Business Law Final Review

Business Law

Final Review

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Subject Areas

The exam covers the areas we have looked at since the midterm

Employment Law

Negligence (Tort)

Agency

Partnership

Company Law

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Contract of Employment

A person who does work in terms of a contract of service is an employee.

A contract of service is a contract of employment

A person who does work in terms of a contract for services is not an employee

They are an independent contractor

Therefore, they have no rights as an employee

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Contract of Employment (cont.)

The relationship between employer and employee is governed by a contract of employmentIt is very important to know if a person is an employee because only employees have certain rights in Employment Law Discrimination Unfair dismissal Redundancy Notice on termination of employment

Also an employer may be vicariously liable for the negligence of an employee

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Contract of Employment (cont.)

The courts have developed several tests to decide what is a contract of service Control Test Integration Test Multiple Test Mutuality of Obligations Test

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Equal Pay

The Equal Pay Act 1970 requires that employers treat men and women equally in terms of pay, holidays, sick pay and hours of work

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Sex Discrimination

The law relating to sex discrimination in employment is in the Sex Discrimination Act 1975

It applies to people who seek employment under a contract of services, or those employed under a contract of services

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Direct Discrimination

Direct discrimination occurs where a person is treated less favourably because of his/her sex or marital status.

In order to show that you have been discriminated against, you have to compare yourself with a person of the opposite sex

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Sexual Harassment

Sexual harassment is a form of direct discriminationHarassment occurs where someone’s actions have the purpose or effect of violating another person’s dignity, or create a hostile, degrading or offensive environmentSexual harassment includes physical behaviour, sexual banter, pornographic images, etc

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Indirect Discrimination

Indirect discrimination occurs where there is behaviour which does not seem to treat people differently, but the effect of the behaviour is discriminatoryThis occurs where some condition or practice is applied to men and women equally, but which has a negative effect on a larger number of women than men (or vice versa)

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Indirect Discrimination (cont.)

For example, Price v. The Civil Service CommissionTo get a particular job in the Civil Service, applicants had to be between 17.5 and 28 years oldPrice complained that this condition was indirect discrimination as women between those two ages were more likely to be temporarily out of the labour market because they were having children or were looking after young childrenThe court agreed

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Race Discrimination

The law relating to race discrimination in employment is in the Race Relations Act 1976

Discrimination is unlawful if it is based on racial grounds

“Racial grounds” is defined in the Race Relations Act as any of “colour, race, nationality, or ethnic or national origins”

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Direct Discrimination

Direct discrimination occurs where a person is treated less favourably because of his/her race.

In order to show that you have been discriminated against, you have to compare yourself with a person of another race

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Racial Harassment

Racial harassment is a form of direct discrimination

Harassment occurs where someone’s actions have the purpose or effect of violating another person’s dignity, or create a hostile, degrading or offensive environment

Racial insults are a form of harassment

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Indirect Discrimination

Indirect discrimination occurs where there is behaviour which does not seem to treat people differently, but the effect of the behaviour is discriminatoryThis occurs where some condition or practice is applied to people of different races equally, but which puts some races or ethnic groups at a disadvantage when compared with other people

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Indirect Discrimination (cont.)

For example, if an employer requires its female employees to wear skirts, Muslim women will not be able to follow this rule as their religion requires them to keep their legs covered

However, it is not indirect discrimination if the employer can show that the condition or practice is justified

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Unfair Dismissal

Under the Employment Relations Act 1996, employees have the right not be unfairly dismissed

That means the employer has to show that it was reasonable to dismiss the employee

The Act provides greater protection and more remedies than Common Law

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Qualification

Protection under the Employment Relations Act is limited to employees

ie people employed under a contract of service

This is one times when it may be important to know if a person is an employee or not

In addition, the employee must have at least 1 year’s continuous employment

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Constructive Dismissal

One of the most important protections for employees in the area of unfair dismissal is the idea of constructive dismissal

This means that the behaviour of the employer gives the employee no choice but to resign

This is intended to prevent situations where the employer does not dismiss the employee directly, but makes life so unpleasant for him/her that s/he is forced to quit

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Negligence

Negligence is a kind of tort which aims to give compensation to an injured partyIn order to make a successful claim in negligence, the claimant must show

1. a duty of care owed by the defendant2. a breach of that duty by the defendant3. the breach resulted in injury/damage to the claimant

In other words, the defendant owed a duty of care to the claimant, but he breached that duty and the breach caused some injury to the claimant

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Foreseeable Consequences

A defendant is not liable for consequences which are too remoteA defendant can only be liable for foreseeable consequencesIt is not necessary for the defendant to foresee how severe the injury could beNor does the defender have to foresee the exact way in which the injury could be caused

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Novus Actus Interveniens

The question of remoteness and causation can arise where some new event occurs after the negligent eventFor example, David negligently collides with Calum’s car and injures him. On the way to the hospital the ambulance driver crashes into a tree and causes Calum severe injuries. Is David liable not only for the original injuries but also for the more serious later injuries caused by the ambulance driver?

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Novus Actus Interveniens (cont.)

This is the problem of a new and intervening cause (in the cases this is often expressed in Latin as nova causaThe technical name for this is novus actus interveniens. Clearly if it had not been for David’s negligence Calum would not have been in the ambulance and would not have suffered further injuries.

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Novus Actus Interveniens (cont.)

There are 3 categories where a new act can break the chain of causation

A natural event

An act of a third party

An act of the claimant

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Defences

The defendant may be able to reduce his liability or avoid liability altogether by pleading one of the following defences

Contributory Negligence This is where some action by the claimant

contributed to his injury This only reduces the amount of compensation

which the defendant has to pay

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Volenti Non Fit Injuria

Volenti Non Fit Injuria This means that the claimant consented to his

injury or to the risk of injury However, this does not mean that the defendant

can behave recklessly Must observe ‘the rules’, for example

If the court accepts this defence then the defender will not be liable in negligence to the claimant

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Employers’ Liability

Employers’ Liability is a special kind of Negligence

It gives employees the right to sue the employer if they are injured at work due to the negligence of their employer arising out of the course of employment

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Employers’ Liability (cont.)

The employer’s duty of care means providing: competent staff safe plant and equipment a safe place of work a safe system of work

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Vicarious Liability

Vicarious Liability means that an employer can be held liable for the negligence of an employee To make a claim based on vicarious liability, you need to show the following

1. The person who injured you was negligent2. The person was an employee (that is, s/he had a

contract of service)3. The employee caused your injury during the

course of their employment • Includes things which are incidental to employment,

like toilet breaks

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Agency

Definition: An agent is a person who is authorised to

represent another person, who is called the principal.

The agent creates a legal relationship between the principal and a third party.

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Creation of Agency

The principal/agent relationship can be created in several ways

Express Appointment

Ratification

Implication

Necessity

Estoppel

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Implied Actual Authority

This authority covers the situation where a third party is entitled to assume that the agent has been given the power to do something by his principal, even though the agent may not have been give that power expressly

In other words, a third party can assume that someone has the powers which a person in the agent’s position usually has, whether or not the agent has been given those powers expressly

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Implied Actual Authority (cont.)

For example, in Watteau v Fenwick, the new owners of a hotel employed the previous owner as the managerThey expressly told him that he could not buy certain things, including cigarsHowever, the manager bought cigars from a third partyThe third party sued the owners for payment as the manager was their agent

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Implied Actual Authority (cont.)

The court held that buying cigars was within the usual authority of the manager of a hotel

If the owners wanted to limit the manager’s authority in buying things then they would have to tell third parties of the limits of his authority

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Partnership

Partnership is one of the three ways of owning a business

The Partnership Act 1890 defines a partnership as the relationship “between two or more persons carrying on a business in common with a view to profit”

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Partnership (cont)

A partnership does not have a separate legal identity from its partners

However, a partnership can have its own name and sue and be sued in that name

Partners are agents for their firm and the other partners, so the rules from the law of agency apply especially implied authority

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What is a Company?

A company is a body corporate or corporation

Because of this, companies have their own separate identity

This concept of separate legal personality has several consequences

1. Limited liability of members for company debts

2. Perpetual successionA company does not end due to the death or bankruptcy of its members

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What is a Company? (cont.)

3. Business property is owned by the company and not its shareholders

4. Court actions and ContractsA company can sue and be sued in its own nameA company can enter into contracts in its own name

5. Liability in tort and crimeA company can be vicariously liable for the negligence of its employeesCompanies can be convicted of crimes

6. The rule in Foss v HarbottleA majority of shareholders must agree to take action to protect their company

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Comparison of Ownership

It is useful to compare the advantages and disadvantages of the three forms of business Sole trader Partnership Company

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Sole Trader - Advantages

No legal filing requirements or fees and no professional advice is needed to set it up.

You just literally go into business on your own.

Simplicity – one person does not need a complex organisational structure.

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Sole Trader - Disadvantages

The disadvantages are that it is not a particularly useful business form for raising capital (money). For most sole traders the capital will be provided by personal savings or a bank loan.Unlimited liability – the most important point to note in terms of comparing this form to the company in that there is no difference between the sole trading business and the sole trader himself. As a result he has personal liability for all the debts of the business.

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Partnership - Advantages

No formal legal filing requirement involved in becoming a partnership beyond the minimum requirement that there be two members of the partnership.

Easier to obtain capital as there can be up to 20 members of the partnership, all of whom could pool their investment within the partnership.

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Partnership – Advantages (cont.)

If you are aware of the problems the Partnership Act can cause (see disadvantages) then you can draft a partnership agreement to vary these terms of the Act

The partnership agreement can therefore be used to provide a very flexible organisational structure although this usually involves having to pay for legal advice.

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Partnership - Disadvantages

A partnership will end on the death of a partner. If you are unaware of this when the partnership is formed, the Act may not reflect the intention of the partners.The partners are jointly and severally liable for the debts of the partnership. This means that each partner can be sued for the total debts of the partnership

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Company - Advantages

Companies are designed as to make it easy to raise capital.

Companies have the ability to subdivide their capital into small amounts, allowing them to draw in huge numbers of investors who also benefit from the sub-division by being able to sell on small parts of their investment.

Limited liability also minimises the risk for investors and is said to encourage investment.

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Company – Advantages (cont.)

It is also said to allow managers to take greater risk in the knowledge that the shareholders will not lose everything.

The constitution of the company provides a clear organisational structure which is essential in a business venture where you have large numbers of participants.

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Company - Disadvantages

Forming a company and complying with company law is expensive and time consuming.It also appears to be an very complex organisational form for small businesses, where the Board of Directors and the shareholders are often the same people