Paper 2.

2(ENG)
Corporate and
Business Law
(English)

PART 2

TUESDAY 3 DECEMBER 2002

QUESTION PAPER

Time allowed 3 hours

This paper is divided into two sections

Section A SIX questions ONLY to be answered

Section B TWO questions ONLY to be answered

Section A – SIX questions ONLY to be attempted

1 (a) Briefly describe the main civil courts in the English legal system. (6 marks)
(b) Explain the three track system for allocating cases between courts. (4 marks)
(10 marks)

2 (a) Define consideration as it is understood in English contract law. (3 marks)

(b) Explain and distinguish between the following terms:
(i) executory consideration; (2 marks)
(ii) executed consideration; (2 marks)
(iii) past consideration. (3 marks)
(10 marks)

3 In relation to the law of contract:

(a) distinguish between express and implied terms; (4 marks)
(b) explain the circumstances under which terms may be implied in contracts. (6 marks)
(10 marks)

4 State and explain the remedies available for breach of contract. (10 marks)

5 Detail the grounds upon which a partnership can be terminated. (10 marks)

6 Explain in relation to the formation of a company what is meant by the terms:

(a) promoter; (5 marks)
(b) pre-incorporation contract. (5 marks)
(10 marks)

7 In company law:
(a) explain the meaning of class rights in relation to company shares providing examples
of such rights; (6 marks)
(b) state how such rights can be altered. (4 marks)
(10 marks)

8 Explain, in relation to private companies, what is meant by and the procedure involved in passing:
(a) a written resolution; (5 marks)
(b) an elective resolution. (5 marks)
(10 marks)

2
Section B – TWO questions ONLY to be attempted

9 In January 2002 Alex, a business consultant, won a lucrative contract with Ball Ltd to provide them with a highly
specialised computer system. The terms of the contract required the system to be fully operational by 30 May subject
to a penalty of £1,000 for every day’s delay. Alex entered into three subcontracts. One was with Chris to provide the
software for the new system, a second was with Dick to provide the necessary computer hardware and a third was
with Eric to write a manual explaining the operation of the new system. All of these tasks were to be carried out by
23 May. Chris, Dick and Eric were each to receive £5,000 for their work.
At the end of March, Chris told Alex that he would not complete the software in time unless Alex agreed to increase
his payment by a further £1,000. Alex agreed to pay the increased sum in order to ensure that the job was done on
time. However, he thought it was only fair that he should increase the money promised to the others, so he promised
them a bonus of £1,000 if the job was done on time. At the same time he asked Eric if he could produce his manual
by 16 May so that he could demonstrate it in advance to the managers of Ball Ltd.
In the event, all three completed their tasks by 16 May and the system was successfully installed before Alex’s
contractual deadline with Ball Ltd. However, Alex has now refused to make any additional payments beyond the
original contractual price to Chris, Dick or Eric.
Required:
Advise Chris, Dick and Eric whether they have any rights in law to enforce Alex’s promise to pay them an extra
£1,000. (20 marks)

10 Fawn Ltd manufactures clothes and used to sell them through its own retail shop. Grace, who is 33 years old, was
employed by Fawn Ltd for three years as the manager of the shop. Grace has been told that her services are no longer
required as Fawn Ltd has decided to close its store and concentrate solely on manufacturing. Grace has also been
told that she will not receive any recompense for her job loss.
Required:
Advise Grace as to the likelihood of her successfully claiming for unfair dismissal or redundancy. (20 marks)

11 Hank is a director in two companies. The first, Improve Ltd has an authorised and issued capital of 100,000 shares
at a nominal value of £1. It has been very successful and is looking to increase its share capital by £50,000 in order
to finance its future development.
The second, Judder Ltd also has an authorised and issued capital of 100,000 shares at a nominal value of £1. It,
however, has not traded profitably and has consistently lost capital for a number of years. Although the company has
shown a profit on its current year’s trading its accounts still show a deficit of £50,000 between assets and liabilities.
The board of directors thinks it would be beneficial if the company were to write off its previous losses and to that
end are looking to reduce its authorised and issued capital by £50,000.
Required:
Advise Hank as to the procedure involved in:
(a) increasing Improve Ltd’s authorised capital; (8 marks)
(b) reducing Judder Ltd’s authorised/issued capital. (12 marks)
(20 marks)

3 [P.T.O.
12 King Ltd is a property development company. Although there are five members of its board of directors, the actual day
to day running of the business is left to one of them Lex, who simply reports back to the board on the business he
has transacted. Lex refers to himself as the Managing Director of King Ltd, although he has never been officially
appointed as such. Lex is assisted in the running of the business by Mary, King Ltd’s company secretary.
Six months ago Lex entered into a contract on King Ltd’s behalf with Nat to produce plans for the redevelopment of
a particular site that it hoped to acquire. However King Ltd did not acquire the site and due to its current precarious
financial position, the board of directors have refused to pay Nat, claiming that Lex did not have the necessary
authority to enter into the contract with him.
The board are also refusing to complete a contract with Owen for the supply of new office furniture that Mary had
ordered on King Ltd’s behalf. They have also learned that Mary has entered into a contract on King Ltd’s behalf to
have an extension built onto her own house.
Required:
Analyse the situation with regard to the authority of both Lex and Mary to make contracts on behalf of King Ltd
and in particular advise the board of directors if the company is liable for each of the contracts.
(20 marks)

End of Question Paper