Subject no. C17J
Chartered Secretaries Qualifying Scheme – Level One
Applied Business Law
November 2012
Wednesday morning 28 November 2012
Time allowed: 3 hours and 15 minutes
(including reading time)
Do not open this examination paper until the presiding officer or an invigilator tells
you to.
You must not take this paper out of the examination room.
The examination paper contains six questions. Each question carries 25 marks. You must
attempt four questions only.
Illustrate your answer by reference to decided authority where appropriate.
© ICSA, 2012
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Questions
Answer four questions from this paper.
1.
Richard owns a valuable painting and contracts with Simon, the owner of a gallery, that
Richard will allow Simon to display this piece of art at a special exhibition for a period of
three months. Simon spends a lot of time and money in advertising this exhibition,
promoting Richard’s painting as the main attraction. A week before the exhibition is due
to open, Richard sells his painting to Annabel. Simon wants to know if he can compel
Annabel to display the painting at the exhibition.
Required
(a)
Explain the doctrine of privity of contract.
(12 marks)
(b)
In relation to the scenario above, discuss the exceptions to the privity doctrine
and advise Simon whether he will be able to enforce Richard’s promise against
Annabel to display the painting in his gallery.
(13 marks)
(Total: 25 marks)
2.
On 1 May 2012, Rainsford Plant & Equipment Ltd (‘Rainsford’) offered to sell
machinery to Hutton & Co plc (‘Hutton’) for £25,000. The offer was made on
Rainsford’s standard form contract, which provided for Rainsford’s terms to prevail over
any terms on the buyer’s standard form contract.
Rainsford’s terms included a price variation clause which allowed it to increase the
price of the machinery to keep pace with inflation. Hutton sent back a form accepting
Rainsford’s offer to supply the machinery for £25,000 and for it to be delivered on 1
August 2012. Hutton sent its acceptance on its own standard form contract which
provided for the price to be fixed at £25,000. Hutton requested that Rainsford sign the
tear-off slip at the bottom of its standard form and return the slip acknowledging receipt
of the order. This tear-off slip contained a term stating that the terms and conditions of
Hutton should prevail. Rainsford signed the slip and returned it to Hutton.
When Rainsford delivered the machinery on 1 August 2012, it tried to invoke the price
variation clause in its original offer and claim an extra £2,000. Hutton refused to pay.
Required
(a)
With reference to decided cases, describe whether there is a legally binding
contract between Rainsford and Hutton.
(15 marks)
(b)
If there is a contract, advise Hutton whether it is obliged to pay the extra £2,000.
(10 marks)
(Total: 25 marks)
© ICSA, 2012
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3.
Rosita manages ‘Posh Nosh’, a small bistro in the town of Manton. It is part of a chain
of bistros owned by Posh Nosh Ltd. There is a sign at the entrance to the bistro which
states that no responsibility can be taken for any injury, loss or damage suffered on the
premises.
Amelia is a regular customer who has been purchasing her lunch from Posh Nosh
every working day for the last three years. During the school holidays, Amelia takes her
eight year old daughter, Henrietta, to Posh Nosh for lunch with her. There has been a
spillage on the floor which has not been cleaned up and Amelia slips and falls,
breaking her leg. The heel of one of Amelia’s expensive ‘designer’ shoes also breaks
off.
In the excitement, nobody notices that Henrietta has wandered off and walked through
a door which has a sign stating ‘no admittance, staff only.’ Henrietta falls down a flight
of stairs and is injured.
Required
(a)
Advise Rosita and Posh Nosh Ltd as to their liability to Amelia and Henrietta
under the Occupiers Liability Acts 1957 and 1984.
(20 marks)
(b)
Advise Posh Nosh Ltd whether it can exclude its liability.
(5 marks)
(Total: 25 marks)
4.
Angela and Dimitri have been running their separate businesses as sole traders and
have now decided to set up in business together as a partnership.
Angela has asked Dimitri to contact one of his clients about acquiring a plot of land for
the new partnership. When Dimitri visits the site, he realises that the land is situated in
an area which is ripe for development. He agrees to purchase the land with the
intention of using it for the purpose of developing his own separate business. When
Angela asks Dimitri if the land is suitable for their partnership he replies that, in his
opinion, it is not suitable. He proceeds to purchase the land in his own name and, 12
months later, sells it at a profit. When Angela discovers this, she informs Dimitri that he
is in breach of his fiduciary duty which he owes Angela and that he must account for
the profit that he has made on the purchase and sale of the land.
Required
(a)
Advise Angela and Dimitri on the different ways in which they might be able to
acquire goods for their business without immediately paying for them.
(20 marks)
(b)
Advise Angela regarding her rights in respect of Dimitri’s purchase of the land.
(5 marks)
(Total: 25 marks)
© ICSA, 2012
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5.
Stephan started working at Quickmart, a local supermarket, on 1 January 2011 as a
part-time checkout operator. In April 2011, he applied to his employer’s loan scheme to
buy a car. In the loan scheme documentation, which he signed, he agreed to repay the
£900 loan in nine equal instalments, the final payment of which was to be taken from
Stephan’s wages in December 2011.
In December 2011, Stephan received £100 more than he was usually paid. He
assumed the extra money was his Christmas bonus.
In January 2012, Stephan was shocked to discover that his wages were considerably
lower than he had anticipated. Quickmart’s Manager, Hassan, told Stephan that the
following deductions had been made:
(i)
£100 was deducted because the first repayment of the loan was not in fact
deducted from Stephan’s wages in April 2011 (Stephan checked his statement
and discovered that Hassan was correct).
(ii)
The extra £100 that Stephan received in December 2011 was an overpayment
and not a Christmas bonus.
(iii)
All staff, including Stephan, have had £50 each deducted from their wages to
cover the cost of the Christmas party (this had not been expressly agreed with
the staff).
(iv)
A 15% deduction had been made from Stephan’s wages due to errors made by
Stephan while working on the checkout.
(v)
The company policy is to allow full-time workers to repay any overpayments over
a long period. This is not extended to part-time workers because of the regular
turnover of such employees.
Stephan has complained about this to Quickmart’s Head Office.
Required
Advise Quickmart’s Head Office on its legal position in respect of points (i) to (v) above.
(Total: 25 marks)
© ICSA, 2012
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6.
Raj and Nancy are agency workers who obtain work through the Montrose
Employment Bureau (‘Montrose’). Montrose has contracts with various local
businesses and supplies extra workers for them as required. The following events have
occurred:
(i)
Raj worked for two years for Roundhouse Ltd (‘Roundhouse’). He got the job
through Montrose. Raj received a lower hourly rate of pay and less holiday
entitlement compared with Roundhouse employees. Also, unlike Roundhouse
employees, he received no sick pay or pension entitlement.
(ii)
Last month, Raj was told his work with Roundhouse would end with immediate
effect because of his persistent lateness. Raj would like to claim compensation
from Roundhouse for losing his job but is unsure whether his status as an agency
worker excludes him.
(iii)
Nancy also obtained work for Roundhouse though Montrose. Nancy is a qualified
forklift truck driver and worked in Roundhouse’s warehouse. On one occasion,
Roundhouse ordered her to work in a warehouse owned by Top Widgets Ltd
(‘Top Widgets’) as Top Widgets’ forklift truck driver was sick. Top Widgets is a
separate company to Roundhouse but they are both owned by the same parent
company. Nancy had never driven Top Widget’s type of forklift truck before and
she drove it, negligently, into a Health and Safety inspector who was making an
unexpected visit to the warehouse.
(iv)
Nancy was badly injured in the accident and thinks that she should have been
given training before starting work at Top Widgets.
Required
(a)
Advise Raj whether he is entitled to the same terms and conditions as
Roundhouse employees.
(4 marks)
(b)
Advise the Health and Safety inspector whether he can claim in respect of his
injuries.
(3 marks)
(c)
Applying relevant case law, advise Roundhouse whether it will be vicariously
liable for the actions of Nancy.
(11 marks)
(d)
Advise Nancy:
 Whether she had the right to refuse to drive the forklift truck.
 Whether she can claim in respect of her injuries.
(7 marks)
(Total: 25 marks)
The scenarios included here are entirely fictional. Any resemblance of the information in
the scenarios to real persons or organisations, actual or perceived, is purely coincidental.
© ICSA, 2012
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