Multiple Choice Question - Legal Aspects of Business

Instructions to Candidates

 

1. Answer ALL multiple choice AND short answer questions
2. Each multiple-choice question (MCQ) has ONE correct answer ONLY. MCQs with three choices carry one mark each. MCQs with four choices carry two marks each. 

MULTIPLE CHOICE QUESTIONS:

Each multiple-choice question (MCQ) has ONE correct answer ONLY. Circle the correct one.

1. A criminal case is known as a:

 

1. Claim

• Prosecution

2. Charge.

 

2. Which court would be likely to try a case involving the recovery of a debt worth £5,000?

 

• Magistrates’ court

1. High Court
2. Crown Court
3. County court

 

3. In the context of the English legal system, which of the following defines the ratio decidendi of a judgment?

 

1. The future application of the case
2. The decision in a previous case

• The legal reason for deciding the case

3. The facts of the case.

 

4. In the context of judicial precedent, a decision made by which of the following courts is most authoritative?

 

1. High Court
2. Privy Council
3. Court of Appeal 

• Supreme Court.

 

5. In the context of contract law, a bid at an auction is which of the following?

 

1. An invitation to treat

• An acceptance

2. An offer
3. A counter-offer.

 

6. Which of the following may imply terms into a contract?

 

1. The parties to the contract
2. Third parties

• Statute

 

7. A Ltd entered into a contract to build bigger premises for B Ltd at a cost of £1,000,000 to allow B Ltd to expand. The work was due to be completed by 1^st December 2020. A Ltd got into financial difficulties. To encourage A Ltd to finish the work on time, B Ltd agreed to pay a completion bonus of £200,000. Which of the following is accurate:

 

1. B Ltd’s promise to pay the bonus is unenforceable as there was no offer and acceptance 
2. B Ltd’s promise to pay the bonus is unenforceable as there was no mutual intention to enter into a legally binding variation

• B Ltd’s promise to pay the bonus is unenforceable as A Ltd did not provide sufficient consideration in return

3. B Ltd’s promise to pay the bonus is probably enforceable as it received consideration under the ‘practical benefits’ principle.

 

8. Which of the following will allow the ‘innocent party’ to terminate a contract?

 

• Late delivery where the contract states that ‘time is to be in every respect the essence of the contract’

1. Late payment
2. Late delivery

 

9. The aim of an award of damages is usually to:

 

• Place the innocent party in the position s/he would have been in of the contract had been properly performed

1. Restore the parties to their pre-contract position
2. Punish the party responsible for breaking the contract.

 

10. An employer will usually not be vicariously liable for torts committed by:

 

1. ‘Limb (b) Workers’ under section 230(3)(b) Employment Rights Act 1996
2. Independent contractors

• Employees

 

11. During drinks after work, Ahmed who is an accountant, recommended that his friend Boris should invest in ‘hypercoin’ - a cryptocurrency (a virtual electronic currency used as a means of exchange in the online trading of goods and services). As a result Boris invested his life savings in hypercoin. A few days later, hypercoin lost all its value after the trading system it supported was revealed as a fraudulent scam. Which of the following best describes Ahmed’s liability for negligent misstatement:

 

1. Ahmed will not be liable because there was no contract between Ahmed and Boris

• Ahmed will be liable because he directed his advice to Boris, and Boris relied upon the advice for the same purpose as it was given by Ahmed 

2. Ahmed will be liable because he ought reasonably to have foreseen that Boris would rely on his advice
3. Ahmed will not be liable because it was unreasonable for Boris to rely on advice given in a social setting from someone who is not a specialist in cryptocurrency investment advice.

 

12. Inga works as a delivery driver for J Ltd. J Ltd are under no contractual obligation to offer Inga work, and if they do, Inga is under no obligation to accept it. Inga is only paid for the work she does. When she accepts work, she must provide her personal services and submit to J Ltd’s directions. Inga is most likely to be:

 

1. An employee
2. A ‘limb (b) Worker’ under section 230(3)(b) Employment Rights Act 1996

• An independent contractor

 

13. Employment law is a mixture of common law and statutory provisions. Which of the following is purely based on statute law?

 

• Summary dismissal

1. Wrongful dismissal
2. Unfair dismissal

 

14. Which of the following have the right not to be unfairly dismissed?

 

1. Employees
2. Workers

• Independent Contractors.

 

15. Lisa has been employed continuously by M Ltd for 13 months. What is the statutory minimum notice period M Ltd must give Lisa to terminate her contract of employment?

 

1. 1 week
2. 2 weeks

• 4 weeks.

 

16. Which of the following describes an agent’s express actual authority?

 

1. There has been an agreement, either orally or in writing, that the agent is authorised to act on behalf of the principal in relation to a particular transaction
2.  A principal/agent relationship in relation to the transaction is implicit in view of the circumstances and/or the conduct of the parties

• The principal represents that a person has the authority to act as his/her agent and this is relied upon by a third party.

 

17. Which of the following business forms does the use of the abbreviation ‘Ltd’ after the name of a business indicate? 

 

• A private limited company

1. A limited liability partnership
2. A limited partnership

 

18. Which of the following is true concerning organisations that use the abbreviation ‘plc’ after their business name?

 

1. The organisation must hold an Annual General Meeting each calendar year
2. The organisation need not have a company secretary

• The organisation must have at least two members. 

3. Members may pass written resolutions.

 

19. In relation to a person investing in a company, which of the following investments is most secure?

 

• Debentures secured by a floating charge

1. Preference shares
2. Debentures secured by a fixed charge
3. Ordinary shares

 

20. In 2013 Naz was disqualified from acting as a company director for 10 years under the Company Directors Disqualification Act 1986 for engaging in fraudulent trading. To avoid the consequences of the disqualification order Naz arranged for his wife, Mandy, to run his fraudulent company. Mandy used the title of managing director but was never appointed as such. Which of the following categories of director applies to Mandy?

 

• De facto director

1. De jure director
2. Shadow director.

 

21. Which of the following resolutions is required to change the name of a company?

 

• Ordinary resolution

1. Ordinary resolution with notice
2. Special resolution
3. Special resolution with notice.

 

22. What is the minimum age that a director can be?

 

1. 16

• 17

2. 18.

 

23. What is compulsory liquidation?

1. When shareholders pass a special resolution to wind up the company and the company is able to meet its debts in full

• When shareholders pass a special resolution to wind up the company and the company is insolvent i.e. it cannot pay its debts

2. When the company is subject to a court order requiring it to be wound up, usually because it is unable to pay its debts.

 

24. S Ltd is a small clothes retailer that went into liquidation during the covid-19 outbreak in early 2020. The assets have been realised and have generated £20,000. £7,000 came from the company van over which Z Bank plc had a fixed charge in relation to an overdraft debt of £10,000. The three directors are each owed £2,000 salary for the last three months. Clothing suppliers are owed £3,000 and there is £4,000 outstanding rent on the shop premises in respect of which S Ltd had a licence. A dividend to shareholders of £3,000 had been declared but had yet to be paid. The costs of winding up S Ltd amount to £2,000.

 

How much can Z Bank plc expect to receive from the distribution of S Ltd’s assets? 

 

1. £7,000
2. £8,500

• £10,000.

 

25. Which of the following is NOT bribery under the Bribery Act 2010

 

1. An individual who accepts payment to perform a public duty
2. A company that offers a client reasonable hospitality

• An employee of a company who offers a non-financial reward to a public official to perform a public duty

3. A foreign national who works overseas for a company registered in the UK that offers cash to a third party for them to influence a public official.

 

SHORT ANSWER QUESTIONS:

T plc are a UK manufacturer of kitchen electrical equipment. Vernon recently bought a toaster, manufactured by T plc from a local retail outlet, X Ltd. 

Vernon unpacked the item and toasted two pieces of bread. He left the kitchen briefly to pick up his post from the doormat. When he returned he was horrified to find that the toaster was on fire. In putting out the flames, Vernon suffered superficial burns. Some of his kitchen units were damaged and the toaster was destroyed.

Upon expert investigation it was discovered that the fire had been caused by a faulty internal component in the toaster. 

1. Identify the legal claim that Vernon might have against the retailer, X Ltd, in relation to the faulty toaster, and explain what Vernon would need to prove in order succeed in this claim.

(3 marks)

It can be observed that the scenario falls under the consumer rights act 2015, under UK legislation. The consumer rights act, 2015 has given the full right to the consumers in asking for the full refund for any kind of faulty appliances sold to them without proper checking. The same situation was faced by Vernon and he will ask for the full refund of the product. 

 

2. Apply the elements of the claim you identified in part (a) to the facts of the scenario in order to predict whether Vernon’s claim is likely to succeed.

It can be noted that the item was marked faulty by the consumer within 30 days of usage and that is why under the consumer rights act 2015, Vernon will ask for the full refund of the product. If the time would have passed beyond 30 days, then new laws and legislative underpinnings would have applied that will go under the “Faulty under 6 months Old”. 

(3 marks)
 

3. Now assume that the retailer, X Ltd, has recently gone into liquidation, making a claim against it unlikely to succeed. Explain what Vernon would need to prove in order to succeed in bringing a claim against T plc, the manufacturer of the toaster, in the tort of negligence. 

It can be understood that under the consumer rights act 2015, it can be observed that consumers do not have the contract with the manufacturer because the Vernon has the direct communication with the X limited, who is the retailer. Therefore, despite of being in the liquidation phase, retailer X limited is liable to refund the whole money of the toaster and it is not the responsibility of the T PLC. The shop or the retailer has the legal correspondence and liability to fix the issue. Legal actions can also be taken by the consumer against the retailer. 

(3 marks)

4. Apply the elements of Vernon’s claim in negligence against T plc to the facts of the scenario in order to predict whether Vernon’s claim is likely to succeed.

The application of the elements include the sale of goods act-under the consumer rights act and all the products must be of the satisfactory quality and fit to the purpose at the same timeframe. There are also some digital contents those are include within the legal claim of Vernon against the T PLC. 

(4 marks)

5. Identify the alternative statutory claim Vernon may have against T plc and explain why this claim will be easier for him to establish than an action in the tort of negligence. 

In case of the alternative statutory claim of the Consumer Rights Act 2015, it can be observed that all the referral to the consumer ombudsman that are needed while entering into the alternative dispute resolution proceedings. On the other hand, there are also some of the similar claims that are able to join other claims together. In this process, they bring about the single claims and therefore increasing the collective strength against the multinational corporations like T PLC.
 

(2 marks)