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BUSI1112-E1
A LEVEL 1 MODULE, FULL YEAR 2021-2022
BUSINESS LAW
SECTION A
Compulsory
Each question is worth TWO marks.
1. Which of the following is NOT a source of English law?
a) Case law;
b) Legislation;
c) The Constitutional Code of Great Britain.
d) The Royal Prerogative;
2. Which of the following does NOT belong? To establish negligence, a claimant must prove that:
a) The defendant owed a duty of care to the claimant;
b) The defendant breached that duty of care by failing to conform to the required standard of conduct;
c) The defendant’s conduct was reasonably foreseeable;
d) The defendant's breach of duty caused the harm, injury or damage to the claimant.
3. A is driving a car whilst using his phone. He collides with B who is driving his E-bike. B suffers a fractured skull as a result of the collision. B is not wearing a safety helmet.
Which statement is wrong?
a) A is likely to be liable for the tort of negligence;
b) A is likely to succeed in proving B’s contributory negligence towards causing the collision;
c) A is not likely to succeed in proving B’s contributory negligence towards causing B’s injury.
d) A is likely to succeed in proving B’s contributory negligence towards causing B’s injury.
4. A is driving his car whilst watching a video on his phone and collides with B a pedestrian. B suffered the below damage:
i. Injuries to his leg which required hospitalisation; and
ii. Damage to his expensive designer suit; and
iii. On sick leave from his employment for four weeks; and
iv. Missed signing a new employment contract that promised a better salary.
Which of the following is correct?
a) A can claim for all of the above;
b) A can claim for i.
c) A can claim for i and ii;
d) A can claim for i, ii and iii.
5. A specialises in buying and selling Chinese vases. B, a member of the public,
approaches A with a vase that he claims is a Tang dynasty masterpiece and shows A documentation of its authenticity. Unknown to B the vase is a cheap replica and the documentation has been forged by the previous owner. A buys the vase from B ignorant of the mistake. C is interested in buying a Tang Dynasty vase, and A introduces the supposed Tang Dynasty masterpiece and shows C the forged documentation. C buys the vase believing it is a real Tang Dynasty masterpiece. Which of the following is wrong?
a) A is an expert and A’s statement to C that the vase is a Tang Dynasty masterpiece is a term;
b) The vase being a Tang Dynasty masterpiece was important to C and A’s statement to C that the vase is a Tang Dynasty masterpiece is a term;
c) Both A & B were experts and B’s statement is likely to be considered as a term;
d) B was not an expert and B’s statement is likely to be considered as a representation.
6. Which of the following statements is correct?
a) A condition is an important term and if breached the innocent party can choose to continue or end the contract;
b) A warranty is a less important term and if breached the innocent party can choose to continue or end the contract;
c) A condition is an unimportant term and if breached the innocent party can claim damages but must continue with the contract;
d) A warranty is an important term and if breached the innocent party can choose to continue or end the contract.
7. A British company sends a Chinese Company an offer by email on Monday at 9 am (UK time). The Chinese Company accepts by reply email on Wednesday at 2 pm (UK time). What time does acceptance take place?
a) Wednesday 2 pm UK time;
b) Wednesday 10 pm Beijing time;
c) Thursday 9 am UK time;
d) Thursday 9 am Beijing time;
8. Which of the following is NOT a duty of an agent?
a) Avoid a conflict of interest;
b) Maintain confidentiality;
c) Act in the principal’s best interests;
d) Exercise reasonable care and skill.
9. A was a skilled jeweller and worked as a sole trader specialising in gold. His lawyer
advises him to incorporate his business as a private limited company. He decides to take this advice and set up ‘JGoldz Ltd’ in which he owned 90% of the shares and the remaining shares were distributed amongst family members. The first few years are a success but recently the company’s liabilities have spiralled out of control owing £150000 to creditors and becoming insolvent. Which of the following statements is true?
a) The veil of incorporation will be lifted to reveal the company as a sham;
b) The veil of incorporation will be lifted because there is no difference between A as a sole trader and A owning 90% of shares in ‘JGoldz Ltd’;
c) The veil will not be lifted because all companies have limited liability;
d) The veil will not be lifted because the debt belongs to the company.
10.Which is NOT a duty of a partner engaged in a partnership under the Partnership Act 1890?
a) Duty to account;
b) Duty of confidentiality;
c) Duty not to compete;
d) Duty of disclosure.
11.A & B are brothers and decide to open a coffee bar in Ningbo. Both A & B decide to invest equal capital and both plan to work full-time for the business. Which of the following is the best possible answer?
a) There is a family connection and therefore the law presumes there is no contract;
b) There is a family connection and therefore the law presumes there is a contract;
c) There is a family connection but this is likely to be rebutted in favour of a commercial agreement;
d) There is a business connection and therefore the law presumes there is a contract.
12.A decides to sell his apartment and advertises it online at a price of around 2M. B sees the advert and telephones B offering 1.5M. A replies with an offer of 1.8M. Which is INCORRECT?
a) B’s bid of 1.5M is likely to be an offer;
b) A’s advertisement of 2M is likely to be an invitation to treat;
c) B’s bid of 1.5 is likely to be a counteroffer;
d) A’s bid of 1.8M is likely to be a counteroffer.
13.Under the Companies Act 2006 what percentage of the vote in favour is required for altering a company’s articles of association?
a) 51%
b) 66%
c) 75%
d) 90%
14.Which of the following is NOT a general duty of a director within sections 171-177 of the Company Act 2006?
a) Duty to maintain confidentiality;
b) Duty to act within powers;
c) Duty to promote the success of the company;
d) Duty to exercise independent judgment.
15.A advertises different firearms on Wechat for 150,000 RMB. Which is the best possible answer?
a) Not an offer because advertisements are ITT;
b) Not an offer because the price is uncertain;
c) It is a unilateral offer;
d) It is unenforceable because it is illegal.
16.A leads a hiking team to the desert, where the team get lost. Fortunately, they stumble across another travelling team, which agrees to direct them back on course and to safety. Once at safety, A promises to give the rescuers their hiking equipment. Can the rescuers enforce A’s promise?
a) No, because rescuing is not valuable consideration.
b) No, because A did not provide any consideration for the rescuer’s promise.
c) Yes, because public policy dictates that rescuers should be able to negotiate for extra benefits from the people they rescue.
d) Yes, because there was an implied contract between A and the rescuers.
17.A calls B to make an offer for the sale of a car on Monday and asks for a return call. On Tuesday, B decides to accept A’s offer and does so by posting a letter to A. A receives the letter on Friday but would have received it on Wednesday but for it being delayed due to bad weather. Which is the best possible answer?
a) Acceptance takes place on Monday;
b) Acceptance takes place on Tuesday;
c) Acceptance takes place on Wednesday;
d) Acceptance takes place on Friday;
18.Which of the following terms describes someone who temporarily stands in as a director for another director who is unavailable?
a) An alternative director;
b) A de facto director;
c) A shadow director;
d) A non-executive director.
19.Which part of the judgment of a case establishes the precedent (rule) that is to be followed by future courts?
a) The Ratio Decidendi;
b) The facts established in a case;
c) The section of the judgment entitled ‘Precedent’;
d) The issues established in a case.
20.A & B decide to set up a business together to sell children’s toys. Both have agreed
that they should share equally in the profits. They will call their business ‘The children’s Toy Company’ . They have renovated a manufacturing plant and equipped it with new tools. Is their business a partnership?
a) Yes, it is a partnership relationship;
b) No, the name of the business denotes a company;
c) No, the business has not started;
d) No, they have not signed a partnership agreement.
SECTION B
ANSWER ANY THREE QUESTIONS (60%)
Please Read the Case Study to Answer the Questions in Part B
In answering these questions, you should draw on the relevant legal concepts, cases and the material contained in the case study.
21.Consider whether Claudette makes a contract with the Customer and, if so, on what basis? (20 marks)
22.Advise whether Claudette should incorporate her business? Additionally, consider whether it would make any difference if a lawyer advised her to incorporate for the reason of being more tax-efficient? (20 marks)
23.Advise what legal claims Claudette could make as a minority shareholder and assess the likely success of each claim. (20 marks)
24.Consider whether Daisy can make a claim of negligence, assess any defences the ice cream business may rely on. (20 marks)
CASE STUDY
Claudette is an experienced businesswoman engaged in owning or running several businesses. One of her business investments is with her friend Gina. Both of them run a business selling dog accessories as a wholesaler to local dog shops, which they do through an online shop. The business is run on a part-time basis by both Claudette and Gina from home and all sales are online. To deliver products to their customers they rely on a separate delivery business, which is owned and run by Claudette. Below is a record of a telephone conversation between Claudette and a customer.
Customer - Monday 1st : I would like to buy 1000 units of ‘doggy super food’
and 500 units of ‘doggy play toy’ .
Claudette – Monday 1st : Sure. ‘Doggy super food’ is 100 RMB per unit and
‘doggy play toy’ is 10 RMB per unit.
Customer – Monday 1st : Would it be possible to pay 90 RMB per unit for ‘Doggy
super food’ and 5 RMB per unit for ‘doggy play toy’?
Claudette – Monday 1st : Yes, it is possible. However, for a discount, you need
to order 2000 units of each item.
Customer – Monday 1st : OKAY, let me think about it.
Claudette – Tuesday 2nd : Hello Customer, I was checking with you on whether
you wish to place your order? I can give you free samples of new ‘doggy treats’ if you order today.
Customer – Tuesday 2nd : I am a little busy right now, can I send you a
confirmation email later?
Claudette – Tuesday 2nd Sure, as long as it arrives before 4pm.
Customer - Tuesday 2nd : Email at Dear Claudette,
3pm I wish to purchase the products and the extra ‘doggy
treats’ are a lovely bonus. I hope you can arrange delivery of each product together as one delivery.
Thanks, Customer.
Claudette is also a shareholder of several companies. Additionally, she occasionally acts as an agent buying and selling company shares on behalf of clients. One client, Dill, instructs Claudette to invest in a 3D printing company. delivery company (‘Fastfood Ltd’). On Dill’s instructions, Claudette buys 10 shares at a price of 1000 RMB per share. Claudette, sensing an opportunity to make money for herself, decides to buy 50 shares (5% of the total shares in the company) at the same price with her own funds. The share price begins to rise. However, the 3D printing company appoint a new director who is lazy and incompetent resulting in the share price plummeting.
One of Claudette’s other businesses is selling ice cream. She has two small shops, each employing one person and each of the shop premises are rented. Staff costs are £100 per day and daily rent for each shop is £50. On average each shop sells two hundred ice creams per day and the cost of the average ice cream is £3. Claudette has bought an insurance policy, in her own name, to cover the eventuality of a customer falling sick from eating an ice cream and subsequently making a successful claim in negligence. To make ice cream her shops use, a machine ‘Creamzze’ specifically made for large scale ice cream making. However, a ‘Creamzze’ machine used in one of her shops has ceased functioning due to a mechanical error. Claudette asks one of her employees, Daisy, working at the ice cream shop, to make the ice cream by hand. Making ice cream by hand is labour intensive and increases Daisy’s workload by 50%. Claudette promises Daisy, that if he helps his family can eat ice cream for free for an entire year. Daisy agrees. Aside from basic tips she received at catering school, Daisy’s skill in hand made ice-cream is unproven and she usually relied upon the ‘Creamzze’ machine to prepare the ice cream. She checks online for further information before beginning to make the ice cream. Later that day a customer, Rose, falls ill after eating one of the ice creams prepared by Daisy. Medical tests show that this was because of the absence of stabilizers in the ice cream mixture that remove bacteria. The medical tests also demonstrate that Rose had a pre-existing stomach disorder, which would have made her recovery period longer.
Claudette is also the Chief Financial Officer of a Company ‘Computers for Business Ltd’ . The company specialises in developing price-efficient computing solutions for large corporations. Claudette has been leading a research team that has developed a manufacturing technique that will allow the company to produce computer components from recycled materials. However, the board of directors are sceptical about whether this technique will have an impact on sales and are concerned about the increase in product price that the new manufacturing technique will create. They decide not to pursue the venture. Claudette is angry and decides to leave ‘Computers for Business Ltd’ and set up her own company ‘Recycled PC Ltd’ which utilises the new manufacturing technique. The new company is a success and many companies place orders immediately. The company’s revenue is estimated to be in the region of 20M. It further transpires that before Claudette left ‘Computers for Business Ltd’ she authorised company funds to be transferred to her nephew who is current studying abroad.