CIMA BA4 General principles of the legal system, contract and employment law: practice questions with answers

Answer: C. Civil law systems (much of continental Europe, Latin America and parts of Asia and Africa) derive from Roman law. Their law is set out in comprehensive written codes (for example France's Civil Code); judges interpret and apply the code, and previous decisions are persuasive rather than binding. Procedure tends to be inquisitorial. Common law systems (England and Wales, the US and many Commonwealth countries) give a central role to judge-made law and binding precedent, alongside legislation, with an adversarial procedure.

Answer: C. Under stare decisis (let the decision stand), courts must follow decisions of higher courts (and in some cases their own earlier decisions) on the same point of law. Only the ratio decidendi, the legal principle or reasoning necessary to reach the decision on the material facts, is binding. Obiter dicta, statements of law not necessary for the decision, and dissenting judgments are persuasive only. A precedent can be avoided by distinguishing the material facts, or overruled by a higher court.

Answer: C. The courts use several tests to decide whether a person is an employee (contract of service) or an independent contractor (contract for services):

- Control test – does the employer control what is done and how, when and where?
- Integration test – is the person an integral part of the organisation?
- Economic reality (multiple) test – considering all factors, including personal service, mutuality of obligation, who provides equipment, who takes the financial risk and opportunity for profit, and how the arrangement is described.

Strong control and the requirement to work personally indicate employment. The distinction matters for employment rights, vicarious liability and tax.

Answer: A. Agreements that lack one of the essentials of a valid contract may be:

- Void: of no legal effect from the start, so neither party can enforce it (for example, a contract to commit a crime).
- Voidable: valid, but one party has the right to set it aside, for example where that party was induced to enter it by misrepresentation or duress. Until it is avoided, it remains binding.
- Unenforceable: valid, but the courts will not enforce it, for example because a required form of written evidence is missing.

A contract is discharged when the obligations under it come to an end.

Answer: A. Wrongful dismissal is a common law claim for breach of contract, usually dismissal without proper notice. The remedy is damages, normally the pay and benefits the employee would have received during the notice period, less any amounts earned in mitigation. The courts will not order an employer to continue employing someone (no specific performance).

Unfair dismissal is a statutory claim under the Employment Rights Act 1996, heard by an employment tribunal. Its remedies are:

- reinstatement (the employee returns to the same job, treated as if never dismissed);
- re-engagement (employment in a comparable or other suitable job with the employer or an associated employer); and
- compensation (a basic award and a compensatory award).

So re-engagement is available only for unfair dismissal.

Answer: B. Criminal law deals with conduct regarded as a wrong against society. Cases are normally brought by the state (in England, usually the Crown Prosecution Service) against the defendant, who must be proved guilty beyond reasonable doubt. Punishments include fines and imprisonment.

Civil law deals with disputes between private parties, such as contract, tort and employment. The claimant sues the defendant and must prove the case on the balance of probabilities. The usual remedy is compensation (damages) or an equitable remedy.