Acca f4glo Notes j15

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June 2015 exams

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June 2015 Examinations Paper F4 GLO

Contents

1 Sharia law 1

2 Market, planned and mixed economies 5

3 International organisations 7

4 International Court of Arbitration 17

5 UNCISG 25

6 International Sale Of Goods Contracts The Sellers Obligations 33

7 Rights and obligations of the buyer and the seller 41

8 When does risk pass from the seller to the buyer? 51

9 Documents found in international trade 55

10 Agency Law 65

11 Partnership Law 71

12 Company Law 81

13 Company Law: Directors and Officers 101

14 Company Law: Meetings and Resolutions 115

15 Company Law: Loan Capital 123

16 Company Law: Liquidations 129

17 Company Law: Illegalities 137

18 Capital Maintenance 147

Test Answers 155

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Paper F4 Global


Chapter 1

SHARIA LAW

Sharia - awaytoawateringplace

Quran - primarysourceofSharialaw

Sunnah - whathascometobeacceptedconduct

Shia,Hanafi,Maliki,Hanbali,Shafii

thefiveschoolsoflaw

theyprovidefurtherdetails/interpretationofacceptableconductandapplicationofthelaw

aShariajudgemayrefertothesesecondaryschoolstodeterminehowtoapplythelaw

ljithad - methodsofinterpretingthelaw

taqlid - thebeliefthatnofurtherinterpretationisrequired

ijma - oneoftwomethodsofinterpretationopentoajudgewhoisnotafollowerofthetaqlidthinking

- ijmaisaconsensusofopinionoflegalscholarsorjudges

qiyas - theShariaequivalentofjudicialprecedent

- involvesthecomparisonoftwosimilarsituationsandtheapplicationofacceptedlawinthefirstsituationtothesecond

1June 2015 Examinations Paper F4 GLO


Judicial precedent

inUKcommonlaw,judgesareboundtofollowdecisionsfromearliersimilarcases

thisconceptdoesnothaveanytrueequivalentinSharialaw,thenearestequivalentisqiyas

judges,intheUK,mayavoidtheearlierdecisionandthereforeavoidhavingtofollowtheprecedentdecision:

ifearlierdecisionwasmadeperincuriam(withoutcare)

iftooobscure

ifinconflictwithbasisprincipleoflaw

iftoowide

(inEurope)ifinconflictwithEuropeanlaw

iffactsarenotmateriallysimilar

rulesforapplyingaprecedent

mustbebasedonapointoflaw,notapointoffact

mustbepartoftheratiodecidendiinthepreviouscase

materialfactsshouldbesufficientlysimilar

priorcourtmusthavesuperiorstatusinthehierarchyofthecourts


Sharia law Chapter 1 2


Separation of powers and the rule of law

ruleoflawreflectsthesituationwhichexistswhenmembersofasocietyabide/obeyasetofrulesgoverningbehaviour

separationofpowers

theprocessofmakinglawsisseparatedintothreedistinctareas:

- the legislatureanelectedbodywhichdecideswhich lawsneedtobepassedtosatisfythenationswishes(forexample,health,defence)

- theexecutiveanelectedbodywhichmakesthedecisionswhichputthelawintoaction(forexampleintheUK,theelectedgovernment)

- thejudiciaryanon-electedbodywhichrulesondisputesaboutlaw

- thesedisputesmaybebetweengovernmentandindividuals(criminallaw)

- orbetweenindividualandindividual(civillaw)

3June 2015 Examinations Paper F4 GLOSharia law Chapter 1


TestQuestion 1QiyasistheShariaequivalentofwhichconceptfromwithinEnglishLaw?

A BurdentoprovebeyondreasonabledoubtB provewithinthebalanceofprobabilitiesC judicialprecedentD Commonisationprocessoflaw (1 mark)

Question 2Inthecontextoftheprincipleof judicialprecedent,a judgeinacaseina lowercourtmayavoidfollowinganearlierdecisionfromahighercourtifwhichofthefollowingcanbeshownabouttheearlierdecision?

A itwasmadeperincuriamB itwasfollowedbyincursionC itwasnotproperlyincurredD thejudgewasincurlers (2 marks)

Question 3Whichofthefollowingisnotagroundforahighcourtjudgetoavoidfollowingtheconceptofjudicialprecedent?

A theearlierratiodecidendiwastooobscureB theearlierratiowastoowideC theearlierratiowasinconflictwithabasicprincipleoflawD theearlierratiowasfromacaseheardinthesupremecourt

(2 marks)

Question 4Theprocessofmakinglawisseparatedintothreedistinctareas.Whichofthefollowingisnotoneofthoseareas?

A thelegislatureB theapplicatorsC theexecutiveD thejudiciary

(2 marks)

Question 5Therearesomebasicrulesforapplyingtheprincipleofjudicialprecedent.Whichofthefollowingisnotoneofthoserules?

A thesimilarityshouldbeapointoflawandnotnecessarilyapointoffactB thesimilarityshouldbeapointoffactandnotnecessarilyapointoflawC theprecedentmustbepartoftheratioofapreviouscaseD thepreviousdecisionshallbefromacourtofsuperiorstanding

(2 marks)


Sharia law Chapter 1 4


Chapter 2

MARKET, PLANNED AND MIXED ECONOMIES

Market

allocationofresourceisdeterminedbytheforcesofsupplyanddemand

marketforcesdictatequantityofproductionandconsumption

priceisdependentuponsupplyanddemand

wealthisheldindividuallyratherthancollectively

Planned

allocationofresourceisdeterminedcentrallybygovernment

pricesarefixedcentrallyforbothresourcesandproduction

pricesarenotthereforetheresultoftheforcesofsupplyanddemand

individualsownitemsofpersonalpropertybut

...realwealthisheldbygovernment(centralorregional)

Mixed

asthenamesuggests,itincorporateselementsofbothmarketandplannedeconomies

resourceallocationandproductionaredeterminedbyamixtureoffactors

governmentdecisions(bothdirectandindirect)

privatesectordecisions

pricesareaffectedbysupplyanddemand

butarealsoaffectedbygovernmentactionssuchastaxationandsubsidies

wealthissplitbetweentheindividualsinsocietyandthegovernment



TestQuestion 1Inthecontextofamarketeconomy,whichofthefollowingstatementsisincorrect?

A theforcesofsupplyanddemanddeterminetheallocationofresourceB priceisdeterminedbytheconflictingforcesofsupplyanddemandC wealthisheldbytheStateonbehalfofthepeopleD levelsofproductionandconsumptionaredictatedbymarketforces

(2 marks)

Question 2Inthecontextofaplannedeconomy,whichofthefollowingstatementsiscorrect?

A theallocationofresourceisdeterminedbymarketforcesB pricesareflexiblewithinapre-plannedrangeC individualsareencouragedtoplanfortheirownretirementfundD individualsownitemsofpersonalpropertybutrealwealthiscontrolledbycentralorregionalgovernment

(2 marks)

Question 3Whichofthefollowingisincorrectinthecontextofamixedeconomy?

A amixtureoffactorsdetermineresourceallocationandlevelsofproductionB resource allocation and levels of production are affected by direct and indirect decisions made at

governmentallevelC pricesareaffectedbysupplyanddemandbutalsoinfluencedbygovernmentactionanddecisionssuch

astaxationandsubsidiesD wealthissplitbetweenindividuals40%,government40%andlocalcommunitygroups20%

(2 marks)


MarkEt, plannEd and MixEd EconoMiEs chapter 2 6


Chapter 3

INTERNATIONAL ORGANISATIONS

UNUnitedNations

generalpurposes:

maintenanceofpeaceandsecurity

developmentoffriendlyrelationsamongnations

promotionofcooperationinsolvingeconomic,social,culturalandhumanitarianproblems

promotionofrespectforhumanrightsandinternationalfreedoms



UNCITRAL United Nations Commission on International Trade Law

one of two bodies actively involved in drafting international law ( the other is the International LawCommission)

concentratesonthedevelopmentandcodificationofinternationallaw

triestoovercomethepracticalproblemscreatedbydifferentnationshavingdifferentlawsrelatingtotrade

lookstostandardiseinternationallawinareassuchas:

saleofgoods

e-commerce

disputeresolution

alsoattemptstoincreaseinternationaltradebyintroducingtheHamburgrulescovering

carriageofgoodsbysea

internationalbillsofexchange

encouragescountriestoadoptUNCITRALprinciples


IntErnatIonal organIsatIons Chapter 3 8


UNCITRAL United Nations Commission on International Trade Law

UNCITRALspecificwaysinwhichUNCITRALtriestoharmoniseandunifyinternationaltrade

coordinatingtheworkofthevariousinterestedorganisations

encouraginginter-organisationalcooperation

promotingwideracceptanceandparticipationinexistinginternationalconventions

preparingnewinternationalconventions,modellawsanduniformlaws

promotingwaysofensuringconsistencyintheinterpretationandapplicationofconventionsandlaws

collectinganddisseminatinginformationonlegaldevelopmentsandnationallegislation

maintainingcloseliaisonandcollaborationwiththeUNConferenceonTradeandDevelopment

maintainingcontactandliaisingwithotherUNelementsconcernedwithinternationaltrade

9June 2015 Examinations Paper F4 GLOIntErnatIonal organIsatIons Chapter 3


WTO World Trade Organisation

formedin1995

basedontheprinciplesoftheGeneralAgreementonTariffsandTrade(GATT)

devotedtothepromotionofinternationalfreetradeingoods,servicesandintellectualproperty

inordertoachievethis,itworksactivelytoremoveobstaclestofreetrade

tariffs

importcontrols

customs

bureaucracy

actsasaforumforthecreationoftradeagreementsandthen

...administersthemwhentheyareformed

continuouslyreviewsthetradepoliciesofdifferentnations

assistsdevelopingnationstodesigntheirownnationaltradepolicies

assistsininternationaltradedisputeresolution




ICC International Chamber of Commerce

purposeistoserveworldbusinessbypromoting

trade

investment

openmarkets

advocatesfreeandfaircompetitionamongbusinesses

encourageseconomicgrowthinbothdevelopedanddevelopingcountries

activeinitsattemptstofightinternationalcommercialcriminalactivities

concernedwiththelegalprocesseswhichunderpintradingactivitysuchastradeagreementsanddisputeresolutionarrangements

developedINCOTERMS



INCOTERMS

producedandpromotedbyInternationalChamberofCommerce

ideaistoaddressthemainissuesinvolvedininternationaltrade

inparticular,thetermsaddress

theextenttowhichthecostsofcarriageareincludedwithinthecontractprice

whichpartyshouldbeartheriskintheeventofgoodsbeingdamagedduringthedeliveryofthosegoods

atwhatmomentdoesownershipofthegoods,andthereforealsorisk,pass

theextenttowhichcustomsdutiesareincludedwithinthecontractprice

theresponsibilityforcustomsclearancedocumentation

theseINCOTERMSincorporatedintoacontractestablishtheextentoftheserviceandtheriskacceptedbyeachofthecontractingparties,andwillbereflectedinthenegotiatedpriceofthecontract




INCOTERMS ( these MUST be learned! )

since2010,just2categories

rulesforuseinrelationtoanymode/modesoftransport

rulesfortransportbyseaorinlandwaterway

anymodeoftransportrules

maybeusedwheneitherseatransportisnotinvolvedor.

.ifitis,,whenseatransportisonlyforpartofthejourney

7rules/abbreviationsapply

EXW exworks

- minimumobligationsforthesellerconcerningdeliveryofthegoods

- buyerisresponsibleforallcostsincurredindeliveryfromsellerspremises

FCA freecarrier(namedplace)

- seller completesobligationswhen thegoodshavebeencleared for export andcustodyhasbeentransferredtoanamedcarrierataspecifiedplace

CIP carriageandinsurancepaidto

- thesellerisresponsibleforcarriageandinsuranceuptoaspecifiedlocation

- thereafter,thebuyerisresponsible

CPT carriagepaidto

- thesellerpaysthecostsofdeliverytoastatedlocation

- onceatthatlocation,thebuyerassumesresponsibility



DATdeliveredatterminal

- requiresthesellertopayforcarriagetotheterminalandthecostsassociateduptothetimethegoodsareunloadedattheterminal

- doesNOTincludecostsofimportclearancethesecostsaretheresponsibilityofthebuyer

- effectively, therefore, the goods aredeliveredwhen they are unloaded at the terminal andplacedatthebuyersdisposal

- theterminalisthenamedterminalinthecontractatthenamedportorplaceofdestination

DAPdeliveredatplace

- thesellerbearsallcosts(except importclearancecosts) involvedindeliveringgoodstothenameddestinationtheplace

- thismeansallcostsuptothepointwherethegoodsarereadytobeunloadedbythebuyerattheagreeddestination

DDP delivereddutypaid

- sellercompletesobligationswhenthegoodshavebeendeliveredtothebuyerataspecifiedlocationinthebuyerscountry

- sellerpaysallcostsofdeliverytothatlocationincludingallimporttaxes,customsdutiesandanyotherofficialchargesintheimportingcountry

seaorinlandwaterwaytransportrules

theserulesapplywhengoodsarebeingtransportedfromoneporttoanother

4rules/abbreviationsapply

FAS freealongsideship

- onlyapplieswheregoodsaretransportedbyship

- sellersresponsibilities/obligationsceasewhenthegoodsareplacedonthequayalongsidetheship

- buyershouldhavearrangedforexportformalities

FOB freeonboard

- buyerarrangesforshipment

- sellercompletesobligationswhengoodsareloadedontotheship

- sellerprovidesexportdocumentation,buyerprovidesimportdocumentation




CFR costandfreight

- onlyapplicabletogoodsbeingdeliveredbyship

- sellerpaysallcostsuntilthegoodshavepassedtheshipsrailintheexportcountrysport

- afterthatpoint,thebuyerassumesresponsibility

- thusthebuyerarrangesformarineinsuranceandforcustomscosts

CIF cost,insuranceandfreight

- allthreecostsshallbetheresponsibilityoftheseller

- insuranceissuchthatthebuyerhastherighttorecoverfromtheinsurer

- minimuminsurancecoveriscontractpriceplus10%

termsapplytodomesticcarriageofgoodsaswellasinternational(previouslytheserulesonlyappliedtointernationalcarriage)

goodssoldwhilstintransit?

onlytheoriginalsellershipsthegoods

sosubsequentpurchasersnowhaveanobligationtoprocuregoodsshipped

buyersandsellersmustcooperateinprovidingsufficientinformationtoeachothertomakeeasiertheimport/exportofthegoods

handlingcosts

the2010termstrytoremoveanawkwardsituationwhichusedtoexistunderthe2000terms

2010termsclearlyallocateresponsibilityforthehandlingcostsatthedestinationterminal



TestQuestion 1TheUnitedNationsissaidtohavefourgeneralobjectives.Whichofthefollowingisnotoneofthosefour?

A maintenanceofpeaceandsecurityB developmentoffriendlyrelationsamongstnationsC promotionofrespectforhumanrightsandinternationalfreedomsD assistingcountriesunderunwelcomeoccupationtogainindependence

(2 marks)

Question 2UNCITRAListheacronymforwhichofthefollowing?

A UnitedNationsCommissiononInternationalTradeLawB UnitedNationsCitizensTradeRegulationsandLegislationC UnitedNationsConventions,InternationalTreaties,RegulationsandLawsD UnitedNationsCharterinTrafficLaw

(1 mark)

Question 3WhichofthefollowingisanINCOTERM?

A ACAB FCAC CPAD DIM

(1 mark)

Question 4WhichofthefollowingisnotanINCOTERM?

A CFRB CIFC CIPD CDM

(1 mark)

Question 5TheINCOTERMDATistheabbreviationforwhichofthefollowing?

A DeliveredatTerminalB DeliveryafterTimeC DateandTime(atnamedplace)D DestinationandTime(namedport) (1 mark)

Question 6TheINCOTERMFASistheabbreviationforwhichofthefollowing?

A FirstAndSecond(carrierpaid)B FreeAlongsideShipC FreeandSingleD FreeAfterSix

(1 mark)




Chapter 4

INTERNATIONAL COURT OF ARBITRATION

ICA International Court of Arbitration

setupbytheInternationalChamberofCommercenearly100yearsago

promotestheuseofarbitrationproceduresincommercialdisputes

overseesallelementsofarbitrationprocess:

maintainslistsofprospectivearbitrators

confirmsappointmentofarbitrators

makesdecisionsaboutchallengestoarbitrators

approvesarbitratorsawards

fixesarbitratorsfees



UNCITRAL Arbitration

involvesthesettlementofadisputedcontractbyanindependentthirdparty,thearbitrator,orarbiter

ofteninvolvescompromise

thetwodisputingpartiesmayormaynotbelegallyrepresented

thedecisionofthearbitratorisbinding....

...althoughthereisnormallyarightofappealtothecourts

advantages

cost

- nocourtcosts

- nocostsoflegalrepresentatives

speed

- generallymuchquickerdecisionthantakingthedisputetocourt

- flexibilityoftheprocessgenerallyleadstoquickerdecisions

privacy

- courtproceedingsareamatterofpublicrecord

- arbitrationisaprivate,unpublicisedmatter

informality

- courtproceedingscanbeextremelystressful

- theinformalityofthearbitrationprocessismuchlessstressful

expertise

- thearbitratorshouldbeanacknowledgedexpertincontractlawareaunderdispute

- ajudgeisanexpertinlawwithpossiblynoexperienceinthedisputedmatter

decisions

- becausearbitrationisnotboundbyprecedent,decisionsofanarbitratorarelikelytobemoreinnovative


IntErnatIonal Court of arbItratIon Chapter 4 18


UNCITRAL arbitration

therequirementofqualificationsforanarbitratorshouldbeestablishedwithinthearbitrationagreement

ifnoqualificationrequirementhasbeenagreed,thenanyonemaybeselected

nooneshouldbepreventedfromservingasanarbitratoronthegroundsoftheirnationalityalone

anarbitratorshouldbeindependentandunbiased

anynominatedarbitratorshoulddiscloseanyrelevantfactswhichmaybeseentoimpairtheirindependence

similarly, if it becomes the case that independence is threatened, an arbitrator should disclose thecircumstances

if it becomes impossible for an appointedarbitrator to continue to act, they shouldwithdraw from theposition,or

bothpartiesmayagreethattheappointmentshouldbeterminated,or

eitherpartymaychallengethearbitratorconcerningindependence

19June 2015 Examinations Paper F4 GLOIntErnatIonal Court of arbItratIon Chapter 4



for a dispute to be submitted to arbitration, under the UNs Model Law on International CommercialArbitrationtheagreementtoturntoarbitrationmustbeinwriting

thereshouldthereforebyanarbitrationclauseagreement

toqualifyasbeinginwritingoneofthefollowingrequirementsshouldbeappropriate

itshouldbecontainedin:

adocument,signedbybothparties

anexchangeofdocumentsclearlyreferringtosuchanagreement/clause

anexchangeofdocumentsofalegalnatureclearlyreferringtosuchanagreement/clause

anotherwrittencontractbetweenthepartiesreferringtothearbitrationagreement/clause

thearbitrationtribunal

if theparties have agreed tohave a sole arbitrator, the twoparties should agreeon thatpersonsidentity

ifthepartiescannotagree,theywillneedtoreferthemattertoanominatedcourtortribunalforthemtodecidetheidentityofthearbitrator

ifthepartieshavenotagreedonasolearbitrator,theModelLawstatesthatthereshouldbethreearbitrators

- onechosenbyeachofthetwodisputingparties,and

- onechosenbythetwoarbitrators





disadvantages

privacy!

- onepartyinthedisputemayactuallywantthepublicity

applicationofthelaw

- independentarbitratorsdonotnecessarilyhaveexpertiseintheinterpretationandapplicationofthelaw,whereas

- judgesincourtsareexpertsinthisfield

predictability

- arbitratorsarenotboundbyprecedentsomaybeinconsistentwhencomparedwithdecisionsinsimilardisputes,whereas

- judgesareboundtofollowtheprinciplesofprecedentsodisputeresolutionmaybeseenaspredictable

precedent

- resolutionunderarbitrationcreatesnoprecedentsofuturesimilardisputeresolutioncoulddifferfromtheearlierarbitrationdecision,whereas

- whereadisputeliesbeyondthescopeofestablishedprecedent,acourtdecisioncouldbeseentocreateanewprecedentuponwhichlatersimilardisputeresolutionwillbebased



UNCITRAL arbitration application to have an arbitration award set aside / cancelled

incapacity

occurswhenonepartyinthedisputeissufferingunderanincapacitywhenthetribunalhearingtookplace

notice

occurswheninsufficientnoticehasbeengivenofeither

- theappointmentofanarbitrator,or

- thedateoftheproceedings

invalidityoftheagreement

ifthetribunaldecisionisinvalidunderthelawgoverningthedisputecontract

publicpolicy

whereadecisionfromatribunalisclaimedtobeagainstthepublicpolicyoftheclaimantsstate

subjectmatter

tribunals are restricted tomaking awards only onmatters includedwithin the agreement to seekarbitration

compositionofthepanelofarbitrators

iftheproperrequirementsofpanelselectionhavenotbeenfollowed(normallythreearbitrators)




UNIDROIT International Institute for the Unification of Private Law

independentinter-governmentalorganisation

studies the need for and how tomodernise, harmonise, standardise and co-ordinate private law in aninternationalcontext

ofparticularconcernisinternationaltradelaw

threetierstructure

secretariat

- responsibleforday-to-dayrunning

governingcouncil

- supervisespolicy

- drawsupaworkprogramme

- superviseshowthesecretariatcarryouttheprogram

generalassembly

- theultimatedecisionmakingbody

- approvesthebudget

- approvestheworkprogramme

- electsthegoverningcouncil



TestQuestion 1WhichofthefollowingisnotamatterfortheICA?

A maintainalistofprospectivearbitratorsB ApprovearbitratorsawardsC ensurearbitratorsareproperlyequippedD makedecisionsaboutchallengestoarbitrators

(2 marks)

Question 2It is a requirement that, for a dispute to be submitted for arbitration, then under the UNs Model Law onInternationalCommercialArbitration,theagreementmustbeinwriting.Isthatstatement

A trueB false

(1 mark)

Question 3Thereareanumberofdisadvantagesclaimedforthearbitrationprocess. Whichofthefollowingisnotoneofthosedisadvantages?

A inconsistencyB unpredictabilityC privacyD informality

(2 marks)

Question 4Thereareanumberofreasonsforaclaimanttoasktohaveanarbitrationawardsetaside.Whichofthefollowingisnotoneofthosereasons?

A costB insufficientnoticeC publicpolicyD compositionofthearbitrationpanel

(2 marks)

Question 5UNIDROIThasathreetierstructure.Whichofthefollowingisnotoneofthetiers?

A secretariatresponsibleforday-to-dayrunningB governingcouncilsupervisestheactivitiesofthesecretariatC generalassemblyelectsthegoverningcouncilD intermediariesfacilitatecommunicationlinksbetweenthesecretariatandthegeneralassembly

(2 marks)




Chapter 5

UNCISG

UNCISG United Nations Convention on Contracts for the International Sale of Goods

appliestocontractswherebuyerandsellerareindifferentstates

twopossibilities

wherebothstateshaveacceptedtheconvention(contractingstates)

whereonlyoneofthestateshasacceptedtheconvention

in this latter situation, both parties have agreed that the contract should be subject to the law of theacceptingstate

nationalityofthepartiesisnotrelevant

locationofpartiesbusinessisimportant



Contracts not covered by UNCISG

acontractforthesaleofgoodsisoneinwhich

theselleragreestotransfertitle(ownership)ofthegoods

tothebuyer

inexchangeforamoneyconsideration(theprice)

soUncisgdoesnotapplytocontracts:

forthesupplyofservices

fortheexchangeofgoods

whereoneofthepartieshasthemainobligationtosupplylabour

formanufacture,wherethebuyerprovidesallthematerial(ormost)

wheregoodsarepurchasedforpersonal,familyorhouseholduse

....unlessthesellerkneworoughttohaveknownabouttheproposeduse

wheregoodsareboughtatauction

wheregoodsareboughtbylegalauthority

forpurchaseofstocksandshares

forpurchaseofshipsoraircraft

forpurchaseofelectricity


UNCISG Chapter 5 26


UN CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS

contractsareagreements

anagreementconsistsofanofferandanacceptance

theagreementshouldbesupportedbyconsiderationand....

....madewithintentiontocreatelegalrelations

anofferisasufficientlydefiniteproposalforconcludingacontractwhich

isaddressedtooneormorepersons

indicatestheintentionandwillingnessoftheofferortobebounduponacceptanceoftheoffer

indicatesthegoods involved, thequantityandthepriceandthereforequalifies for thedescriptionsufficientlydefinite

offersmustbedistinguishedfrominvitations

aninvitationisnotcapableofacceptance

aninvitationisinvitinganotherpersontomakeanoffer

27June 2015 Examinations Paper F4 GLOUNCISG Chapter 5


UN CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS

forexample:

goodsinasupermarketareinvitations

goodsinashopwindowareinvitations

advertsarenormallyinvitations

but,veryoccasionally,advertsmaybetakentobeoffers

mailcataloguesareinvitations

theprocessofanauctionsaleconstitutestheauctioneersinvitingaseriesofoffers


UNCISG Chapter 5 28


Offers

halfoftheagreement

anexpressionofwillingnesstobeboundonspecificterms

mustbecertain

muststillexistwhenaccepted

mustbedistinguishedfrominvitations

mustbedistinguishedfromstatementsofintent

aresponsetoarequestforinformationisnotanoffer

arequestforinformationisnotacounteroffer

revocationofanoffermustbecommunicatedtotheofferee

anofferiseffectivefromthemomentitisreceivedbytheoffereewhether

- orally

- bymail

- bypersonaldelivery

anofferwillceasetobecapableofacceptanceif

- withdrawn

- revoked

- rejected



withdrawal

iswhere theofferor communicates to theofferee the intention towithdraw theofferbefore theoffereehasreceivedit

revocation

( effectively,withdrawal after theoffereehas received it )maybe effected at any timebefore theoffereehasacceptedit

ifanofferisstatedasbeingirrevocablethentheofferorcannotrelyuponrevocation

rejection

occurswhentheoffereesaysno

butmayalsooccurwhentheoffereesacceptanceisnotcompleteandunconditional

anymaterialalterationtothetermsstatedintheofferor,indeed,anyadditionaltermsintroducedwithintheacceptancewillhavetheeffectofrejectingtheofferandreplacingitwithacounteroffer

animmaterialalterationisnotrejectionandcounteroffer

thecontractisvalidincorporatingtheimmaterialalterations


UNCISG Chapter 5 30


Acceptance

theotherhalfoftheagreement

mustbecompleteandunconditional

...subjecttoallowingimmaterialalterationstotheoffer

theoffermuststillbeopenatthetimeofacceptance

acceptancemustbecommunicatedtotheofferor,buttheofferormaywaivethisrightofcommunication

communicationmaybebyareliablethirdparty

silencecannotbeacceptance

acceptancemaybebyconduct

oncetheactsofacceptancehavestarted,theofferorcannotrevoketheoffer

ifacceptanceisbyletter,itiseffectivefromthedateshownintheletter

acceptanceshouldbewithinareasonabletimeoftheoffer

- oraloffer?immediateacceptance

- emailedoffer?twoorthreedays

- surfacemailoffer?afewdays

- telegrammedoffer? reasonable time commences from the date the telegrammedofferwashandedinfordelivery



TestQuestion 1TheUnitedNationsConventiononContractsfortheInternationalSaleofGoodsdoesnotapplytoallinternationalcontracts.TowhichofthefollowingdoesUNCISGapply?

A AsaleofgoodsinanauctionB AsaleofashipC AsaleofgoodsforamoneyconsiderationandtitleistransferredfromthesellertothebuyerD Acontractwherethetwopartiesexchangegoodsofsimilarvalue

(2 marks)

Question 2UNCISGappliestowhichofthefollowingcontracts?

A Aselleragreestotransfertitletothegoodsfornoconsiderationthegoodsweresuperfluoustothesellersrequirements

B Thebuyeristopaymoneytothesellerinexchangeforthetransferofownershipofthegoodsfor,unknowntotheseller,thebuyerspersonaluse

C Thebuyeristoreceivetitle/ownershipofthegoodsassoonasthepurchasepricehasbeenpaidintothesellersbankaccount

D Thebuyer, thenationalgovernment, is toacquire thegoods tobeused in thewareffort against theinvadingneighbourstate

(2 marks)

Question 3Whichofthefollowingispotentiallyincorrect?Inthecontextofcontractlaw,anofferisasufficientlydefiniteproposalforconcludingacontractwhich.

A ismadetoaspecifiedindividualB indicatestheintentionandwillingnessofthepersonmakingt=heoffertobebounduponacceptanceof

theofferC indicatesthegoodsinvolvedD givesasufficientlydefinitivedescriptionofthegoods

(2 marks)

Question 4WhichwordcorrectlycompletesthesentenceAnadvertistakentobeanoffer

A neverB occasionallyC frequentlyD always

(2 marks)

Question 5Whenyouhaveaskedthepriceofsomegoodsintheshopwindow,theshopkeeperbehindthecounterhassaid$20.Whatisthestatusofthatreplyfromtheshopkeeper?Itis.

A AnofferB Acounter-offerC AnacceptanceD noneoftheabove

(2 marks)


UNCISG Chapter 5 32


Chapter 6

INTERNATIONAL SALE OF GOODS CONTRACTS THE SELLERS OBLIGATIONS

contractsinvolvingcarriage

if thegoodsarenot specific i.e. theyareunidentifiedgoods from inventory, the sellermustnotifythebuyerabout thedetailsof theconsignmentgivingclear indicationabout theparticulargoodsallocatedtothebuyerscontract

inaddition,thechoiceoftransportshouldbeappropriatetotheparticulargoods

- inanimateornon-perishablegoods,noproblem

- butperishablegoodsshouldbeplacedinthehandsofanappropriatecarrier

timingofthedelivery

deliveryshouldbeeffectedonthedatespecifiedinthecontract(orwithinaspecifiedperiod)

ifnodateorperiodisspecified,thesellershoulddeliverwithinareasonabletimeoftheformationofthecontract

specificgoodsthoseparticularunits/itemswhicharetobesoldi.e.thisparticularpairoftrousers

unidentified goods drawn from inventory not individually identifiable, rather they are part of generalinventoryi.eapacketofbiscuitsratherthanthatpacketofbiscuits



Contracts involving carriage

twomainareas

delivery

quality

delivery

thesellerisobligedtodeliverthegoods,handoveranydocumentsrelatingtothegoodsandtransfertitletothegoodsasrequiredbythecontract

ifaplacefordeliveryisspecifiedwithinthecontract,thenthegoodsmustbedeliveredtothatspecifiedplace

ifnoplaceisspecified,impliedtermsapply

ifcarriageofthegoodsisinvolvedinthecontract,thesellersobligationceaseswhenthegoodsaredeliveredtothecarrier(orfirstcarrierifmorethanoneisinvolved)

ifunidentifiedgoodsareinthesellersinventory,thesellersobligationsarecompleteuponplacingthegoodsatthebuyersdisposal

ifspecificgoodsareinvolved,again,thesellersobligationsarecompleteuponplacingthegoodsatthebuyersdisposal.

ifnoneoftheabovethreeplacesituationsisapparent,thesellersobligationsceasewhenthegoodsareplacedatthedisposalofthebuyeratthesellersplaceofbusiness


IntErnatIonal SalE of GoodS ContraCtS thE SEllErS oblIGatIonS Chapter 6 34


Quality

thesellermustdelivergoodswhichareofthequantity,qualityanddescriptionrequiredbythecontract,and...

...whicharecontainedorpackagedinthemannerrequiredbythecontract

however,ifthecontractfailstospecifyquantityandqualityandthereisnodescriptionwithinthecontract,thesellermustneverthelessmeetconformityrequirements

goodsdeliveredshouldbefitforanypurposewhichhasbeenspecified

ifnopurposehasbeenspecified,thegoodsdeliveredshouldbefitforthepurposeforwhichgoodsofthatdescriptionwouldnormallybeused

ifasampleisofferedbythesellerforinspectionbythebuyer,thegoodsdeliveredmustbeexactlythesamequalityasthesampleoffered.Itisirrelevantwhetherthebuyerdoesinfactinspectthesample

ifnosampleisoffered,thegoodsdeliveredmustbeexactlyinaccordancewithanydescriptiongiven

thegoodsshouldbepackagedinthemannerwhichisnormalforgoodsofthatdescription

35June 2015 Examinations Paper F4 GLOIntErnatIonal SalE of GoodS ContraCtS thE SEllErS oblIGatIonS Chapter 6


there isnoobligationontheseller toensurethatthegoodscomplywith legislation inthebuyersstateunless

thatsamelegislationappliesinthesellersstate,or

thebuyermadethesellerawareofthelegislation,or

thesellerknewtherequirementsimposedbythelegislation

thesellerwillnotbeliableforbreachoftheconformityrequirementsinthesituationwherethebuyerknewthatthegoodswouldnotconform

thesellerwillbeliableifthenon-conformityexistedatthedatethetitle/risktothegoodspassedtothebuyer

thisissoevenifthefailuretoconformbecameapparentonlyafterthedatethetitle/riskpassed

inaddition,thesellerisliableevenaftertitle/riskhaspassedwherethesellerisinbreachofobligations

forexample,wherethereisaguaranteethatthegoodswillremainfitforthepurposeforaperiodoftimeafterdelivery

finally,ifthequantitydeliveredislessthanthequantityorderedbutdeliveryisbeforethecontractdatefordelivery,thesellerisabletomakegoodtheshort-fallatanytimeuptothecontractdateofdeliverywithnopenalty

theonlyexceptioniswhere,asaresultofthereducedquantity,thebuyerincursunreasonableexpenseorinconvenience.Inthatsituation,thebuyermayseekcompensationintheformofdamages




The buyers duty to examine the goods

assoonaspossibleafterdelivery,thebuyershouldexaminethegoods

whenthebuyerisgoingtodespatchthegoodsimmediatelyonreceipt,andthesellerisawareofthatfact,thebuyermayinspectthegoodsuponreceiptatthatnextdestination

noticeofnon-conformityshouldbegiventothesellerwithinareasonabletimeafterthenon-conformitywasdiscovered

failuretogivenoticewithinthatreasonabletimewilllosethebuyertherighttosueforbreach

ifnon-conformitynoticeisnotgivenwithintwoyearsofdelivery,thebuyerwilllosetherightofcompensation

however, if thesellerknewof thenon-conformity,and failed todisclose this to thebuyer, thesellerwillremainresponsible



Third party rights

thesellermustdelivergoodswhicharefreefromanythirdpartyrightorclaim

...unlessthebuyeragreestoacceptthosegoodssubjecttotherightorclaimofthethirdparty

specialprovisionsrelatetothesituationwheretherightorclaimisbasedonintellectualpropertyorindustrialproperty

in thesesituations thesellermustdelivergoodswhichare free fromtheseproperty rightsprovided therightsexistinthelawof

thestatewherethegoodswillberesoldorused,or

thestatewherethebuyerhasaplaceofbusiness

intellectualpropertyincludes

trademarks

patents

copyrights

suchacontractwherethesethirdpartypropertyrightsareaffectedmustinvolvethebuyersawarenessandacceptancethattherightsexistandwillberespected




TestQuestion 1InthecontextoftheUNConventionfortheInternationalSaleofGoods,whereacontractinvolvescarriageofthegoods,twomainareasareaddressedbytheConvention.Whatarethosetwoareas?

1)Delivery 2)Date 3)Quality 4)Carrier

A 1and3B 2and4C 1and4D 2and3

2 marks)

Question 2InthecontextoftheUNConventionfortheInternationalSaleofGoods,whereacontractinvolvescarriageofthegoods,deliveryistobemadeattheplacespecifiedinthecontract.Butifnoplacefordeliveryisspecified,whathappens?

A UNCISGceasestoapplyB UNCISGimpliestermsC thesellerremainsresponsibleuntilthebuyerhaspossessionD thesellersresponsibilitiesceasewhenthegoodsleavethesellerspremises

(2 marks)

Question 3InthecontextoftheUNConventionfortheInternationalSaleofGoods,whereacontractinvolvescarriageofthegoods,thesellermustdelivergoodswhichareofthequantity,qualityanddescriptionrequiredbythecontract.Butifthesedetailsarenotspecified,whathappens?

A thesellerhasnoresponsibilityforqualityB thesellermustmeetconformityrequirementsC thesellermustmeetthebuyertoconfirmthedetailsD thesellermaydelivergoodsofanyquantity,qualityanddescriptionthathebelievestobeappropriate

(2 marks)

Question 4Whichofthefouroptionsisincorrect?InthecontextoftheUNConventionfortheInternationalSaleofGoods,whereacontract involvescarriageof thegoods, there isnoobligationontheseller toensure that thegoodscomplywithlegislationinthebuyersstateunless..

A thesamelegislationappliesinthebuyersstateB thebuyermadethesellerawareofthelegislationC thesellerknewtherequirementsofthelocallegislationD thebuyerreasonablyexpectedthesellertobeaware

(2 marks)

Question 5InthecontextoftheUNConventionfortheInternationalSaleofGoods,whereacontractinvolvescarriageofthegoods,thebuyerhasadutytoexaminethegoods.Whichofthefollowingstatementsisincorrect?

A Assoonaspossibleafterdelivery,thebuyershouldexaminethegoodsB noticeofnon-conformityshouldbesenttothesellerwithinareasonabletimeafterthenon-conformity

wasdiscoveredC ifnon-conformityisnotnotifiedwithintwomonthsofdelivery,thebuyerwilllosetherighttocompensationD wherethegoodsaretobeforwardedstraightawayafterdeliveryandthesellerknewthisfact,thebuyer

mayinspectthegoodsattheirnextdestination(2 marks)



Chapter 7

RIGHTS AND OBLIGATIONS OF THE BUYER AND THE SELLER

Thebuyersremediesarisingfromthesellersbreachofcontract

requireproperperformance

avoidthecontract

proportionallyreducethecontractprice

seekdamages

damagesmaybeclaimedbythebuyerevenwhenanyofthefirstthreeremediesisalsoclaimed

properperformance

thebuyermayrequirethesellertohonourthecontract

thisright is lost ifthebuyerhasalreadytakenactionwhichis inconsistentwiththerequirementofperformance,forexample,thebuyerhastreatedthecontractasavoided

thebuyermayextendthetimeperiodforperformance

anorderbythecourtofspecificperformancewillonlybeawardedifthatisconsistentwiththeexistinglocallaw

ifabreachbytheselleriswithreferencetonon-conformanceofthedeliveredgoodsthebuyermayrequirethesellerto

- repairthegoodswherenon-conformanceisminor,or

- replacethegoodswherenon-conformanceisfundamental

thesellermayseektoremedythefailuretoperformif

- thereisnounreasonabledelay,and

- thebuyerisnotunreasonablyinconvenienced

forthistoapply,thesellermustgivenoticetothebuyeroftheintentiontoremedy,and

thebuyershouldcontactthesellershowingacceptanceoflateperformance



note,thebuyermustactuallyreceivethenotificationfromtheseller

wherethebuyerfailstoreplytothesellersnotice,thesellerisentitledtoassumethatthebuyerhasacceptedlateperformance

wheregoodsaredeliveredbeforetheduedate,thebuyer

mayacceptdelivery,or

refusedeliveryuntilthecontracteddate

whereexcessgoodsaredelivered,thebuyer

mayacceptallthegoods,or

someoftheexcess,or

justthosegoodsasperthecontract

ifthebuyeracceptssomeoralloftheexcess,thebuyermustpayforthatexcess

avoidthecontract

thebuyermayavoidthecontractwherethesellerisinfundamentalbreach

mayalsoavoidinthesituationwheretheseller

- failstodeliver,or

- givesnoticethatdeliverywillnotbepossibleonthecontractdate(oranyextensiontothatdate)

suchadeclarationofavoidanceiseffectiveonlyifitismadebynoticefromthebuyertotheseller

proportionallyreducethecontractprice

fornon-conformitybreachthebuyermayreducethecontractpriceinproportiontothedegreeofnon-conformity

ifthesellercorrectsthenon-conformity,thebuyercannotreducetheprice

ifthirdpartyrightsareinvolvedandthebuyercouldnotreasonablyhaveknownthen,onsubsequentdiscovery,thebuyermayreducethecontractprice


Rights and obligations of thE buyER and thE sEllER Chapter 7 42


Obligations of the buyer

thebuyermusttakedeliveryofthegoodsasspecifiedwithinthecontractandmustpaytheagreedpriceforthosegoods

ifapriceisnotspecifiedwithinthecontractitisassumedthatthebuyerandsellerhaveanagreementtosetthepricewhichprevailedatthedateofthecontract

ifthepriceisdeterminedbytheweightofgoodsdelivered,thevalueiscalculatedbasedonthenetweight

placeofpayment,ifnotspecifiedwithinthecontract,shallbe

atthesellersplaceofbusiness,or

ifpayablewhengoods/documentsaredeliveredtothebuyer,attheplacewherethatdeliverytakesplace

timingofpayment,ifnotspecifiedwithinthecontract,shallbe

ondeliveryofthegoods/documents

...butonlyafterthebuyerhasexaminedthegoods

thesellermayincludeacontracttermwhichstatesthattitletothegoodsshallnotpassuntilpaymenthasbeenmade.ThisiscalledaRomalpaClause

inaddition,wherecarriageisinvolved,thesellermaystatethatthegoodsshallnotbereleasedtothebuyeruntilpaymentismade

wherethereisanagreeddateofpayment,thebuyershouldpayonthatdatewithoutthesellerhavingtorequestpayment

thebuyerisobligedtotakedeliveryofthegoods,and

takeallsuchreasonablestepstoenablethesellertoeffectdelivery

43June 2015 Examinations Paper F4 GLORights and obligations of thE buyER and thE sEllER Chapter 7


Thesellersremediesarisingfromthebuyersbreachofcontract

requireacceptanceofthegoods

requirepaymentforthegoods

avoidthecontract

seekdamages

acceptanceandpayment

thesellermayenforcethecontractualtermswithreferencetoacceptanceandpaymentunless...

...thesellerhastakenstepsincompatiblewiththatright,forexample,thesellerhasnotifiedthebuyerthatthecontractisbeingtreatedasavoided

itispossibleforthesellertoextendthetimeperiodforthebuyertomeetobligations

...butsuchextensionshouldbeofreasonablelength

avoidthecontract

ifthebuyersbreachisfundamental,or

thebuyerrefusestoacceptthegoods,or

thebuyerfailstopayaccordingtothecontract

ifthebuyerhaspaid,thesellerlosestherighttoavoidunless...

...itisinrespectoflateperformancebythebuyer,or

....itisinrespectofanyotherbreachbythebuyer




Damages

maybeclaimedbyeitherpartyinadditiontoanyotherremedyclaimede.g.avoidance

isamonetaryamountclaimedincompensationforthelosssufferedbytheinjuredparty

theamountofdamagesawardedislimitedtothatamountwhichcouldhavebeenreasonablyforeseeablebythebreachingparty

theinjuredpartyshouldseektomitigatethelosssufferedasaresultofthebreach,forexample:

bysellinggoodswhichhavebeenrejectedbythebuyerandclaimingonlythedifferencebetweencontractpriceandsaleproceeds

bybuyingreplacementgoodsandclaimingonlytheamountpaidinexcessofthecontractprice



Breach of contract

definedasthefailureofonepartytoperformtheirobligationsunderthecontract

twotypes

anticipatorybreach,and

breachduringperformance

anticipatorybreachisabreachinadvanceoftheduedateforcommencementofperformance

ifitbecomesapparentthattheotherpartywillnotperformamaterialpartoftheirobligationsbecause

- thereisaseriousindicationoftheirinabilitytoperform

- creditworthinessisindoubt

- indicationsarisingfromtheotherpartyspreparationtoperform

in these situations, one party may suspend their own performance, even if the due date forcommencementhasnotyetbeenreached

butmustgivenoticeoftheintentiontosuspend

whensuchnotice is received, if theotherpartygivesassurancethateverything isfine, thenotifiercannotsuspendperformance

whengoodshavealreadybeendespatchedbeforethepotentialbreachbecomesknown,thesellercanpreventdeliveryofthosegoods,eventhoughthebuyermayalreadyholdthetitledocuments




Breach during performance

remediesavailabletotheinjuredpartyhavealreadybeencoveredinthesenotes

possiblethatthebreachmaybeclassedasfundamental

thisisamajorbreach,forexample,onepartygivingnoticethattheywillnotcontinuewiththecontract

inthissituation,theinjuredpartymaydeclarethatthecontractisavoidedand

...claimdamages

instalmentcontracts

wheredeliveryofthegoodsisbyinstalmentstherightsoftheinjuredpartydependonthetimingofthebreach

- in(say)ateninstalmentcontract,thefirstinstalmentisinbreach(e.g.poorquality)thebuyermaytreatthewholecontractasavoided

- butifthefirstseveninstalmentsareacceptedandtheeighthisinbreach,thebuyerwilllikelyonlybeabletorejecttheeighthinstalmentandclaimdamagesorrequirereplacement



Effects of avoidance

whereacontractisavoided,bothpartiesarereleasedfromtheirobligations

but,ofcourse,remediesmustthenbeavailabletotheinjuredparty

claimdamages

resorttoatribunal

exerciseanyrightsspecifiedinthecontractinanticipationofavoidance

claimrecoveryofanygoodsdelivered(restitution)

butnote,restitutionisonlyavailableifnothirdpartyrightswillbeadverselyaffectedandfullrestitutionispossible(restitutioinintegrum)




TestQuestion 1InthecontextoftheUNConventionfortheInternationalSaleofGoodsandthesellerbreachesthecontract,thebuyersremediesareasfollows,butwhichoneisincorrect?

A requireproperperformanceB AvoidthecontractC seekdamagesD Acceptthegoodsdeliveredbuthasnoobligationtopay

(2 marks)

Question 2InthecontextoftheUNConventionfortheInternationalSaleofGoodsandthebuyerbreachesthecontract,thesellersremediesareasfollows,butwhichoneisincorrect?

A requireacceptanceofthegoodsB requirepaymentforthegoodsC seekdamagesD repossessthegoodsandclaimapenaltyequalto50%ofthesalevalueofthegoods

(2 marks)

Question 3In thecontextof theUNConvention for the InternationalSaleofGoods,whereeither the selleror thebuyerbreachesthecontract,thentheinjuredpartymayclaimdamages.Therearesomebasicprinciplesappliedtothedeterminationoftheamountofdamagesclaimable.Whichofthefollowingisnotoneofthoseprinciples?

A Damagesmaybeclaimedbytheinjuredpartyinadditiontoanyotherremedyclaimedforexample,avoidance

B Damagesisamonetaryamountclaimedincompensationfortheloss/damagesufferedbytheinjuredparty

C theamountofdamagesislimitedtothatamountthatcouldhavebeenreasonablyforeseeablebytheinjuredparty

D theinjuredpartyshouldseektomitigatethelosssufferedasaresultofthebreach(2 marks)

Question 4Whichofthefollowingstatementsisfalseinthecontextofbreachofcontract?

A BreachofcontractisdefinedasthefailureofonepartytoperformtheirobligationsunderthecontractB therearetwotypesofbreachanticipatoryandactualC Anticipatory breach is where one party gives notice, in advance of the date for commencement of

performance,totheotherthattheywillnotperformamaterialelementoftheirobligationsD whengoodsarealreadyintransitwhenthebuyersbreachbecomesknown,thesellercanpreventdelivery

ofthosegoods,eventhoughthebuyermayalreadyholdthetitledocuments(2 marks)

Question 5Whereacontractisavoided,bothpartiesarereleasedfromtheirobligations.But,ofcourse,remediesmustthenbeavailablefortheinjuredparty.Whichofthefollowingisnotanavailableremedy?

A AclaimfordamagesB resorttoatribunalC ClaimrecoveryofanygoodsactuallydeliveredD AppealtotheCourtaskingforaCourtorderinstructingthebreachertofulfilltheirobligations

(2 marks)



Chapter 8

WHEN DOES RISK PASS FROM THE SELLER TO THE BUYER?

whendoesriskpassfromthesellertothebuyer?

threepossiblesituations

- contractsinvolvingcarriage

- contractsforgoodssoldwhilstintransit

- contractsnotinvolvingcarriage

contractsinvolvingcarriage,specificgoods

ifthecontractspecifiestheevent,timeorplacewhenriskistopass,thenriskpassesaccordingtothecontractterm

ifnosuchtermiswithinthecontract,riskpasseswhenthegoodsareputintothehandsofthecarrier,orfirstcarrierifmorethanoneisinvolved

contractsforgoodssoldwhilstintransit

whengoodshavebeenputinthehandsofacarrier,forexample,todelivertoadistributioncentre,andthosegoodsaresoldwhilstintransit,riskpassestothebuyeratthetimethecontractisenteredinto

theeffectofthisisthatthebuyerassumesresponsibilityand,therefore,riskasatthedatethegoodsareputintothehandsofthecarrier

exceptionally,ifthesellerknewatthetimeofthecontractthatthegoodsweredamagedorhadbeenlost,thesellerremainsliable

contractsnotinvolvingcarriage

riskpassesfromthetimethegoodsareputatthedisposalofthebuyerandthebuyerisawareofthatfact

finally,whengoodsdonotconformtorequiredstandards,andthisisnotdiscovereduntilafterriskhaspassed,thesellerisliableforbreachofobligationsconcerningnon-conformity



Preservation of goods bothpartieshaveadutytopreservethegoods(ptg)

so,whoeverhaspossessionmustptgeventhoughownershiphaspassedtotheother

ifabuyerrefusestoacceptdelivery,thesellerstillhasanobligationtoptg

whenabuyerisobligedtopayforgoodsondelivery,butthenfailstodoso,thesellermustthenptg,butneednotdeliver

whenabuyerintendstorejectthegoods,butneitherthesellernoragentisavailabletoacceptthisrejection,thebuyerisobligedtoptg

thislatterpointappliesunlessitwouldbeunreasonablyexpensiveorinconvenient

thepartywhoispreservingthegoodscanrecoverreasonableexpensesfromtheotherparty

...andmayevenstoretheminthepremisesofathirdparty(atreasonableexpense)

ifthegoodsareperishable,itisavailablefortheoneinpossessiontosellthematthebestavailablepricebeforetheybecomeworthless


WhEn doEs risk pass from thE sEllEr to thE buyEr? Chapter 8 52


Impediment

ifapartyfailstoperformtheirobligationsunderacontract,thenormalpositionisthattheotherpartymayavoidthecontractandclaimdamages

however,ifthebreachingpartycanprovethattheirfailuretoperformwasduetoanimpedimentbeyondtheircontrol,theywillnotbeliabletopaydamages

theimpedimentshouldbesuchthatitwasnotreasonablyforeseeableatthetimethecontractwasenteredinto

oncetheimpedingeventceasestopreventperformance,thecontractshouldgoaheadasplanned

ifathirdpartysfailuretoperformisthecauseofcontractfailure,thebreachingpartyisexemptfromliabilityonlyiftheycanprovethatboththemselvesandthethirdpartywouldbeexemptbecauseofcircumstancesbeyondtheircontrol

iffailuretoperformisbecauseofanimpediment,theimpededpartymustgivenoticetotheotherpartywithinareasonabletimeafterfirstknowingoftheimpediment

53June 2015 Examinations Paper F4 GLOWhEn doEs risk pass from thE sEllEr to thE buyEr? Chapter 8


TestQuestion 1Inthecontextofthepassingofriskfromthesellertothebuyer,whichofthefollowingstatementsisincorrect?

A inacontractinvolvingthecarriageofspecificgoodsandthecontractspecifiesanevent,atimeoraplaceforthepassingofrisk,thenthatiswhenriskshallpass

B wherethecontractinvolvesthesaleofgoodsthatareinthehandsofacarriertoadistributioncentreandthegoodsaresoldwhilstintransit,thebuyerassumesriskfromthedateofthesalewhilstintransit

C inacontract thatdoesnot involvecarriage, riskpasses to thebuyer fromthemoment thegoodsareplacedatthebuyersdisposalandthebuyerismadeawarethatownershipofthegoodsisnowpassed

D inacontractinvolvingthecarriageofspecificgoodsandthecontractdoesnotspecifyanevent,atimeoraplaceforthepassingofrisk,riskshallpasswhenthebuyerhaspossessionofthegoods

(2 marks)

Question 2Inacontractforthesaleofgoods,bothpartieshaveadutytopreservethegoods.Butwhichofthefollowingstatementsisincorrect?

A thisdutyofpreservationappliestobothparties.ItisirrelevantwhichpartyhaspossessionB whereabuyerrefusestoacceptdelivery,forwhateverreason,thesellercontinuestohavetheobligation

topreservethegoodsC whenabuyer,afterphysicaldeliveryofthegoods,nowwishestorejectthem,butneitherthesellernor

thesellersagentisavailabletoretakepossession,thebuyerassumestheresponsibilitytopreservethegoods

D thepartythatisinpossessionofperishablegoodsthataretoberejectedmaysellthegoodsatthebestpriceavailablebeforetheybecomeworthless

(2 marks)

Question 3Ifapartyfailstoperformtheirobligationsunderacontract,thenormalpositionisthattheotherpartymayavoidthecontractandclaimdamages.However,ifthebreachingpartycanshowthattheirfailuretoperformwasduetoanimpedimentbeyondtheircontrol,theywillnotbeliablefordamages.Whichofthefollowingstatementsisincorrect?

A the impediment shouldbe such that itwasnot reasonably foreseeable at the time the contractwasenteredinto

B tobeablesuccessfullytoclaimimpediment,theimpededpartymustshowthattheimpedimentissuchthattheyarephysicallyunabletocompletetheirobligations

C oncetheimpedingeventceasestopreventperformance,thecontractshouldgoaheadasplannedD wherefailuretoperformisbecauseofanimpediment,theimpededpartymustgivenoticetotheother

partywithinareasonabletimeafterfirstbecomingawareoftheimpediment(2 marks)


WhEn doEs risk pass from thE sEllEr to thE buyEr? Chapter 8 54


Chapter 9

DOCUMENTS FOUND IN INTERNATIONAL TRADE

International Bills of exchange

abillofexchangeis

anunconditionalorder

inwriting

addressedbyoneperson(drawer)toanother(drawee)

signedbythepersongivingit

requiringthepersontowhomitisaddressed

topay

ondemand,orofafixedordeterminablefuturetime

asumcertaininmoney

to,ortotheorderof

aspecifiedperson(payee)

ortobearer



forabillofexchangetobeclassedasaninternationalbillofexchange,itmustidentifyatleasttwoofthefollowingfiveplacesofwhichatleasttwoareindifferentstates

theplacewherethebillisdrawn

theplacewherethedrawersigned

theplacenexttothedraweesname

theplacenexttothepayeesname

theplacewhereitistobepaid

inaddition,thewordsInternationalBillofExchangemustbeshown(UncitralConvention)

thebillwillbesentbythedrawertothedrawee(typicallythedrawersbank)

thedraweewillsignitandthusacceptliability

bythatsignature,thedraweebecomestheacceptor

theacceptedbillwillthenbedeliveredtothepayee(thedrawerscreditor)

inturnthepayee,iftheywantthemoneynowinsteadofatsomefixedordeterminablefuturetime,cansignthebillandthusbecomestheindorser

theindorsementmaybeinfavourofaspecifiedperson(theindorsee)ormaybesignedinblank

anindorseeofanindorsedbillcanthemselvesindorseitinfavourofanother....

andthatothercanindorseitinfavourofanotherwhocan,inturn,indorseitinfavourof.......

ifsignedinblank,thebillbecomesabearerbillandthepersonwhohaspossessionofthatbearerbillisthepersonentitledtoclaimthemoneyrepresentedbythebill


DocumEnts founD in intErnational traDE chapter 9 56


thebearerofabearerbillcansettleadebtmerelybypassingthebilltotheircreditorwho,inturn,becomesthebearer

liability?If,onfinalpresentationtotheacceptor(originallycalledthedrawee)theacceptorrefusestopay,thebillisclassedasdishonoured

inthissituation,allpriorpartieswhohavesignedthebillbeforeitcameintothehandsoftheholder(aswellasthepersonwhopassedabearerbilltotheholder)willbeliable

itispossibletohaveyetanotherpartytoabillaguarantorincaseofneed

suchapersonwhoguaranteesabillispresumedtobeguaranteeingthatthedraweewillpaythebillonfinalpresentation.

57June 2015 Examinations Paper F4 GLODocumEnts founD in intErnational traDE chapter 9


Parties

drawer owesmoneytothepayee

drawee typically,thedrawersbank

payee thecreditorofthedrawer

acceptor thedraweewhosignsasaccepted

indorser thepayeewhosignsthebillontothepayeesowncreditor

indorsee thecreditoroftheindorser

guarantor apersonwhoguaranteesthatthebillwillbehonoured

holder apersonwhohastakenthebillthroughtheprocessofnegotiation/indorsement,orthebearerofabearerbill




Bills of lading

documentswhichareissuedbyacarriertoaseller(oragent)acknowledgingthatthecarrierhasreceivedthegoodsandthattheyhavebeenplacedonboardaparticularvesselboundforaparticularlocation

evidencesthetimingofthepassingofgoodstothecarrier

normally,therefore,alsothepassingofrisktothebuyer...

...unlessthepartieshaveseparatelyagreedthetimingofthepassingofrisk

billofladingmaybe:

negotiableornon-negotiable

inland,oceanorthrough

airway

negotiable

thepersonwhoownsthebillofladingalso,therefore,ownsthegoods

thebillismadeoutinfavouroftheseller

thecarrierthereforeholdsthegoodsonbehalfoftheseller

thesellerwillpresentthebilltoabanktoobtainpayment

...andthenindorsethebillbysigningit(negotiateit),therebytransferringtitletothegoods

non-negotiable

thebillismadeoutinfavourofthebuyertowhomthecarriermustdeliverthegoods

allairwaybillsarenon-negotiable



inlandbill

relatestoacontractforcarriageoverlandtotheinternationaldeparturepoint

forexample,frompointofmanufacturetotheshippingport

oceanbill

relatestoacontractforcarriagefromaportinthesellersstatetoaspecifiedportinanotherstate

throughbill

relatestoacontractforcarriagewhicheffectivelycombinesinlandwithocean

soacontracttotransportgoodsfrompointofmanufacturetospecifiedportinbuyersstate

airwaybill

relatestoacontractforcarriageofgoodsbyair

appliesbothtodomesticflightsaswellasinternationalflights




Letters of credit

areameanswherebyasellercangetimmediatepaymentforgoodssold....

...butthebuyerstillenjoysaperiodofcreditbeforepaymentismade

lettersofcreditshouldbearrangedbeforethecontractisenteredinto

mechanism(Bisbuyer,BBisbuyersbankortheissuingbank,Sisseller,SBissellersbankortheadvisingbank)

1BasksBBtoissuealetterofcreditinfavourofS

2bytheissue,BBisguaranteeingthatSwillbepaid

3BBasksSBtoadviseSthataletterofcredithasbeenissued

4SBagreestohandletheirendoftheprocess

5SproducestoSBproofofdelivery/transferofthegoods

6SBpaysS,andforwardsthedocumentstoBB

7BBchecksthedocuments,andpaysSB

8BBdebitsBsaccount,andhandsthedocumentsovertoB

aletterofcreditmaybeconfirmedorunconfirmed

confirmediswhere,atstep4above,SBaddsitsownguarantee

unconfirmedSBdoesnotadditsownconfirmation/guaranteethatSwillbepaid

lettersofcreditmayberevocableorirrevocable

revocableabuyermaychangethedetailswithoutnotifyingtheseller

irrevocablemuchpreferable froma sellers pointof view thebuyer cannot amend thedetailswithoutnotifyingtheseller



Letters of comfort

applytosituationsinvolvingagroupofcompanies

typically,aletterofcomfortwillbewrittenbyaparent/holdingcompanyindicatingitsintentiontocontinuetosupportitssubsidiary

mostcommonlyapplicablewherethesubsidiaryisinsolventoristryingtoraisefinance

but(normally)itisjustacomfort

rarelydoes sucha letterbind theparent so, if the subsidiary in factdoesbecome insolvent, there isnoliabilityfortheparenttosettlethesubsidiarysobligations




TestQuestion 1AnBillofExchangemustidentifyatleasttwooffiveplacesforittobeclassifiedasInternational,twoofwhichshallbeindifferentstates.Whichofthefollowingisnotoneofthosefiveplaces?Theplace:

A whereitistobepaidB whereitwasdrawnC wherethedrawersignedD wherethebillwassketched

(2 marks)

Question 2Whichofthefollowingisnotanoriginalpartytoabillofexchange?

A DraweeB payeeC AcceptorD Drawer

(1 mark)

Question 3Whichofthefollowingisanoriginalpartytoabillofexchange?

A holderB indorserC DrawerD Acceptor

(1 mark)

Question 4Whichofthefollowingisnotapossibledescriptionofabilloflading?

A inlandB oceanC thoroughD Airway

(1 mark)

Question 5Whichofthefollowingbestdescribesthepurposeofaletterofcomfort?

A itissentbytheinstitutionalinvestorstothefamilyoftherecentlydeceasedChiefExecutiveOfficerB itissentbythemanagerofthebranchofthebankusedbythesellertothebanksheadofficetoreassure

theheadofficethatthesellersbankingactivitiesareundercontrolC itissentbytheleaderofthesellersauditteamtotheChiefFinancialOfficertoreassuretheCFOthatall

errorsdiscoveredduringtheauditwereconsideredtobeimmaterialD itissentbyacompanysparentcompanytoreassuretheauditors(andsometimesotherstoo)that,despite

theilliquidsituationatpresentbeingsufferedbythesubsidiary,itisthesincereintentionoftheparentcompanydirectorstohavetheparentcompanycontinuetosupportthe insolventsubsidiarythroughitstimeoffinancialinstability.Butitisnormallynotavailabletobeusedagainsttheparentcompanytoguaranteethesubsidiarysdebts

(2 marks)



Chapter 10

AGENCY LAW

Agency creation

anagencyrelationshipexistsbetweenaprincipalandanagentinwhichtheroleoftheagentistobringtheprincipalintocontractualpositionswiththirdparties

thisrelationshipmaybeestablishedinanumberofways

byagreement,express

usuallyinwriting,theprincipalwillappointtheagent,typicallywithspecificauthority

iftheagenthasunrestrictedpowertoactonbehalfoftheprincipal,thisisapowerofattorneyandmustbeinwriting

byagreement,implied

asaresultoftheconductofthetwoparties,thecourtsmayimplyanagencyrelationship

byratification

anagencyrelationshipmaybecreatedretrospectively!

whereanunauthorisedpersonactsinawaywhichsuggeststheyareanagent,thepersononwhosebehalftheyclaimedtobeactingmayadopt/ratifythecontract

ratificationisnotpossibleif,atthetimetheagententeredintotheagreement,theprincipaldidnotexist

ratificationmustapplytotheentirecontractandmustbenotifiedtothethirdpartywhomusthaveknownthattheagentwasnotactingontheirownbehalf



byestoppel

agencyrelationshipcreated,possiblywithouteitherexpressorimpliedagreementoftheprincipal

wheretheprincipalholdsouttothirdpartiesthatsomebodyistheiragentthen...

...theycannotdeny(theyareestoppedfromdenying)thatthesomebodyistheiragent

bynecessity

where there isanemergencysituationand thegoodsownercannotbecontacted,a thirdpersonactingingoodfaithmaytakeactionconcerningtheownersgoods

thataction-takingthirdpartybecomesanagentbynecessity


AgEncy LAw chapter 10 66


Authority of the agent

authorityofanagentmaybeexpress,impliedorapparent

expressauthorityiswheretheprincipalexpresslyauthorisestheagentinrelationtoaspecificcontract

thisauthoritymaybewrittenor

maybeoral

whereanagentactsbeyondthelimitsoftheexpressauthoritytheagentwillbeliableforbreachofwarrantyto

theprincipaland

thethirdparty

impliedauthorityariseswheretheagentactsinaccordancewithwhatisnormalinthecircumstance

forexample,anagentactingasthepurchasingofficerofanentitymaybeseentohavetheimpliedauthoritytoenterintopurchasing/procurementcontractsontheentitysbehalf

theentitywillthereforebeliabletothethirdparty,but

...theentitywillhaveaclaimagainsttheagent

apparentauthority,sometimescalledostensibleauthoritymaybegreaterthanactualauthority

thissituationarisesforexamplewhenanentityallowstheagenttoactasthoughtheyhaveauthorityeventhoughsuchauthoritydoesnotinfactexist

whereathirdpartycontractswiththisagent,andisnotawareofanyrestrictionontheagentspower,theentitywillbeliabletotheinnocentthirdparty

thisapparentorostensibleauthorityisnotlimitedtowhatisnormalforanagent

67June 2015 Examinations Paper F4 GLOAgEncy LAw chapter 10


itcouldbemuchwider,andwillbesoif:

theentityitself(andnotjustthedirector)representstheagentashavingwiderauthority

suchrepresentationshouldbeoneoffact,notoneoflaw

therepresentationmustbemadedirecttothethirdpartyandnot,therefore,tosomeoneelse

thethirdpartymustshowthattheyrelieduponthisrepresentationand

...musthaveacteduponthatrepresentation

Termination of agency relationship

anagencyagreementmaybeterminatedby

agreementor

operationoflaw

itisautomaticallyterminatedby

deathoftheagentortheprincipal

insanityoftheagentortheprincipal

bankruptcyoftheprincipal




Liability of the agent

solongasanagentactswithinthelimitsoftheirauthority,theagent

incursnoliabilityunderthecontract

cannotenforcethecontract

butanagentmaybeheldpersonallyliablewhere

theagententersintoacontractwithoutdisclosingtheexistenceofaprincipal

theagentactsonownbehalfeventhoughclaimingtoactonbehalfofaprincipal

normaltradecustomhasestablishedliabilityontheagent

69June 2015 Examinations Paper F4 GLOAgEncy LAw chapter 10


TestQuestion 1Inthecontextofthelawofagency,anagentwillnotbeliableforacontractinwhichofthefollowingsituations?

A wheretheagentfailstodisclosethattheyareactingasagentB wheretheagentintendstotakethebenefitofthecontractforhimselfandfailstodisclosethattheyare

actingasagentC wheretheagentactsonhisownbehalfbutdoesidentifythatheisanagentD whereanagentsauthorityhasbeenterminatedbutthethirdpartydoesnotknowofthattermination (2 marks)

Question 2Anagencyrelationshipmaybeformedinwhichofthefollowingways?

A remediationB ratificationC reprobationD restitution (2 marks)




Chapter 11

PARTNERSHIP LAW

apartnershipisdefinedinUKlawastherelationshipwhichsubsistsbetweentwoormorepeoplecarryingonbusinessincommonwithaviewtoprofit

muchofpresent-daypartnershiplawiscontainedinthePartnershipAct1890

partnersmayagreeamongstthemselveshowtheirfirmistooperate,solongastheirarrangementislegal

thebusinessmustbebeingcarriedon.Itshouldbemorethanaone-offtransaction,andmustbecontinuing

itmustbewithaviewtoprofitandismorethanthesimplesharingofgrossrevenues

ifabusiness relationshipsatisfies thedefinition, thecourtsmaywelldeterminethatapartnershipexists,regardlessofanywrittendocumentation(orintentionoftheparties)tothecontrary

asageneralrule,partnersinafirmarejointlyandseverallyliableforpartnershipdebts

everypartnerisanagentofthefirmandtheotherpartnersforthepurposeofthebusinessofthefirm

theactsofeverypartnerdoneinthecourseofthefirmsbusinessbindthefirmandthepartnersunlessthepartnerwasexceedinghisauthorityand

...theotherpartyknewthatfact,orwasnotawarethatthepersonwasapartner



The Agreement

partnershipsareformedbyagreement,andtheinternalarrangementsareamatterforagreementamongstthepartners

partnerscanagreetodoanything-solongasitslegal

becauseapartnershipisformedbyagreement,itisalsocapableofbeingamendedbyagreement....

andterminatedbyagreement

typicalmatterstobeagreeduponinclude:-

-accountsandaudit

-divisionofprofitsand,therefore,alsosharingoflosses

-drawingsallowedtobetakeninadvanceofbeingcreditedwithashareofprofits

-capitalofthefirmandrespectivecontributionsofeachpartner

-interestpayableoncapitalcontributionsorchargeableonoverdrawncurrentaccounts

-salariesofpartnersbeforeprofitsareshared

-currentaccountsaswellasfixedcapitalaccounts,orjustonecombinedaccountforeachpartner

-goodwillcomputationbasis

-timeperiodforwhichthepartnershipistolast.Ifnotimeperiodisspecified,thisisapartnershipatwill


PartnErshiP Law Chapter 11 72


1890 Actin the event that partners fail tomake an arrangement about somematterwhich is later disputed, then thePartnershipAct1890establisheswhatshouldhappen.Themainprovisionsare:-(medicsinbed)

managemententitlementforallpartners

equalityofprofitshare

derivedbenefit,withoutconsentoftheotherpartners,shouldbepaidbackintothefirm

indemnitybyotherpartnerswhereonepartnerincursapersonalliabilitywhendoinganythingnecessarytoprotectthefirmoritsproperty

competingbusinessprofits,gainedwithoutconsent,shouldbepaidbackintothefirm

salaries-noautomaticentitlement

interestoncapitalnotpayable,butinterestattherateof5%perannumispayableonloansandadvances

madetothefirmoverandaboveagreedfixedcapital

nonewpersonmaybeintroducedintothefirmasapartner

booksofaccountshallbeavailableforinspectionbyanypartneratanytime

expulsionofapartnerrequiresunanimousconsent

disputesconcerningthebusinessofthefirmaresettledbymajorityvotebutnochangeinthenatureofthefirmsbusinessmaybemadewithoutunanimousconsent

73June 2015 Examinations Paper F4 GLOPartnErshiP Law Chapter 11


Dissolution Grounds Automatic and by Court Order ( dissolutions )

deathofapartner

insolvencyofapartner

sendingnoticeinapartnershipatwill

sharepledgedbypartnertosettleprivatedebts

objectofajointventureiscomplete

lapseoftimewherepartnershipformedforaspecificperiod

unabletocarryoutonesobligationscreatedbythepartnershipagreement

terminationbytheCourtundertheprinciplesofjustandequitable

insanityofapartner

onlyabletocarryonthebusinessataloss

naughtyconductcalculatedtoaffectthecarryingonofthefirmprejudicially

shirtyconduct-persistentbreachesofthepartnershipagreement

thefirstsixareallobjectivemattersoffact,whereas

thelastsixhavetobeprovedinaCourtandthedissolutionisasaresultoftheCourtssubjectivedecision




LPA 1907 and LLPA 2000

LimitedPartnershipsAct1907mainfeaturesare:-

atleastonegeneralpartner(withunlimitedliability)andonelimitedpartner(withlimitedliability)

mustberegisteredwiththeregistrarofcompanies

limitedpartnershouldtakenopartinthemanagementofthefirm

ifthefirmbecomesbankrupt,onlythegeneralpartnersareliableforthefirmsdebts

LimitedLiabilityPartnershipsAct2000mainfeaturesare:-

combinationoftheadvantagesofapartnershipwiththoseofalimitedcompany

mustberegisteredwiththeregistrarofcompanies

mustfilefinancialstatementsandbeaudited

asaseparatelegalentity,thepartnersarenotliableforthefirmsdebts,therebyprotectingthemselvesfrompersonaldisasters.However,theprovisionsrelatingtowrongfulandfraudulenttradingapply.



International partnerships

Frenchlawdoesnotrecognisepartnerships

instead,Frenchlawlookstodeterminewhetherapersonorgroupofpeopleareactingforcommerce

ifthisactingforcommerceisestablishedasafact,theaffectedpersonorpeoplearerequiredto

maintainproperaccountingrecords

recordparticularsinthecommercialregister

wheretwoormorepeopleareinvolvedinactingforcommercetheyareknownasaSociet

aSocietisthereforetheFrenchequivalentofaUKpartnership

aSocietmaybe

- societennomcollectif,or

- societencommanditesimple

ennomcollectifissimilartoatraditionalUKpartnership

encommanditesimpleissimilartoalimitedpartnershipinthatoneormoreoftheparticipantshaslimitedliability




International partnerships

Muslimlawrecognisesthreetypesofprofit-sharingoperations

Musharakah

Mudaraba

Shirkahal-Inan

MusharakahisverysimilartoatraditionalUKpartnership

participantspoolresourcestoinvestinacommercialventure

decisiontakingisshared

profitsandlossesareshared

MudarabaissimilartoaUKpartnershipwhereone(ormore)ofthepartnerstakesnoactivepart

thisdormantorsleepingpartnerinvestsinthefirmandsharesinthefirmsprofits

theinvestmenthastheappearanceofaloanbutunderMuslimlawthepaymentofinterestisforbidden

...butareturnbywayofprofit-sharingisnotforbidden

Shirkahal-InanhastheappearanceofatraditionalUKpartnership

participantsinvestmoneyorothervalueand

shareprofits

butpartnersarenotliableforthedebtsoftheotherpartnersand

canonlysueoncontractswhichtheythemselvesenteredinto.



Partnership compared with company ( learn fast rats )

Partnership Company

liability usuallyunlimitedforpartners usuallylimitedformember

existence noseparatelegalexistencesonoperpetualexistence

separatelegalentitysoenjoyperpetualexistence

accounts norequirementtofilewithgovernment requiredtofileannualaccounts

raisingcapital cannotsecuredebtsbywayoffloatingcharge

cansecuredebtbywayoffloatingcharge

number normallyalimitof20partners nolimitonthenumberofmembers

formality firmmaybecreatedbyinformaloralagreement

companymusthaveaformalconstitution

assets partnersownassetsjointly companyownsassetsmembersowncompany

separateentity firmdoesnotexistasaseparateentity companydoeshaveseparatepersonality

transferofinterest partnerscannotwithoutunanimousconsent

memberscan

reductionofcapital easyforpartnerstowithdrawtheircapital

verydifficultforcompaniestoreducecapital

activeparticipation partnersareentitledtotakeanactivepartinmanagement

membersappointdirectorsasagentstomanagethecompany

taxation partnerstaxedonprofitshare companypaystaxonprofitsmemberspaytaxontheirdividendincome

secretary norequirementforpartnershipfirmtohaveasecretary

publiccompaniesmusthaveappropriatelyqualifiedsecretary




TestQuestion 1InpartnershipwithhercivilpartnerJustina,JasminerunsashoeshopJasminesShoes.WhichanswerbestdescribestheextentofJasminesliabilityintheeventofthebusinesshavingtoclosebyreasonofitsdebts?

A limitedtotheextentofthefairvalueofthefirmsassetsB limitedtotheextentofJasminespersonalguaranteetothebankC limitedtotheamountasyetunpaidbyJustinaD thereisnolimittotheextentofJasminesliability (2 marks)

Question 2Whatwordsaremissingfromthefollowingstatement?--------------istherelationshipthatsubsistsbetweentwoormorepeoplecarryingonbusinessincommonwithaviewofprofit

A AmarriageB AnagencyC ApartnershipD Anagency

(1 mark)

Question 3Inabusinesscarriedonasapartnership,whichofthefollowingisanautomaticgroundforthedissolutionofthefirm?

A deathB insanityC inabilitytocontinueataprofitD inabilitytoperformapartnersshareoftheduties

(2 marks)

Question 4Theexpressionpartnershipatwilldescribesthesituationwhereapartnershipisdissolvableby

A ApartnerdeclaringherselfbankruptB Apartnerindicatingintheirwillthatthepartners

Acca f4glo Notes j15

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