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ACCA Fundamentals Level

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Paper F4 ENG

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Corporate and Business Law

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Mock Examination 2

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Question Paper ria
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Time allowed 2 hours

This paper is divided into two sections:

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Section A ALL 45 questions are compulsory and MUST be attempted

Section B ALL 5 questions are compulsory and MUST be attempted
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Please note that it is not possible to predict question topics in an examination of this nature. We have
based the content of this Mock Exam on our long experience of the ACCA exams. We do not claim to have
any endorsement of the question types or topics from either the examiner or the ACCA and we do not
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guarantee that either the specific questions or the general areas that are featured here will necessarily be
included in the exams, in part or in whole.
We do not accept any liability or responsibility to any person who takes, or does not take, any action based
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(either in whole or in part and either directly or indirectly) upon any statement or omission made in this
book. We encourage students to study all topics in the ACCA syllabus and this Mock Exam is intended as
an aid to revision only.
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DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER
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EXAMINATION CONDITIONS
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Section A – ALL 45 questions are compulsory and MUST be

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attempted

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1 In a case that is being heard under the civil law, which of the following is the injured party?
A The prosecution
B The claimant

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C The defendant (1 mark)

2 What is a treasury share?

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A A share issued on terms that it may be brought back by the company at a future date
B A share offered to members to purchase pro rata to their existing holding
C A share given fully-paid to existing members
D A share created when a company purchases its own shares for cash or out of distributable profit

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(2 marks)

3 Which rule of statutory interpretation means that words in an Act should be given their grammatical
meaning?

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A The literal rule
B The golden rule
C The mischief rule (1 mark)

4 Which of the following is an example of wrongful dismissal?

A Dismissal with insufficient notice
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B Dismissal on grounds of trade union membership
C The repudiation of an essential term of the employment contract by the employer resulting in the
resignation of the employee
D Dismissal on grounds of pregnancy (2 marks)
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5 Hamble is the Chief Executive Officer of Bead Ltd. In a communication with one of Bead Ltd's suppliers,
Hamble states that Avery is now an agent of Bead Ltd and that the supplier should in future communicate
with Bead Ltd through Avery.
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Which type of agency agreement has been created?

A Agency by estoppel
B Agency by necessity
C Agency by implied agreement (1 mark)
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6 An employment contract can be in which of the following forms?

A Written only
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B Oral only
C Written or oral (1 mark)
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7 Which of the following describes the liability of partners who retire from an unlimited partnership?
A Liable for partnership debts only up until the date of retirement
B Liable for partnership debts incurred before and after retirement
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C Liable for partnership debts until all creditors of the firm have been notified of their retirement
(1 mark)
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8 A liquidation committee is involved in which of the following insolvency procedures?

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A Members' voluntary liquidation
B Creditors's voluntary liquidation
C Compulsory liquidation

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D Administration (2 marks)

9 George is a director of two companies that operate in the same industry, Zip Ltd and Bung Ltd. Both Zip Ltd
and Bung Ltd have recently tendered for the same contract with Jane Ltd. Only one company will be awarded

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the contract.
Which statutory duty of a director is George in breach of?

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A Act within powers
B Exercise independent judgement
C Not to accept benefits from third parties
D Avoid conflicts of interest (2 marks)

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10 Which of the following is NOT a test used by the courts to determine the employment status of an
employee?

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A Control test
B Integration test
C Delegation test (1 mark)

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A
B
Written resolution with a 75% majority ria
Which of the following is a legitimate method for an auditor to leave office?

Ordinary resolution with 14 days' notice of the meeting

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C Resignation of the auditor before the end of their term of office (1 mark)

12 Which of the following is a remedy for unfair dismissal?

A Re-engagement as an employee of the employer
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B Damages for breach of employment contract

C Damages for the employer's negligence (1 mark)

13 Which of the following is NOT an essential element of a valid contract?

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A Acceptance
B Invitation to treat
C Intention to create legal relations
D Consideration (2 marks)
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14 Which of the following is the name given to something that induces the formation of a contract but does not
become a term of the contract?
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A Condition
B Warranty
C Representation
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D Statement (2 marks)

15 In relation to the tort of negligence, what is novus actus interveniens?

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A A decision by the court that reverses the burden of proof

B An intervening act that may break the chain of causality
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C An event that makes the damage too remote so that the defendant is not liable
D A defence to a liability in negligence (2 marks)
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16 Which type of legal wrong is 'passing-off' classified as?

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A A criminal offence
B A breach of contract
C A tort (1 mark)

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17 The Queen's Bench Division is a part of which of the following courts?
A The Court of Appeal

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B The Supreme Court
C The High Court (1 mark)

18 In the English civil law system, the decision of which of the following courts may be appealed directly to the

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Supreme Court?
A Crown Court
B County Court

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C High Court (1 mark)

19 Gup has a contract to supply Jud with a computer on 31 March 20X1. On 2 March 20X1 Gup tells Jud that
due to demand in the market for computer chips, the cost of supplying the computer has increased and that

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he will no longer be able to supply it.
On 2 March 20X1, which of the following options is available to Jud?

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A Jud may treat the contract as discharged, but cannot sue for damages until after 31 March
B Jud must allow the contract to continue until actual breach occurs and then sue for damages
C Jud may treat the contract as discharged and sue for damages on 2 March, or allow the contract to
continue until actual breach occurs and then sue for damages
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D Jud must accept that Gup's performance is impossible and there is no legal remedy for him
(2 marks)

20 In which of the following circumstances does volenti non fit injuria apply?
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A Where the claimant accepted the risk of loss or damage

B Where the claimant fully or partly contributed to their losses
C Where the claimant accepts the burden of proof (1 mark)
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21 DDD plc requested a meeting with the auditor of a company that it wanted to takeover in order to discuss the
company's finances. In the meeting, the senior partner of audit firm stated that the target company's latest
accounts can be relied upon. The takeover took place and it was discovered that the accounts of the target
company understated debts by £10 million.
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Which of the following describes the legal position of the audit firm?
A The auditor does not owe a duty of care to DDD plc because it was not a client of the firm
B The auditor does not owe a duty of care to DDD plc because the accounts are not intended as advice
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in a takeover
C The auditor owes DDD plc a duty of care because of the statement of the senior partner
D The auditor owes DDD plc a duty of care because they could have foreseen that the accounts may be
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used in a takeover (2 marks)

22 What is the statutory minimum notice period that an employee with 12 years of service has to give their
employer when they wish to terminate their employment?
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A 1 week
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B 4 weeks
C 6 weeks
D 12 weeks (2 marks)
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Mock exam 2: questions 139

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23 Which type of consideration has been provided where goods are delivered and payment is made at the same
time?

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A Executory consideration
B Executed consideration
C Past consideration (1 mark)

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24 Luce sent an email to Brice that asked 'Will you sell your car to me?'. Brice sent an email in reply that stated
'The price of the car is £2,000'.

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How will Brice's email to Luce be treated under contract law?
A As an offer
B As an invitation to treat

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C As a supply of information
D As an invitation to tender (2 marks)

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25 In relation to company meetings, what is a proxy?
A A person appointed by a shareholder to attend the meeting and vote on their behalf
B A person who presides over the meeting
C A person who counts the votes cast by members on a resolution (1 mark)

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26 One ground for a creditor to apply for the compulsory liquidation of a company is that they are owed a
minimum amount of money, they have issued a written demand for payment of what is owed and the

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company fails to repay the debt or offer reasonable security for it within 21 days.
What is the minimum amount of debt owed by the company for this procedure to apply?
A £500
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B £750
C £1,000
D £1,500 (2 marks)
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27 Which of the following statements concerning consideration is correct?

A Consideration must be adequate
B Consideration must be sufficient
C Consideration from each party must be of equal value
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D Consideration must be present in all contracts (2 marks)

28 Which of the following types of right under the Human Rights Act 1998 is subject to restriction in order to
take the public interest into account?
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A Absolute rights
B Qualified rights
C Derogable rights (1 mark)
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29 Which of the following will NOT cause a floating charge to crystallise?

A Liquidation of the company
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B Sale of the assets the charge is secured on

C Cessation of the company's business
D Appointment of a receiver by the chargee (2 marks)
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30 Which of the following is the remedy to the injured party in the event of a breach of warranty?
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A Treat the contract as discharged only

B Claim damages only
C Treat the contract as discharged and claim damages (1 mark)
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31 The Criminal Division of the Court of Appeal normally hears appeals from which of the following courts?

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A High Court
B Crown Court
C County Court

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D Magistrate's Court (2 marks)

32 In the context of the English legal system, what are 'Rules of Court'?

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A A form of delegated legislation
B Parliamentary procedures followed in the formation of primary legislation
C A handbook used by Judges when interpreting primary legislation
D Guidance given to Judges when applying the Human Rights Act 1998 (2 marks)

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33 A private limited company is distinguished from other corporate forms by what at the end of its name?
A plc

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B Ltd
C LLP (1 mark)

34 In relation to the payment of dividends, which of the following is a distributable reserve?

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A Capital redemption reserve
B Revaluation reserve
C Retained earnings

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D Share premium account
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Which of the following will prevent a company from appointing an administrator?
(2 marks)
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A The company is currently unable to pay its debts
B A resolution of the floating chargeholders with a 75% majority
C A receiver currently in office at the company
D A declaration of solvency from the directors (2 marks)
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36 In relation to insider dealing, information that is 'made public' is not classed as inside information.
Which of the following is information that is 'made public'?
(1) Information that is published under the rules of the regulated market
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(2) Information concerning public companies

(3) Information communicated by the company Chairman
(4) Information published in The Gazette
A 1 and 2
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B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
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37 Which TWO of the following must be included on an employee's statement of prescribed particulars given to
them soon after they commence employment?
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(1) Job title

(2) Entitlement to flexible working
(3) Provision of training facilities
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(4) Details of pensions or pension schemes

A 1 and 2
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B 1 and 4
C 2 and 3
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D 3 and 4 (2 marks)
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38 Which party is NOT liable on a pre-incorporation contract?

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A The company
B The third party
C The promoter (1 mark)

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39 After what period of continuous service does an employee become eligible for redundancy pay?
A 12 months

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B 18 months
C 24 months (1 mark)

40 Which TWO of the following parties are bound by a company's constitution?

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(1) The company's shareholders
(2) The company's suppliers
(3) The company's debentureholders

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(4) The company itself
A 1 and 2
B 1 and 4

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C 2 and 3
D 3 and 4 (2 marks)

41 Which TWO of the following are valid defences available to a charge of bribery?
(1)
(2)
(3)
The person did not expect to make a profit
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The person was exercising their function as a member of the intelligence service
The person was exercising their function as a member of the armed forces on active service
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(4) The person had reasonable grounds for their conduct
A 1 and 2
B 1 and 4
C 2 and 3
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D 3 and 4 (2 marks)

42 Which of the following is NOT a type of repudiatory breach of contract?

A Renunciation
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B Incapacitation
C Frustration
D Breach of condition (2 marks)
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43 How is an advertisement of goods for sale treated under contract law?

A As an offer
B As a supply of information
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C As an invitation to treat (1 mark)

44 In the tort of negligence what is the effect of the 'egg-shell skull' rule?
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A The claimant is expected to take extra care if they are more prone to injury
B The claimant is expected to have notified the defendant that they are at a high risk of injury
C The defendant is expected to take the victim as they find them
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D The defendant is expected to assume liability for unforeseeable damage to the claimant if the claimant
is especially vulnerable (2 marks)
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45 Terms of a contract may include exclusion clauses limiting a party's liability for losses due to negligence.

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Which TWO of the following exclusion clauses are only valid if reasonable?
(1) Liability for death
(2) Liability for economic loss

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(3) Liability for damage to a vehicle
(4) Liability for personal injury
A 1 and 2

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B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)

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SECTION B – ALL 5 questions are compulsory and MUST be

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attempted

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1 Ali is a dealer in Persian rugs and placed an advertisement in his local paper stating: 'Once in a lifetime
opportunity to own a handmade Persian antique rug for only £1,500 – cash only. This is a serious offer – the
rug will go to the first person who accepts it – offer valid for one day only – today Saturday'.

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When Bud saw the advert, he immediately posted a letter of acceptance of Ali's offer in order to make sure
he got the rug. Cil also saw the advert and after inspecting the rug offered Ali a cheque for £1,500, but he
refused to accept the cheque and told her she could not have the rug. Later in the day, Das asked Ali if he
would keep the offer open until he could get to his bank to arrange a loan. Ali agreed, but subsequently,

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when Ed offered to pay £2,000 in cash for the rug, Ali sold the rug to him.
On Monday morning Bud's letter arrived, and Das returned to complete his purchase of the rug.

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Required
(a) Explain whether Bud has entered into a binding contract with Ali (2 marks)
(b) Explain whether Cil has entered into a binding contract with Ali (2 marks)
(c) Explain whether Das has any right of action against Ali (2 marks)

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(Total = 6 marks)

2 Brian is the manager of a distribution warehouse that supplies a number of Do-It-Yourself stores. Following

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the introduction of a new computerised stock record system, Brian is dismissed, because he is unable to
adapt to the new working practices – no warnings were given and no disciplinary action was taken before his
dismissal. Brian has worked for the company for fifteen years. As a result of the re-organisation, John is also
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dismissed because of his involvement in trade union activities. He has worked for the company for nine
months.
Brian is seeking compensation for redundancy and John intends to make a claim for unfair dismissal.
Required
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(a) Identify the remedies for unfair dismissal (2 marks)

(b) State whether Brian will be successful in claiming redundancy compensation (2 marks)
(c) State whether John will be successful in a claiming unfair dismissal (2 marks)
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(Total = 6 marks)

3 Mat is in the process of setting up an IT business as a private limited company. He has been told that in
order to register the company he should submit appropriate articles of association and a memorandum of
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association.
He also thinks that because there is an existing similar, local business called Netscape Ltd it would be a
good idea to call his new company Netscope Ltd based on the chance that he could transfer some of its
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business to his new company.

Required
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(a) State the purpose of a company's articles of association and memorandum of association.
(2 marks)
(b) Explain
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(i) What is meant by 'passing-off' in relation to company names

(ii) Whether the owners of Netscape Ltd could take a passing-off action against Mat if he decides
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to name his business Netscope Ltd (4 marks)

(Total = 6 marks)
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4 Five years ago Kim, Liz and Meg formed Orb Ltd in which Kim and Liz each hold 40% of the shares and Meg

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owns the remaining 20%. They are the only directors. The objects of Orb Ltd contained in its articles are
restricted to research, production and marketing environmentally-friendly cleaning products.
In the course of a research project for Orb Ltd, Kim discovered a new highly powerful industrial cleaner, but

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unfortunately it is extremely toxic and not at all environmentally-friendly. She persuaded Liz that Orb Ltd
should sell the new product and the pair recently signed a contract with Zeeb Ltd to distribute it.
Meg maintains that the contract is contrary to the restrictions stated in Orb Ltd's articles and is not binding

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on the company.
Required
(a) State the legal capacity of a registered company to contract (2 marks)

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(b) Explain
(i) Whether Zeeb Ltd may enforce its contract with Orb Ltd
(ii) Whether Meg may stop Kim and Loz marketing the new product (4 marks)

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(Total = 6 marks)

5 Martha is the finance director of a publicly listed chain of fashion stores. The company is finding it
increasingly hard to pay its creditors as its sales are falling rapidly and the point has been reached where

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Martha must decide whether to close the failing business down or to battle on, even though the business is
unlikely to pull through.
Em jointly owns a rival store. It too is experiencing financial difficulties and she is thinking about starting a
members' voluntary winding up to close the company down.
Required ria
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(a) State the criminal offence Em may commit if a members' voluntary winding up is commenced
(2 marks)
(b) Explain any liability Martha may have in relation to:
(i) Fraudulent trading under s213 Insolvency Act 1986
(ii) Wrongful trading under s214 Insolvency Act 1986 (4 marks)
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(Total = 6 marks)
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