LW282: Business Law
Outline Solutions (May/June 2014)
_________________________________________________________________________
Section A
1.
Students can choose from a range of methods of alternative dispute resolution for example,
arbitration, mediation, negotiation or the ombudsman. ADR helps parties to resolve disputes
outside the court system. Advantages of ADR are considered to be wide ranging and can
include it is generally a quicker and more cost effective way of resolving disputes,
proceedings are held in private and therefore sensitive or competitive information stays
confidential, specialist practitioners are able to use their knowledge to resolve disputes more
quickly with their expert knowledge and decisions that are in line practice, the law is not
always central to the process which can assist in terms of taking into account a wide range of
factors.
2.
A company has limited liability because it has its own separate legal personality. This legal
personality is separate and distinct from that of its shareholders, directors or employees. A
company is a corporate entity. This legal principle is supported by the case of Solomon v
Solomon & Co Ltd (1897) HL. Students may also choose to include the facts of this case to
support their answer and the decision that was held by the courts, that Saloman was a
separate person from the company.
3.
The definition for a general ordinary partnership is found in statute. Partnership is the
relationship that subsists between persons carrying on a business in common with a view to
profit’ s1(1) Partnership Act 1890. A general ordinary partnership has no separate legal
personality. Under section 9 Partnership Act 1890 all partners are jointly liable for all debts.
Under section 10 all partners are jointly and severally liable for any torts committed by
members of the partnership.
4.
Students should explain that frustration occurs when an event outside the parties control
makes it impossible for a contract to be performed. To prove that a contract has been
frustrated, the person claiming must prove, the supervening event radically changed the
nature of the contractual obligation. Students can cite destruction of subject matter, personal
incapacity, illness, death, government intervention, non-occurrence of event and supervening
illegality. Students can support each ground with a relevant case and or example.
5.
Students should explain that in order to be successful in an action for negligence a person
must establish the three essential elements, the defendant owed the claimant a duty of care,
the defendant breached that duty of care and that it was reasonably foreseeable damage
was caused by the breach of the duty. Students may support there answers with a case and
can include Donoghue v Stevenson (1932), Caparo Industries v Dickman (1990), Home
Office v Dorset Yacht Co (1970), Nettleship v Weston (1971).
6.
A constructive dismissal occurs when an employee is entitled to resign without giving any
form of notice because of the employer’s behaviour. Constructive dismissal is set out in the
Employment Rights Act 1996. The employee is entitled to compensation. For constructive
dismissal to be found, an employer must have acted or behaved in such a way to breach the
employees contract of employment. Constructive dismissal cases often involve a breach of
an implied term of a contract for example that of mutual trust and confidence. Western
Excavations (ECC) Ltd v Sharp (1978) lays out three conditions for deciding if a resignation
can be treated as constructive dismissal, employer must have done something to breach the
contract, employee must resign shortly after, employee must resign because of that breach.
Section B
1.a.
Judicial (binding) precedent
This question requires discussion of a combination of the
following factors:
A distinctive feature of English Legal System. Judges bound by
the law of binding precedent when exercising creative or
interpretative functions. Holds judges in lower ranking courts
bound to follow legal principles, formulated by judges in higher
ranking courts. Hierarchy of the courts, House of Lords most
senior of English Courts, decisions made in this court bind all
others. Treat own decisions as binding but can depart where facts
permit. Court of Appeal – its decisions are binding on all lower
courts and binding on future Court of Appeal judges. Ratio
decidendi – the reason for the decision – binds future courts. This
is the statement of law applicable to the legal problem raised by
the material facts. Consider facts of current case & whether facts
come within the scope of law in previous decision. Reversing
overruling decisions, persuasive decisions. Distinguishing facts
allows judges to avoid precedents.
Advantages
Candidates should give a clear understanding of the broad range
of advantages & disadvantages & demonstrate appropriate
knowledge based on the following;




Disadvantages





Promotes certainty - assists litigants, assists predictions of
cases
Flexibility – higher judges can overrule own decisions,
ability to distinguish cases on individual facts.
practical nature – principles developed in response to
actual problems
speed – can help the development of law
Uncertainty – powers to distinguish can lead to confusing
decisions & distorted applications of case law
Rigidity – certainty preserved by rigid rules that inhibits
development of law
Vast amount of case law can mean relevant principles are
overlooked during litigation, resulting in increased cost to
litigant.
Haphazard development – changes in law depends on
facts of case reaching appropriate higher court, litigants
precluded because of cost
Undemocratic
1.b.
Candidates can include the following in their answer:
 Bill – first reading formal introduction to the House of Commons, a formality to
announce the existence of the Bill.
 Bill – second reading and full debate on the general principles, starts with a speech
from the minister proposing the Bill.
 A vote will then be taken, provided a majority is reached the Bill proceeds to the
next stage
 Bill then passes to the Committee Stage 25 – 45 members, proportional
representation.
 Bill – Report Stage, to report on finding, any amendments then reported to the
House of Commons
 A further vote is taken
 Bill – third reading, followed by a short debate, verbal only amendments
 A further vote
 The bill passes to the House of Lords and follows a similar procedure as listed
above
 A final vote is taken
 Royal Assent, must be receive before the Bill becomes an Act
2.
A straightforward discussion question on the formation requirements and liability of a
general/ordinary partnership and a company.
Partnership – relationship that subsists between persons carrying on a business in common with a
view to a profit s1(1) Partnership Act 1890. In an unlimited partnership, all members accept
unlimited liability for business debts. No rules to formation. Can be by written or oral agreement or
implied by conduct. Lack of regulatory requirement may be an advantage. The partners are bound
by internal duties to each other and are in a position of trust and operate on the basis of mutual
trust.
This has advantages and disadvantages, profit and assets can be shared according to agreed
figures – partnership agreement. The partnership has no separate legal personality. Do not need to
declare accounts to the general public. This is often seen as an advantage in terms of
accountability. All partners are liable for the acts of each other in contract and in tort and this could
be a disadvantage. If a partner leaves the partnership is dissolved. A further advantage is that
every partner has a right to participate in the management of the company.
A company; Most relevant - company limited by shares. A company is an entity which is registered
and operates under the Companies Act 2006. Noah and Lola would have to complete the
necessary registration forms and supply these to Companies House. In accordance with Part 2
Companies Act 2006 this includes;




An application for registration – includes the Articles of Association
Memorandum of association
A statement of compliance – stating all the 2006 CA requirements are met
The appropriate fee
Property of the company belongs to the company and debts are settled by the companies’ assets.
The liability of its members is limited, seen as an advantage. Salomon v Salomon & Co Ltd (1897).
A company has ‘perpetual succession’ until wound up – change of ownership does not affect its
existence. A company makes its own contracts, can own premises and property in its own right. A
company is managed differently to a partnership. Noah and Lola could both be the main
shareholders/directors initially as the company is small. Accountable, accounts must be produced
annually for the Register of Companies, even if a small company and the publicity may be seen as
a disadvantage as it is expensive and a burden.
The partnership will be able to draw on the existing skills of Noah & Lola. A partnership may be a
viable option for their first business provided a partnership agreement is drawn up as the assets of
the business will still be owned by Noah & Lola. However a business in the competitive world of
advertising may be considered to be more of a high risk and setting up a company may be more
appropriate in terms of limiting liability.
3.
This is a question based on the law of contract based on the
principles of offer and acceptance;
Valid offer, revocation
Students must explain the principles of a valid offer from
Giovanni to Sam, principle of an offer made on certain terms.
Guthing v Lynn (1931), intending to be binding and
communicated to offeree (Giovanni) which it is, as Giovanni
offers to sell the cappuccino machine to Sam for £5,000.
Candidates should explain Sam’s acceptance is conditional on
being able to raise the finance and as such is not a legally
binding acceptance.
The law requires acceptance to be
unconditional.
Candidates should explain an offer can be revoked at any time
by the offeror and Giovanni’s attempts to do this by writing a
letter to Sam informing him that he no longer wishes to sell the
boat. Candidates must note that revocation is not effective until
received Byrne v Van Tiehoven (1880) Routledge v Grant (1828)
. Notice of revocation is crucial and Sam does not receive notice
of revocation until after he has accepted the offer. The Postal
Rule does not apply to revocation. Therefore revocation will not
take place until Sam receives and reads Giovanni’s letter.
Acceptance
Candidates should express this is the unconditional assent to all
terms on offer. Can be oral, in writing or inferred by conduct. To
be binding acceptance must be a mirror image of offer, firm and
communicated.
Sam accepts the offer by leaving a message for Giovanni on his
answer phone, to be effective acceptance needs to be heard by
Giovanni Entores v Miles Far East Corp (1955) or Brinkibon v
Stahag Stahl und Stahl (1983). This occurs when Giovanni
listens to the message. At this point a valid acceptance is made.
Acceptance – communication – Postal Rule, Adams v Lindsell
(1893). Although it has not been expressly agreed between the
parties that acceptance may occur by the post. If it is considered
a reasonable means of acceptance, Giovanni’s offer will be
deemed to have been accepted as soon as Sam posted the letter
to Giovanni, provided the letter was stamped and addressed
correctly. Effective from the moment of posting even if it does not
arrive.
Strong possibility a valid contract has been made which Sam can
seek to rely on if reasonable to rely on postal rule although
acceptance by message left on answer phone will suffice.