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3b FBLW
19 November 2001
Day 1 – early afternoon
INSTRUCTIONS TO CANDIDATES
Answer the ONE question in section A (this has 25 sub-questions, and is on pages 2 – 7).
Answer TWO questions ONLY from section B (these questions are on pages 8 and 9).
Write your examination number in the boxes provided on the front of the answer book.
Write FBLW on the line marked "Subject" on the front of the answer book.
Write your examination number on the special answer sheet for section A. Detach the sheet
from the booklet and insert it into your answer book before you hand this in.
Do NOT write your name or your student registration number anywhere on your answer book.
Tick the appropriate boxes on the front of the answer book to indicate which questions you have
answered.
Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE
correct answer.
Question One
(i) In the event of a conflict between equity and the common law, the common law
prevails.
(ii) An Act of Parliament can overrule any common law or equitable rule.
A (i) only. B (ii) only. C Neither (i) nor (ii). D Both (i) and (ii).
1.3 In the tort of negligence, if a claimant is partly responsible for his/her own injuries, then
1.4 An employer must provide an employee with a written statement of particulars of the
employment
1.6 The vast majority of contracts are "simple". What is the meaning of the word "simple" in
this context?
A B Ltd has accepted an offer and is contractually entitled to the 100 television sets.
B A Ltd can refuse to supply B Ltd as the advertisement is not an offer, but an invitation to
treat.
C A Ltd can only refuse to sell the television sets to B Ltd if it has sold all its stock.
D As B Ltd has not yet paid for the television sets, the company has no contractual right to
them.
A If the creditor agrees to accept less than the full amount due, the debt is discharged at
common law.
B At common law, a creditor who has agreed to accept less than the full amount due, may
go back on his word and recover the balance.
C Payment of less than the full amount due by a third party cannot discharge the whole
debt.
D Payment of less than the amount due cannot discharge the whole debt, even if made
early at the request of the creditor.
A Damages.
B Specific performance.
C Rescission.
D Injunction.
(i) As a general rule, a contract will only be discharged if all its terms have been
precisely performed.
A (i) only. B (ii) only. C Neither (i) nor (ii). D Both (i) and (ii).
1.12 In breach of contract, C Ltd refused to sell a motor car to D Ltd at the agreed price of
£10,000. If the type of motor car is readily available on the market at a price of £9,000,
which ONE of the following is correct?
A D Ltd is entitled to an order of specific performance, forcing C Ltd to carry out its contract.
B D Ltd is entitled to damages of £1,000.
C D Ltd is entitled to nominal damages only.
D D Ltd is not entitled to damages.
A The liability of the company and its shareholders is limited, but the directors are fully liable
for the company’s debts.
B The liability of the company and its directors is limited, but the shareholders are fully liable
for the company’s debts.
C The liability of the company, its directors and shareholders is limited.
D The liability of the directors and shareholders is limited, but the company is fully liable for
its own debts.
1.14 Adam, Ben and Carol have carried on business together in partnership since July 2001.
In September 2001, they decided to enter into a formal partnership agreement. The
partners agreed the terms of the agreement in October 2001 and signed the completed
agreement in November 2001.
(i) It is not possible to register a company limited by shares with the same name as a
company already on the register.
(ii) Once on the register, a company limited by shares cannot change its registered
office.
A (i) only. B (ii) only. C Both (i) and (ii). D Neither (i) nor (ii).
1.16 The authorised share capital of Wye Ltd is £250,000 divided into 250,000 ordinary £1
shares. The asset value of each share is £2. Angela and Brian are the only
shareholders. Each has taken 50,000 shares and each has, so far, paid £10,000.
A The issued share capital of Wye Ltd is £250,000, and the paid up capital is £20,000.
B The issued share capital of Wye Ltd is £100,000, and the paid up capital is £20,000.
C The issued share capital of Wye Ltd is £250,000, and the paid up capital is £100,000.
D The issued share capital of Wye Ltd is £20,000, and the paid up capital is £20,000.
(i) The Articles of Association of a company limited by shares contain the internal
regulations of the company.
(ii) The Articles of Association form a contract between the shareholders and the
company.
A (i) only. B (ii) only. C Both (i) and (ii). D Neither (i) nor (ii).
1.18 Which of the following resolutions may be used to increase a company’s authorised
capital?
A (i) only. B (ii) only. C Both (i) and (ii). D Neither (i) nor (ii).
1.19 XYZ plc has issued shares on terms that they will be bought back by the company 12
months after the date of issue. What are these shares called?
A Ordinary shares.
B Bonus shares.
C Preference shares.
D Redeemable shares.
1.20 Which ONE of the following statements is INCORRECT in relation to elective resolutions?
A The repayment may amount to a "preference", and Alex may be required to hand back
the £15,000 to XY Ltd.
B Alex may be fined.
C The repayment of the loan is valid so long as Alex was acting in good faith.
D XY Ltd and Alex may be guilty of fraud.
1.23 The court has decided that Jill, a director of Jay Ltd, has been wrongfully trading, in that
she continued to carry on business at a time when she should have known that
insolvency was inevitable.
1.24 Jack has acted in breach of his fiduciary duty as a director of JK Ltd. If the breach does
not amount to fraud on the minority, which ONE of the following is correct?
1.25 Zed plc holds its board meetings on the fifteenth day of each month. At the meeting on
15 June 2001, the board discussed a potential contract with RST Ltd. On 1 July 2001,
Lucy, a director of Zed plc, bought shares in RST Ltd. On 25 July 2001, Zed plc
contracted with RST Ltd.
When should Lucy have declared her interest to the board of Zed plc?
(Total = 50 marks)
Question Two
(a) Explain how the law determines whether negotiating parties have reached agreement.
(15 marks)
(b) In September 2001, Exe Ltd ("Exe") telephoned Seller Ltd ("Seller") and ordered 5,000
computer speaker systems at a price of £150,000. It was agreed that the goods would be
delivered within five days and that payment should be made within 28 days of the receipt of
the goods. Following the telephone conversation, Seller sent Exe a document described as
a "sales contract" which set out Seller's terms and conditions. The sales contract contained
a tear-off "acknowledgement" section which Exe was asked to sign and return to Seller.
One week later, Exe signed the acknowledgement and returned it to Seller together with a
letter which stated that the contract was to be governed by Exe's terms and conditions, a
copy of which was enclosed.
The speaker systems were delivered and Exe paid the £150,000 by the due date. Exe has
now received a demand from Seller for £3,000 "transport costs", and has been referred to
one of Seller's terms which provides, in small print: "If the purchaser does not arrange for
the collection of the goods purchased, the seller will arrange for them to be transported
subject to reimbursement by the purchaser who is fully liable for the cost".
Exe is refusing to pay, and has referred Seller to its own terms and conditions which include
the statement: "Any price which Exe Ltd agrees to pay shall be deemed to include all
transport costs".
Required:
As the Company Secretary of Seller Ltd, write a memorandum to your Sales Director,
explaining whether the company is entitled to recover the £3,000 transport costs from Exe
Ltd.
(10 marks)
(Total = 25 marks)
Question Three
(a) Explain how the law determines whether an individual is an employee or an independent
contractor.
(13 marks)
(b) Tom was employed as a mechanic by Cee plc. In October 2001, he had an argument with
Keith, the workshop manager, who lost his temper and told Tom to collect his possessions
and leave, as he was dismissed with immediate effect.
Required:
Prepare a memorandum, in your role as Company Secretary, addressed to the Senior
Human Resources Officer of Cee plc, explaining whether Tom has any remedies against
Cee plc.
(12 marks)
(Total = 25 marks)
Required:
(a) Explain the differences between fixed and floating charges.
(8 marks)
(b) Identify the steps which may be taken by Zed Bank plc in the event of the company
defaulting on the loan.
(6 marks)
(c) Explain whether Edward and Fozia are correct so far as company law is concerned, in
believing that shareholder approval was needed before DEF Ltd could obtain the loan, and
whether they can arrange for the company to withdraw from the loan.
(4 marks)
(d) Explain whether Edward and Fozia have the ability to remove Danny as a director.
(4 marks)
(e) Explain whether Edward and Fozia have the ability to change the Articles of Association so
that in future all decisions must be approved by the shareholders.
(3 marks)
(Total = 25 marks)
End of paper