Business and Contract Flashcards
(149 cards)
1
Q
When will there be NO presumption to create legal relations?
A
When the parties are related. But the further relatives they are, the weaker the presumption.
2
Q
When is a shareholder protected by limited liability?
A
When their shares are fully paid.
3
Q
When is the postal rule excluded by an offer?
A
When the offeror indicates that they need to hear acceptance by a particular date.
4
Q
What must be included in an application to register a company?
A
The memorandum of association.
The articles only need to be included if the model articles are not being adopted.
5
Q
Are partners required to manage a business?
A
No. They can play a less active role in managing a business than other partners.
6
Q
What is the nominal value of shares?
A
The original value of the shares when they were issued.
Note: most questions have shares issued at a pound each.
7
Q
Can limited partners participate in management?
A
Partners in a limited partnership (not a limited liability partnership) cannot participate in management if they want to retain limited liability.
8
Q
Are shareholders personally liable to each other?
A
Yes. Statute provides that members of a company are in a contract with each other. An infringement of a member’s rights would allow them to sue an individual member.
9
Q
What is the difference between a unilateral and a bilateral contract?
A
A unilateral contract is a promise in return for an act, as opposed an exchange of promises.
10
Q
When is acceptance of an offer via email deemed to be communicated?
A
During working hours but outside lunch time.
11
Q
What sort of language deems the terms of a contract too vague?
A
‘On Hire Purchase’
‘On Standard Industry Terms’
12
Q
When is a contract binding for a minor?
A
When it is a contract for necessaries or a contract of service that is more favorable than not to the minor.
13
Q
What constitutes mental incapacity to enter a contract?
A
An inability to understand the terms of the contract which the other party is aware of.
14
Q
When does a partner continue to be liable after retirement?
A
If they fail to give actual notice to people they are in business with or are held out as if they are still part of the partnership.
15
Q
Can you claim the arrears for lessened rent? Do you have to give notice?
A
If you agree to reduce rent until an event, you have no right to the full rent before that event happens. After the event happens, you can claim for the full rent by giving reasonable notice.
16
Q
How can a partner leave or be added to a partnership?
A
Unless an agreement states otherwise, a partner can only be removed from or added to a partnership through unanimous agreement of ALL the partners (including the partner being removed).
17
Q
When can a past act amount to consideration?
A
If the act was done at the other party’s request, there was mutual understanding that the act would be rewarded and there is a general presumption to create legal relations.
18
Q
What sort of tax do partners pay?
A
Partners pay income tax on the income profits of the partnership.
19
Q
When is part payment of a debt sufficient consideration?
A
Only if you pay early.
If you pay early, you gave consideration for the promise to accept half-payment.
20
Q
Is a promise to do something consideration?
A
Yes.
21
Q
When does a partner have apparent authority?
A
The other party does not know that the partner doesn’t have authority AND the transaction is one which a partner would be reasonably expected to have authority to make.
22
Q
Can a partner set up a competing business after leaving a partnership?
A
Yes. They are only restricted from competing while still partners.
23
Q
Does the short term right to reject and receive a refund apply to B2B?
A
No.
24
Q
When is a term referred to as a ‘condition’ not treated as a condition in the legal sense?
A
When neither party intended for it to be a condition in the legal sense.
25
When will exemption clauses be void?
If they exempt liability for negligence that causes death or personal injury.
If they exempt liability for breaches of implied terms of SGSA and SGA or express terms and are NOT reasonable.
26
Which factors affect the reasonableness of exemption clauses?
Bargaining strength.
Options available.
Awareness of the exemption clause.
27
What classifies as 'regular and consistent' course of dealings?
More than one previous contract.
28
Can someone sue a manufacturer if they were sold a faulty item by a third party (a seller)?
They can only sue them for negligence. Not for damages in contract as they do not have a contract with the manufacturer.
29
Are any terms implied into contracts that are C2C?
No. Just B2B and B2C.
30
Who can request the directors to call a general meeting?
Any shareholder or shareholders together holding more than 5% of the voting shares.
31
Do members not attending a meeting count in the % of a vote?
No. They must be present or appoint a proxy to count in the vote.
32
What is a simple majority?
More than 50%.
33
Who can request a poll vote of one vote per share?
A single shareholder with 10% or more of the shares or two shareholders or a director or the chair of the meeting.
34
Who cannot vote on a transaction they are interested in?
Directors cannot.
Shareholders can.
35
What is the notice required for each type of meeting?
Reasonable notice for a board meeting.
14 clear days for a shareholder meeting.
36
What is needed for a 'general' shareholder meeting to be held on short notice?
The agreement of shareholders holding at least 90% of the voting shares.
37
What do you need to be a Person with Significant Control (PSC)?
MORE than 25% of shares. Exactly 25% is not enough.
38
Who has a casting vote?
The chair of the board of directors.
39
What requires a special resolution of the shareholders?
Disapplying pre-emption rights.
Changing the name of a company.
Amending articles.
40
What is the lapse period of a written resolution?
28 regular days.
41
What requires an ordinary resolution of the shareholders?
Removing auditors.
Removing a director (with 28 days of notice) which MUST be board meeting.
Giving a director a long term service contract which is GUARANTEED to last more than two years.
A substantial property transaction with a director or a person connected to them.
Loaning more than 10k to a director personally.
Ratifying a director’s breach.
Giving directors authority to allot new type of shares.
42
What is a substantial property transaction?
Any transaction with a director worth more than 100k or more than 5k and 10% of net assets.
43
For emails and letters, when does the clock start for the 14 clear days after a general meeting is called?
48 hours after the notice is sent or posted.
44
What is the minimum number of directors at a board meeting?
2.
45
Do holidays and weekends count in 14 'clear' days for the purpose of a general meeting?
Yes. All days count.
46
When do pre-emption rights not exist?
When the consideration for the shares being allotted is something other than cash.
47
When can a company loan money to a director?
When the director will use the money to buy something used for business. Otherwise, an ordinary resolution is required.
48
When is a shareholder meeting not required?
When every single shareholder agrees on something - there is unanimous agreement.
49
Can a board appoint a new director?
Yes.
50
When will a company classify as 'connected to a director'?
When the director or someone connected to them owns 20% of the shares of the company.
51
What must be filed at companies house upon removal or appointment of a director?
Just the relevant form.
52
What must be filed at companies house upon a change of name?
Resolution and form (notice) and fee.
53
Do shareholders at a meeting abstaining count in the % of the vote?
No.
54
Are contracts entered into by minors void or voidable?
Voidable only at their option.
55
When does a third party have a right enforce a promise under a contract?
Only if the contract explicitly intended for this to be possible. Express provisions of otherwise exclude this right.
56
What is the consequence of a board of directors making a SPT without obtaining shareholder approval?
57
When is it ok if a director voted to ratify their breach?
If the vote would have passed regardless of their vote.
58
Can someone continue to make a derivative claim after a breach of a director's duty has been ratified?
No.
59
Can a written resolution be used to remove a director?
No. They have the right to defend themselves and so a board meeting is required.
60
Who decides a dividend and who declares it?
Board decides.
Shareholders declare.
61
Can a disqualified director set up or manage another company?
Only with leave of the court.
62
Are all directors employees of a company?
Not non-executive directors.
63
When is it possible to be a PSC without owning MORE than 25% of voting shares.
When you can appoint or remove a majority of the board of directors.
64
Who are 'persons connected with directors' for the purposes of SPTs?
Spouses or partners living with them.
Parents and children.
65
What is the minimum age for directors?
16.
66
Do auditors owe shareholders a duty of care?
No. Only to the company.
67
Can a company have one director?
Yes.
68
Who ratifies a breach of a director's duty and how?
The shareholders through ordinary resolution.
The director/shareholder who breached cannot count in the vote to ratify.
69
Which type of transactions are directors obliged to declare their interest in?
Proposed AND existing ones.
70
What does a company need to do upon receiving notice from shareholders that they intend to remove a director?
Immediately send a copy of the notice to the director.
71
When is a course of dealings regular but not consistent?
When the terms were communicated on certain occasions during the dealings but not others.
72
When are you entitled to a price reduction?
When repeat performance isn't possible.
73
Can you sue a worker for negligent work in contract law?
Not usually because exemption clauses will usually cover them implicitly.
74
Will a court consider the parties' ability to take out insurance when examining the reasonableness of an exemption clause?
Yes.
75
When are exemption clauses valid?
When reasonable according to what the parties intended and ought to have known about the contract.
76
Can liability for defective items and fitness for purposes be excluded?
Not in B2C contracts governed by the CRA.
77
Can you exclude liability for personal injury in a contract?
No.
78
What happens when someone is attempting to rely on an ambiguous term of a contract?
The court will interpret the clause against them.
79
What is the highest form of security against a property?
Legal Mortgage.
80
Does a fixed charge give the lender a right to immediate possession?
No.
81
When can a company pay dividends out of capital?
No. That would be illegal.
82
What is the process of issuing a new class of shares?
- Ordinary resolution to allow new class of shares.
83
What is an accrual on a balance sheet?
A bill that is yet to be paid.
84
What is the process of buyback?
If buyback out of profits - ordinary resolution.
If buyback out of capital - ordinary resolution to buyback and special resolution to pay with capital.
85
How soon must a charge be registered at Companies House after being executed? What is the consequence of not doing so?
21 days.
The charge is void against other creditors.
86
What is the percentage ownership requirement to surrender loss?
You must be a 75% residuary in the company you're surrendering loss to.
The carry across must be for the same accounting period.
87
What is a capital allowance? What are the different types?
A % of assets or investments that can be deducted from chargeable receipts (revenues) for the sake of calculating trading profits.
Investment Allowance: usually 1 million.
Written Down Allowance (18%) of capital the company owns.
88
Are chargeable gains included in the calculation of trading profits?
No.
89
What are the CGT bands?
10% if income and capital gains is less than 37.7k - 'basic rate'.
20% if income and capital gains is more than 37.7k 'higher rate'.
Added 8% if you're selling residential home.
90
How far back can you carry back losses?
One year.
This year's losses can be reduced from last year's trading profits OR capital gains.
91
How far forward can you carry forward losses?
Indefinitely until loss is wiped out from future TRADING profits.
92
What is carry-across tax relief?
Trading losses can be deducted from this year's capital gains.
93
Do individuals pay CGT on the sale of their primary residence?
No. CGT is completely relieved.
94
How is a gift treated for the sake of CGT?
As if it was sold at market price.
95
What must a close company of less than five members do when it makes a loan to one of the members?
If it's more than 15k, pay 32.5% of the loan to HMRC until loan is paid back or written off.
96
If you gift your spouse something, is it a chargeable instance for the purposes of CGT?
No but they take on your CGT liability, as if they acquired the asset at the cost at which you acquired it.
97
How are CGT and income intepreted for the sake of corporation tax?
They are the same thing.
98
What is replacement of business assets relief for CGT?
Only for physical property and goodwill.
Example: if you make a capital gain on a business asset of 80k, then replace the property by buying something for 200k, the new purchase price for the new property is 200 minus 80k.
99
What is the formula for trading profits?
Chargeable receipts - business costs - capital allowances
100
Do companies enjoy annual exemptions for tax?
No.
101
What are the corporation tax bands?
Up to 50k - 19%
50 to 250k - between 19 and 25%
More than 250k - 25%
102
How do very large companies with profits over 20 million pay corporation tax?
In four installments throughout the period.
103
Which companies need to register for VAT?
Taxable supply of goods - worth more than 85k in the preceding 12 months or expects do more than that in the next 30 days.
104
What is an unenforceable penalty clause?
Extravagant sum.
Lump sum on happening.
Penalty clause greater than money owed. Eg 30k if 2k of rent isn't paid.
105
Are specified damages enforceable?
Yes.
106
When is disappointment remedied in contract law?
When the purpose of the contract was enjoyment or pleasure.
107
Does a contract of guarantee need to be a written contract?
No. It only has to be evidenced in writing that is signed.
108
When are negotiating damages awarded?
When there is no financial loss other than the chance to negotiate a release fee.
109
What is the difference between an indemnity and a guarantee?
Indemnity - promise to compensate loss.
Guarantee - promise to perform contractual obligations of someone else.
110
What is the doctrine of complete performance?
If we agree that I'll only pay you on completion of a task, you're entitled to nothing until you complete it.
111
Does illness of a performer frustrate a performance contract?
Yes as long as the illness is unforeseen and not the fault of the performer.
112
Can you have more than one fixed charge over the same asset?
Yes.
113
How are fixed charges over the same asset prioritized?
By date of creation so long as they were registered correctly within 21 days.
114
What is the time window for an insolvency-related transaction at an undervalue?
Two years for ANYONE.
115
What is a defence to a transaction at an undervalue?
The transaction was entered into in good faith.
116
When are floating charges before insolvency void?
When they are given in exchange for no consideration, AND:
Within a year of insolvency if created for strangers.
Within two years of insolvency if created for persons connected with the company.
117
For how long is a bankrupt person estopped from becoming a company director?
One year of bankruptcy order.
118
How is a company declared bankrupt or insolvent?
Creditor obtains judgement against a company or serves statutory demand for a sum of 750 or more.
119
What is an individual voluntary agreement?
An agreement between an someone and his creditors outlining how debts will be paid. 75% of creditors must approve.
120
What must a liquidator prove to render a floating charge void?
Prove that the company was insolvent at the time or became insolvent as a result of the charge.
121
What are the different thresholds for insolvency between a company and an individual?
750 for companies.
5000 for individuals.
122
What is a preference and what is the time period for a preference?
Six months prior to insolvency for strangers.
Two years for persons connected.
123
What is a requirement for preferences that doesn't exist for transactions at an undervalue?
Intent to prefer which is presumed if it's a person connected with the company.
124
What is the order of distribution of assets upon insolvency?
Winding up costs then fixed charges then preferenced debts then floating charges then unsecured creditors then finally shareholders.
125
Who are preferential creditors on insolvency?
Anyone with a mortgage or fixed charge.
Salaried employees.
HMRC with respect to VAT.
126
What are the bars to rescission?
- Innocent third party acquires interest in property.
- Contract is affirmed.
- Undue delay.
- Impossibility.
127
When will damages in lieu of rescission be awarded?
Only if misrep is non-fraudulent.
128
What is the difference between damages awarded for fraudulent/statutory vs negligent misrep?
For fraudulent and statutory misrep, the usual remoteness rule for tort damages does not apply. All consequential losses are recovered on tortious basis.
For negligent rep, remoteness applies.
129
When is restitution impossible and therefore barring rescission of a contract?
When I buy something and make extensive modifications to it, it cannot be returned.
130
Can you make a misrep by not correcting someone's mistaken belief?
No.
131
When is a mortgagee put on inquiry with constructive notice of undue influence?
When the transaction is suspicious and not for the joint benefit of both mortgagors.
132
What must a mortgagee do once they are put on inquiry of undue influence?
Warn of the risks and urge independent legal advice.
133
When do relationships of trust and confidence, in the context of undue influence, need to be proved? Who needs to prove it?
When they are not presumed to be of trust and confidence.
Mortgagee needs to prove it.
134
In the context of undue influence, is a husband-wife relationship presumed to be one of trust and confidence?
No.
135
Is equality of bargaining power relevant to duress?
No.
136
What is the difference between executed and executory consideration?
Executed - physically performed.
Executory - promised.
137
Who can inspect a register of members of a private company?
Anyone so long as it is for a proper purpose.
138
How many designated members does an LLP need to have?
Two.
139
To which terms does the Unfair Contract Terms Act apply?
Only exclusion and liability limitation clauses.
140
Are manufacturers liable under the CPA?
Yes. Everyone is. Producers, manufacturers, suppliers, and importers.
141
How many days do you have to update a PSC register?
14.
142
What are the requirements of voluntary strike-off?
No trade, change of name, or disposal of assets for value in the last three months. No current or proposed legal proceedings.
143
When will a condition, even if in a signed contract, need to be brought to the other party's attention?
When it is particularly onerous.
144
Do the Companies Act Articles of Association stipulate that there is a maximum number of shareholders?
No.
145
Is there a presumption of force majeure in English law?
No.
146
What is the maximum amount of loss that can be carried forward?
5 million + 50% of actual loss.
147
What is statutory misrepresentation?
Misrepresentation that is non-fraudulent but the defendant cannot provide reasonable grounds for believing what they did.
148
Is liability under the CPA strict?
Yes.
149
Can capital losses be offset against trading income? Can trading losses be offset against capital gains?
You can offset trading losses against capital gains but not the opposite.
