussion of appellate jurisdiction of the civil courts is NOT required).
Total 10 Marks
QUESTION 9: CONTRACTUAL DISCHARGE
Define frustration and list and explain any SIX circumstances under which a
contract may be discharged by frustration.
Total 10 Marks
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QUESTION 10: EMPLOYMENT LAW
TechWorld Ltd sells customised computer software. Business has declined in recent
years and the company has decided that it will need to dismiss 10 of its 50
employees within the next six months. In this regard, advise the company in
relation to the following matters:
(a) The legal definition of redundancy.
(2 marks)
(b) The possible selection criteria of employees for redundancy and what criteria
would be deemed unfair.
(c) The amount of compensation payable.
(5 marks)
(3 marks)
Total 10 Marks
QUESTION 11: TORT LAW
In the context of negligence, explain the various factors that the Court will take into
consideration in determining whether there has been a breach of the standard of
care.
Total 10 Marks
QUESTION 12: CONSUMER LAW
Discuss any FOUR terms implied into every consumer contract for the sale of goods
under the terms of the Sale of Goods Act 1979 (as Amended by The Sale and
Supply of Goods Act 1994 and The Sale and Supply of Goods to Consumers
Regulations 2002).
Total 10 Marks
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QUESTION 13: VARIOUS TOPICS
A. Explain how the fundamental breach rule operates in the context of the
construction of exclusion clauses. Use case law to support your answer.
(3 marks)
B. What must an employee do on order to be eligible to make a claim for unfair
dismissal?
(3 marks)
C. Outline any THREE pre-requisites conditions to create an agency by ratification.
(3 marks)
D. In the context of remoteness of damage in negligence, the main test applied is:
(1) The
(2) The
(3) The
(4) The
“But For” test;
reasonable foreseeability test;
modern day test; or
proximity test.
(1 mark)
Total 10 Marks
•
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Suggested Solutions
Note:
These solutions include references to section nos. of relevant acts/legislation. These
are included for student information only and students are not expected to cite
section nos. in an examination.
Solution to Question 1
A. Discuss any
Governance.
FIVE
provisions
of
the
Combined
Code
on
Corporate
(10 marks)
B. List any FOUR other sources of corporate governance in Northern Ireland.
(2 marks)
C. Define the offence of fraudulent trading and provide examples. Outline both
the civil actions and criminal penalties that may be imposed where the offence
is proven.
(8 marks)
Total 20 Marks
•
A. Combined Code on Corporate Governance: the Code requires that
companies must have the following: (1) Effective Board-a strong, involved
board of directors (no individual/small group can dominate board decision
making), (2) a balance of executive and non-executive directors, including
(two) independent non-executive directors, (3) a clear division of
responsibilities between the chairman (responsible for the working of the
board/meetings) and chief executive (full operational control to carry out board
policies), (4) the provision of timely, quality information from the board, (5)
formal, transparent procedures for the appointment of new directors (maximum
period of employment contract of 1 year), (6) regular re-election of all company
directors, (7) a committee (usually NED’s) to decide the remuneration of the
executive directors (8) balanced and understandable financial reporting; (9)
transparent arrangements for considering how they should apply the financial
reporting and internal control principles and how to maintain an appropriate
relationship with the company’s auditors; and (10) maintenance of a sound
system of internal control (any 5 x 2 marks = 10 marks)
•
B. Sources of Corporate Governance: any four of the following: (1) UK
company law legislation – the Companies Acts 2006, (2) UK criminal law
legislation– including for example, The Proceeds of Crime Act 2002, (3)the
company’s own Constitutional Documents-for example the Articles of
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Association (regulating acceptable behaviour/procedures etc), or (4) the Listing
Rules, published by the London Stock Exchange (4 x 0.5 marks = 2 marks)
•
C. A. Fraudulent Trading: definition under The Insolvency (NI) Order 1989 S.
177 – elements of the offence: where a company officer “knowingly” and
“intentionally” was a party to the fraudulent carrying on of the company’s
business, with the intent to defraud its creditors or creditors of any other
person– the fraudulent trading may be a single or series of acts (4 marks) –
examples: a) keeping two sets of books and concealing case payments as in Re
Aluminium Fabricators Limited (1984) b) cash payments made directly to the
owners selling the pub rather than payments made to the business itself as in
Re Huntington Lodges Ltd (1985) (2 marks) – criminal sanctions under Part 29
CA 2006– on conviction on indictment imprisonment not exceeding 10 years
&/or a fine – civil sanctions under I(NI)Order 1989-personal liability for the
debts of the business arising from the fraudulent act – (2 marks)
QUESTION 2
A. Alex is one of the executive directors of Hamilton Hotels Ltd. Hamilton
Hotels recently acquired a property in Belfast that it plans to renovate and
then operate as their flagship hotel in Northern Ireland. At a recent
shareholder meeting it was discovered that the Belfast property was in fact
owned by Alex’s wife Kath, although he never mentioned his personal
interest in the property to any person involved in the company. Outline
whether Alex has breached any of his statutory duties as a company
director, and the steps that he should have been taken to ensure the validity
of the contract.
(6.5 marks)
B. Outline any age requirements to become a company director and the
circumstances in which a director may be disqualified from office.
(3.5 marks)
Total 10 Marks
•
A. Alex & Statutory Duty – purchase by Hamilton Hotels of Alex’s wife’s
property amounts to a Substantial Property Transaction: Section 190 CA 2006 –
purchase by a the company of a non-cash asset (wife’s property) from a
director/connected person or acquisition by a Director of a non-cash asset from
the company – whose value exceeds £100,000 or 10% of the company’s assets
(3 marks) – in this situation before the acquisition can take effect the company
must obtain approval to proceed with the transaction by an ordinary resolution
of its shareholders – the Director must disclosure the conflict to the Board at
the meeting where the contract is proposed or the first meeting after he
becomes interested (2 marks) – failure to comply would leave Alex liable to a fine
and to account for any personal gain from the transaction, and to indemnify the
company for any loss suffered (1 mark) – such a breach may also lead to a
possible disqualification order (0.5 marks)
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•
B. Eligibility: a person is only eligible if they are 16 years and above. (0.5 marks)
A director may be disqualified from office if they become: (1) an un-discharged
bankrupt, (2) a person of unsound mind (3) a person subject to a
disqualification order under CA 2006 (4) A director who is absent from his
duties for a period of 3 months or more without leave (5) misconduct (Any 3 for
3 marks)
Solution to Question 3
Matt has been the auditor to Lyndon Construction Ltd for the past 15 years, and in
the past five years has failed to attend the company’s stock take, although he has
continued to sign-off on the company’s accounts. It has recently been discovered
that the directors have been falsifying the stock figures to make the company
appear more profitable and that Matt has been inadvertently signing-off on these
falsified account.
In relation to the auditor’s report:
(2 marks)
A. What must the auditor state in their report?
B. The auditor must carry out investigations for the preparation of their report in
(3 marks)
order to form an opinion in relation to what?
F. What rights does an auditor have for preparation of their report?
(2 marks)
G. In what circumstances can an auditor be convicted of a criminal offence? (1
mark)
E. Determine whether Matt is liable for any loss sustained by the company.
(2 marks)
Total 10 Marks
A. Auditor must state in his report- s.495-8 CA’2006 (1) whether the accounts give
a true and fair view of the financial state of affairs of the company and (2) whether
the accounts have been properly prepared in accordance with the Companies Act.
(2 marks)
B. The auditor must carry out investigations as are necessary to form an opinion as
to whether (a) proper accounting records have been kept and proper returns
adequate for the audit have been received from the branches (b) accounts are in
agreement with the accounting records (c) the information in the director’s
remuneration report is consistent with the accounts (3 marks).
C. The Auditors have rights (1) to access all books and accounts of the company,
(2) right to attend and speak at general company meetings (3)a right to receive a
copy of any written resolution proposed (4) right to speak to relevant persons
(company officers/employees) to attain information relevant for their report. (2
marks)
D. The Act makes it a criminal offence for an auditor to knowingly or recklessly
cause their report to be misleading, false or deceptive and may be subject to a fine.
(1 mark)
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E. By not attending the stock take for 15 years – but still signing off on the
company accounts – Matt has breached his duty to act with due skill, care and
caution– in effect Matt has been negligent by breaching the standard required of
him in his position as auditor –Re Kingston Cotton Mill (No 2) (1896) states that the
auditor does not need to be a detective but is a watchdog-Matt may have to
compensate the company for all loses suffered as a result of his negligence. He
may also be found guilty of the new criminal offence under the Companies Act 2006
and subject to a fine (not imprisonment) (2 marks)
Solution to Question 4
(2 marks)
A. Define what is meant by share premium capital
B. Discuss the function of the share premium account and explain the purposes
for which monies in this account can be utilised.
(5 marks)
C. Assuming that a company incurred some financial loss after trading for a
number of years, and wanted to issue 500,000 £1 shares at a discount price
of £0.75 in order to increase their working capital, advise them (in brief) on
the feasibly of this transaction, and determine whether it is in accordance
with company law.
(3 marks)
Total 10 Marks
•
A. Where a share is sold for above the nominal value, for example a share with
a nominal value of £1.00 is sold for £1.25, the value received on a share in
addition to or above the nominal value of the share(s) i.e. £0.25p/share is
(2 marks)
referred to as the share premium capital
•
B. Share Premium Account: where a company issues shares above their par
nominal value (at a premium) the excess in value must be lodged into the share
premium account (1 mark) – under CA2006 s.610 the account can only be
utilised as follows: (1) to write off the expenses relating to any issue of shares
or debentures by the company or (2) to write off the commission relating to any
issue of shares or debentures by the company or (3) to pay up new shares to
be issued to members as bonus shares (4 marks)
•
C. Shares at a discount (s.552-553 CA2006): there is a general prohibition in
company law in relation to issuing shares at a discount and this act affects the
integrity of the capital account (1 mark)equence of paying any commission on
the issue of shares, and (2) where shares are issued for non-cash consideration
(provided there is an independent valuation of the asset) (2 marks)
Solution to Question 5
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State the function of the liquidator (2 marks) and discuss the powers of a company
liquidator (8 marks)
•
•
Function of a Liquidator- is defined in The Insolvency (Northern Ireland) Order
1986 s.121- to ensure that the company’s assets are got in, realised and
distributed to the company’s creditors and, if there is a surplus, to the person’s
entitled to it. (2 marks)
Powers of a company liquidator-defined under s.140-143- (1)power to pay any
class of creditor in full (2) power to make any compromises or arrangements
with creditors (3) power to carry on the business for the winding up of the
company (4) power to bring or defend any action or legal proceeding in the
name of the company (5) power to sell any part of the company’s property,
including the goodwill and book debts of the company (6) power to execute any
deeds, receipts other docs in the name of the company (7) power to raise
money on any company assets (8) power to appoint an agent to do business
which the liquidator is unable to do (9) power to do all other necessary things
for the winding up of the company(any 8 for 1 mark each)
Solution to Question 6
A. Ann and Patrick have operated an interior design business in partnership for the
past six years. Ann has recently decided to retire from the business due to ill
health and Brian has agreed to take over her share of the partnership. Explain
to Ann the steps that she is required to take on retirement to ensure that she is
no longer liable for the future debts of the partnership.
(8 marks)
B. List the order in which partnership debts are paid upon the dissolution of the
partnership.
(2 marks)
Total 10 Marks
•
A. Liability for Partnership Debts of a Retiring Partner: Section 9 PA 1890
states that partners are jointly liable on foot of all partnership contracts and for
any debts of the firm – a retiring partner is liable for any debts due at the time
of retirement – unless the remaining partners agree to indemnify the retiring
partner against such claims through a contract of novation – this is a tripartite
contract involving the retiring partner, the remaining members of the continuing
partnership and the existing creditors – under this agreement any liability of the
retiring partner is passed to the remaining partners – and creditors effectively
give up rights against the retiring partner (4.5 marks) – regarding future
partnership debts the retiring partner is not liable provided he notifies third
parties (existing customers) of changes in the partnership – and advertises the
fact in a national newspaper (such as the Irish Times) – otherwise liability
based on estoppel applies in respect of the retiring partner (3.5 marks)
14
•
B. Debts on Dissolution: once the value of the partnership property is realised
the proceeds are applied in the following order: (1) all debts to outsiders, (2) all
monies advanced by partners beyond their original capital contribution, and (3)
all capital contributions of the individual partners - any residue is divided
between the partners in the same proportion as they shared in profits (Section
44 of the PA 1890) – if there is a deficit then the deficiency has to be made
good out of any profits held back from previous years, or out of partners’
capital, or by the partners individually in the proportion to which they were
entitled to share in profits (2 marks)
Solution to Question 7
A. Discuss the procedure that should be followed to effect an alteration of the
Articles of Association.
B. Explain the meaning of the term “issued share capital”.
(2.5 marks)
(2 marks)
C. List any THREE pieces of information that must be included in a company’s
annual return.
D. List the different types of liquidation and outline the main differences.
(3 marks)
(2.5 marks)
Total 10 Marks
•
A. Alteration of the Articles: any alteration of the Articles requires the passing
of a special resolution of the shareholders, with 21 days’ notice of the meeting
to consider this resolution (1 mark) – to be valid this alteration: (1)must not
contradict company law, and (2) must be in the best interests of the company,
as a whole (3) send copy of Resolution to Registry within 15 days (3 x 0.5 = 1.5
•
B. Issued Share Capital: this is the amount of shares that a company has
issued out from its share capital- share capital does not have to be issued all at
once. (2 marks)
C. Annual Return: the general information included in the annual return
includes: (1) name (2) registered number (3) private or public company (4)
the company’s registered address, (5) address company keeps registers if not
at registered address (6) principal business activities (7) name and address of
any company secretary (8) name, residential address, dat of birth, nationality
and business occupation of directors (9) annual return date (11) issued share
capital information and details of shareholders (any 3 = 3 marks)
D. (1) Compulsory (0.5 mark) (2) Voluntary- members/voluntary (0.5 marks)
marks)
•
•
The main difference is that in a compulsory liquidation the company is not solvent and in
a voluntary liquidation either the members or the company itself initiate a liquidation
(1.5 marks)
Solution to Question 8
Detail the original jurisdiction of the main civil courts in Northern Ireland (a
discussion of appellate jurisdiction of the civil courts is NOT required).
15
Total 10 Marks
•
The civil courts in Northern Ireland are hierarchical in nature – the lowest being
the Magistrates Court and the highest being the Court of Appeal (Appeal from
the COA lies with the new Supreme Court (formerly HOL) in England.– the
Magistrates and County Courts are classified as inferior courts –whereas the
Supreme Court, Court of Appeal and High Court are classified as superior courts
(0.5 marks)
•
Magistrates Court – this is a court of local jurisdiction – that deals with mostly
criminal matters and some civil issues arising within the context of that
jurisdiction – it has the authority to deal with claims for compensation in
contract and civil wrongs – provided the damages sought are less than £5,000 –
it also deals with issues such as the granting of intoxicating liquor and nightclub licences, the granting maintenance orders in family law,, and minor
landlord/tenant disputes (3 marks)
•
Small Claims Court- claims les than £2000 e.g. consumer claims for faulty
goods, non-payment of work done (0.5 marks)
•
County Court – there are various county courts located throughout Northern
Ireland. They deal with appeals from the Magistrates courts and claims for
compensation in contract and civil wrongs where the compensation sought is
between £5,000 and £15,000. In personal injury claims compensation up to
£50,000 may be awarded in the County court.– it also deals with
landlord/tenant disputes, some equitable matters e.g. trusts and some probate
matters. It has the power to deal with divorce matters (provided matters are
not complex) (3 marks)
•
High Court – is divided into three divisions: Queen’s Bench Division, which deals
with mostly common law matters and is the largest division and deals with
actions based in tort or contract (claims over £15,000 and can award unlimited
damages in contract and civil wrong). This division also includes the Commercial
Court. The Chancery Division deals with traditional equitable matters, such as
trusts and mortgages, Revenue and Bankruptcy. The Family Division deals with
matrimonial cases, family property, proceedings relating to children and appeals
from magistrates (family issues only) courts and county courts. The High Court
also has supervisory jurisdiction over inferior courts, administrative bodies &
persons with quasi judicial functions by way of judicial review and all divisions
hear appeals from the inferior courts. (3 marks)
Solution to Question 9
Define frustration and list and provide circumstances under which a contract may
be discharged by frustration.
16
Total 10 Marks
Frustration: this is where a contract cannot be completed as agreed due to some
unforeseeable action or event outside the control of the contracting parties. (2
marks)
Circumstances where a claim of frustration will be upheld: (1) Impossibility: when
the subject-matter of the contract is destroyed or a party to the contract takes ills
or dies– in Taylor v Caldwell (1863) the destruction of a music hall by a fire 4 days
before a performance was due to take place was held to amount to frustration. In
Condor v Barron Knights (1966) the employment contract of a drummer in a pop
group was deemed frustrated when medical evidence proved that he would not be
unable to perform more than a couple of the seven nights a week he was required
to perform-the contract was deemed frustrated as it was an event beyond the
drummer’s control. (2 marks)
(2) where government interference prevents performance of the contract or
performance of the contract becomes illegal. In Avery v Bowden (1856) the
government made it illegal during the Crimean war to load from an enemy port.
See also Fibrosa Spolka Akcykna v Fairbairn (1943) (2 marks)
(3) where a particular event, which is the sole reason for the contract fails to take
place In cases, including Krell v Henry (1903), when the coronation procession of
Edward VII had to be cancelled due to the illness of HRH – consequently many
arrangements made in which persons obtained the right to view the procession
from hotels and rooms overlooking the route came before the English Courts – and
the Courts ruled that the contracts were frustrated (2 marks)
(4) if a party dies or becomes incapacitated. See Robinson v Davidson (1871),
where a piano player contracted illness before a performance, and Flynn v Great
Northern Railway Company (1953), where medical evidence proved that a van
driver was unable to return to his job. (2 marks)
Solution to Question 10
TechWorld Ltd sells customised computer software. Business has declined in recent
years and the company has decided that it will need to dismiss 10 of its 50
employees within the next six months. In this regard, advise the company in
relation to the following matters:
A. The legal definition of redundancy.
(2 marks)
B. The possible selection criteria of employees for redundancy and what criteria
would be deemed unfair.
(5 marks)
C. The amount of compensation payable.
(3 marks)
Total 10 Marks
17
•
A. Redundancy: Definition of Redundancy: Section 174 of the Employment
Rights Order (Northern Ireland) 1996 (ER(NI)O’96)defines redundancy as being
a dismissal attributable wholly or mainly to (1) the fact that the employer has
ceased, or intends to cease, to carry on the business for the purposes of which
the employee was employed by him or has ceased, or intends to cease, to carry
on that business in the place where the employee was so employed, or (2) the
fact that the requirements of that business for employees to carry out work of a
particular kind, or for employees to carry out work of a particular kind in the
place where they were so employed have ceased or diminished or are expected
to cease or diminish (2 marks)
•
B. Selection Criteria: employer must utilise an independent selection criteria,
such as: (1) last in first out, (2) skills required, (3) productivity/performance
(4) attendance/disciplinary records– would be deemed unfair selection if the
redundancy decision was based on discriminatory factors such as (1) gender,
(2) marital status, (3) family status, (4) religious belief, (5) age, (6) race, (7)
disability, (8) sexual orientation, (9) membership of the travelling community,
(10) trade union membership, (11) pregnancy or (12) because an employee has
exerted (or attempted to exert) their rights under protective legislation (5
marks)
•
C. Payments: statutory redundancy payments are calculated with reference to
the age of the employee and the length of service (up to a maximum of 20
years) as follows:
Age 18-21: half a week’s pay per year of service;
22-41: One week’s pay per year of service;
42 and above: One and a half weeks’ pay per year of service.
Although an employer may provide a higher redundancy payment as a
voluntary measure (3 marks)
Solution to Question 11
In the context of negligence, explain the various factors that the Court will take into
consideration in determining whether there has been a breach of the standard of
care.
Total 10 Marks
•
Standard of Care: whether or not the standard of required care is breached is
ascertained based upon the reasonable man test –this test was developed in
Blyth v Birmingham Waterworks (1865)- in effect would a hypothetical person
of reasonable prudence, common sense & common knowledge have committed
the act complained of – this test is objective, ie. Did the defendant exercise the
care that a reasonable man would have exercised? (2 marks)
18
•
In determining whether a reasonable man would act in a certain manner the
Court review the following factors: (1) foreseeable likelihood of damage– the
higher the probably of an accident – the higher the standard of care it carries –
therefore when the risk is higher the defendant must do more to meet his duty.
In Glasgow Corporation v Taylor (1992) the local authority was a held to be
negligent when children ate poisonous berries in a park. A warning notice was
not deemed sufficient to protect children. (2) the seriousness of the likely
damage- the young old or disabled may be more prone to more serious injury
than a fit able bodied person. The ‘egg shell skull’ rule means that you must
take the victim the way they are. Where the risk to the vunerable is high, the
level of care required is raised. In Paris v Stepney Borough Council an employee
was provided with protective goggles as was standard practice, but this
employee was already blind in one eye. He sustained injury to his good eye
and the court found that a higher standard of care was owed to this employee
due to his existing injury in one eye. (3) Issues of practicality and cost- it is not
always reasonable to ensure that all possible precautions have been taken.
Where the cost of disruption to eliminate the danger far exceeds the risk of it
occurring it is likely that the defendants will be found not to have breached their
duty if they do not implement them. Latimer v AEC Ltd (1952) the defendants
owned a factory that became flooded, making the floor slippery. They did all
they could to make the factory safe. An employee fell on the floor and claimed
negligence and that the employees should have closed the factory. It was held
that closing the factory outweighed the risk to the employees (4) Common
Practice- where an individual can prove that their actions were in line with
common practice or custom it is likely that they would have met their duty of
care- Re Herald of Free Enterprise (1987) even though it was not common
practice for the captain to check the bow doors, his failure to do so was
considered negligent. (5) Social Benefit– Where an action is of some benefit to
society, defendants may be protected from liability even if their actions create
risk. E.g. a fire engine that speeds to a major disaster provides a social benefit
that may outweigh the greater risk to the public. (2 marks each for any four
examples)
Solution to Question 12
Discuss any FOUR terms implied into every consumer contract for the sale of goods
under the terms of the Sale of Goods Act 1979 (as Amended by The Sale and
Supply of Goods Act 1994 and The Sale and Supply of Goods to Consumers
Regulations 2002).
Total 10 Marks
•
Terms implied into every contract: (1) implied conditions as to title/right to sell
– Section 12– this assumes that the goods are free from charges/mortgages at
the point of sale or that the seller has the right to sell (2) implied conditions as
to description –Section 13- this assumes that goods sold by description must
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correspond to that description – a sale by description does not preclude a sale
where goods are exposed for sale and selected by the consumer – a description
includes tags, labels etc… (3) implied conditions as to sale by sample – Section
15 – this assumes that the bulk of the goods purchased must correspond with
the sample – the consumer must also be afforded a reasonable opportunity for
inspection, (4) implied conditions as to merchantable quality – Section 14 – this
assumes that the goods are as durable as a reasonable person would expect –
taking account of the price, description and all other relevant circumstances
(time of sale, changing standards) – there is an exception to this term where
the defect is brought to the attention of the buyer before the contract is made,
or the defect should be obvious to a reasonable person by an application of the
doctrine of caveat emptor – and (5) implied term as to fitness for the purpose
intended – Section 14 – assuming normal usage – if the goods are going to be
used for an alternate purpose, and the seller is aware of this purpose, then the
buyer can assume that they are fit for that alternate purpose – where a
reasonable alternate use is notorious within the market – then an assumption of
fitness for purpose is assumed, unless the seller specifically states otherwise
(any 4 x 2.5 marks = 10 marks)
Solution to Question 13
A. Explain how the fundamental breach rule operates in the context of the
construction of exclusion clauses. Use case law to support your answer.
(3 marks)
B. What must an employee do in order to be eligible to make a claim for unfair
dismissal?
(3 marks)
C. Outline any THREE pre-requisites conditions to create an agency by ratification.
(3 marks)
D. In the context of remoteness of damage in negligence, the main test applied is:
(1) The
(2) The
(3) The
(4) The
•
“But For” test;
reasonable foreseeability test;
modern day test; or
proximity test.
(1 mark)
Total 10 Marks
A. Exclusion Clauses and the Fundamental Breach Rule: this rule states that an
exclusion clause is not valid where it is intended to apply to the core or
fundamental purpose of the contract – in effect, if the proferens is trying to
completely exclude their fundamental obligations in relation to the contract then
the clause will be struck down as invalid (2 marks) – relevant case law includes:
Karsales (Harrow) v Wallis (1956), and Clayton Love & Sons v B&I Steampacket
Co. Ltd. (1970) (any 1 = 1 mark)
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•
B. Eligibility to make a claim for unfair dismissal: (1) be employed under a
contract for service (2) employed for a continuous period of one year (3) not an
employee excluded under the legislation from making a claim= 3 marks)
•
C. Agency by Ratification/Prerequisites: (1) the principal must have existed at
the time that the contract was made between the agent and the third party, (2)
ratification must occur within a reasonable period of time, (3) upon the creation
of the contract, the agent must have informed the third party that they were
acting for the principal, (4) the contract must be legal and the principal must
have the legal capacity to create the contract at the point of formation, (5) the
principal must ratify the contract in totality or not at all, (6) once ratified the
principal is bound to the contract from the date of creation, (7) the agent must
disclose all relevant and material facts to the principal, likely to impact his
decision to ratify, and (8) the principal must communicate to the third party
that he has ratified the contract (any 3 = 3 marks)
•
D. Remoteness: in the context of remoteness of damage in negligence, the
main test applied is the reasonable foreseeability test (2) (1 mark)
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