Monday 11 November 2024
Your weekly SQE Prep Quiz has arrived
Dear Subscriber,
I hope you had a great weekend. Please see below for the question, the answer to the previous question and associated resources. This is the web version of this newsletter.
Question: Sophie is an elderly woman who owns a valuable piece of land. Her nephew, Tom, has been helping her with her day-to-day needs and managing her finances. Tom suggests that Sophie should sell her land to him at a price significantly below its market value. Sophie is reluctant, but Tom insists, saying that he might no longer be able to help her if she doesn’t agree to the sale. Feeling pressured and fearing the loss of Tom’s support, Sophie reluctantly signs the sale agreement. A few weeks later, Sophie realizes that she may have been pressured into selling her land at an undervalued price and seeks legal advice on how to challenge the validity of the sale.
Which of the following principles best applies to Sophie’s situation, and what must she demonstrate to challenge the validity of the contract?
1. The principle of undue influence; Sophie must demonstrate that Tom exerted improper pressure on her due to their relationship of trust and confidence.
2. The principle of duress; Sophie must show that Tom used illegitimate threats to coerce her into signing the contract.
3. The principle of misrepresentation; Sophie must demonstrate that Tom made false statements about the value of the land to induce her agreement.
4. The principle of unconscionable bargain; Sophie must prove that Tom took advantage of her vulnerability without providing adequate consideration.
5. The principle of mistake; Sophie must show that the contract was signed under mutual mistake and seek rescission.
Study Material: For more on mitigating doctrines and problems with contracts see the video linked here.
Free Study Planner: You can download our NEW SQE1 Study Planner for the July 2025 exam by clicking here.
Discount Codes: 1) Use code “REVSQE10” for 10% off all ReviseSQE products (including bundles) and free p&p for printed resources when purchasing directly at https://revise4law.co.uk/revisesqe-shop/ . 2) Use “IOANNIS” to get 15% off any of the Pro Plans of AI tutor Law Drills at https://www.lawdrills.com/
Join the community: Become a member of ‘iGlinavos Scholars’ on YouTube (£2.99/month, click here for info), get priority access to new videos, and participate in members-only livestreams, where we work through SQE1 MCQs together, analysing questions and answers. Also, you get access to a members’-only FB group for support directly from me and other candidates. Receive priority notification of discounts and deals on products and services that can help you succeed, and much more!
Answer and feedback to last week’s question: Ella is a director of FreshFarm Ltd., a company specializing in organic produce. She is also a director and shareholder of another company, GreenGrocers Ltd., which operates in the same industry. FreshFarm Ltd. is in the process of negotiating a lucrative contract to supply organic vegetables to a major supermarket chain. Ella attends a FreshFarm Ltd. board meeting where the contract terms are discussed. Shortly afterward, she approaches the supermarket on behalf of GreenGrocers Ltd. and secures the contract for her own company, undercutting FreshFarm Ltd. in the process. When the other directors of FreshFarm Ltd. find out, they accuse Ella of breaching her duties as a director.
Which of the following duties under the Companies Act 2006 has Ella most likely breached, and what remedy might FreshFarm Ltd. pursue?
1. The duty to exercise reasonable care, skill, and diligence; FreshFarm Ltd. can sue Ella for negligence.
2. The duty to promote the success of the company; FreshFarm Ltd. can apply to the court for an injunction preventing Ella from acting as a director.
3. The duty to avoid conflicts of interest; FreshFarm Ltd. can seek an account of profits for any benefit Ella obtained from the contract.
4. The duty to declare an interest in a proposed transaction; FreshFarm Ltd. can rescind the contract Ella secured with the supermarket on behalf of GreenGrocers Ltd.
5. The duty to act within powers; FreshFarm Ltd. can request that Ella be removed as a director under section 168 of the Companies Act 2006.
Correct Answer: 3. The duty to avoid conflicts of interest; FreshFarm Ltd. can seek an account of profits for any benefit Ella obtained from the contract. Feedback: Under section 175 of the Companies Act 2006, directors are required to avoid situations where they have, or could have, a conflict of interest with the company. By securing the contract for GreenGrocers Ltd., which competes with FreshFarm Ltd., Ella has placed herself in a direct conflict of interest. Her actions have diverted a business opportunity that FreshFarm Ltd. was pursuing, potentially causing harm to FreshFarm Ltd.
The most appropriate remedy for FreshFarm Ltd. would be to seek an account of profits, which would require Ella to disgorge any profits she obtained from securing the contract for GreenGrocers Ltd. This remedy is designed to prevent directors from benefiting personally from conflicts of interest at the expense of their company. Option 1 is incorrect because the duty to exercise reasonable care, skill, and diligence applies to the standard of competence expected from directors, not to conflicts of interest. Option 2 is incorrect because the duty to promote the success of the company is a general duty, and while it may be related, it does not directly address conflicts of interest. Option 4 is incorrect because the duty to declare an interest (under section 177) applies when a director has an interest in a transaction with the company itself, not when they take business opportunities away from the company. Option 5 is incorrect because while FreshFarm Ltd. might consider removing Ella as a director, this would be a separate process and does not address the primary breach of conflict of interest.
Thus, the correct answer is that Ella breached the duty to avoid conflicts of interest, and FreshFarm Ltd. can seek an account of profits as a remedy.
Thank you for subscribing and let me know how you are getting on in your preparation through our Facebook Group. Feel free to forward this email to anyone you think will benefit.
If you wish to unsubscribe: You can stop receiving the newsletter at any time by emailing us at newsletter@glintiss.co.uk with ‘unsubscribe’ as the subject. We will promptly remove your email address from our mailing list. Thank you for being with us.
You will hear from me again soon.
All the best
Dr Ioannis Glinavos
Leave a Reply