Contract Law 10th Edition Ewan McKendrick - Solutions

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Dee Ltd has an authorised and issued share capital of £15,000 in £1 shares. The directors have decided to issue for cash at par a further 10,000 £1 shares.What procedures must the directors follow to implement their decision?(The Institute of Chartered Accountants in England and Wales)
Describe and discuss the significance of each of the following:(a) The pre-emption rights of existing shareholders.(b) Preference shares.(c) Redeemable shares.
Alf and Bert formed a company called Tyne Ltd. They became the sole directors and took up 50 per cent of the shares, the other shares being allotted to 15 other people. Alf and Bert sold their business to Tyne Ltd for £130,000, although it was valued at £120,000. How should the profit be dealt
Prior to the incorporation of Ouse Ltd, Mark, its promoter, made a contract on behalf of the company. Who will be liable if the contract is breached?A Mark.B Ouse Ltd.C The shareholders of Ouse Ltd.D The directors of Ouse Ltd.
Which of the following expressions best describes the relationship of company promoter to the company?A Fiduciary B Equitable C Agent to a principal D Commercial
Tay plc has issued listing particulars containing a material misrepresentation. Relying on the particulars, Alf, Bert and Clare subscribed for shares. Alf sold half of his shares immediately.Bert went to an extraordinary general meeting of Tay and voted on a number of matters. Who can rescind the
Fylde plc has issued listing particulars containing a material misrepresentation in a report by an accountant who did not consent to the inclusion of the report in the form in which it was included.Fred purchased shares on the stock market from Joe who was an original subscriber under the listing
A public company wishes to have its shares listed on the London Stock Exchange. What percentage of its shares must be in the ownership of the public?A 10 per cent B 20 per cent C 25 per cent D 30 per cent
J is the managing director of Z plc, a listed company. She has recently seen the end of year accounts for Z plc which are to be published in three weeks’ time. These accounts show the company to have substantial liquid assets and J believes that Z plc is likely to attract takeover bidders when
(a) ‘The law treats a registered company as a separate legal person from its members. To this general rule there are several exceptions.’Examine the statement, giving two examples of circumstances in which the court will look at the reality behind the legal facade.(b) Dairy Products Limited
Harriet subscribed for shares in Overseas plc on the basis of the prospectus which showed that for the previous five years the company had earned substantial and increasing profits. Shortly after allotment she sold half her shares to Georgina at a large profit. The information in the prospectus was
Explain ‘rescission’ and the loss of the right to rescind in respect of prospectuses.(The Institute of Company Accountants)
‘The Financial Services and Markets Act 2000 has provided a more rational and fair procedure to compensate investors who are misled by a misrepresentation in a prospectus (or listing particulars) on an issue of shares by a company. Nevertheless, the common law remedies remain of
(a) Why must every company have a registered office? What information about the registered office must be published? To what extent can the registered office of the company be changed and what procedures must be observed when it is so changed?(b) In the absence of a company taking advantage of
H plc wishes to change its articles of association to add a clause which states ‘any director of the company may be removed from office if all other directors give notice in writing of their desire that the named director be so removed’. You are required to explain the procedure for alteration
Give the facts in Macaura v Northern Assurance Co Ltd [1925] AC 619 and explain the importance of its ratio decidendi. (University of Paisley)
Explain the rules applicable to the determination and payment of dividends.(The Institute of Company Accountants)
Fred, George and Harry, who run a business buying and selling antiques, have been advised to form a private company to run the business. They seek your advice on the major differences between their present general partnership and the proposed company, and in particular as to the rules relating to
The summarised draft balance sheet of a company as on 31 March 200X was as follows:
Explain the rules of company law which regulate the making of distributions by public companies, private companies and investment companies. Indicate also the consequences which can follow the making of an unlawful distribution.(The Association of Chartered Certified Accountants)
The assets of Derwent plc are less than one-half of its called-up share capital. The directors must call an extraordinary meeting of the members to be held not later than 56 days from the date:A On which the auditor informed the directors in writing of the capital loss.B On which all the directors
What is the maximum permitted period between the passing of a resolution sanctioning a purchase of own shares partly from capital and the date of payment?A Fifteen days B One week C Five weeks D Seven weeks
The directors of Tyne Ltd intend a purchase by the company of its own shares from John, a member, but partly out of Tyne’s capital. They have made an appropriate statutory declaration and have also called an extraordinary general meeting of the members. Which of the following resolutions must be
The directors of Humber Plc are intending that the company should purchase some of its own shares partly from capital. Amongst other things they must make a statutory declaration containing a statement that in their opinion the company will be able to carry on business as a going concern and will
Jock wants Trent Ltd to give a security over its assets to the Derwent bank so that the bank may lend Jock money to buy shares in Trent Ltd. The position regarding this proposal is:A It is lawful if the court approves.B It is lawful if approved by an ordinary resolution in general meeting.C It is
(a) The general legal principle is that a company has a separate legal existence from that of its members. In what circumstances does that general principle not apply? Give examples of such situations.(b) Walter is employed as a managing director by Clipse Ltd whose main object is to retail office
Section 33. of the Companies Act 2006 provides that the company’s constitution shall, when registered, bind the company and the members to the same extent as if they respectively had been signed and sealed by each member, and contained covenants on the part of each member to observe all the
(a) State the exceptions to the general rule that a public company must not give financial assistance to any person for the purpose of the acquisition of its own shares.(b) Milk Bottles Ltd is a profitable small family company whose principal activity is the retail distribution of milk. The elderly
Assume you are the management accountant reporting to the finance director of a public listed company. The finance director has recently undertaken a financial review as part of the company’s strategic review process. In his report he has suggested that the company has more funds than are
Identify and explain the three specific circumstances envisaged by the Companies Act 2006 for a reduction of share capital. (The Institute of Chartered Accountants in England and Wales)
Microchip is a public limited company. Allan and Bill are directors of the company who own 85 per cent of its equity shares between them. In addition, Allan also owns certain debentures issued by the company. The remaining 15. per cent of the equity shares is owned by Charles.Allan now wishes to
Soapstone Ltd has agreed with a merchant bank that the bank is to take a £50,000 equity stake in the company in the form of ordinary shares which will be redeemable in 2011 or earlier at the option of Soapstone Ltd.Advise the directors as to the funds which can be used for the redemption, and as
What type of resolution must be passed in general meeting in order that there may be a valid alteration of the company’s articles?A A special resolution with special notice to the company.B An ordinary resolution following special notice to the company.C A special resolution.D An ordinary
What type of resolution is required at a general meeting to increase the nominal capital?A An ordinary resolution.B A special resolution following special notice.C A special resolution.D An extraordinary resolution.
Where would a preference shareholder go to ascertain the rights attaching to the shares?A To the share certificate.B To the share certificate and the memorandum of association.C To the articles of association only.D To the articles of association and/or the terms of issue.
Boxo Limited has varied the class rights of one of its classes of shares. What proportion of the owners of those shares who did not consent to or vote for the variation can make an application to the court to have the variation cancelled, and within what time must they apply?A The holders of not
Where rights are attached to a class of shares set out in a company’s statement of capital and initial shareholdings and the company’s constitution and the articles do not contain any provision regarding the way in which the rights may be varied then they may be varied by:A a special resolution
‘A secretary is a mere servant; his position is that he is to do what he is told, and no person can assume that he has any authority to represent anything at all . . .’ per Lord Esher in Barnett Hoares & Co v South London Tramways Co (1887).
Tom and Dick wish to form a company to manufacture wooden hen houses to be called Cluck Ltd. Explain the procedure for incorporation and commencement of business
With specific reference to the facts and principle of law in Salomon v Salomon & Co Ltd, discuss corporate identity and the occasions when it is set aside. (University of Paisley)
‘A company is contractually bound by the actions of its directors when those directors act within their authority.’You are required to discuss this statement.(The Chartered Institute of Management Accountants)
Distinguish between preference shares, participating preference shares and ordinary shares.(The Institute of Chartered Accountants in England and Wales)
(a) Distinguish between ordinary and preference shares.(b) Shark plc has a share capital of £150,000. It is divided into 50,000 £1 preference shares and 100,000 £1 ordinary shares. All shares have been issued. The rights attached to the preference shares include the right to have capital repaid
Bob, a non-executive director of Test Ltd, who has no responsibility for the purchasing department, makes a contract on behalf of Test (which is unknown to his fellow directors) to buy goods from a new supplier. What is the legal position of Test?A It is bound because all matters decided upon by
A managing director of a company has usual (or ostensible) authority to bind the company by his acts. Which of the following sets out the full limit of this authority?A All commercial activities relating to the running of the business.B All activities of the company whether commercial or not.C Such
A transaction with another company entered into by Tom, a director of Thames Ltd, with the authority of the board is outside the authority of the board under the articles of Thames Ltd but within its objects. The transaction is:A valid under s 40 of the Companies Act 2006.B void as being beyond the
Delta plc and Ullswater Ltd have each recently received their certificates of incorporation.A Delta plc and Ullswater Ltd can now both commence trading and borrow.B Only Delta plc can trade and borrow.C Only Ullswater Ltd can trade and borrow.D Neither Delta nor Ullswater can trade or borrow.
The company secretary of Beech Ltd has in the past been permitted to order office equipment and stationery for the company but no single transaction has exceeded £500. Recently, without the knowledge of the directors, he ordered a computer installation costing £200,000. The board does not wish to
Contrast the rules governing contracts purporting to be made on behalf of a company before it has been incorporated under the Companies Act with those governing contracts made by or on behalf of an incorporated company before it is entitled to do business.(The Institute of Company Accountants)
(a) What is the rule in Royal British Bank v Turquand (1856), and what defences against its application are available to a company?(b) Beetlecrush Ltd was a company involved in pest control. In 1999 Pellet was appointed as managing director of the company by a board resolution, which gave him
B is the managing director of T Ltd. He has decided that the company should have a new factory built. He arranges for P Ltd to carry out the building work on the usual standard term contract for the building industry which requires that T Ltd makes progress payments on a three-monthly basis.The
In what circumstances will an agent bind a company to a contract made with a third party?What effect does the company’s constitution have on the power of agents to bind companies to such contracts? (The Institute of Chartered Secretaries and Administrators)
(a) State the legal rules applying to a transaction within the powers of the company, but entered into by directors in excess of their authority.AND(b) Bob is chairman of Light Ltd. He functions as the company’s chief executive and makes most decisions regarding its business. He reports his
Perfect Puddings Ltd was incorporated to purchase the chocolate manufacturing business previously carried on by Louise. The contract of sale between the company and Louise provided, inter alia, that as long as Louise held 20 per cent of the shares of Perfect Puddings, she was entitled to be
Free Range Chickens R Us wishes to change its articles of association to add a clause which would state that ‘any director of the company may be removed from office if all other directors give notice in writing of their desire that the named directors be so removed’.You are required to explain
H plc wishes to change its articles of association to add a clause which states ‘any director of the company may be removed from office if all other directors give notice in writing of their desire that the named directors be so removed’.You are required to explain the procedure for alteration
Describe the procedure for alteration of articles and detail the considerations made in determining the validity of the alteration. (The Institute of Company Accountants)
Under the Companies Act 1985, the capital clause of a company limited by shares was contained in the memorandum. Where is it located under the 2006 Act?A The memorandum of association.B The company’s constitution as defined by s 17. of the 2006 Act.C A statement of capital and initial
The articles of association of a company on a paper incorporation must be signed by:A each one of the directors.B a majority of the directors.C all the subscribers to the memorandum.D one of the subscribers to the memorandum.
The Model Articles will apply automatically except where it is excluded or modified by special articles of association in the case of:A private companies limited by shares only.B public companies limited by shares only.C all companies limited by shares.D all limited companies.
Fred bought some shares in Tyne Ltd on 1 February 20XX. To whom does Fred become bound in contract?A The company only.B The members of Tyne on 1 February 20XX.C Tyne and those who are at present its members.D Tyne and those who were members of Tyne on 1 February 20XX.
‘The company’s constitution forms a contract between a company and its members. This contract is, however, an unusual one, limited both in its scope and permanence despite the best efforts of the Companies Act 2006 to clarify matters.’Discuss. (The Institute of Chartered Secretaries and
(a) Section 33 of Companies Act 2006 provides that the company’s constitution constitutes an agreement between the company and its members as if they have signed and sealed a contract to abide by its provisions.Comment.(b) A, B and C are members of X Ltd. The company has now discovered that C is
Success Limited has been trading profitably for 10 years, with capital provided by each of its four directors and their families. The directors consider that the company could be even more profitable, if it were able to make a public issue of securities, and they are advocating the re-registration
Discuss how the Companies Act 2006 approaches the notion of a company’s constitution with specific reference to the change in approach taken since the Companies Act 1985.Explain how the Model Articles can be utilised. (University of Hertfordshire)
Promoters wish to form a company to be called ‘Barchester City Council Tuition Services Ltd’.What is the legal position as to the permissibility of that name in company law?A The name cannot be registered because it is unlawful.B It can be registered if the Secretary of State gives permission.C
Ribble Ltd has a share capital of 1,000,000 ordinary shares. The holders of 800,000 shares vote on a resolution to change the company’s name. The minimum number of votes which must be cast in favour of the resolution for it to be effective is:A 400,001 B 500,000 C 600,000 D 750,000
On 1 February Mersey Ltd passed a special resolution changing its name to Trent Ltd. On the same day the managing director made a contract with Thames Ltd to sell it some goods. On 1. March the company received its new certificate of incorporation and on 1 April Trent Ltd failed to deliver the
A transaction with a trade creditor which falls outside a company’s express objects set out in the articles is:A Valid under s 39 of the CA 2006.B Void as being ultra vires the company.C Void as being ultra vires the directors.D Void at the instance of the members.
For several years Jay Ltd has been carrying on the business of managing night clubs. The directors are now proposing that the company should operate a chain of pizza restaurants but, because some of the shareholders are objecting to the proposal, they wish to know if it would be permissible.
Explain the term ‘business name’ and describe the relevance of the Business Names Act 1985.
Jane is a promoter dealing with the formation of a private limited company. You are required to advise Jane on the following matters.(a) The restrictions which exist upon the choice of corporate name.(b) The documentation which must be sent to the Registrar of Companies in order to obtain
The objects clause as traditionally contained in the memorandum of association of a company has been the subject of considerable debate and disagreement, even with the introduction of s 3A of the Companies Act 1985. The only way in which this area could be clarified once and for all was to pursue
Eric and Stanley have been carrying on business in partnership as building contractors in a small town for some years. They carry out most of the work themselves and only occasionally employ labour. They have no plans to enlarge the area of their operations. It has been suggested to them that they
In 2005 Archie, Bert, Colin and David, as shareholders and directors, set up a company to acquire a disused mill to renovate into single-person flats. David had bought the mill in 2004 and sold it to the company once it was formed. Bert has now become concerned that this deal has caused the company
‘There are occasions when the courts will look behind the formality of legal personality and will appear to disregard it, but it is impossible to find any consistent principle upon which they will do so.’Discuss. (Kingston University)
Meg used to be employed by Trent Ltd. Her contract contained a clause under which she agreed not to compete with Trent Ltd. The clause was reasonable in terms of its duration and area. Meg has now formed a company called Meg (Corporate Services) Ltd and has started to compete against Trent Ltd
Joe and Fred wished to form a company. On 1 March 20XX they filed the appropriate documents with the Registrar. On 10 May 20XX they received a certificate of incorporation dated 1 May 20XX. Later they found out that the company had been registered on 4 May 20XX. On what date was the company
Before the incorporation of Ouse Ltd, its promoter Bob entered into a contract on behalf of the company. The contract gave the unformed company third-party rights. Who is liable if the contract is later breached?A Ouse Ltd.B Bob and Ouse Ltd.C The shareholders of Ouse Ltd.D The directors of Ouse
Fred is a member of a private company at the date of its re-registration as a public company.Fred cannot profit by selling non-cash assets to the public company within an initial period of two years from the date of re-registration unless:A The sale is approved by a resolution of the board and the
Thames was re-registered from a limited to an unlimited company. It wishes to re-register as a public company.A It must apply to the Registrar to be registered as a public limited company.B It must re-register as a private limited company and then re-register as a public company.C It must pass a
When a private company wants to re-register as a public company it must file a balance sheet with the Registrar. The balance sheet must be one which is not more than:A Fifteen months old at the date of re-registration.B Seven months old at the date of re-registration.C Fifteen months old at the
Philip, who is in the process of forming a company, wishes to avoid personal liability upon any contracts he may enter into on behalf of the proposed company. Advise Philip.
Bill and Ben trade in partnership as garage mechanics. They are considering changing their form of business association and trading as a private registered company limited by shares.Explain to them the legal procedures that they must follow in order to form such a company, and advise them on the
April) on 6 April 2005.On 15 March 2005, Brian agreed to purchase a quantity of coffee from Benco Ltd in a letter which he signed ‘For and on behalf of Brian Foods Ltd, B Brian, Director’.At the first meeting of the board of directors of Brian Foods Ltd the contract with Benco Ltd was approved
Brian, who had decided to transfer his existing wholesale food business to a private limited company called Brian Foods Ltd, delivered the necessary documents to the Registrar of Companies and received the Certificate of Incorporation (dated
The directors of Balkan Ltd have decided that it is necessary to convert their company into a public limited company. Advise them on:(a) the differences between a private and public limited company;AND(b) the procedures to be followed during re-registration.
Three friends own and are also directors of a limited company carrying on the family business.They have it in mind to change the organisation to an ordinary partnership. What aspect of the business would be affected if this change were carried out?A The right to sue in the business name.B The right
To what extent is a member of a company which is limited by guarantee personally liable for the company’s debts?A He is personally liable for all the company’s debts at any time.B He is personally liable for all the company’s debts if the company is wound up.C His personal liability is
Fred has been allotted 200 £1 ordinary shares in Ark Ltd with a nominal value of £1 and a premium of 0.40 pence. Fred has paid 0.85 pence. What is Fred’s maximum liability if the company is wound up?A £30 B £110 C £2,000 D £280
The members of a social club wish to form a legal entity. There is no commercial risk but they do not want too much disclosure of their affairs to the public. What type of company should they form?A A company limited by guarantee.B An unincorporated association.C A private company limited by
Thomas Taylor-Wright is a sole trader, based in Saville Row in London, where he has a very lucrative business making men’s exclusive formal suits. Thomas has decided that he would like to expand his business and is having discussions with a fellow tailor, Terry Thimble, about possibly going into
John, who runs Trent Ltd, a small manufacturing company, has heard that he may not have to appoint auditors in regard to future accounts and is keen to save the audit fees. Advise John as to the relevant law. (Authors’ question)
Explain by reference to statutory and common law examples what is meant by the term ‘lifting the veil of incorporation’. (The Chartered Institute of Management Accountants)
‘. . . a fundamental attribute of corporate personality . . . is that the corporation is a legal entity distinct from its members’ – Gower.Which do you consider are the two outstanding advantages of incorporation? Give reasons for your choice and explain their dependence upon this fundamental
The principle of law set out in Salomon v Salomon & Co Ltd is not always applied. Give the facts of this case and give its principle of law, and discuss when the judiciary or statutory provisions will not take account of that principle. (University of Paisley)
(a) In the celebrated case of Salomon v Salomon & Co Ltd [1897] AC 22, Lord Halsbury LC observed: ‘Either the limited company was a legal entity or it was not. If it was, the business belonged to it and not to Mr Salomon. If it was not, there was no person and no thing to be an agent at all and
21.5 John, who had recently left his wife, booked a holiday with Harry’s Tour Company Ltd. The holiday did not live up to expectations. John now suffers from severe depression. He has been advised by his doctors to give up his job. The depression has been caused partly by the breakup of his
21.4 Fire Prevention Ltd entered into a contract with Borchester Town Council, under which they agreed to provide a fire-fighting service of 15 fire engines and 40 firemen. In breach of contract, Fire Prevention only supplied 12 fire engines and 35 men and thereby saved themselves £40,000.
21.3 Is a court ever justified in awarding damages by reference to the gain which the defendant has made as a result of the breach rather than by reference to the loss which the claimant has suffered?

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Contract Law 10th Edition Ewan McKendrick - Solutions

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