SQE1 Tort & Business Law 2 — Questions and Answers
Question 1: Under the Companies Act 2006, what is the minimum number of directors required for a private limited company?
- None
- One (Correct answer)
- Two
- Three
Correct answer: One
Under s.154 of the Companies Act 2006, a private limited company must have at least one director. A public limited company must have at least two directors.
Question 2: What is a 'partnership' under the Partnership Act 1890?
- A company registered at Companies House with limited liability
- The relation which subsists between persons carrying on a business in common with a view of profit (Correct answer)
- A formal agreement requiring written incorporation documents
- Two or more employees working together in an organisation
Correct answer: The relation which subsists between persons carrying on a business in common with a view of profit
Under s.1(1) of the Partnership Act 1890, a partnership is 'the relation which subsists between persons carrying on a business in common with a view of profit'. It requires no formal registration and can be created informally.
Question 3: Under English law, what is the key distinction between a Limited Liability Partnership (LLP) and a traditional partnership?
- An LLP has no partners — only members
- An LLP is a separate legal entity with limited liability for members; a traditional partnership is not a separate legal entity and partners have unlimited personal liability (Correct answer)
- An LLP cannot enter contracts in its own name
- Traditional partnerships must have more than 20 partners
Correct answer: An LLP is a separate legal entity with limited liability for members; a traditional partnership is not a separate legal entity and partners have unlimited personal liability
An LLP (under the Limited Liability Partnerships Act 2000) is a separate legal entity from its members, who benefit from limited liability. A traditional partnership under the Partnership Act 1890 is not a separate legal entity, and partners have unlimited joint and several liability for the firm's debts.
Question 4: What is the primary duty of a company director under s.172 of the Companies Act 2006?
- To act in the best interests of the company's employees
- To act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole (Correct answer)
- To maximise short-term profits for shareholders
- To comply with all regulations regardless of commercial impact
Correct answer: To act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole
Section 172 of the Companies Act 2006 requires directors to act in the way they consider, in good faith, most likely to promote the success of the company for the benefit of its members as a whole, having regard to specified factors including long-term consequences and stakeholders.
Question 5: In the law of tort, what is the defence of 'contributory negligence'?
- A complete defence that defeats the claimant's claim if the claimant was at all negligent
- A partial defence that reduces the claimant's damages by the proportion they contributed to their own loss (Correct answer)
- A defence requiring the claimant to have been completely sober
- A defence only available in road traffic accident claims
Correct answer: A partial defence that reduces the claimant's damages by the proportion they contributed to their own loss
Under the Law Reform (Contributory Negligence) Act 1945, contributory negligence is a partial defence. If the claimant contributed to their own loss by their own negligence, their damages are reduced by the proportion they were responsible for, but their claim is not defeated entirely.
Question 6: What is 'passing off' as a tort in business law?
- Falsely claiming a product has been inspected when it has not
- Misrepresenting goods or services as those of another, causing damage to the other's goodwill (Correct answer)
- Selling counterfeit currency
- Fraudulently obtaining a trademark registration
Correct answer: Misrepresenting goods or services as those of another, causing damage to the other's goodwill
Passing off protects unregistered trade reputation. Its three elements (Jif Lemon case) are: goodwill (in the claimant's business), misrepresentation (causing confusion with the claimant's goods/services), and damage (or likelihood of damage) to the claimant's goodwill.
SQE1 Tort & Business Law 2
Under the Companies Act 2006, what is the minimum number of directors required for a private limited company?