ICAEW BL Business Law: mock exams and practice questions

Sample question 1 · 1 · Introduction to legal principles

Kofi, a self-employed courier, knocks a cyclist, Megan, off her bike. Kofi is prosecuted for careless driving, and Megan also sues him for damages for her injuries. Which of the following correctly describes the two sets of proceedings?

1. A Megan must prove her claim beyond reasonable doubt, because the same facts are being tried in a criminal court.
2. B If Kofi is acquitted in the criminal case, Megan's civil claim for damages must then be dismissed.
3. C The prosecution must prove Kofi's guilt beyond reasonable doubt; Megan must prove her claim on the balance of probabilities.
4. D Megan brings the criminal case as claimant, and the Crown brings the civil case as prosecutor.

Show the answer

Answer: C. Criminal and civil law differ in their parties, burden and standard of proof, and outcomes. A criminal case is brought by the state (the Crown, usually through the Crown Prosecution Service) against a defendant. The prosecution bears the burden of proof and must prove guilt beyond reasonable doubt; the outcome is conviction or acquittal and, on conviction, a sentence. A civil case is brought by a claimant against a defendant to enforce private rights. The claimant must prove the case on the balance of probabilities, and the usual remedy is damages. The same incident can give rise to both, and because the standards differ, an acquittal does not prevent a successful civil claim.

Sample question 2 · 2 · Civil law: contract, agency and negligence

Fernhill Lighting, a shop in Bristol, displays a designer lamp in its window with a price ticket of £45. The ticket should have read £450. Meena Dhillon goes into the shop, takes the lamp to the counter and says she accepts the shop's offer to sell it for £45. The manager refuses to sell it for less than £450. What is the legal position?

1. A The display was an invitation to treat; Meena made an offer of £45, which the shop was free to reject.
2. B The window display was an offer, which Meena accepted, so the shop must sell the lamp for £45.
3. C The display was an offer, but the shop can avoid the contract because the price ticket was a mistake.
4. D A contract was formed at £450, because that is the price the shop always intended to charge.

Show the answer

Answer: A. Goods displayed in a shop window or on shelves with a price attached are an invitation to treat, not an offer (Fisher v Bell; Pharmaceutical Society of GB v Boots Cash Chemists). The customer makes the offer when presenting the goods for purchase, and the shop is free to accept or reject it. As the shop rejected Meena's offer of £45, no contract was formed.

Sample question 3 · 3 · Company and insolvency law

Rhian Morgan holds all 100 £1 ordinary shares in Coldharbour Ltd, which are fully paid, and is its only director. The company now owes £48,000 to a supplier, Teasel Supplies Ltd, and has no assets. Rhian gave no personal guarantee and has not acted wrongfully or fraudulently. What is the legal position?

1. A Rhian is personally liable for the £48,000, because a sole member and director runs the company as her agent
2. B Teasel can claim only against Coldharbour Ltd; Rhian has no further liability because her shares are fully paid
3. C Rhian must contribute up to £100, the nominal value of her shares, towards the £48,000 debt
4. D Rhian and the company are jointly liable, because a one-member company has no separate legal personality

Show the answer

Answer: B. A registered company is a legal person separate from its members (Salomon v A Salomon & Co Ltd, 1897), so Coldharbour Ltd alone owes the £48,000. In a company limited by shares a member's liability is limited to the amount, if any, unpaid on her shares (CA 2006 s 3(2)). Rhian's shares are fully paid, she gave no guarantee and no statutory or court ground for lifting the veil applies, so Teasel is an unsecured creditor of the company only.