Answer ANY TWO questions.
All questions carry equal marks.
Q1. (a) ‘Consideration must be sufficient but need not be adequate.’
Critically assess the accuracy of this statement
(b). The N Bank has lent Fred £20,000 which is due for repayment on December1. Learning that Fred’s employers, X Ltd, is on the verge of insolvency, it asks Fred in early November for immediate repayment because it fears that Fred may be unable to repay the loan when the time comes for repayment. Fred replies that he can only give the Bank £15,000.The Bank agrees to accept the £15,000 in full settlement of the debt.
(i) Would the N Bank be able to sue Fred for the outstanding £5,000?
(ii) Would your advice be different, if Fred’s father, John, had asked the N Bank if he could settle his son’s debt, by the father giving the N Bank £15,000 on December 1 and the Bank agreed to accept the smaller sum from John in full settlement of the debt.
Q2 (a) Distinguish between the actual and ostensible authority of an agent.
(b). Fnancing Ltd appointed Arthur as its agent to buy investment stock for it from John, a stockbroker, and from a number of stockholders. Arthur purchased the stock and Financing Ltd paid John and the other stockholders for it. Six months later, Financing Ltd became dissatisfied with Arthur’s work and wrote to him on May 1 telling him that it did not want him to continue buying stock for it. On June 1, Arthur, claiming that he was still the agent of Financing Ltd, bought stock on credit from John. Financing Ltd is refusing to pay for the new stock purchased by Arthur.
Advise John on the liability of Financing Ltd, if any, and of Arthur for the payment of the stock .
Q3. (a) What is the effect where a signature on a bill of exchange is forged or placed thereon without the authority of the person whose signature it purports to be?
(b) How far is a paying bank protected by law when paying a cheque to a person who is not the rightful owner of it?
