ACCA AS Corporate and Business Law (LW) — Questions and Answers
Question 1: Which of the following is NOT a requirement for a valid simple contract under English law?
- Offer and acceptance
- Consideration
- A written document signed by both parties (Correct answer)
- Intention to create legal relations
Correct answer: A written document signed by both parties
Under English law, a simple contract does not need to be in writing. The essential elements are offer, acceptance, consideration, intention to create legal relations, and capacity. Only certain contracts (e.g., land transfers) must be in writing.
Question 2: Under the Companies Act 2006, what is the minimum number of directors required for a public limited company?
- One
- Two (Correct answer)
- Three
- Four
Correct answer: Two
Section 154 of the Companies Act 2006 requires a public company to have at least two directors. A private company needs only one director.
Question 3: In the context of agency law, which of the following best describes 'apparent authority'?
- Authority explicitly granted by the principal in a written agreement
- Authority that arises from the conduct of the principal leading third parties to believe the agent has authority (Correct answer)
- Authority granted by a court order
- Authority that an agent assumes without any basis
Correct answer: Authority that arises from the conduct of the principal leading third parties to believe the agent has authority
Apparent (or ostensible) authority arises where the principal's conduct leads a reasonable third party to believe the agent has authority to act, even if no actual authority was granted. This was established in Freeman & Lockyer v Buckhurst Park Properties.
Question 4: Which remedy is available to a party for breach of a condition in a contract?
- Damages only
- Repudiation of the contract only
- Either repudiation of the contract or damages, or both (Correct answer)
- Specific performance only
Correct answer: Either repudiation of the contract or damages, or both
A condition is a fundamental term of the contract. Breach of a condition entitles the innocent party to repudiate (terminate) the contract AND/OR claim damages. This gives the widest range of remedies compared to breach of a warranty.
Question 5: Under the Insolvency Act 1986, which of the following is the correct order of priority for distribution of assets in a compulsory liquidation?
- Unsecured creditors, preferential creditors, secured creditors, liquidator's costs
- Secured creditors (fixed charge), liquidator's costs, preferential creditors, unsecured creditors (Correct answer)
- Liquidator's costs, secured creditors, unsecured creditors, preferential creditors
- Preferential creditors, liquidator's costs, secured creditors, unsecured creditors
Correct answer: Secured creditors (fixed charge), liquidator's costs, preferential creditors, unsecured creditors
The correct priority is: (1) fixed charge holders, (2) costs of liquidation, (3) preferential creditors (e.g., employee wages), (4) floating charge holders, (5) unsecured creditors, (6) shareholders. Fixed charge holders rank first as their security attaches to specific assets.
Question 6: A fraudulent misrepresentation in contract law requires which of the following elements?
- A false statement made carelessly without checking its truth
- A false statement made knowingly, without belief in its truth, or recklessly (Correct answer)
- An honest but incorrect statement of opinion
- A statement that later becomes untrue due to changed circumstances
Correct answer: A false statement made knowingly, without belief in its truth, or recklessly
Fraudulent misrepresentation, as defined in Derry v Peek (1889), requires a false statement made knowingly, without belief in its truth, or recklessly as to whether it is true or false. Careless statements without fraud constitute negligent misrepresentation.
ACCA AS Corporate and Business Law (LW)
Which of the following is NOT a requirement for a valid simple contract under English law?