SCHOOL OF BUSINESS AND COMPUTER

SCIENCE

F4 ENG – CORPORATE AND BUSINESS LAW

REVIEW EXAMINATION 1
13th October, 2023

INSTRUCTIONS
TIME ALLOWED: 3 HOURS
Paper divided into 2 sections –
SECTION A: All multiple questions are compulsory and
must be answered.

SECTION B: All 5 long questions are compulsory and must

be answered.

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ALL QUESTIONS ARE COMPULSORY AND MUST BE ATTEMPTED

SECTION A

1. Bonds wrote McGuire, “I will sell you my house and lot at 419 West Lombard Street, San
Francisco, California for $950,000 payable on merchantable deed, deal to be completed
within 60 days of the date of your acceptance”. Assuming that Bonds’ Letter contains terms
which are deemed sufficiently certain and definite, which of the following statements is
correct?

a. Bonds’ Letter is not an offer unless Bonds intended it to be an offer.

b. Bonds’ letter is not an offer unless McGuire thought Bonds intended to make an
offer.

c. Bonds’ letter is an offer if a reasonable person with full knowledge of the

circumstances would be justified in thinking it was intended as an offer..

d. Bonds’ letter is not a offer unless both Bonds and McGuire considered it as an
offer.
(2 marks)

2. Iverson Jewelers wrote a letter to Miller, ‘We have received an exceptionally fine self
winding Rolox watch which we will sell to you at a very favourable price”.

a. The letter is an offer to sell.

b. A valid offer cannot be made by letter.

c. The letter contains a valid offer which will terminate a reasonable time.

d. The letter lacks one of the essential elements of an offer.

(2 marks)

3. Don was negligently driving south on Merdock Avenue when his car rear-ended a care
driven by Patty. The force of the impact forced Patty to rear-end Terry’s car. In turn, the
force of the second impact caused Terry’s car to hit a lamppost, which then fell on a house
owned by Paul. The force of the impact scared Paul, causing him to immediately have a
heart attack. Paul sues Don for negligence. If Paul recovers, the most likely reason is:

a. Paul was able to prove that Don proximately caused Paul’s injuries.

b. Paul was able to prove that the damages he suffered were actually caused by Don.

c. Paul was able to prove that Don breached a duty of due care owned by Don to
Paul.

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 d. Paul was able to prove all of the above (a, b & c).

(2 marks)

4. On May 1, Back-Talk Computer Store offered to sell five (5) computer servers to
Gatekeeper Company for $5,000.00 each, delivery to be on May 30. Later that day (May
1), Gatekeeper responded that it would buy the computers if they were delivered within
three business days. Back-Talk notified Gatekeeper the next day, May 2, that it would not
be able to deliver the goods within the time requested by Gatekeeper. Which of the
following is true regarding Back-Talk’s offer?

a. There is no contract between Back-Talk and Gatekeeper.

b. Gatekeeper’s additional term became part of the contract, so Back-Talk is

obligated to deliver the goods within three business days.

c. Back-Talk’s offer was accepted by Gatekeeper.

d. Gatekeeper may later accept Back-Talk’s May 1 offer if it is then willing to accept
delivery in four weeks.
(2 marks)

5. The body of law which establishes rights between persons and provides for redress for
violation of those rights is known as:

a. Criminal Law.
b. Civil Law
c. The Uniform Commercial Code.
d. Stare decisis.
(1 mark)

6. On May 1, 2005, Eckerly Realty Inc. mailed a written offer to Masse for the sale of an
office building. The offer included an express term that it would expire on June 30, 2005 if
the acceptance was not delivered into the hands of the offeror by the expiration date. On
June 3-, 2005 at 8:00 a.m.. Masse sent a written acceptance to Eckerly via Masse’s
personal messenger. However, the messenger was not able to deliver the acceptance
until July 1, 2005. On July 2, 2005, Eckerly contacted Masse, informing him that the
acceptance had been delivered one day late, As a result, Eckerly refused to honour the
acceptance. Which of the following is the most correct statement?

a. There is no contract between Eckerly and Masse. However, if Massee would have
mailed the acceptance on June 30, 2005, a contract would have been created.

b. There is a contract between Eckerly and Masse. The moment Masse gave the
acceptance to the messenger, a contract was formed because acceptances are
valid immediately upon dispatch.

c. There is a contract between Eckerly and Masse. The fact that the acceptance
arrived only one day late is of no significance.

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 d. There is no contract between Eckerly and Masse.
(2 marks)

7. Which of the following statements is correct concerning the “reasonable person” standard
in tort law?

a. The reasonable person standard varies from person to person.

b. The reasonable person standard focuses on the defendant’s subjective mental

state rather than on the defendant’s behavior.

c. A person with a physical disability must act as would a reasonable person with the
same disability.

d. A person with a mental disability must act as would a person with the same mental
disability.
(2 marks)

8. Robert make the following statement while negotiating the sale of his car, ‘This is the
sharpest car on the market”. His statement may support a claim for:

a. Misrepresentation.
b. Fraud.
c. Fraud and misrepresentation.
d. None of the above.
(1 mark)

9. Paula rented an apartment to Dave for $500 per month. Paula and Dave signed a one-
year lease, to be effective beginning January 1st. After three months, Dave decided that
he did not like the apartment. He gave Paula a 30-day written notice, stating that he would
vacate the rental unit at the end of the thirty days, which was April 30th. Upon receipt of
Dave’s notice, Paula made reasonable efforts to find a new tenant. Nevertheless, the
apartment remained vacant from May 1st through June 30th. Paula re-rented the
apartment beginning July 1st for one year. Paula sues Dave in small claims court. What
is the likely outcome?

a. Paula is entitled to the balance of the lease, or $4,000, because Dave did not have
a valid reason to breach the contract.

b. Paula is entitled to nothing, because Dave gave Paula thirty-days written notice.

c. Paula is entitled to $1,000, because she tried to find another tenant immediately
upon learning Dave’s intent to breach the contract, but was unable to re-lease the
apartment until July 1st.

d. Paula is entitled to %500, which represents one-month’s rent.

(2 marks)

10. Tom and Jerry entered into a contract whereby Tom agreed to sell Jerry $1000 worth of
heroin, an illegal substance. This is an example of a:

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 a. quasi contract.
b. void contract.
c. voidable contract.
d. secondary party beneficiary contract.
(1 mark)

11. Which of the following indicates partnership?

A. Joint tenancy
B. Tenancy in common
C. Receipt of annuity
D. Sharing of profits
E. Sharing of gross returns
(1 mark)

12. The following clauses must be in the memorandum of association of a Company except

A. The name of the Company

B. That the company is a private or public company
C. The name of the secretary and auditors
D. That the registered office of the company shall be situated in Nigeria
E. That the liability of members is limited by shares or guarantee or unlimited
(2 marks)

13. A Director of a company must be at least of the age of

A. 18
B. 21
C. 25
D. 28
E. 35
(1 mark)

14. Which meeting must a public company hold within six months of incorporation?

A. Commencement meeting
B. Promoters’ meeting
C. Creditor’s meeting
D. Statutory meeting
E. General Meeting
(2 marks)

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15. Which of the following is not an invitation to treat?

A. Display of goods in a shop window

B. Auction
C. Invitation to tender
D. Advertisement of goods in periodicals
E. Sale of necessaries
(1 mark)

16. Winding up of a company may take any of the following forms except

A. Creditors’ winding up
B. Members’ winding up
C. Winding up by the court
D. Winding up subject to supervision by the court
E. Winding up at the complaint of the liquidator
(2 marks)

17. The appointment of a director of a company at a general meeting is by

A. Extra-ordinary resolution
B. Ordinary resolution
C. Special resolution
D. Business resolution
E. Director’s resolution
(2 marks)

18. The Financial statements of a company shall include the following except

A. The balance sheet as at the last day of the year

B. A profit and loss account, or in the case of a company not trading for profit, an
income and expenditure account for the year
C. Notes on the account
D. Auditors’ reports
E. Audit Committee’s report
(2 marks)

19. The decisions of which of the following courts will bind the Court of Appeal?
A. The Supreme Court and a Divisional
Court of the High Court
B. The Supreme Court and the Court of
Appeal
C. The Supreme Court, the Court of Appeal and a Divisional Court of the High
Court
(1 mark)
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20. Which of the following is the aim of criminal law?
A. To compensate injured parties
B. To recover property which has been
taken from the true owner
C . To enforce legal obligations
D. To penalise wrongdoers (2 marks)

21. Which of the following statements correctly describes to

whom auditors owe a duty of care for professional
negligence?
A. To a company’s shareholders in general
and to potential investors
B. To a company’s shareholders in general
only
C. To potential investors and those
shareholders increasing their stakes
(1 mark)

22. Which TWO of the following are defences to negligence?

A. Contributory negligence
B. Volenti non fit injuria
C. Res ipsa loquitur
D. Novus actus interveniens
(2 marks)

23. Which of the following is NOT an automatically unfair reason for dismissal?
A. Taking part in unofficial
strike action
B. Trade union
membership
C. Pregnancy
(1 mark)

24. Lupo has been employed by Snake Ltd for four years.
He was aware that the company was experiencing trading difficulties
but is still shocked to be sent home without notice when Snake Ltd is
compulsorily wound up.
He sues for wrongful dismissal but at the hearing the liquidator proves
that he has discovered that Lupo has embezzled £20,000 from the company.
Required
Will Lupo be entitled to any
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 compensation for his dismissal?
A . Yes, he has been constructively
dismissed
B. Yes, he has been wrongfully dismissed without notice and no
regard should be paid to the embezzlement discovered later
C. No, the employment contract was frustrated by Snake Ltd’s liquidation
D. No, Snake Ltd was justified in its
dismissal of Lupo
(2 marks)

25. Klup Ltd wishes to rely upon a demand for payment of a debt
as the basis for a winding-up petition on the grounds of
insolvency.
Required
Which TWO of the following criteria must be met for the petition to be successful?
A. 21 days has elapsed since the demand with no payment
B. The debt is for more than £750
C. The debt has resulted in a court judgment
D. The demand was served personally on a director
(2 marks)

26. Alison suggests to Bill that he should buy shares in a certain

company. She has information as an insider but does not pass the
information on to Bill.
Required
Which TWO of the following facts must be proved before Alison can
be convicted of the encouraging’ offence of insider dealing?
a. Bill goes on to buy the shares
b. She had reasonable cause to believe Bill would buy the shares
c. The information was likely to affect the price of the shares
d. She tells Bill what the information is
(2 marks)

27. Which TWO of the following are examples of market abuse?

a. Interfering with the normal process of share prices rising and falling
b. Attempting to hide the source of funds from criminal activity
c. Selling shares in the knowledge that the share price is about to fall
d. Recklessly making a misleading profit forecast (2 marks)

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28. Which of the following courts would hear an appeal
against a sentence imposed by the Magistrates’ Court?
A . The Crown
Court
B. The
County
Court
C. The High Court (1 mark)

29. Which of the following statements describes a liquidated damages clause?

A. A clause excluding one party’s liability for
damages in the event of a breach
B . A pre-determined formula for assessing damages
payable for breach
C. An onerous clause which will only be enforced by
the courts if it is in writing

(1 mark)

30. What occurs in a negligence case as a direct result of the claimant proving res ipsa
loquitur?
A. The defendant must prove that they were not negligent
B. The defendant then cannot prove that they were not negligent
C. The claimant is automatically paid the full amount of damages they are claiming
D. The claimant does not have to mitigate their claim for damages (2 marks)

31. What is an ultra vires action by a company?

A. An act beyond the directors’ powers, for which the company
has the capacity but the directors do not have the authority
B. An act beyond the company's capacity, as it is restricted by the company’s objects
C. An act which is beyond the established commercial activities of the company
(1 mark)

32. What is a debenture?

A. A written acknowledgement of a
debt by a company

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 B. A loan secured on a company’s
assets
C. A general term used to describe
loan notes issued by a company

(1 mark)

33. Which of the following is NOT a statutory duty of a director

under the Companies Act 2006?
A . Duty to act within powers
B. Duty to avoid transactions with the company
D. Duty to exercise independent judgement
(1 mark)

34. In which TWO of the following situations is the court likely to

agree that it is ‘just and equitable’ that the company be wound
up?
a. The main object of the company can no longer be achieved
b. There is deadlock in the management of the company’s affairs
c. Winding up is a better option than alternative solutions
d. The parties have agreed to settle a dispute by sale of shares but cannot agree on a
price
(2 marks)

35. Which of the following is a correct difference between

fraudulent and wrongful trading?
A. Fraudulent trading involves the directors intending to
deceive the creditors
B. Fraudulent trading involves the company trading even though
there is little prospect of it avoiding insolvent liquidation

C. Wrongful trading involves the directors intending to deceive the creditors

(1 mark)

36. Which of the following statements concerning delegated legislation is correct?

A. All delegated legislation must be approved by an
affirmative resolution of Parliament

B. The power to make delegated legislation may be

granted to local authorities
C. Delegated legislation is also known as primary legislation (1 mark)

37. What does it mean to say that cases must be proved on a

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 ‘balance of probabilities’ and when is this appropriate?
A. In criminal cases, when it is demonstrated that the prosecution’s
case is more likely to be true than not
B. In civil cases, where it is demonstrated that the claimant’s case is
more likely to be true than the defendant’s case
C. In criminal cases, where there is no significant doubt in the minds
of the jury that the prosecution’s allegations are true
(1 mark)

38. Under the doctrine of judicial precedent, what is the effect of

an obiter dictum of the Supreme Court?
A. Binds all other courts except the
Supreme Court itself
B. Binds all other courts including the
Supreme Court
C. Binds courts below the Court of
Appeal
D. Binds no courts at all but is
persuasive in practice
(2 marks)

39. What is the status of a written advertisement for the sale of

goods in a newspaper in the law of contract?
A . It is an invitation for others to make an
offer to the advertisers
B . Any advertisement is ‘too vague’ to
have any legal effect
C . It is a mere supply of information
(1 mark)

40. What is the statutory minimum notice period that an employer

must give an employee who has been employed for between
one month and two years?
A. One
week
B. Two
weeks
C. One
Month
1 Mark

41. What is the minimum paid-up share capital of a public limited company?
A.
£12,500

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 B.
£50,000
C. £100,000 (1 mark)

42. Which TWO of the following situations will terminate an ordinary partnership?
a. Subsequent illegality of the venture
b. The conviction of a partner for a criminal offence of dishonesty
c. Expiration of a fixed-term partnership
d. A judgment against a partner in a civil action for debt
(2 marks)

43. Which TWO of the following statements are correct?

a. Trading companies have an implied power to borrow
b. Non-trading companies must pass an ordinary resolution before they can borrow
c. Non-trading companies have an implied power to borrow
d. Trading companies must have an express power to borrow
(2 marks)

44. Which TWO of the following statements concerning

company meetings and resolutions are correct?
a. Written resolutions can only be passed by private companies
b. The text of ordinary resolutions must be set out in full in the
notice convening the meeting where it will be voted on
c. 28 days’ notice must be given in respect of an annual general meeting
d. 14 days’ notice of the meeting is required where a special resolution is to be voted
on
(2 marks)

45. Which TWO of the following statements describe the effect of an administration order?
a. Past transactions of the company may not be challenged
b. No creditor can appoint a receiver
c. The administrator acts as agent for the company as a whole, including the creditors
d. The administrator can sell assets which are subject to a fixed or floating charge to
raise money for the company (2 marks)

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 SECTION B
Question 1

(a) Explain the term ‘Judicial precedent’ and state two of its advantages
(2 marks)

(b) Kayode and Abinga has an agreement by which they contributed $500,000 each as
deposits for the purchase of spare parts. By the agreement, they are to share the
spare parts equally on continuous basis. Kayode recently received a consignment
of spare parts at the cost of $600,000. Abinga demanded that the spare parts be
shared equally with Kayodeon the ground that, by their agreement, they are
partners. However, Kayode has sold two-thirds of the spare parts. Ahinga,
Therefore, demands an account from the Kayode of the sales by him of the spare
parts. Kayode insists that he cannot account to Abinga because they are not
partners.

Required:
Advise Abinga on the status of his relations with Kayode
(2 marks)

(c) The powers of the Board of Directors in running the company differ from those of
the General Meeting in nature and limit

Required:
Explain succinctly the nature and extent of the powers of the Board of Directors
(2 marks)
Total 6 Marks)

Question 2
Jan is the owner and sole shareholder of The Shack Ltd which has been making losses for
the past six months. Despite everything she could do, the business has reached the limit of its
overdraft and can no longer pay its monthly outgoings. Jan knows the business owns a number
of valuable assets (which are worth more than the business’ combined debts), so she has
decided to sell them and liquidate the company.

Required
(a) Which type of insolvency procedure will Jan use to liquidate the company? O
Administration
i Compulsory liquidation
ii Members’ voluntary liquidation
iii Creditors’ voluntary liquidation (2 marks)

(b) Which of the following parties will be paid back FIRST from the assets of The Shack Co?
i The employees

i i The liquidator
iii The secured creditors
iv Floating chargeholders
v Jan

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 vi Unsecured creditors (2 marks)

(c) Which of the following parties will be paid back LAST from the assets of The Shack Co? O
The employees
i The liquidator
ii The secured creditors

i i i Floating chargeholders
iv Jan
v Unsecured creditors (2 marks)

(Total = 6 marks)

Question 3
It is Friday evening and Ace and Ben see a car for sale at Charlie’s Auto Centre. The car has a
price tag in the window of £10,000 with a sign saying ‘25% off this car until Monday
only’.
Ace is going away on holiday on Saturday morning, so he writes a letter to Charlie, offering to
pay him £7,500 when he returns in two weeks’ time. He posts the letter on the way to the airport
on Saturday morning.
Ben likes the car but does not think it is worth the price being offered. He calls Charlie on
Saturday and offers £5,000 in cash for it. Charlie declines the offer but says he is happy to keep
the offer of 25% off the price open for him until Tuesday.
On Monday, Del visits Charlie and buys the car for £7,500. On Tuesday, Charlie receives
Ace’s offer letter and Ben calls him, also offering to pay £7,500.

Required
(a) Which of the following statements concerning offers is NOT correct? O Verbal
offers must be confirmed in writing to be valid
O Offers must be a definite promise
O Offers must be certain in their terms
O An offer can be made to a specific class of person (2 marks)

(b) Which of the following correctly describes the price tag in the car window? O An
invitation to treat
O An offer
O An invitation to tender
O An intention to create legal relations (2 marks)

(c) Which of the following statements correctly describes the legal situation with Ace, Ben, Charlie and
Del?
O Ace’s letter to Charlie will be treated as valid acceptance of an offer
O Ben can sue Charlie for damages for not keeping the offer open for him until
Tuesday
O Charlie was free to sell the car to Del on Monday
O Del’s agreement to buy the car from Charlie is not legally binding (2 marks) (Total

= 6 marks)

Question 4
Mike, Nic and Olive are in partnership. Their business is a management consultancy that
helps private companies become listed. There is a partnership agreement which states that
partnership funds should not be used to buy shares in any company.
In February, Mike used the company credit card to purchase computer equipment. He told Nic
and Olive that the equipment was needed for the business, but it was delivered to Mike’s home
for his personal use. Until this point, there was no balance to pay on the credit card, now the
balance stands at almost £10,000.
In March, Nic used money from a partnership savings account to purchase shares in Halo pic
on behalf of the partnership. This company had recently used the partnership to acquire listed
status. Nic planned on selling the shares in the future to make a profit for the partnership.
In April, after Nic bought the shares, Olive retired from the partnership but the creditors were
not notified of her retirement until July. In June the partnership’s bank refused to allow the
payment of the monthly office rent as there were insufficient funds in the partnership’s account

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 and the partnership had reached the limit of its overdraft facility.
In December, an economic recession hit which caused Halo pic to suffer substantial losses and
the value of Halo pic’s shares plummeted, leaving them almost worthless.

Required
(a) Which statement concerning the liability of the partners for the credit card balance is
correct?
O Only Mike is liable to repay the overdraft because he used the funds for his own personal
use
O Only Mike is liable to repay the overdraft because he lied to the other partners about
how he would use the money
O None of the partners are liable to repay the credit card because the funds were not used
for legitimate partnership expenses
O All of the partners are liable to repay the credit card because Mike had authority to
use it (2 marks)

(b) Who is liable for the partnership losses in respect of the shares in Halo pic? O Mike
and Nic only
O None of the partners
O Nic only

O Mike, Nic and Olive (2 marks)

(c) Which of the partners are liable for the office rent debt?

O Mike, Nic and Olive

O None of the partners
O Mike and Nic only
O Olive only (2 marks)

(Total = 6 marks)
Question 5
Rochelle works in an accountancy practice as a part-qualified accountant. One of the
practice’s clients is Slim. Unknown to Rochelle, Slim’s business is being used to hide an
illegal operation. One day, Slim rings Rochelle and asks her for some advice. Slim is careful to
try not to alert Rochelle that the reason for the advice is to help him to cover up and process
illegal gains.
Rochelle gives Slim the advice he needs, but afterwards has private suspicions that Slim may
be involved in money laundering. However, on reflection, Rochelle decides that because she
has no evidence that money laundering is taken place, she will keep the matter to herself.

Required
(a) Which of the following statements concerning the offence of money laundering is correct?
O The money laundering offences of tipping off and failure to report can only be committed
by qualified accountants or other qualified finance professionals
O The offence of money laundering is committed when there is an attempt to disguise
the source of illegal gains of £1,000 or more
O The offence of money laundering is committed when the gains from any illegal
activity are disguised
O The offence of money laundering can only be committed where illegal funds are
electronically transferred (2 marks)

(b) Have Rochelle and Slim committed any money laundering offences?

No offence Money Failure to

committed laundering report Tipping off

Rochelle O O O O

Slim O O O O

(4 marks)

(Total = 6 marks)

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