ACCA Business and Corporate Law 4 — Questions and Answers
Question 1: Under contract law, what is 'promissory estoppel' and when does it apply?
- A clause that prevents promises from being enforced after a deadline
- A doctrine that enforces a promise to prevent injustice when the promisee reasonably relied on it (Correct answer)
- A rule preventing oral modifications to written contracts
- A remedy that voids contracts made under duress
Correct answer: A doctrine that enforces a promise to prevent injustice when the promisee reasonably relied on it
Promissory estoppel enforces a promise even without consideration when the promisee reasonably and detrimentally relied on it, and injustice can only be avoided by enforcement.
Question 2: Which type of merger requires approval from both companies' boards of directors AND shareholders?
- Short-form merger
- Statutory merger (Correct answer)
- De facto merger
- Triangular merger
Correct answer: Statutory merger
A statutory merger under state law typically requires board approval and shareholder votes from both the acquiring and target corporations.
Question 3: In partnership law, what is the liability exposure of a general partner for partnership debts?
- Limited to their capital contribution
- Limited to their proportional ownership share
- Unlimited personal liability (Correct answer)
- Limited to the value of partnership assets
Correct answer: Unlimited personal liability
General partners bear unlimited personal liability for all debts and obligations of the partnership, meaning creditors can reach personal assets.
Question 4: What is insider trading under US securities law?
- Trading securities of a company where you are employed in any capacity
- Trading securities based on material, non-public information in breach of a duty (Correct answer)
- Buying securities immediately before a public offering
- Selling securities within 6 months of purchase
Correct answer: Trading securities based on material, non-public information in breach of a duty
Insider trading occurs when a person trades securities based on material non-public information in breach of a fiduciary or other duty of trust and confidence.
Question 5: Under employment law, which federal statute prohibits employment discrimination based on race, color, religion, sex, and national origin?
- The Fair Labor Standards Act
- The National Labor Relations Act
- Title VII of the Civil Rights Act of 1964 (Correct answer)
- The Age Discrimination in Employment Act
Correct answer: Title VII of the Civil Rights Act of 1964
Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, and national origin by employers with 15 or more employees.
Question 6: What is the legal significance of a 'quorum' in corporate governance?
- The minimum vote required to remove a director
- The minimum number of shares or directors needed to conduct valid business (Correct answer)
- The percentage of profit that must be distributed as dividends
- The maximum number of directors allowed on a board
Correct answer: The minimum number of shares or directors needed to conduct valid business
A quorum is the minimum number of shareholders or directors whose presence is required for a meeting to legally transact business.
Question 7: Which contract clause specifies the amount of damages a party will receive upon breach, determined at the time of contracting?
- Indemnification clause
- Force majeure clause
- Liquidated damages clause (Correct answer)
- Consequential damages clause
Correct answer: Liquidated damages clause
A liquidated damages clause pre-sets the amount of damages payable upon breach; courts will enforce it if the amount is a reasonable estimate of anticipated harm.
ACCA Business and Corporate Law 4
Under contract law, what is 'promissory estoppel' and when does it apply?