Acing the SQE/SQE1 Sample

Questions

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Answers and Explanations

Question 1

1. B The website designers made an offer through their leaflet by advertising their website design packages and including their standard terms and conditions, which contained a limitation clause. However, this offer was not accepted by the architect merely by asking for a quotation. This action only amounted to an invitation to treat, which is an invitation to negotiate or start a contract.

The architect made a counter offer by sending a letter with his own standard terms and conditions, which did not contain a limitation clause. However, by signing and returning the tear-off slip stating that he accepted the quotation on the website designers’ standard terms and conditions, the architect accepted the website designers' offer, and the contract was formed on their terms.

Therefore, option B is the most accurate statement because the quotation constituted an offer which the architect accepted on the website designers’ standard terms and conditions.

In English contract law, a limitation clause is a provision in a contract that seeks to limit the liability of one or both parties in the event of a breach of contract or other loss or damage.

For example, a limitation clause may limit the amount of damages that a party can claim, or exclude certain types of losses or damages altogether. It may also limit the time within which a party can bring a claim, or require that certain conditions be met before a claim can be made.

Limitation clauses are often used in commercial contracts, where the parties may wish to limit their exposure to potential losses or liabilities. They are also commonly found in consumer contracts, such as insurance policies or standard terms and conditions, where the supplier may seek to limit its liability to the consumer in the event of a breach of contract.

However, limitation clauses are subject to certain legal requirements and limitations. For example, under the Unfair Contract Terms Act 1977, limitation clauses that seek to exclude or limit liability for death or personal injury resulting from negligence are generally unenforceable.

Similarly, a limitation clause may be unenforceable if it is found to be unfair or unreasonable, or if it is not sufficiently clear and specific to be enforceable. Therefore, it is important for parties to carefully draft limitation clauses to ensure that they are legally enforceable and do not run afoul of these limitations and requirements.

Question 2

C The priority of competing security interests in a company's assets is determined by the rules of priority established under the law of secured transactions. In this case, there are two competing security interests over the company's assets: the trade supplier's floating charge and the bank's floating charge.

Under the general rule of priority, a later security interest will have priority over an earlier one if it is created in good faith, for valuable consideration, and without notice of the earlier interest. However, if the earlier interest is properly registered, it will generally take priority over any later interest, regardless of when it was created or whether the later holder had notice of it.

In this case, the trade supplier's floating charge was created earlier than the bank's floating charge, but it was not registered at Companies House. The bank was aware of the existence of the trade supplier's charge, but it was not registered at the time the bank created its own charge.

The failure to register the trade supplier's charge means that it is void against the administrator and the bank. This means that the administrator and the bank are not bound by the trade supplier's charge and can enforce their own security interests over the company's assets. As a result, the bank's floating charge takes priority over the trade supplier's charge, even though it was created later in time.

In summary, the failure to register the trade supplier's floating charge means that it is void against the administrator and the bank. This allows the bank's floating charge to take priority over the trade supplier's charge, even though it was created later in time.

In English company law, a floating charge is a type of security interest that can be taken out over a company's assets to secure a loan or other form of credit. Unlike a fixed charge, which attaches to specific assets of the company (such as property or machinery), a floating charge is a charge over a group of assets that are subject to change over time.

The assets covered by a floating charge may include inventory, accounts receivable, and other assets that are subject to fluctuation in value and turnover. The charge "floats" over these assets, meaning that the company can continue to use and dispose of them in the ordinary course of business, subject to certain restrictions set out in the charge agreement.

A floating charge allows a lender to secure a loan without taking possession of specific assets, which can be beneficial for both the lender and the company. For the lender, a floating charge provides security over the company's assets while allowing the company to continue to operate and generate income. For the company, a floating charge can provide more flexibility in managing its assets, as it can continue to use and dispose of the assets covered by the charge without seeking permission from the lender.

However, there are limitations on the use of floating charges in company law. For example, a floating charge may be invalid if it is created to secure past debts, rather than future debts. Additionally, if a company enters into administration or liquidation, a floating charge will "crystallize" into a fixed charge, which means that the lender will no longer be able to use the assets covered by the charge.

Overall, floating charges are an important tool in the financing of businesses in the UK, providing a flexible means of securing credit while allowing companies to continue to operate and manage their assets.

In English company law, a debenture is a type of document that creates a fixed or floating charge over a company's assets as security for a loan or other form of credit. When a company enters into a debenture with a bank, it is essentially agreeing to use its assets as collateral for the loan.

A debenture can take many forms, but it typically sets out the terms of the loan, the amount of the loan, the interest rate, and the repayment terms. The debenture will also specify the assets that are being used as collateral for the loan, whether they are fixed or floating assets.

If the debenture creates a fixed charge, it means that the assets being used as collateral are specific and clearly defined, and cannot be sold or otherwise disposed of without the lender's consent. Examples of fixed assets might include property or machinery. If the debenture creates a floating charge, it means that the assets being used as collateral are not specific and may change over time. Examples of floating assets might include inventory, accounts receivable, or other assets that are subject to fluctuation.

Entering into a debenture with a bank can be an important means for a company to secure financing, but it also comes with certain risks. If the company defaults on the loan, the bank may take possession of the assets used as collateral to recover the debt. Therefore, it is important for companies to carefully consider the terms of the debenture and ensure that they are able to meet their obligations under the loan agreement.

Question 3

D is correct. Litigation privilege protects confidential communications between a client and their lawyer or third parties for the dominant purpose of obtaining or giving legal advice in connection with actual or anticipated litigation.

In this case, the two-page letter was written by an independent financial adviser with the sole purpose of giving advice about drafting the letter before claim in the present litigation. Therefore, it was created for the dominant purpose of obtaining legal advice in connection with the present litigation, and it is likely to be protected by litigation privilege.

The fact that the letter was found in the office of the claimant’s managing director and is in the possession of the claimant’s solicitor does not affect the claimant's right to withhold inspection of the letter under litigation privilege.

Option A is incorrect because control is not a relevant factor for determining whether litigation privilege applies.

Option B is incorrect because legal advice privilege only applies to confidential communications between a client and their lawyer for the purpose of giving or receiving legal advice.

Option C is incorrect because proportionality is a factor to be considered in granting or denying inspection of a document, but it is not a basis for claiming a right to withhold inspection.

Option E is incorrect because the timing of the letter does not affect the applicability of litigation privilege.

Question 4

Option C is correct. In this situation, the contract for the supply of cycling clothing was signed by the cycling enthusiast in his own name, but on behalf of the company before it was formally incorporated. Therefore, the contract is not legally binding on the company because the company did not exist at the time the contract was signed. Until a company is incorporated, it has no legal personality, rights or obligations. Therefore, any contracts entered into before incorporation are not binding on the company, and the promoter who signed the contract will be personally liable for any obligations arising from the contract. In this case, because the contract was signed by the cycling enthusiast in his own name, on behalf of the company, the obligation to perform the contract rests with the enthusiast personally rather than the company. The benefit of the contract will therefore also reside with the enthusiast alone, and not with the company or its shareholders. In order to make the contract binding on the company, the enthusiast would need to sign a new contract in the name of the company after it has been formally incorporated. This would ensure that the company, as a separate legal entity, is bound by the terms of the contract and can enjoy its benefits.

Question 5

Option C is correct. The cousin cannot bring legal proceedings as the woman’s representative under the HRA. Under the HRA, a victim of an infringement of their Convention rights may bring proceedings in court against a public authority. However, the HRA does not provide for representative actions, except in specific cases where the victim is dead or lacks capacity. Option A is incorrect because family representatives are not specifically granted standing under the HRA. Option B is incorrect because although anonymity is a serious concern for the victim, this alone is not sufficient to allow someone else to bring proceedings on her behalf. Option C is the correct answer because only a victim of an infringement can bring an action under the HRA. The cousin is not a victim of the infringement, and therefore cannot bring proceedings on behalf of the woman. Option D is incorrect because the court's satisfaction that the representative is able to meet the expenses of the proceedings is not sufficient to allow someone else to bring proceedings on behalf of the victim. Option E is incorrect because the provision for representative actions under the HRA applies only in limited circumstances where it is not reasonably practicable for the victim to bring separate actions, such as where there are numerous individuals making identical claims.

Question 6

Option D is correct. Yes, because the transaction involves the sale and purchase of land whose value exceeds 10% of the company’s asset value, which triggers the requirement for shareholder approval under the Companies (Model Articles) Regulations 2008 (unamended). This is because the sale of a substantial non-cash asset such as land requires the approval of the company's shareholders under the regulations, and the value of the land being sold exceeds 10% of the company's net assets. The fact that the proposed purchaser is known to the directors, and that they are also shareholders, is not relevant to the requirement for shareholder approval.

Question 7

C is correct. The most likely remedy that the court will award in this situation is the cost of cure. This is a form of damages that requires the supplier to pay the reasonable cost of replacing the tiles with tiles that include the correct border design showing the Greek flag. The aim of this remedy is to put the owner of the restaurant in the position they would have been in if the contract had been performed correctly, by giving them the tiles that they originally ordered and paid for.

Question 8

The correct answer is C. The Limitation Act 1980 sets out time limits within which legal claims must be brought. The time limit for breach of contract claims is generally six years from the date of the breach. In this case, the alleged breach of contract by the plumber took place in June 2015, and the claim was brought in March 2021, within the six-year time limit. When a party to a legal claim dies, the claim does not automatically come to an end. The court has the power to allow the claim to continue against the deceased party's personal representatives, who are responsible for dealing with the deceased person's assets and liabilities. This is done by substituting the personal representatives for the deceased party in the claim. In this case, the plumber died after the claim was brought but before it was resolved. As a result, the claimant applied to substitute the plumber's personal representatives for the deceased plumber in the claim, so that the claim could continue. The court has the power to order a new party to be substituted in a legal claim if the relevant limitation period was current when the proceedings were started. In this case, the claim was brought within the six-year time limit for breach of contract claims, and therefore the court has the power to allow the claimant to substitute the plumber's personal representatives as the defendant in the claim.

Question 9

The correct answer is B. B is correct. There is a contract between the man and the woman because sufficient consideration has been promised. Consideration is a key element in forming a contract, and it refers to something of value that is given in exchange for something else. In this case, the man promised to sell the bicycle to the woman for £25, and the woman promised to pay that amount. This exchange of promises is sufficient consideration to form a contract. Although the man later discovered that the bicycle was worth much more than he initially thought, that does not change the fact that a contract was already formed between the two parties. The man cannot unilaterally cancel the contract simply because he made a mistake about the value of the bicycle. Therefore, if the woman still wants to buy the bicycle for £25, she can hold the man to his promise and force him to sell it to her. However, if the woman agrees to release the man from the contract, then it would be terminated.

Question 10

The correct answer is D. The House of Lords has been replaced by the Supreme Court as the highest court in the UK. Therefore, option C is no longer correct. Under the current legal system, the Court of Appeal and the Supreme Court have the power to grant permission to appeal. The Court of Appeal may grant permission to appeal against its own decision, either at the hearing or later, if an application is made. The Supreme Court may grant permission to appeal against a decision of the Court of Appeal or, in exceptional cases, against a decision of a lower court, if it considers that the case raises an important point of principle or practice, or that there is some other compelling reason for the appeal to be heard. Therefore, the correct answer is D, the Court of Appeal and the Supreme Court have the power to grant permission to appeal.

Question 11

The correct answer is B. The cause of action the woman should pursue in tort is B. Public nuisance. Public nuisance is an unreasonable interference with a right that is common to the public. In this case, the man's farmers market is causing the village to become very busy on Thursdays, which is affecting the woman's ability to deliver her goods and resulting in a loss of trade. This interference with the woman's right to carry out her business activities is a common issue affecting the public. Private nuisance, on the other hand, refers to an unreasonable interference with an individual's use or enjoyment of their property. In this case, the woman is not complaining about any interference with her property, but rather the impact on her business activities. Rylands v Fletcher is a strict liability tort that arises when there is an escape of a dangerous substance from a defendant's land, causing damage to a claimant's property. Negligence and trespass to land are also not applicable to this scenario, as they do not adequately address the issue of public interference that is affecting the woman's business. Therefore, the most appropriate cause of action for the woman in this case is public nuisance.

Question 12

The correct answer is D The liability to pay Capital Gains Tax (CGT) on the gain realised on the sale of the office premises will be on the individual partners and not on the firm as a separate legal entity. The liability to pay CGT will be in accordance with their profit sharing ratios for capital gains, which are based on their capital contributions. Therefore, the senior partner will be liable to pay CGT on 50% of the gain, the managing partner on 30% of the gain and the junior partner on 20% of the gain. This is because they share capital profits in accordance with their capital contributions. The fact that they share income profits equally does not affect their liability for CGT.

Question 13

The correct answer is C. The trading loss of £45,000 made in the second accounting period can be set off against the chargeable gain of £75,000 from the first accounting period because the chargeable gain occurred within the 12 month period ending immediately before the accounting period in which the trading loss was incurred. This is known as the "same accounting period" rule. Option A is incorrect because the fact that no trading or capital losses were incurred in the first accounting period is not relevant to the application of the same accounting period rule. Option D is also incorrect because the company does not need to have been carrying on business for a full 12 month period before the accounting period in which the trading loss was incurred for the same accounting period rule to apply.

Question 14

The correct answer is D. The shareholders’ resolution to adopt the New Articles and the New Articles must be filed with the Registrar of Companies. This is because, under section 22 of the Companies Act 2006, any amendment to a company’s articles of association must be evidenced by a copy of the resolution adopting the amendment, and a copy of the articles as amended. The prescribed fee must also be paid. Board minutes proposing the changes to the Model Articles and the New Articles may be kept as internal records but do not need to be filed with the Registrar.

Question 15

The correct answer is D. The golden rule is a method of statutory interpretation where the judge departs from the literal meaning of the words used in a statute to avoid an absurd or unjust result. In this scenario, the judge looked at the natural and ordinary meaning of the words used in the relevant statute, but found that this interpretation would lead to an absurd meaning. Therefore, the judge interpreted the words in a different way to avoid this absurdity, which is consistent with the application of the golden rule. Option A, the literal rule, would require the judge to give effect to the natural and ordinary meaning of the words used in the statute, even if this leads to an absurd result. Option B, the mischief rule, involves interpreting a statute to give effect to the intention of Parliament by considering the problem the statute was intended to remedy, but this does not appear to be relevant to the scenario described. Option C, the extrinsic evidence rule, involves using external sources such as parliamentary debates or historical context to interpret a statute, but there is no mention of such sources being used in this scenario. Option E, the intrinsic evidence rule, involves looking at the language and structure of the statute itself to interpret it, but this does not seem to be the method used by the judge in this scenario.

Question 16

The correct answer is B. This is the general principle of the British constitutional law, that when there is a conflict between a statute and a prerogative power, the statute prevails. In this case, although the government is exercising its prerogative powers, the compensation scheme created by Parliament in the legislation has the force of law and the government cannot avoid its obligation to pay compensation by relying on its prerogative powers. The affected occupiers of the buildings can rely on this legislation to claim compensation for any costs and losses incurred while the buildings are under the government's control.