BUSINESS LAW MCQ
UNIT1:
Question 1
Jake and Michael decide to import motorcycles from Europe to undercut expensive official dealers
in the UK. Michael, who can speak French, goes to France and orders the bikes. Jake pays the
French seller directly. Jake gives Michael 10% of the difference between the 'official' UK price and
the price Jake actually pays. Jake then sells the bikes in his shop.
Indicate whether the following statement is true or false: Jake and Michael are in partnership
together.
Correct Answer: False .
Michael and Jake's actions do not satisfy the definition of a partnership under s.1 Partnership Act
1890. Michael is acting as Jake's agent: he does not accept any financial risk and he does not get a
share of the profits.
Question 2
Jamie and Malcolm went into partnership earlier this year. Jamie provided 25% and Malcolm 75%
of the capital needed to buy the partnership assets. Jamie works full-time in the business, but it
was agreed that Malcolm would not spend any particular number of hours working for the
business and simply provide consultancy advice as and when requested by Jamie.
There is no written partnership agreement and nothing else has been agreed. How will Jamie and
Malcolm share the profits?
Which one of the following is CORRECT?
A. Jamie will be entitled to 25% of the profits and Malcolm will be entitled to 75%.
B. Jamie and Malcolm will each be entitled to 50% of the profits.
C. Under the Partnership Act 1890, Jamie is entitled to a reasonable salary, and Jamie and Malcolm
will split the remainder of the profits between them equally.
D. Because Malcolm is under no obligation to work for the business, he will not be entitled to a
salary but James will be entitled to a reasonable sum for the work he carries out. Malcolm and Jamie
will then split the remainder of the profits between them, Malcolm receiving 75% and Jamie 25%.
1
,Correct Answer: B.
Under s.24(1) Partnership Act 1890, both partners are entitled to half of the income profits because
there is no agreement to the contrary.
Question 3
Muriel, Molly and Marilyn have been in partnership since 1990. They all work full-time for the
business. They share profits equally and have no relevant express agreement between them.
Which one of the following is CORRECT?
A. If Molly leaves the business, she could be prevented from setting up a competing business.
B. Each partner is entitled to receive a salary in addition to her share of the profits.
C. Muriel and Molly together could expel Marilyn, even if Marilyn objects.
D. Any of the 3 partners could dissolve the partnership at any time without giving a reason.
Correct Answer: D.
Section 26 Partnership Act 1890 provides that a partnership "at will" may be dissolved by any
partner giving notice to the others. Section 30 Partnership Act 1890 only provides for restrictions on
competition whilst Molly is still a partner. Section 24(6) Partnership Act 1890 provides that a partner
is not entitled to a salary. Section 25 Partnership Act 1890 effectively provides that partners can only
be expelled by unanimous consent - including the consent of the partner to be expelled.
Question 4
John, Andrew and Robert have been in partnership together for 3 years and they have no
partnership agreement. John has recently been declared bankrupt.
Indicate whether the following statement is true or false: Andrew and Robert can insist on
continuing the business in partnership without John, who will have to retire.
Correct Answer: False.
Bankruptcy automatically dissolves the partnership under s.33 Partnership Act 1890.
Question 5
Two years ago Adam, Rebecca and Kamal set up a partnership. Their agreement provides for
income and capital profits to be shared in the same proportions as their capital contributions
which were: Adam - £10,000, Rebecca - £10,000 and Kamal - £20,000. The business has just ceased
2
,to trade, having a total realisable value of £24,000 after allowing for payment of all claims on the
partnership including the partners' capital contribution. How much should Kamal receive from this
£24,000? Which one of the following is CORRECT?
A. £12,000
B. £8,000
C. £20,000
D. £6,000
Correct Answer: A.
The partners have agreed to share profits in the same proportions as their capital contributions so
profits will be split £6,000 to Adam, £6,000 to Rebecca and £12,000 to Kamal.
Question 1
Liam and Daniel have been partners since 1990 in a garage trading as L & D Vehicle Repairs. They
have no partnership agreement. They have always purchased their stock from Car Parts (Garages)
Co. Liam has just learnt that Daniel has been a sleeping partner in Car Parts (Garages) Co for the
last year. When challenged, Daniel replied that Car Parts (Garages) Co wrote to L & D Vehicle
Repairs suggesting a merger of the 2 businesses but, as Liam always said it was good to keep their
business small, Daniel thought that Liam would not agree to the merger; instead, he negotiated
his personal involvement with Car Parts (Garages) Co.
1.
Liam is entitled to claim from Daniel an account for his share of the profits of Car Parts (Garages) Co
on the basis that Daniel is involved in a competing business without Liam's knowledge and consent
2.
Liam is entitled to expel Daniel from the partnership and to force Daniel to sell to him his share of
the business
3.
On the basis that the opportunity to invest in Car Parts (Garages) Co was initially offered to L & D
Vehicle Repairs, Liam may succeed in claiming that Daniel should now account to Liam for any profit
he has received from his involvement with the firm.
4.
If Daniel now retires as a partner in L&D Vehicle Repairs, Liam will nevertheless continue as a partner
in the firm.
Question 2
3
, Nicola has helped her daughters Antonia and Chelsea establish a beauty therapist business by
providing the necessary finance and by visiting the salon regularly to provide business advice.
Antonia and Chelsea had a formal partnership agreement drawn up between them. Nicola does
not want to be a partner in the firm as she runs her own driving school business. However, as
Nicola is often seen at the salon, Antonia has occasionally told product suppliers that Nicola is a
partner in the firm.
Nicola wants to know if she could be liable for a debt of the firm to a supplier to whom Antonia
had represented that Nicola was a partner.
Which one of the following is INCORRECT?
1.
Nicola could possibly be liable, if Nicola knew of and allowed the representations made by Antonia
2.
Nicola could possibly be liable, if the contract with the supplier was made after the representation
3.
Nicola could possibly be liable, if the supplier thought Nicola was a partner
4.
Nicola could not be liable in any circumstances
Question 3
Oliver, Henry and Michelle are in partnership supplying office furniture. On 26 February the firm
enters into a contract to supply desks to a customer. On 4 March Henry retires from the
partnership and the other two agree to indemnify him against any liability on the contract. On 25
March the partnership defaults on the contract. On 28 March Isobel joins the firm as a partner.
Who is liable for breach of contract?
Which one of the following is CORRECT?
1.
Only Oliver, Michelle and Isobel are liable for the breach of contract
2.
Oliver, Henry, Michelle and Isobel are liable for the breach of contract
3.
Only Oliver and Michelle are liable for the breach of contract
4.
Only Oliver, Henry and Michelle are liable for the breach of contract
Question 4
4
UNIT1:
Question 1
Jake and Michael decide to import motorcycles from Europe to undercut expensive official dealers
in the UK. Michael, who can speak French, goes to France and orders the bikes. Jake pays the
French seller directly. Jake gives Michael 10% of the difference between the 'official' UK price and
the price Jake actually pays. Jake then sells the bikes in his shop.
Indicate whether the following statement is true or false: Jake and Michael are in partnership
together.
Correct Answer: False .
Michael and Jake's actions do not satisfy the definition of a partnership under s.1 Partnership Act
1890. Michael is acting as Jake's agent: he does not accept any financial risk and he does not get a
share of the profits.
Question 2
Jamie and Malcolm went into partnership earlier this year. Jamie provided 25% and Malcolm 75%
of the capital needed to buy the partnership assets. Jamie works full-time in the business, but it
was agreed that Malcolm would not spend any particular number of hours working for the
business and simply provide consultancy advice as and when requested by Jamie.
There is no written partnership agreement and nothing else has been agreed. How will Jamie and
Malcolm share the profits?
Which one of the following is CORRECT?
A. Jamie will be entitled to 25% of the profits and Malcolm will be entitled to 75%.
B. Jamie and Malcolm will each be entitled to 50% of the profits.
C. Under the Partnership Act 1890, Jamie is entitled to a reasonable salary, and Jamie and Malcolm
will split the remainder of the profits between them equally.
D. Because Malcolm is under no obligation to work for the business, he will not be entitled to a
salary but James will be entitled to a reasonable sum for the work he carries out. Malcolm and Jamie
will then split the remainder of the profits between them, Malcolm receiving 75% and Jamie 25%.
1
,Correct Answer: B.
Under s.24(1) Partnership Act 1890, both partners are entitled to half of the income profits because
there is no agreement to the contrary.
Question 3
Muriel, Molly and Marilyn have been in partnership since 1990. They all work full-time for the
business. They share profits equally and have no relevant express agreement between them.
Which one of the following is CORRECT?
A. If Molly leaves the business, she could be prevented from setting up a competing business.
B. Each partner is entitled to receive a salary in addition to her share of the profits.
C. Muriel and Molly together could expel Marilyn, even if Marilyn objects.
D. Any of the 3 partners could dissolve the partnership at any time without giving a reason.
Correct Answer: D.
Section 26 Partnership Act 1890 provides that a partnership "at will" may be dissolved by any
partner giving notice to the others. Section 30 Partnership Act 1890 only provides for restrictions on
competition whilst Molly is still a partner. Section 24(6) Partnership Act 1890 provides that a partner
is not entitled to a salary. Section 25 Partnership Act 1890 effectively provides that partners can only
be expelled by unanimous consent - including the consent of the partner to be expelled.
Question 4
John, Andrew and Robert have been in partnership together for 3 years and they have no
partnership agreement. John has recently been declared bankrupt.
Indicate whether the following statement is true or false: Andrew and Robert can insist on
continuing the business in partnership without John, who will have to retire.
Correct Answer: False.
Bankruptcy automatically dissolves the partnership under s.33 Partnership Act 1890.
Question 5
Two years ago Adam, Rebecca and Kamal set up a partnership. Their agreement provides for
income and capital profits to be shared in the same proportions as their capital contributions
which were: Adam - £10,000, Rebecca - £10,000 and Kamal - £20,000. The business has just ceased
2
,to trade, having a total realisable value of £24,000 after allowing for payment of all claims on the
partnership including the partners' capital contribution. How much should Kamal receive from this
£24,000? Which one of the following is CORRECT?
A. £12,000
B. £8,000
C. £20,000
D. £6,000
Correct Answer: A.
The partners have agreed to share profits in the same proportions as their capital contributions so
profits will be split £6,000 to Adam, £6,000 to Rebecca and £12,000 to Kamal.
Question 1
Liam and Daniel have been partners since 1990 in a garage trading as L & D Vehicle Repairs. They
have no partnership agreement. They have always purchased their stock from Car Parts (Garages)
Co. Liam has just learnt that Daniel has been a sleeping partner in Car Parts (Garages) Co for the
last year. When challenged, Daniel replied that Car Parts (Garages) Co wrote to L & D Vehicle
Repairs suggesting a merger of the 2 businesses but, as Liam always said it was good to keep their
business small, Daniel thought that Liam would not agree to the merger; instead, he negotiated
his personal involvement with Car Parts (Garages) Co.
1.
Liam is entitled to claim from Daniel an account for his share of the profits of Car Parts (Garages) Co
on the basis that Daniel is involved in a competing business without Liam's knowledge and consent
2.
Liam is entitled to expel Daniel from the partnership and to force Daniel to sell to him his share of
the business
3.
On the basis that the opportunity to invest in Car Parts (Garages) Co was initially offered to L & D
Vehicle Repairs, Liam may succeed in claiming that Daniel should now account to Liam for any profit
he has received from his involvement with the firm.
4.
If Daniel now retires as a partner in L&D Vehicle Repairs, Liam will nevertheless continue as a partner
in the firm.
Question 2
3
, Nicola has helped her daughters Antonia and Chelsea establish a beauty therapist business by
providing the necessary finance and by visiting the salon regularly to provide business advice.
Antonia and Chelsea had a formal partnership agreement drawn up between them. Nicola does
not want to be a partner in the firm as she runs her own driving school business. However, as
Nicola is often seen at the salon, Antonia has occasionally told product suppliers that Nicola is a
partner in the firm.
Nicola wants to know if she could be liable for a debt of the firm to a supplier to whom Antonia
had represented that Nicola was a partner.
Which one of the following is INCORRECT?
1.
Nicola could possibly be liable, if Nicola knew of and allowed the representations made by Antonia
2.
Nicola could possibly be liable, if the contract with the supplier was made after the representation
3.
Nicola could possibly be liable, if the supplier thought Nicola was a partner
4.
Nicola could not be liable in any circumstances
Question 3
Oliver, Henry and Michelle are in partnership supplying office furniture. On 26 February the firm
enters into a contract to supply desks to a customer. On 4 March Henry retires from the
partnership and the other two agree to indemnify him against any liability on the contract. On 25
March the partnership defaults on the contract. On 28 March Isobel joins the firm as a partner.
Who is liable for breach of contract?
Which one of the following is CORRECT?
1.
Only Oliver, Michelle and Isobel are liable for the breach of contract
2.
Oliver, Henry, Michelle and Isobel are liable for the breach of contract
3.
Only Oliver and Michelle are liable for the breach of contract
4.
Only Oliver, Henry and Michelle are liable for the breach of contract
Question 4
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