AAT L2 Introduction to Business and Company Law 3 — Questions and Answers
Question 1: Under the Consumer Rights Act 2015, goods sold to consumers must be:
- The cheapest available on the market
- Of satisfactory quality, fit for purpose, and as described (Correct answer)
- Accompanied by a written guarantee
- Manufactured in the UK
Correct answer: Of satisfactory quality, fit for purpose, and as described
The Consumer Rights Act 2015 requires that goods must be of satisfactory quality (meeting a reasonable person's expectations), fit for any particular purpose made known to the seller, and match any description given. Failure to meet these gives the consumer rights to a refund, repair, or replacement.
Question 2: A director of a limited company owes a duty of care to:
- Only the shareholders
- The company itself, acting in good faith to promote its success (Correct answer)
- Only the employees
- Only the bank that provided the company's loan
Correct answer: The company itself, acting in good faith to promote its success
Under the Companies Act 2006, directors owe their duties to the company. They must act in the way they consider most likely to promote the success of the company for the benefit of its members (shareholders) as a whole, having regard to various stakeholders.
Question 3: An agency relationship in business law exists when:
- A person works as an employee of a company
- One person (the agent) has authority to act on behalf of another (the principal) in dealings with third parties (Correct answer)
- Two companies merge together
- A company subcontracts work to a freelancer
Correct answer: One person (the agent) has authority to act on behalf of another (the principal) in dealings with third parties
An agency relationship arises when a principal authorises an agent to act on their behalf in transactions with third parties. The agent's actions bind the principal. Examples include estate agents selling property and sales representatives closing deals for their company.
Question 4: Statutory law (legislation) is:
- Law made by judges through court decisions
- Law created by Parliament through Acts of Parliament (Correct answer)
- Law based on custom and tradition
- Law that only applies to criminal matters
Correct answer: Law created by Parliament through Acts of Parliament
Statutory law consists of Acts of Parliament (and secondary legislation such as statutory instruments). Parliament debates and passes bills which become Acts. Examples include the Companies Act 2006, the Employment Rights Act 1996, and the Consumer Rights Act 2015.
Question 5: Case law (common law or precedent) is:
- Law passed by Parliament
- Law developed by judges through decisions in court cases, which establishes precedents for future cases (Correct answer)
- Law that only applies in Scotland
- Law that is only advisory and not binding
Correct answer: Law developed by judges through decisions in court cases, which establishes precedents for future cases
Case law is developed by judges through their decisions in court cases. When a legal point is decided by a court, it may set a precedent that lower courts must follow in similar future cases. Case law interprets and supplements statutory law.
Question 6: A contract made under duress is:
- Perfectly valid and enforceable
- Voidable — the victim can choose to have it set aside (Correct answer)
- Automatically void from the start
- Only invalid if it involves more than £10,000
Correct answer: Voidable — the victim can choose to have it set aside
A contract entered into under duress (threats, coercion, or undue pressure) is voidable at the option of the victim. The contract exists but the party who was coerced can choose to have it set aside (rescinded) by a court.
AAT L2 Introduction to Business and Company Law 3
Under the Consumer Rights Act 2015, goods sold to consumers must be: