AAT L2 Introduction to Business and Company Law 2

Question 1

The Partnership Act 1890 provides that, in the absence of a partnership agreement, profits and losses are shared:

Accepted Answer

Equally between all partners

Answer

Under the Partnership Act 1890, if there is no written partnership agreement, profits and losses are shared equally between partners regardless of the amount of capital each partner has contributed or the work each partner does.

Question 2

Consideration in contract law is best described as:

Accepted Answer

Something of value given by each party to the contract — it is the price of the promise

Answer

Consideration is the value exchanged between parties. It can be money, goods, services, or a promise to do (or not do) something. Each party must provide consideration for the contract to be enforceable. Past consideration (something already done) is not valid.

Question 3

A limited liability partnership (LLP) provides:

Accepted Answer

The flexibility of a partnership with the limited liability protection of a limited company

Answer

An LLP combines elements of a partnership (internal flexibility, profit sharing) with the limited liability of a company (partners' personal assets are protected). LLPs must be registered at Companies House and file annual accounts.

Question 4

The Memorandum of Association for a limited company:

Accepted Answer

Is a document signed by the initial subscribers stating their intention to form a company

Answer

The Memorandum of Association is a legal document signed by the initial subscribers (founders) stating their intention to form a company and to take at least one share each. Under the Companies Act 2006, it is a simpler document than it was historically.

Question 5

Breach of contract occurs when:

Accepted Answer

One party fails to perform their obligations under the contract without lawful excuse

Answer

A breach of contract occurs when one party fails to fulfil their contractual obligations without a valid legal reason. The innocent party may be entitled to remedies such as damages (monetary compensation), specific performance, or rescission of the contract.

AAT Level 2 Practice Test

AAT Level 2 Practice Test

AAT L2 Introduction to Business and Company Law 2