ACCA LW Exam 1

✅ Correct answer: The judiciary checking the executive's use of power

📌 Explanation: Under the separation of powers the legislature makes law, the executive implements it and the judiciary interprets it and reviews whether the other branches have acted within their legal powers. By invalidating a levy that a minister imposed without parliamentary authority, the court is checking the executive.

❌ Why the other options are wrong: Debate in Parliament is a legislative check on government, not what happened here; the executive does not review court rulings, which bind it; courts interpret and apply the law and do not enact legislation in place of the legislature.

📋 Objective: 1.1 (Business, political and legal systems)

✅ Correct answer: Balance of probabilities, proved by the family

📌 Explanation: The family's action is a civil claim: a private claimant sues to obtain a remedy such as damages. In civil proceedings the burden lies on the claimant, who must prove its case on the balance of probabilities; the criminal standard applies only to the state's separate prosecution of the driver.

❌ Why the other options are wrong: Beyond reasonable doubt is the criminal standard, which applies to the prosecution and not to the family's claim; the state is not a party to the civil action, so it bears no burden there; Enkuba is the defendant and does not have to disprove the claim to the criminal standard.

📋 Objective: 1.1 (Business, political and legal systems)

✅ Correct answer: Obiter dictum: persuasive only, not binding

📌 Explanation: A statement of law made in passing that is not necessary for the decision is obiter dictum. Under the doctrine of judicial precedent only the ratio decidendi binds lower courts; obiter dicta, even from senior judges, are persuasive, so a lower court may choose whether to follow the remark.

❌ Why the other options are wrong: The remark did not form part of the reasoning needed for the decision, so it is not ratio decidendi; obiter dicta do not bind lower courts, however senior the judge; describing it as ratio but only persuasive confuses both its classification and its effect.

📋 Objective: 1.1 (Business, political and legal systems)

✅ Correct answer: Legislative codes setting out general principles

📌 Explanation: In civil law systems the primary source of law is legislation, codified into comprehensive codes that set out general principles. Judges apply the code to the facts of the case; court decisions and academic writing help interpret the code but do not bind in the way precedent does in common law systems.

❌ Why the other options are wrong: Binding precedent from the higher courts is the defining feature of common law, not codified systems; academic writing is influential in civil law countries but is a secondary aid to interpretation; custom may fill gaps but ranks below the enacted codes.

📋 Objective: 1.1 (Business, political and legal systems)

✅ Correct answer: Ijma

📌 Explanation: Ijma is the consensus of qualified Islamic jurists on a point of law and is recognised as a source of Sharia after the Quran and the Sunnah. A rule accepted because jurists have unanimously agreed on it therefore rests on Ijma.

❌ Why the other options are wrong: Qiyas is reasoning by analogy from an existing rule to a new case, not agreement among jurists; Fiqh is the body of jurisprudence produced by interpreting the sources rather than a source itself; the Sunnah is the practice and sayings of the Prophet, not the consensus of later scholars.

📋 Objective: 1.1 (Business, political and legal systems)

✅ Correct answer: It binds Uganda only once it is ratified

📌 Explanation: A treaty or convention creates obligations only for states that consent to be bound, usually by ratification after signature. Signature alone signals an intention to ratify; until Uganda ratifies, the convention imposes no obligations on it, and in some states domestic legislation is also needed before firms can rely on it.

❌ Why the other options are wrong: Signature does not normally bind a state to a convention that requires ratification; a template that states adopt and adapt describes a model law, not a convention; a convention binds states, and it affects businesses only through the state's acceptance of it.

📋 Objective: 1.2 (International trade, international legal regulation and conflict of laws)

✅ Correct answer: The WTO, in a dispute between member states

📌 Explanation: The WTO administers the multilateral trade agreements and provides a dispute settlement system, but only member states can be parties to it. Olugendo cannot bring the case itself; it must persuade its government to raise the complaint against the other member state under the WTO procedure.

❌ Why the other options are wrong: The ICC International Court of Arbitration handles commercial disputes under arbitration agreements, not tariff disputes with states; UNCITRAL drafts model laws and conventions and does not decide disputes; the OECD develops policy and guidelines and has no power to fine member countries.

📋 Objective: 1.2 (International trade, international legal regulation and conflict of laws)

✅ Correct answer: One selects the governing law, the other the forum

📌 Explanation: Conflict of laws, or private international law, asks two separate questions: which country's law governs the contract and which country's courts may hear a dispute. A choice-of-law clause answers the first and a jurisdiction clause the second, and parties may choose different countries for each.

❌ Why the other options are wrong: Treating both clauses as choosing the governing law ignores the jurisdiction clause; treating both as choosing the court ignores the choice-of-law clause; a clause naming the courts of Johannesburg confers jurisdiction on those courts and does not fix the seat of any arbitration.

📋 Objective: 1.2 (International trade, international legal regulation and conflict of laws)

✅ Correct answer: Conciliation

📌 Explanation: In conciliation the neutral third party takes an active, interventionist role, investigating the dispute and putting forward terms for settlement, but the parties remain free to reject those proposals. This matches Amazzi's wish for proposed terms that do not bind either side.

❌ Why the other options are wrong: In mediation the mediator mainly facilitates discussion so that the parties reach their own settlement, rather than putting forward terms; arbitration ends in an award that binds the parties; litigation ends in a court judgment that binds the parties.

📋 Objective: 1.3 (Alternative dispute resolution mechanisms)

✅ Correct answer: The court must refer the parties to arbitration; The signed clause meets the writing requirement

📌 Explanation: Article 7 requires an arbitration agreement to be in writing, which a clause in a signed contract satisfies. Under Article 8, where an action is brought in a matter covered by such an agreement, the court must refer the parties to arbitration if a party requests it no later than its first statement on the substance, unless the agreement is null and void, inoperative or incapable of being performed.

❌ Why the other options are wrong: Being filed first in court gives no priority over a valid arbitration agreement; the Model Law requires writing but not notarisation; asking the court to refer the dispute is how a party enforces the clause, so it is not a waiver of arbitration.

📋 Objective: 1.3 (Alternative dispute resolution mechanisms)

✅ Correct answer: Three arbitrators, with the court appointing the blender's

📌 Explanation: Article 10 provides that, failing agreement, the number of arbitrators is three. Under Article 11, each party appoints one arbitrator and the two appoint the third; if a party fails to appoint within 30 days of a request from the other, the appointment is made, on request, by the court or other authority specified by the state.

❌ Why the other options are wrong: A sole arbitrator applies only if the parties agree to one; the Model Law does not let the other party fill the defaulting party's appointment; the ICC Court appoints only where the parties have chosen the ICC rules, which the clause does not do.

📋 Objective: 1.3 (Alternative dispute resolution mechanisms)

✅ Correct answer: Buying a used aircraft for executive travel; Buying electricity for its Ikeja showroom

📌 Explanation: Article 2 excludes certain sales from the CISG, including sales of ships, vessels, hovercraft and aircraft and sales of electricity. The aircraft purchase and the electricity supply therefore fall outside the Convention even though the parties have their places of business in different Contracting States.

❌ Why the other options are wrong: Buses bought for resale are ordinary commercial goods; parts manufactured to the buyer's designs are still a sale of goods under Article 3 unless the buyer supplies a substantial part of the materials; a sale of used cars to a foreign dealer is a commercial sale within Article 1.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: Exclude the CISG expressly in their contract

📌 Explanation: Article 6 allows the parties to exclude the application of the Convention, or to derogate from or vary most of its provisions. A clear express term excluding the CISG and choosing a national law is the reliable way to achieve this, because otherwise the Convention applies where both places of business are in Contracting States.

❌ Why the other options are wrong: States do not grant exemptions for individual contracts; UNCITRAL drafted the Convention but does not register or approve contracts; the route of carriage is irrelevant, because Article 1 looks at where the parties have their places of business.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: It is only an invitation to make offers

📌 Explanation: Article 14(2) treats a proposal not addressed to one or more specific persons as merely an invitation to make offers, unless the contrary is clearly indicated. A price list sent to 300 importers with no statement of intention to be bound is such a proposal, so the importer's order is the offer, which Ssanyu may accept or reject.

❌ Why the other options are wrong: Because the list is not an offer, the order cannot accept it and form a contract; irrevocability under Article 16 applies only to an offer that fixes a time, states it is irrevocable or is reasonably relied on; sending a price list cannot create binding contracts with each recipient.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: Mpewo, because DDP puts import duties on the seller

📌 Explanation: Under DDP (Delivered Duty Paid) the seller delivers the goods cleared for import, ready for unloading at the named destination, and bears the costs and risks of bringing them there, including import clearance formalities and import duties. It is the Incoterm with the greatest obligation for the seller.

❌ Why the other options are wrong: Import clearance by the buyer is the position under terms such as DAP, but not DDP; the carrier is engaged to transport the goods and does not take on the seller's duty obligations; Incoterms 2020 does not split import duties between the parties under DDP.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: The Durban buyer contracts and pays for sea freight; Risk passes once the starch is on board at Lagos

📌 Explanation: Under FOB the seller delivers by placing the goods on board the vessel nominated by the buyer at the named port of shipment, and risk passes to the buyer at that point. The buyer contracts for and pays the main sea carriage from Lagos, and neither party is obliged to insure for the other.

❌ Why the other options are wrong: Insurance for the buyer's benefit is a seller duty under CIF and CIP, not FOB; risk passing at the destination port describes a D term; paying the main freight to the destination is a seller obligation under the C terms, such as CFR or CIF.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: The pumps are not fit for the made-known purpose

📌 Explanation: Under Article 35(2)(b), unless otherwise agreed, goods must be fit for any particular purpose expressly or impliedly made known to the seller when the contract is made, unless the buyer did not rely, or could not reasonably rely, on the seller's skill and judgement. Amazzi stated the depth and relied on the maker, so the pumps do not conform.

❌ Why the other options are wrong: Fitness for ordinary purposes is a separate requirement and does not cure unfitness for a purpose made known; the particular-purpose duty arises from what was made known, without a depth term in the contract; the buyer's duty to examine goods affects notice of defects, not whether the goods conform.

📋 Objective: 2.2 (Obligations of the seller and buyer, and provisions common to both)

✅ Correct answer: Ngege can no longer rely on the defect

📌 Explanation: Article 39 requires the buyer to give notice of a lack of conformity within a reasonable time after discovering it, and in any event within two years of the goods being actually handed over, unless a contractual guarantee period applies. Notice given more than two years after the March 2024 delivery is too late, however prompt it was after discovery.

❌ Why the other options are wrong: Prompt notice after discovery does not override the two-year long-stop period; avoidance is a remedy that Ngege loses along with the right to rely on the defect; a six-year period reflects some national limitation rules, not the CISG notice rule.

📋 Objective: 2.2 (Obligations of the seller and buyer, and provisions common to both)

✅ Correct answer: It cannot avoid the contract before 30 June

📌 Explanation: Article 47 lets the buyer fix an additional period of reasonable length for the seller to perform. During that period, unless the seller has given notice that it will not perform, the buyer may not resort to any remedy for breach, so Emmere cannot avoid before 30 June; it keeps its right to damages for the delay.

❌ Why the other options are wrong: Immediate avoidance would contradict the additional period that Emmere itself fixed; fixing an additional period does not remove the right to claim damages for delay; once the period expires without delivery, Emmere may avoid under Article 49 rather than wait indefinitely.

📋 Objective: 2.2 (Obligations of the seller and buyer, and provisions common to both)

✅ Correct answer: $25,800

📌 Explanation: Where the contract is avoided and the seller has not resold, Article 76 gives the difference between the contract price and the current price at the time of avoidance: 40,000 × ($6.50 − $5.90) = $24,000. Article 74 adds other foreseeable losses, here storage of $1,800, so total damages are $24,000 + $1,800 = $25,800.

❌ Why the other options are wrong: The figure of $24,000 omits the foreseeable storage costs recoverable under Article 74; $22,200 deducts the storage costs instead of adding them; $261,800 claims the full contract price of $260,000 plus costs, ignoring that Omuzigo keeps oil worth $236,000.

📋 Objective: 2.2 (Obligations of the seller and buyer, and provisions common to both)

✅ Correct answer: Declare the contract avoided without waiting further

📌 Explanation: Under Article 72, if before the date for performance it is clear that one party will commit a fundamental breach, the other may declare the contract avoided. A clear written refusal to take or pay for the goods is such a case, and because the buyer has declared it will not perform, Engabi need not first ask for adequate assurance.

❌ Why the other options are wrong: Waiting for the delivery date is not required once the future breach is clear; price reduction under Article 50 is a buyer's remedy for non-conforming goods; suspension under Article 71 is available, but Engabi is not limited to it when a fundamental breach is certain.

📋 Objective: 2.2 (Obligations of the seller and buyer, and provisions common to both)

✅ Correct answer: Mubisi is exempt from damages but other remedies remain

📌 Explanation: Article 79 exempts a party from liability for a failure to perform caused by an impediment beyond its control that it could not reasonably have foreseen, avoided or overcome. The exemption covers only damages: under Article 79(5) the buyer keeps its other rights, such as avoidance if the delay is a fundamental breach, and it lasts only while the impediment exists.

❌ Why the other options are wrong: The contract is not discharged by Article 79, which only shields the seller from damages; the lawfulness of the ban is why it is an impediment beyond Mubisi's control, not a reason to pay damages; Article 79(5) preserves the buyer's rights other than damages, including avoidance.

📋 Objective: 2.2 (Obligations of the seller and buyer, and provisions common to both)

✅ Correct answer: $37,500

📌 Explanation: Article 50 lets the buyer reduce the price in the same proportion as the value of the goods actually delivered bears to the value that conforming goods would have had at the time of delivery. The reduced price is $50,000 × $45,000 / $60,000 = $37,500, a reduction of $12,500.

❌ Why the other options are wrong: The figure of $35,000 deducts the $15,000 value shortfall in money terms instead of applying the proportion; $45,000 simply pays the value of the goods delivered, ignoring the contract price; $50,000 ignores the buyer's right to reduce the price for non-conforming goods.

📋 Objective: 2.2 (Obligations of the seller and buyer, and provisions common to both)

✅ Correct answer: It is a claused bill, evidencing damage on loading

📌 Explanation: A bill of lading acts as a receipt stating the quantity and apparent condition of the goods when loaded. A notation recording damage makes it a claused (unclean) bill, which is evidence that the bags were torn and wet on shipment, so the buyer may look to the seller rather than the carrier for that damage.

❌ Why the other options are wrong: A bill noting defects in the goods is not clean, whatever their extent; the notation affects the receipt function but does not stop the bill operating as a document of title; the receipt records damage present on loading, which points away from carrier liability for it.

📋 Objective: 3.1 (Transportation documents and means of payment)

✅ Correct answer: The bank holding the endorsed bill of lading

📌 Explanation: A bill of lading is a document of title, and the carrier's obligation is to deliver the goods to the lawful holder who presents it. By endorsement and delivery Emmere transferred the right to the buyer, and the buyer's endorsement to the bank as security makes the bank the holder entitled to delivery.

❌ Why the other options are wrong: The sales invoice gives no right to demand the goods from the carrier; Emmere gave up its right to delivery when it endorsed and delivered the bill; a copy of an invoice has no title function, and the carrier delivers against the original bill.

📋 Objective: 3.1 (Transportation documents and means of payment)

✅ Correct answer: It adds its own undertaking to pay Mutima

📌 Explanation: A confirming bank, usually in the beneficiary's country, adds its own definite undertaking to honour a complying presentation, in addition to that of the issuing bank. Mutima can therefore claim payment from the Lagos bank against compliant documents even if the Moroccan issuing bank fails to pay.

❌ Why the other options are wrong: Simply notifying the beneficiary is the role of an advising bank that has not confirmed; the applicant is the buyer, which asks its own bank to issue the credit; banks deal in documents, not goods, so no bank vouches for the quality of the cocoa.

📋 Objective: 3.1 (Transportation documents and means of payment)

✅ Correct answer: The bank decides on the documents, not the oil; The bank may refuse the documents as non-complying

📌 Explanation: Under UCP 600 banks deal with documents and not with the goods to which they relate (Article 5), and they examine a presentation on the face of the documents alone (Article 14). A bill of lading dated after the latest shipment date is a discrepancy, so the bank may refuse to honour, whatever the quality of the oil.

❌ Why the other options are wrong: The quality of the goods is irrelevant to a bank that deals only in documents; the principle of strict compliance leaves no margin for a short delay in shipment; the bank has no power to demand reshipment, and its choice is to honour or refuse the presentation.

📋 Objective: 3.1 (Transportation documents and means of payment)

✅ Correct answer: A standby letter of credit

📌 Explanation: A standby letter of credit operates like a guarantee: the bank pays the beneficiary on presentation of a statement or documents showing that the applicant has defaulted, rather than on proof of shipment. It suits Obugagga, which wants payment only if the contractor fails to perform.

❌ Why the other options are wrong: A confirmed credit adds a second bank's promise to pay against shipping documents, not on default; a revolving credit is renewed for repeated shipments; a transferable credit lets the beneficiary pass the credit to a second beneficiary, such as its own supplier.

📋 Objective: 3.1 (Transportation documents and means of payment)

✅ Correct answer: Ssanyu is drawer, importer drawee, bank payee

📌 Explanation: The drawer is the person who draws the bill and gives the order to pay; the drawee is the person to whom the order is addressed; and the payee is the person to whom payment is to be made. Ssanyu draws the bill, the importer is ordered to pay, and the bank is to receive payment.

❌ Why the other options are wrong: The importer receives the order to pay, so it is the drawee rather than the drawer; Ssanyu created the order, so it is neither the payee nor the drawee; the bank is to receive payment and is not the party ordered to pay.

📋 Objective: 3.1 (Transportation documents and means of payment)

✅ Correct answer: A letter of comfort, usually not binding

📌 Explanation: A letter of comfort is an assurance, usually given by a parent company, about its intention to support a subsidiary. A statement of present intention is generally treated as not legally binding, so the bank normally cannot enforce it against Mubisi, unlike a guarantee.

❌ Why the other options are wrong: A guarantee is an express undertaking to pay if the debtor defaults, which the letter does not give; a standby credit is a bank's undertaking, not a parent's letter; a bill of exchange is an unconditional written order to pay a sum, which this statement of intention is not.

📋 Objective: 3.1 (Transportation documents and means of payment)

✅ Correct answer: The firm is bound, as the supplier was unaware

📌 Explanation: Each partner is an agent of the firm and binds it when doing an act for carrying on, in the usual way, business of the kind carried on by the firm. Buying surveying equipment is within that usual authority, and an internal restriction binds a third party only if it knows of it.

❌ Why the other options are wrong: The firm is liable on the whole contract, not a portion matching the internal limit; Namuli may have to indemnify her partners, but the supplier can enforce the contract against the firm; a breach of the internal agreement does not make the contract void against an unaware outsider.

📋 Objective: 4.2 (Partnerships)

✅ Correct answer: Members' liability for its debts is generally limited; It is a legal person separate from its members

📌 Explanation: A limited liability partnership is a body corporate with legal personality separate from its members, so it contracts and owns property in its own name. Members' liability is limited to the amount they have agreed to contribute, subject to exceptions such as wrongful trading, while members may still take part in running the business.

❌ Why the other options are wrong: An LLP must be registered by filing an incorporation document with the registrar; two members, not seven, is the minimum, with at least two designated members; the bar on taking part in management applies to limited partners in a limited partnership, not to LLP members.

📋 Objective: 4.2 (Partnerships)

✅ Correct answer: Specific performance against both Mukiibi and Kibira Estates

📌 Explanation: A company normally has a separate legal personality, but the courts lift the veil where a company is a sham or facade used to evade an existing legal obligation. As in Jones v Lipman, a court may order specific performance against both the individual and the company he formed to avoid completing the sale.

❌ Why the other options are wrong: Treating the company as separate would let Mukiibi evade his contract, which is exactly why the veil is lifted; the transfer to a company he controls does not defeat Ngege's claim; winding up is not a remedy that enforces the sale and is not what the buyer seeks.

📋 Objective: 4.3 (Corporations and legal personality)

✅ Correct answer: Rescind the sale or recover her $25,000 profit

📌 Explanation: A promoter owes fiduciary duties to the company being formed and must not make a secret profit. If she fails to disclose her profit to an independent board or to the members, the company may rescind the contract or, where rescission is not possible or not chosen, recover the undisclosed profit of $65,000 − $40,000 = $25,000.

❌ Why the other options are wrong: Promoters do owe fiduciary duties to the company they form, as in Erlanger v New Sombrero Phosphate; recovering the full price while keeping the land would give the company a double recovery; disqualification is a sanction for unfit directors, not the civil remedy for a promoter's secret profit.

📋 Objective: 4.4 (The formation and constitution of a company)

✅ Correct answer: A special resolution passed by at least 75%

📌 Explanation: A company may alter its articles by special resolution, which at a meeting requires a majority of at least 75% of the votes cast. The alteration must be made bona fide for the benefit of the company as a whole, and entrenched provisions carry stricter conditions, but Mpewo's articles contain none.

❌ Why the other options are wrong: An ordinary simple-majority resolution is not enough to change the constitution; directors cannot alter the articles, which form a contract between the members and the company; an ordinary resolution with special notice is the procedure for removing a director or an auditor.

📋 Objective: 4.4 (The formation and constitution of a company)

✅ Correct answer: The second lender has priority over the press

📌 Explanation: A charge must be registered within 21 days of its creation; if it is not, it is void against a liquidator, an administrator and the company's creditors, although the debt itself remains payable. The first lender becomes unsecured, so the second lender's registered fixed charge has priority over the press.

❌ Why the other options are wrong: Priority by date of creation applies only between validly registered charges; the charges do not rank equally, because the first is void against the second lender; an unregistered charge is void against the liquidator, which is exactly the protection that registration provides.

📋 Objective: 5.2 (Loan capital)

✅ Correct answer: Apply to court within 21 days to cancel it

📌 Explanation: Class rights may be varied with the written consent of holders of at least 75% of the class, or a special resolution at a class meeting, which the 80% consent satisfies. Holders of at least 15% of the class who did not consent may apply to the court within 21 days to have the variation cancelled, and the 16% objectors qualify.

❌ Why the other options are wrong: Unanimous consent is not required once the 75% threshold is met; the time limit for the application to court is 21 days, not six months; members have no general right to force the company to buy their shares when class rights are varied.

📋 Objective: 5.1 (Share capital)

✅ Correct answer: An ordinary resolution at a meeting, after special notice

📌 Explanation: An auditor may be removed at any time by ordinary resolution passed at a general meeting, and special notice of 28 days must be given of the resolution. The auditor has the right to make written representations and to speak at the meeting, which is why a written resolution cannot be used.

❌ Why the other options are wrong: A written resolution cannot be used to remove an auditor, and public companies cannot use written resolutions at all; the directors or audit committee cannot remove the members' appointee; a special resolution is not required, only an ordinary resolution with special notice.

📋 Objective: 6.2 (Other company officers)

✅ Correct answer: Not passed: 70% of total votes, below 75%

📌 Explanation: A written special resolution of a private company is passed only when members holding at least 75% of the total voting rights of eligible members agree to it. Holders of 700,000 of 1,000,000 votes is 70%, so the resolution fails, even though 700,000 of the 750,000 votes returned (93%) are in favour.

❌ Why the other options are wrong: Measuring against votes returned applies the rule for votes cast at a meeting, not the written resolution rule; a simple majority of eligible votes is enough only for a written ordinary resolution; unanimity is not needed, since 75% of total voting rights would suffice.

📋 Objective: 6.3 (Company meetings and resolutions)

✅ Correct answer: A members' voluntary liquidation

📌 Explanation: A members' voluntary liquidation is available only where the directors make a statutory declaration of solvency stating that the company will pay its debts in full within a period not exceeding 12 months. The members then pass a special resolution and appoint the liquidator, and creditors expect to be paid in full.

❌ Why the other options are wrong: A creditors' voluntary liquidation is used where no declaration of solvency is made because the company is insolvent; compulsory liquidation follows a court petition and is unnecessary for a solvent company closing by choice; administration is a rescue procedure for companies in financial difficulty.

📋 Objective: 7.1 (Insolvency and administration)

✅ Correct answer: $220,000

📌 Explanation: Assets subject to a floating charge are applied first to the costs of the liquidation ($45,000) and then to preferential debts ($35,000), leaving $300,000 − $45,000 − $35,000 = $220,000 for the floating-charge holder. Its $40,000 shortfall ranks as an unsecured debt, and nothing remains for unsecured creditors from this fund.

❌ Why the other options are wrong: The figure of $260,000 pays the charge holder in full ahead of costs and preferential creditors, treating the floating charge like a fixed charge; $255,000 ignores the priority of preferential debts; $265,000 ignores the liquidation costs, which are paid before preferential creditors.

📋 Objective: 7.1 (Insolvency and administration)

✅ Correct answer: Neither may act without the administrators' consent or leave

📌 Explanation: Administration imposes a moratorium: while the company is in administration, no step may be taken to enforce security over its property and no legal process may be started or continued against it, except with the administrator's consent or the court's permission. Both the fixed-charge lender and the trade creditor are therefore restrained.

❌ Why the other options are wrong: The moratorium covers enforcement of fixed as well as floating security; an undisputed debt still cannot be sued for without consent or permission; the moratorium exists to protect the company during the rescue attempt, so creditors are restrained rather than freed.

📋 Objective: 7.1 (Insolvency and administration)

✅ Correct answer: Execution of a court judgment was returned unsatisfied; It left a $20,000 statutory demand unpaid for 21 days

📌 Explanation: A company may be wound up by the court if it is unable to pay its debts. Inability is shown where a creditor owed more than the prescribed minimum serves a statutory demand that is not paid, secured or compounded within 21 days, or where execution on a judgment is returned unsatisfied in whole or in part.

❌ Why the other options are wrong: A qualified audit report concerns the accounts and is not a statutory test of insolvency; a trading loss in one year does not by itself prove the company cannot pay its debts as they fall due; the resignation of directors does not show an inability to pay debts.

📋 Objective: 7.1 (Insolvency and administration)

✅ Correct answer: Tipping off

📌 Explanation: Tipping off is committed where a person in the regulated sector discloses that a suspicious activity report has been made and the disclosure is likely to prejudice any investigation. Nakitto properly reported her suspicion, so she has not failed to disclose, but telling the customer about the report is tipping off.

❌ Why the other options are wrong: Failure to disclose applies where a person in the regulated sector does not report knowledge or suspicion of laundering, and Nakitto did report; concealing involves hiding or disguising criminal property; arranging involves entering into an arrangement that helps another acquire, retain or use criminal property.

📋 Objective: 8.1 (Fraudulent and criminal behaviour)

✅ Correct answer: Mpewo is guilty of failing to prevent bribery

📌 Explanation: A commercial organisation commits the corporate offence of failing to prevent bribery if a person associated with it, such as an agent, bribes another person intending to obtain or retain business or an advantage for it. Its only defence is having adequate procedures to prevent bribery, and Mpewo had none.

❌ Why the other options are wrong: Lack of knowledge is not a defence to the corporate offence, which is one of strict liability; facilitation payments are treated as bribes; bribing a foreign public official is itself an offence, so the official's nationality does not help Mpewo.

📋 Objective: 8.1 (Fraudulent and criminal behaviour)

✅ Correct answer: It applies, as both firms are in Contracting States

📌 Explanation: Under Article 1(1)(a) the CISG applies to contracts for the sale of goods between parties whose places of business are in different Contracting States. Green coffee bought for a roasting business is goods, it falls outside the Article 2 exclusions, and the parties have not used Article 6 to exclude the Convention.

❌ Why the other options are wrong: The Convention applies without any choice by the parties, who may only opt out under Article 6; agricultural commodities are goods and are not excluded by Article 2; buying goods to process and resell is a commercial purpose, not the personal, family or household use that Article 2 excludes.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: It had no effect, as the offer was irrevocable

📌 Explanation: Article 16(1) allows an offer to be revoked if the revocation reaches the offeree before it has dispatched an acceptance, but Article 16(2)(a) makes an offer irrevocable if it indicates, by stating a fixed time or otherwise, that it is irrevocable. Mwanyi's offer stated that it was irrevocable until 15 March, so the 4 March email had no effect.

❌ Why the other options are wrong: Arrival before acceptance matters only for a revocable offer; a rise in market prices is not a ground for revoking an irrevocable offer; withdrawal under Article 15 must reach the offeree before or at the same time as the offer, and the offer had already reached Essuubi on 1 March.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: 10 March, when the acceptance reached Mwanyi

📌 Explanation: Under Article 18(2) an acceptance becomes effective at the moment the indication of assent reaches the offeror, and Article 23 provides that the contract is concluded when the acceptance becomes effective. Essuubi's acceptance reached Mwanyi on 10 March, within the period fixed by the offer, so the contract was concluded on that date.

❌ Why the other options are wrong: The CISG has no postal rule, so dispatch on 9 March is not enough; an offer alone cannot form a contract until it is accepted; the end of the irrevocability period is only the deadline for acceptance, not the date on which the contract was made.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: It is a non-material addition that became a term

📌 Explanation: Under Article 19(2) a reply that purports to accept but contains additional terms that do not materially alter the offer is an acceptance, unless the offeror objects without undue delay. A request to stencil a logo does not concern price, payment, quality, quantity, delivery, liability or disputes, and Mwanyi did not object, so it became a term.

❌ Why the other options are wrong: Material alterations are those listed in Article 19(3), and a logo stencil is not among them; the CISG imposes no signature requirement, since Article 11 lets a contract be made in any form; nothing in the Convention makes a non-material addition void.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: Essuubi, which must still pay the price

📌 Explanation: Under FCA (Incoterms 2020), where the named place is the seller's premises, delivery occurs and risk passes when the goods are loaded on the means of transport provided by the buyer's nominated carrier. The bags were identified and loaded on 20 April, so the loss falls on Essuubi, and under Article 66 of the CISG it must still pay the price.

❌ Why the other options are wrong: Mwanyi's duty to deliver was performed on loading, so it need not supply replacement coffee; risk passing on arrival at Casablanca describes a D term, not FCA; neither the CISG nor Incoterms divides an accidental loss between the parties.

📋 Objective: 2.1 (Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms)

✅ Correct answer: Express actual authority in the appointment

📌 Explanation: Express actual authority is the authority the principal expressly gives the agent, here in the written appointment allowing sea-freight bookings of up to $30,000 per booking. A $22,000 booking in Kiwempe's name falls within those limits, so Kiwempe is bound to Lyato Lines Ltd.

❌ Why the other options are wrong: Apparent authority matters only where the agent lacks actual authority, which is not the case here; agency of necessity needs an emergency in which the principal cannot be contacted; ratification is needed only when an agent acts without authority, so no later adoption was required.

📋 Objective: 4.1 (Agency law)

✅ Correct answer: Implied authority usual for such freight agents

📌 Explanation: An agent has implied actual authority to do whatever is incidental to, or usually done by, an agent of that type in carrying out its express authority. Paying customary port charges is usual for a freight agent at Apapa, so Ekkubo acted with authority and is entitled to be reimbursed by its principal.

❌ Why the other options are wrong: The written appointment is silent on port charges, so the authority is not express; apparent authority protects third parties and does not ground the agent's own claim against the principal; estoppel requires a representation relied on by a third party, not silence after the event.

📋 Objective: 4.1 (Agency law)

✅ Correct answer: Bound, because Ekkubo had apparent authority to book

📌 Explanation: Apparent authority arises where the principal represents to a third party that the agent has authority and the third party relies on it. By paying earlier over-limit bookings from Lyato without objection, Kiwempe held Ekkubo out as able to make them, and Lyato did not know of the limit, so Kiwempe is bound.

❌ Why the other options are wrong: A secret internal limit does not bind a third party who was given no notice of it; the principal is bound on the whole booking, not a portion matching the limit; ratification is not needed where apparent authority already binds the principal.

📋 Objective: 4.1 (Agency law)

✅ Correct answer: Kiwempe ratified it, binding itself from the start

📌 Explanation: A principal may ratify a contract made on its behalf without authority if the agent acted as agent for a named or identifiable principal that existed and had capacity at the time. Ekkubo named Kiwempe as the insured, so Kiwempe's written adoption ratifies the policy, which then takes effect as if it had been authorised from the start.

❌ Why the other options are wrong: Once the policy is ratified it binds the principal and the agent drops out; lack of authority is exactly what ratification cures, so the policy is not void; ratification is retrospective and relates back to the date the contract was made.

📋 Objective: 4.1 (Agency law)

✅ Correct answer: Elect to sue either Ekkubo or Kiwempe

📌 Explanation: Where an agent with actual authority contracts in its own name without disclosing that it acts for a principal, the third party may sue the agent. On discovering the undisclosed principal, the third party may choose to sue the principal instead, but must elect between them. Kiwempe had instructed Ekkubo to arrange storage, so it may be sued.

❌ Why the other options are wrong: The agent remains personally liable on a contract it made in its own name; the undisclosed principal may be sued once discovered, because the agent acted within its actual authority; concealment of the agency does not release both parties from paying the rent.

📋 Objective: 4.1 (Agency law)

✅ Correct answer: $3,000,000

📌 Explanation: Distributable profits are accumulated realised profits less accumulated realised losses: $4,800,000 − $1,300,000 = $3,500,000. As a public company Omwenge must also satisfy the net assets test, so net unrealised losses of $1,100,000 − $600,000 = $500,000 must be deducted, leaving $3,000,000.

❌ Why the other options are wrong: The figure of $3,500,000 is the private company limit and ignores the net assets test; $2,400,000 deducts the full unrealised losses without setting off the unrealised profits; $4,100,000 adds the unrealised revaluation profit, which is not distributable.

📋 Objective: 5.3 (Capital maintenance and dividend law)

✅ Correct answer: $3,500,000

📌 Explanation: A private company may distribute its accumulated realised profits less its accumulated realised losses, so its limit would be $4,800,000 − $1,300,000 = $3,500,000. The additional net assets test, which requires net unrealised losses to be covered, applies only to public companies.

❌ Why the other options are wrong: The figure of $3,000,000 applies the public company net assets test to a private company; $4,100,000 adds unrealised profits, which neither type of company can distribute; $2,400,000 deducts the unrealised losses of $1,100,000 as if they were realised and ignores the unrealised profits.

📋 Objective: 5.3 (Capital maintenance and dividend law)

✅ Correct answer: $2,000,000 share capital; $1,500,000 share premium

📌 Explanation: Shares are recorded in share capital at their nominal value, 2,000,000 × $1 = $2,000,000, and any amount received above nominal value must be credited to the share premium account: 2,000,000 × ($1.75 − $1.00) = $1,500,000. The total cash received is $3,500,000.

❌ Why the other options are wrong: Crediting the whole $3,500,000 to share capital ignores the rule that a premium goes to the share premium account; $3,500,000 of premium counts the full proceeds as premium; the reversed pairing records the premium as nominal capital and the nominal value as premium.

📋 Objective: 5.1 (Share capital)

✅ Correct answer: Paying up bonus shares issued to existing members

📌 Explanation: The share premium account is treated as capital and may be used only for limited purposes, such as paying up new shares to be allotted to members as fully paid bonus shares, or writing off the expenses and commission of the issue that created it. A bonus issue is therefore a permitted use.

❌ Why the other options are wrong: A cash dividend from share premium would return capital to members, breaching capital maintenance; share premium cannot be used to write off trading losses outside an authorised reduction of capital; repaying part of the price to the new subscribers is also a return of capital.

📋 Objective: 5.1 (Share capital)

✅ Correct answer: Mulindwa must repay what he received, as he knew

📌 Explanation: A distribution made in breach of the rules on distributable profits is unlawful. A member who knows, or has reasonable grounds to believe, that it is unlawful must repay it to the company. Mulindwa knew the accounts showed insufficient profits, so he must repay; innocent members are not liable, although the directors may be liable for breach of duty.

❌ Why the other options are wrong: Members who received the dividend without knowledge or reasonable grounds for belief are not liable to repay it; member approval cannot make lawful a distribution that breaches capital maintenance; the auditor did not receive the dividend and is not the party required to repay it.

📋 Objective: 5.3 (Capital maintenance and dividend law)

✅ Correct answer: To declare an interest in a proposed transaction

📌 Explanation: A director who is in any way, directly or indirectly, interested in a proposed transaction with the company must declare the nature and extent of that interest to the other directors before the company enters into it. Kalibbala's 30% stake in Ekisenge Properties Ltd was such an interest, and he did not declare it.

❌ Why the other options are wrong: No benefit was offered to Kalibbala by a third party because of his directorship; approving a branch lease is within the bank's powers, so the constitution was not breached; nothing suggests he let others dictate his judgement, since his fault was silence about his interest.

📋 Objective: 6.1 (Company directors)

✅ Correct answer: She breached it and must account for the $900,000 profit

📌 Explanation: A director must avoid situations in which she has, or can have, a conflict with the company's interests, and this applies in particular to exploiting property, information or opportunity whether or not the company could take advantage of it. Nakibuuka learnt of the opportunity through her role and must account to the bank for her $900,000 profit.

❌ Why the other options are wrong: The duty applies even if the company could not itself take the opportunity, as in Regal (Hastings) v Gulliver; acting through a family company does not avoid the conflict; a director in breach of this duty must account for the profit rather than keep it.

📋 Objective: 6.1 (Company directors)

✅ Correct answer: An objective minimum, raised by his own banking expertise

📌 Explanation: A director must exercise the care, skill and diligence of a reasonably diligent person with the general knowledge, skill and experience reasonably expected of someone in that role, and also with the director's own general knowledge, skill and experience. The objective test is the minimum, and Ssempa's 20 years in credit risk raise the standard expected of him.

❌ Why the other options are wrong: Applying only the objective standard ignores the subjective element that raises the bar for a specialist; applying only his own knowledge ignores the objective minimum; non-executive directors owe the same general duties as executive directors.

📋 Objective: 6.1 (Company directors)

✅ Correct answer: Ordinary resolution with special notice; he may claim compensation

📌 Explanation: Members may remove a director before the end of his term by ordinary resolution at a general meeting, with special notice of 28 days, whatever his service contract says. Removal does not deprive the director of any claim for compensation or damages for early termination of his service contract.

❌ Why the other options are wrong: A special resolution is not required, and removal does not cancel his contractual right to compensation; a written resolution cannot be used to remove a director, and a public company cannot use written resolutions at all; the board has no power to remove a director appointed by the members.

📋 Objective: 6.1 (Company directors)

✅ Correct answer: The bank is liable, as she had apparent authority

📌 Explanation: A company secretary is the company's chief administrative officer and has apparent authority to make contracts of an administrative nature in the company's name, such as hiring cars to transport clients, as in Panorama Developments v Fidelis Furnishing Fabrics. Mmotoka could not know of her private use, so Nsimbi Bank plc is bound and may recover from Nabukalu.

❌ Why the other options are wrong: Nabukalu may be liable to the bank, but that does not stop the rental firm enforcing the contract against it; apparent authority does not depend on board approval of each administrative contract; her private misuse was unknown to the rental firm, so it does not defeat the firm's claim.

📋 Objective: 6.2 (Other company officers)

✅ Correct answer: Insider dealing by dealing in price-affected securities

📌 Explanation: An individual who has information as an insider commits insider dealing if he deals in securities that are price-affected in relation to that information. As finance director Kakooza held inside information about the unannounced deposit, which was specific, not public and likely to have a significant effect on the price, and he bought shares on a regulated market.

❌ Why the other options are wrong: Encouraging applies where an insider persuades another person to deal, which describes his later tip to Kigongo; improper disclosure involves passing information to another person, whereas here he dealt himself; market manipulation involves false or misleading signals, and nothing false was spread.

📋 Objective: 8.1 (Fraudulent and criminal behaviour)

✅ Correct answer: Encouraging another person to deal

📌 Explanation: An insider commits an offence if he encourages another person to deal in price-affected securities, knowing or having reasonable cause to believe that dealing would take place. Kakooza urged Kigongo to buy while holding inside information, and this offence does not require him to reveal the information itself.

❌ Why the other options are wrong: Kakooza did not deal in these 20,000 shares himself, Kigongo did; he did not pass on the information, which was never mentioned; giving no reason is no defence, because encouraging another to deal is an offence without disclosure of the information.

📋 Objective: 8.1 (Fraudulent and criminal behaviour)

✅ Correct answer: She committed the offence of improper disclosure

📌 Explanation: An insider commits an offence by disclosing inside information to another person otherwise than in the proper performance of the functions of her employment. Describing the unannounced find to a friend over dinner is not part of a geologist's duties, and the offence does not depend on the friend dealing.

❌ Why the other options are wrong: The disclosure offence is complete when the information is passed on improperly, whether or not the recipient deals; Nakazzi did not buy or sell shares herself; the later announcement does not cancel a disclosure made while the information was still inside information.

📋 Objective: 8.1 (Fraudulent and criminal behaviour)

✅ Correct answer: He would have sold even without the information

📌 Explanation: It is a defence to insider dealing for the individual to show that he would have done what he did even if he had not had the information. Mutebi had contracted on 20 May, before the find, to pay a house deposit and sold to meet that commitment, so his sale was not driven by the information.

❌ Why the other options are wrong: The information was confined to insiders and had not been disclosed widely enough to support that defence; dealing includes both buying and selling securities; the length of time the shares were held is not a defence to insider dealing.

📋 Objective: 8.1 (Fraudulent and criminal behaviour)

✅ Correct answer: No offence, as the information had been made public

📌 Explanation: Insider dealing requires inside information, which must not have been made public. Once Kyuma released the find in a stock exchange announcement at 08:00, the information was public, so an analyst who read it and then bought shares at 10:30 was dealing on public information and commits no offence.

❌ Why the other options are wrong: Buying before the price peaks is ordinary investment, not an offence, once the information is public; reading a public announcement early does not turn it into inside information; analysts may lawfully trade on published news, which is how markets absorb it.

📋 Objective: 8.1 (Fraudulent and criminal behaviour)