The Institute of Cost and Management Accountants of Bangladesh

Questions of Assignment
Business Level - Paper GE 05 –Fundamentals of Ethics, Corporate
Governance and Business Law
The Law of Contract
Question No – 01
Beryl enters a shop to purchase a new dress. She tells the shop assistant that she would like to buy the blue dress
which is displayed in the shop window and priced at £100. The assistant removes the dress from the window for
Beryl, but when she tries to pay for it at the till, the manager informs her that it is not for sale. He tells her that the
dress is for display purposes only.

Required:

Delete as appropriate and complete the following sentences:

Beryl is/is not entitled to the dress because the display of the dress in the shop window constitutes an..... (3
words) and not an…..(1 word). It follows that Beryl does not have/has a contract with the shop owners who
have/have not (1 mark) acted in breach of contract.

Question No – 02
Vendor owned a factory. He persuaded Mr. Purchaser to sign a contract to buy it, and to pay a deposit of
£50,000. During negotiations he told Purchaser that the local authority had no plans to build a rumoured road
nearby. In fact the local authority had decided to build the road and was about to commence work. This might
have been discovered by checking at the Town Hall, but Vendor genuinely believed what he had said.

Required:

Delete as appropriate and complete the following sentences:

Vendor appears to have made a…….. (1 word) to Purchaser. This renders the contract…… (1 word) and if
Purchaser acts quickly, he will be able to……. (1 word) the contract which means that Vendor and Purchaser will
be returned to their pre-contract position. Purchaser will/will not be obliged to pay the rest of the price and he
will/will not be able to recover his deposit. In addition, Purchaser may be able to recover damages from Vendor
unless Vendor can show that he was not negligent under the …… Act 1967 (1 word) .

Question No – 03
HIJ Ltd contracted with TUV plc for the latter to service the former's industrial machinery. HIJ Ltd agreed to sign a
document headed 'TUV p/c Service Agreement', which contained a clause stating neither TUV plc nor its
employees will accept any responsibility for any loss or damage arising from the servicing of customers'
machinery, irrespective of the manner in which the loss was caused. An employee of TUV plc carelessly failed to
replace certain parts of a machine which he had serviced. This error caused the machine to seize up, and HIJ Ltd
lost several days' production and had to purchase a replacement machine.

Required:

Delete as appropriate and complete the following sentences:

The clause was/was not (1 mark) incorporated into the contract by the…………. (1 word) of HIJ Ltd. The term is
an ………………. (1 word) clause and, as such, is subject to the provisions of the …………….. (3 words) Act
1977. This Act provides that such a clause is……………… (1 word) unless it can be shown to be …………….. (1
word). A schedule to the 1977 Act sets down a ……………… (1 word) test. On balance, it would appear that the
clause is/is not valid.
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Question No – 04
Delete as appropriate and complete the following sentences:

The remedy which requires a person to carry out his contract is known as …………………… (2 words). The
remedy requiring a person not to act in breach of contract is known as an ……………… (1 word). These are
both …………………… (1 word) remedies and, as such, are discretionary. If the contract contains a provision
which is designed to frighten the other party into completing the contract by setting down a disproportionate
sum payable in the event of a breach, the provision will be regarded as a ………………………. (1 word) clause
and will be treated as ……………….. (1 word), that is, of no legal effect. If one party has completed his
contractual obligations, all that remains is to sue for the price, in which case remoteness of damage and
mitigation of loss are relevant/irrelevant.

The Law of Employment

Question No – 05
Nigei is employed by New Bank Limited as a clerk. He has worked for the bank for 3 years, and, until recently, the
quality of his work was excellent. In the last few weeks, however, the quality of his work has deteriorated and he
is often late for work. His manager, Supreet, has warned him informally on several occasions that his work is
unsatisfactory, but to no avail. When Nigel joined the bank he undertook to study to obtain his banking
qualifications within 3 years, but so far he has made little progress, passing only the first part of the examinations
after several attempts.
Supreet has spoken to the bank's personnel manager about Nigel's poor performance and his failure to obtain
the required qualifications within 3 years. He has advised Supreet that Nigel's employment should be terminated
unless there is an immediate improvement in his performance and punctuality.

Supreet proposes to hold a formal disciplinary interview with Nigel, but is concerned about its content and
structure.

(a) Required:
Delete as appropriate and complete the following:

Nigel's contract may be determined by giving him either ……………. weeks' notice or the length of notice
specified in the contract, whichever is the ……………………(1 word). Failure to give Nigel the correct
period of notice would constitute …………….. (2 words). A claim may be made before the court or
…………….. (2 words) and must be made within ……………….. (2 words). Only if the Bank can show that
Nigel was guilty of gross misconduct can ……………. (1 word) dismissal be justified.
(b) Nigel could alternatively claim ………….. (1 word) dismissal and he may make a claim within 3 months of
his dismissal.
c) The Bank would have to show that the reason for the dismissal was for one of the following:

…………………………………………….. (1 word) …………………………………………….. (1 word)

…………………………………………….. (1 word) …………………………………………….. (4 words)

…………………………………………….. (3 words)

Furthermore, the tribunal would have to be satisfied that the Bank acted reasonably in all the
circumstances.
(d) The bank would probably rely on ……………………. (1 word) as the potentially fair ground for Nigel's
dismissal on the basis that his performance has been unsatisfactory and that he was recruited on the
understanding that he would gain his banking qualification within 3 years.

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 Company Administration
Question No – 06
Paul had been in business on his own account for a number of years, acting as a retailer of household goods and
furnishings. In April 2010 Paul decided that he would incorporate his business by transferring it to Paul's
Furnishings Ltd, a company which he proposed to register as soon as possible. Paul called to see his solicitor
(Anne) who arranged for the necessary documents to be sent to the Registrar of Companies. In the meantime
Paul notified his suppliers of the change and ordered some new furniture from Luxury Chairs Ltd. Paul signed
the order `Paul; for and on behalf of Paul's Furnishings Ltd'.

Required:

Delete as appropriate and complete the following:

At law Paul is a …………….. (1 word) of Paul's Furnishings Ltd. The company will not come into existence until
Paul receives a ……………………. (3 words) (2 marks) from the ……………………… (3 words). Paul has
ordered goods on behalf of the company before it has been registered, and has therefore entered into a
……………… (1 word) contract. This contract is enforceable against ………………. (1 word)

Question No – 07
A, B, C and D are the only directors and shareholders in ABCD Ltd, each holding 500 ordinary £ 1 shares.

Required:

Delete as appropriate and complete the following:

To propose an ordinary resolution …………………. (1 word) (1 mark) days' notice must be given to the
shareholders. To pass a special resolution …………………… (1 word) (1 mark) days' notice must be given. If the
shareholders wish to change the company's Articles of Association they will need to pass a ………………….. (1
word) resolution. This resolution can be passed by the votes of any ………………….. (1 word) of the
shareholders. Alternatively, the Articles could be changed by a ………………….. (1 word) resolution which
would require the support of ……………….. (percentage) the shareholders.
Company Finance and Management
Question No – 08
Dee Ltd was incorporated to purchase and resell a large estate. The company had three directors - D, E, and F -
who each held one-third of the company's issued share capital.
The Articles of Association of Dee Ltd provided that all three directors had to be present to constitute a quorum
and thus a valid board meeting. E and F had to travel abroad on other business, and, although they did not
formally appoint D managing director, they agreed he should carry out the day-to-day management of the
company in their absence, and that the company should attempt to sell the estate on their return.
While E and F were abroad, D decided to develop the estate, and on behalf of Dee Ltd instructed Gee Ltd, a
property development company, to produce a major development plan and to secure the necessary planning
consents. Following the return of E and F, Dee Ltd refused to pay Gee Ltd on the ground that D had no authority
to engage the latter company. Gee Ltd has now advised Dee Ltd of its intention to initiate court proceedings to
recover the amount due.

Required:

Delete as appropriate and complete the following sentences:

The ……………. (1 word) is the agent of the company. Individual directors have no/also have power to contract

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on behalf of the company unless power has been/irrespective of whether power has been delegated by the
board. In this case Dee Ltd will/will not be liable to Gee Ltd, as D has acted within his apparent authority/without
any authority. Gee Ltd may/will not be entitled to obtain compensation from D personally for breach
……………….. (4 words), a remedy available to a third party where an agent exceeds his authority. E and F have
no power to/may dismiss D (1 mark) by passing …………………… 2 words) resolution with ……………….. (1
word) notice under section 168 of the Companies Act 2006.

Question No – 09
Jane is a member of the board of Retailer Ltd and holds 51% of the company's issued share capital. The company
has a number of shops situated at holiday resorts around the country. One particular shop has traded at a loss
for a number of years and the board has decided that it should be sold. The shop has been valued at £120,000 to
include the premises and the stock. Jane wishes to buy the shop for her own use and is willing to pay the
£120,000 valuation.

Required:

Complete the following sentences:

As a director Jane owes a ………………. (1 word) duty to the company not to place herself in a conflict of
…………………….. (1 word) and duty situation. As a result she is required to formally ………………………
(3 words) to the board. In addition, as the value of the property being sold to Jane exceeds ……………………
(state the amount) this is a ……………………………. (2 words) transaction' and it follows that the (1 word)
must approve the sale by passing ……………….. (2 words) resolution which requires a simple majority to
vote in favour.

Corporate Governance
Question No – 10
Which of the following is correct?

A It is a criminal offence for listed companies to fail to comply with the UK Corporate Governance Code.

B A listed public company has complied with the UK Corporate Governance Code if it produces a report
explaining why it has not implemented its recommendations.

C The UK Corporate Governance Code has no status and may be ignored by all companies.

D A public company may be sued for breach of statutory duty if it fails to comply with the UK Corporate
Governance Code.

Question No – 11

To which of the following does a director owe duties of care and skill?
(i) The public at large.
(ii) The company's creditors.
(iii) The shareholders as a body (the company).

A (i) only.
B (ii) only.
C (i) and (iii) only.
D (iii) only.
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Question No – 12

Which of the following are not represented at board level in the United Kingdom?

(i) Creditors.
(ii) Shareholders.
(iii) Employees. A (i) only.

(i) and (ii) only.

B (i) and (ii) only
C (iii) only.
D (i) and (iii) only.

Question No – 13

Which of the following types of committee are not recommended by UK best practice?

A Planning Committee.
B Nominations Committee.
C Remuneration Committee.
D Audit Committee.

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