Business Law and Ethics: Contracts, Companies and Professional Conduct
This domain tests legal rules for transactions and entities, plus the ethical framework governing professional conduct. Questions are usually short scenarios: identify the rule, apply it to the facts, and state the consequence.
Contract fundamentals
- Formation needs offer, acceptance, consideration, intention to create legal relations and capacity; consideration must be sufficient but need not be adequate.
- Acceptance must be unqualified and communicated by the prescribed method; under the postal rule it takes effect on posting, not receipt. Revocation is effective only when communicated to the offeree before acceptance.
- Terms may be implied by statute or custom; exemption clauses are construed contra proferentem and limited by statute.
Company law and agency
- A company is a separate legal person; directors owe duties of good faith, care and skill, and must not divert corporate opportunities or conflate personal and company interests.
- An agent binds the principal within actual or apparent authority; ratification can cure an act outside authority.
Ethics
- Fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, professional behaviour.
- Threats: self-interest, self-review, advocacy, familiarity, intimidation; apply safeguards or decline the engagement.
Worked example
An offer is emailed on 1 March; the offeree posts acceptance on 3 March, received on 6 March. The offeror purports to revoke on 4 March. Under the postal rule the contract formed on 3 March, so the revocation is too late and the contract stands. If instead the offer had required receipt of acceptance, no contract would exist until 6 March and the revocation would be effective.
Traps that cost marks
- Saying consideration must be adequate, or that a counter-offer is acceptance.
- Treating confidentiality as absolute; disclosure is permitted where required by law or professional duty.
- Confusing independence in fact with the appearance of independence - both are required.