Business Law Flashcards

Question 1

Q

The United Kingdom of Great Britain and Northern Ireland (UK) has three distinct legal systems and sets of laws:

Answer

A

those relating to England and Wales
those relating to Scotland
those relating to Northern Ireland.

Question 2

Q

Public Law (3) vs Private Law (3)

Answer

A

Public Law involves:

the relationship between individuals and the state
is concerned with the decisions by, and control of, government bodies.
is made up of Criminal Law, Constitutional Law, and Administrative Law

Private Law:

is concerned with the rights and duties between individuals
covers areas of law such as contract, tort, property, company, and family law.
The individuals may be private persons, companies, or even a state body such as a local authority if, for example, a citizen has a contract with that local authority.

Question 3

Q

Differences between Civil and Criminal Law

Question 4

Q

Basic Terminology

Appellate jurisdiction

Civil jurisdiction

Criminal jurisdiction

Original jurisdiction

System of hierarchy

Answer

A

Appellate jurisdiction

Courts which have the authority to hear cases that have previously been heard in a lower court.

Civil jurisdiction

Cases which are concerned with disputes between private citizens or citizens and the state.

Criminal jurisdiction

Cases concerned with accusations against persons who have broken the criminal law.

Original jurisdiction

Courts which have the authority to hear cases for the first time where no previous decision in that particular case has been made.

System of hierarchy

The higher courts have greater authority than those lower down the structure.

Question 5

Q

Basic Terminology

Bill

Common law

Convention/Treaty

Court of Justice of the European Union

Delegated legislation

European Court of Human Rights

Obiter dicta

Parliamentary sovereignty

Ratio decidendi

Answer

A

Bill

A document of proposed law to be discussed by Parliament which if passed is called an Act.

Common law

Generally means law developed by judges through decisions in courts as opposed to laws created by Parliament.

Convention/Treaty

An international agreement between states.

Court of Justice of the European Union

The Court of the European Union, dealing with interpretation and breaches of EU law.

Delegated legislation

Laws made by a body other than Parliament, under powers given by Parliament.

European Court of Human Rights

The Court set up as the guardian of the European Convention on Human Rights, dealing with breaches of fundamental human rights.

Obiter dicta

Part of the judgment of a case giving comments on the law but not with reference to the actual facts of the case. Persuasive statements of the law.

Parliamentary sovereignty

The doctrine which states that laws made by Parliament are the highest form of laws in the UK and must be obeyed by the courts. This has been modified by membership of the EU.

Ratio decidendi

Part of the judgment of a case giving the legal reasons for the decision. These are binding statements of the law.

Question 6

Q

The characteristics of English Law (5)

Answer

A

Long piecemeal development (small changes)
Absence of codification in many areas
Judges create, as well as interpret the law
Adversarial system of trial (having or involving opposing parties or interests in a legal contest)
Role of lay people

Question 7

Q

Classification of English Law

Private Law vs. Public Law

Answer

A

Public Law

Constitutional and administrative law
Criminal Law

Private (civil) Law (relationships between individuals)

Tort

 - Negligence
 - Nuisance
 - Damage to business interests

Family law
Probate

Property

 - Land
 - Chattels (personal possession)
 - Intellectual (intangible creations of the human intellect)

Company and partnership law
Contract

Question 8

Q

Classification of English Law

Common law vs statutorily law

Answer

A

Common law = Judge-made law as distinguished from legislation passed by Parliament.

Statutory law = law that is created by the legislature in written statutes, as opposed to the unwritten law or common law

Question 9

Q

Civil and Criminal Law Differences - Purpose

Answer

A

Criminal

To regulate behaviour
To promote public order
To preserve national security

Civil

To govern the relationships between individuals (or corporations)
To enforce individual rights and duties

Question 10

Q

Civil and Criminal Law Differences - Who are the parties

Answer

A

Criminal

Generally started by the police
The State prosecutes the defendant

Civil

Generally started by an individual/company (claimant)
Sues another individual/company (defendant)

Question 11

Q

Civil and Criminal Law Differences - Where is the case heard

Answer

A

Criminal

Proceed to trial in the Magistrates Court (summary offences (minor offences) and offences triable either way)
Or the Crown Court (indictable offences (worst crimes) and offences triable either way)

Civil

90% of cases heard in the County Court
Or High Court (if more serious)
Or specialised Tribunals
Or Alternative Dispute Resolution (ADR) eg. mediation

Question 12

Q

Civil and Criminal Law Differences - Burden of proof

Answer

A

Criminal

“Beyond reasonable doubt”
The burden of doubt falls to the prosecution who must prove “beyond reasonable doubt” that the defendant is guilty

Civil

“On the balance of probabilities”
The burden of proof is usually on the claimant who must prove his case “on the balance of probabilities”

Question 13

Q

Civil and Criminal Law Differences - Penalties

Answer

A

Criminal

Purpose: punishment; protection; rehabilitation; deterrence
Examples: fine, imprisonment, community service and probation

Civil

Purpose: to correct the wrong: to compensate the person who has suffered a loss
Examples: Damages, injunction, restitution; specific performance

Question 14

Q

Civil and Criminal Law Differences - Language

Answer

A

Criminal

Prosecution/ the Crown v. the defendant;

Eg. R v Thomas - R meaning Rex or Regina meaning King or Queen in Latin

Civil

Individual claimant v. the defendant

Eg. Harvey v Facey (1893)

Only Liability - Someone is liable for …

Question 15

Q

Common Law (5) vs Equity (5)

Answer

A

Common law

Developed by Chancellors, In dealing with petitions addressed to the King from citizens complaining about the rigidity of the common law
Complete system of law
Does not recognise the existence of equity?
Upholds rights irrespective of the motives or intentions of the parties
Remedies available as of right

Equity

Developed by circuit judges from English customary law applying the principle of stare decisis
Complements the common law, but could not replace it
Acknowledges the common law and tries to provide an alternative solution
Originally, a court of conscience which ordered the parties to do what was just and fair. These principles are contained in equitable maxims, e.g. “He who seeks equity must do equity’ and ‘Delay defeats equity’
Discretionary remedies

Question 16

Q

Main features associated with civil and common law systems

Answer

A

Common law systems

Main source of law= codes and statutes
Role of judges investigator (known as inquisitorial systems)
Origins: Continental Europe
Advantages: Stable and fairer

Civil law systems

Main source of law= judicial cases and statutes
Role of judge arbiter (knows as adversarial systems)
Origins: England and former British Empire:
Advantages: Flexibility

Question 17

Q

There are three main sources of English law:

Answer

A

A. Parliament - (Statutes)
B. The Courts - (Common Law/Case Law)
C. International law/EU law?

Question 18

Q

A. Act of Parliament (statutory law) (3)

Answer

A

Theory of Parliamentary sovereignty

Direct (primary) legislation: E.g. Health and Safety at Work Act 1974
Indirect (delegated) legislation: E.g. Management of Health and Safety at Work Regulations 1992; Lifting Operations and Lifting Equipment Regulations 1998.

Parliament is the supreme law-making power in the UK

The Courts cannot, generally, strike down as invalid an Act of Parliament.

Question 19

Q

Advantages (3) and disadvantages (2) of delegated legislation

Answer

A

Advantages:

Speed
Flexibility
Technical/local knowledge

Disadvantages:

Certainty in the law
Laws passed by unelected officials/bureaucrats

Question 20

Q

Judicial rules and principles of statutory interpretation (4)

Answer

A

The literal rule:
e.g. Whitely v Chappell (1868-9); London and North Eastern Railway Co v Berriman (1946); Fisher v Bell (1961)
The golden rule: (a rule of construction that interprets a provision, usually a statute, according to the ordinary sense of the words, unless it produces an illogical or inconsistent result)
e.g. R v Allen (1872); Adler v George (1964)
The mischief rule: (a rule of statutory interpretation that helps courts to identify the problem that a law seeks to remedy, and then interpret the language of the law in order to achieve the intended outcome)
e.g. Smith v Hughes (1960)
The purposive/teleological method (an approach to statutory and constitutional interpretation under which common law courts interpret an enactment within the context of the law’s purpose)

Question 21

Q

How are statutes interpreted? – Aids to interpretation

Judges can interpret legislation but NOT fill the gaps and to help them, judges may use a number of tools:

Answer

A

Intrinsic aids:

Aids to interpretation found in the statute itself.
For example, the 1963 Animal Boarding Act section 5(2) states: ‘In this Act animal means any dog or cat.’
2. External aids:

Interpretation Act 1978
Government Reports
Parliamentary Reports (Hansard) - Pepper v Hart (1993)
Official Reports
Oxford English Dictionary and relevant legal textbooks

Question 22

Q

How are statutes interpreted? – Statutory presumptions

Answer

A

The Courts will assume that certain features are implied in all legislation. These presumptions include the Act of Parliament in question:

Applies to the whole of the UK
Does not breach any of the UK’s international agreements
Does not alter the common law
Does not repeal earlier Acts of parliament
Does not interfere with a person’s liberty, private property, or other rights.
Does not operate retrospectively, i.e. its provisions are not backdated to a date before the act was passed.
Provides that intention to commit the action must be present for criminal liability.
Does not intend to remove any matter from the jurisdiction of the courts.

However, if a statute makes it clear that one or more presumptions are not applicable, then the courts must follow the law set down in the statute even if the law adversely affects the rights and liberties of citizens

Question 23

Q

Sovereign (definition)

Answer

A

A chief ruler with supreme power

Question 24

Q

B. The Courts (Case law)

Answer

A

Judge-made law is based on the doctrine of binding precedent (stare decisis);

Depends on several factors:

Court hierarchy
Whether the facts come within the scope of the previous case
Whether what the judge said was in the ratio decidendi or merely obiter dicta.

Question 25

Q

The routes for civil and criminal courts

Question 26

Q

How judicial precedent works

Question 27

Q

Ratio Decidendi

Answer

A

Ratio decidendi (a Latin phrase meaning the ‘reason for deciding’)

Constitutes that part of the judgment that will bind future courts when deciding later cases with similar facts
It is the ratio decidendi that forms the binding precedent E.g. The Supreme Court decides that ‘Andrew did X and its decision is Z…’ It is the legal principle of the case.
Hence, when a similar X issue comes up in the Court of Appeal or another lower court, they must follow the decision Z of the Supreme Court unless and until the Supreme Court overrule its decision.

Question 28

Q

Obiter Dicta

Answer

A

Obiter dicta (a Latin phrase meaning ‘things said by the way’)

All parts of the judgment which do not form part of the ratio decidendi.
These are often discussion of hypothetical situations: for example a judge might say ‘Andrew did X, but if he had done Y, my decision would have been… D’.
None of the obiter dicta forms part of the case law, although judges in later cases may be influenced by it, and it is said to be a persuasive authority.

Question 29

Q

Example of the application of judicial precedent

Answer

A

In Wolman v Islington LBC (2007) the Court of Appeal found that “It was an offence in Greater London to park a motorcycle on its stand on the pavement with its body and one or both of its wheels on or over the pavement.”

This is how the court interpreted Section 15 of the Greater London Council (General Powers) Act 1974 on any part of the pavement”. Motorbike driver parked his vehicle “with the front wheel of the bike resting on his own property the rear wheel is suspended slightly above the surface of the pavement…”

Question 30

Q

C. International law

Answer

A

Treaties

Customary International law

Question 31

Q

Treaties

Answer

A

Agreements between the UK and other countries/international organisations

Examples include:

The Treaty of the Functioning of the European Union
The European Convention on Human Rights
The EU-UK Withdrawal Agreement
European Union (Future Relationship) Act 2020

Question 32

Q

European Union (EU)

Answer

A

UK joined EEC in 1973 following passing of the European Communities Act 1972;

EU has 4 main institutions:

The Council
The European Commission
The European Parliament
The European Court of Justice (CJEU)

Question 33

Q

How does EU law affect the UK?

Answer

A

EU creates a new source of law (s 2(4) of the European Communities Act 1972 provides that English law should be interpreted and have effect subject to the principle that EU law is supreme (R v Secretary of State for Employment ex parte Equal Opportunities Commission (1994).

The role of the Courts: Because EU law takes precedence over domestic legislation, the role of the courts has changed as a result of the membership.

Domestic courts (whether in the UK or in any other member state) must follow the interpretation of EU law as given by the CJEU

Question 34

Q

What about Brexit?

Answer

A

The EU-UK Withdrawal Agreement (Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community) is a treaty that set the terms of the withdrawal of the UK from the EU and Euratom.

The European Union (Withdrawal Agreement) Act 2020 implemented this agreement into the UK domestic legal order.

As of the 31st of January 2020, the UK is not an EU MS anymore.

But, it still had to follow EU rules until the end of the transition period which ended in the 31st of December of 2020.

The EU and the UK reached a trade agreement EU–UK Trade and Cooperation Agreement and was implemented in the UK’s legal order by the European Union (Future Relationship) Act 2020

Question 35

Q

European Convention on Human Rights (ECHR)

Answer

A

European Convention on Human Rights (ECHR) adopted in 1950;
This is an international source of law;
SEPARATE from law and institutions of the EU;
ECHR provides absolute, limited and qualified human rights;
Human Rights Act 1998 (HRA), came into force October 2000.
The HRA implements the Convention rights in the domestic legal order making it easier for those rights to be enforced by UK courts.

Question 36

Q

Provisions of the Human Rights Act 1998

Answer

A

S.2- Courts must consider decisions from ECtHR;
S.3- all UK legislation must be interpreted in line with Convention rights;
S.4- court can declare UK legislation incompatible with Convention rights (however it cannot overrule an Act of Parliament);
S.6- unlawful for public authority to act in a way incompatible with ECHR.

Question 37

Q

Alternatives to the Courts

Answer

A

Tribunals

ADR:
Arbitration
Conciliation
Mediation
Ombudsmen

Question 38

Q

Advantages and disadvantages of ADR

Answer

A

Cost ✔
Accessibility ✔
Speed ✔
Expertise ✔
Conciliation of the parties ✔
Privacy/no loss of reputation ✔

Imbalance of power between parties ❌
Enforcement may be difficult ❌
There is no system of precedent ❌
There is low take-up rate ❌

Question 39

Q

Tribunals

Answer

A

The Tribunals Courts and Enforcement Act 2007

First-Tier Tribunal and Upper-Tribunal

The majority of legal decisions are taken by tribunals

Specialist forum dealing with disputes between individual and government departments (e.g., Tax Chamber; Health, Education and Social Care Chamber)

An exception is the Employment Tribunals and Employment Appeal Tribunal which deal with disputes between employers and employees.

Question 40

Q

Advantages and disadvantages of Tribunals

Answer

A

Cost ✔
Speed ✔
Expertise ✔
Relief of congestion in the ordinary courts✔
Privacy✔

Lack of openness ❌
Unavailability of state funding ❌

Question 41

Q

What is a ‘contract’?

Definition
Vast majority are entered into _______ ________
Can be in?

Answer

A

A legally binding agreement between two or more parties
Vast majority are entered into without formalities
Can be in oral or written form.

Question 42

Q

Types of Contract

Broadly, two types of contract:
3 types of contract:

Answer

A

Speciality contracts;

3 types:
i. Agreements which must be created in the form of a deed;
ii. Agreements which must be made in writing;
iii. Agreements which need only to be evidenced in writing.

Simple contracts.

Question 43

Q

The Offer

Definition
Offeror (definition)
Offeree (definition)

Important to…

Answer

A

Offer = An offer is a proposal made on certain terms by the offeror with a promise to be bound by that proposal if the offeree accepts the terms.

Offeror = person making the offer
Offeree = person receiving the offer

Important to distinguish from an invitation to treat = merely an invitation to negotiate

Question 44

Q

Invitation to Treat (examples)

Advertisements
Goods displayed (in a shop) for sale
Goods displayed (in shelfs) for sale:

Answer

A

Advertisements:
Partridge v. Crittenden (1968)
Goods displayed (in a shop) for sale:
Fisher v. Bell (1961)

Goods displayed (in shelfs) for sales
Where goods are sold on a self-service basis, the customer makes an offer to buy when presenting the goods at the cash desk

Auctions: The auctioneer’s request for bids is an invitation to treat and each bid is an offer that can be retracted at any time before the fall of the hammer
Tenders (where a buyer, in need of goods/services, issues an invitation called a Request for Tender (RFT) to suppliers. Suppliers will then submit a proposal/tender)

Question 45

Q

Advertisements for unilateral contracts

Answer

A

BUT advertisements are not always invitations to treat, they may constitute offers to the public at large.

Example of an offer to enter a unilateral contract

Rhona will pay £100 reward to anyone who finds her lost purse

Question 46

Q

But distinguish from ‘mere puffs or boast’

The advertisement was not a ‘mere puff’ but was ‘…intended to be understood by the ________ as an _______ which has to be acted upon…’

What is a mere puff?

Answer

A

The advertisement was not a ‘mere puff’ but was ‘…intended to be understood by the public as an offer which has to be acted upon…’

Mere puff: A hyperbolic exaggeration, which was not intended to be taken seriously and would not have been taken seriously by a reasonable person.

Example of a ‘mere puff’: Super-white, a manufacturer of washing powder states in an advertisement that ‘our washing powder washes whiter than any other powder…’

Question 47

Q

Statements giving information or expressing an intention

Example: Ben asks Ann: Will you sell me your iPhone? Ann replies to Ben: The lowest price I would sell it is £100. Ben then replies: Great, I agree to buy it for £100.

What is its effect?

Answer

A

*Ann’s reply to Ben is not an offer. It is merely an expression of intention.

Question 48

Q

Termination of an Offer

First 3

Answer

A

By acceptance

Must be absolute, unconditional and COMMUNICATED to the offeror
Silence can never amount to acceptance
Acceptance by Post
postal rule: The general rule for acceptances by post is that they take effect when they are posted, rather than when they are communicated.
Unilateral contracts are usually accepted by conduct. There is no acceptance until the relevant act has been completed.
Problematic situations with communications of acceptance
The rule that acceptance takes effect when it is communicated to the offeror may be displaced where it would be unfair to allocate the offeree the risk of the acceptance not being received.
Battle of the forms:
Standard form contracts common in business transactions;
Each communication which attempts to impose that party’s offers will be viewed as a counter-offer;
‘Battle’ usually won by ‘who fires the last shot’.

By rejection

includes the offeree making a counter offer.
A counter offer terminates the original offer.
E.g. Sarah offers to sell her iPhone to David for £100. David offers to pay £50 but Sarah refuses. David then agrees to pay £100 however Sarah has not yet accepted.
BUT not merely asking for more information:
E.g. Jonathan is making an offer to sell his car to Maria if she pays £2000 by Monday. Maria replies and asks Jonathan if she could buy the goods on credit.

Revocation

An offer may be withdrawn at any time before acceptance:
BUT revocation must be communicated:
Even by a reliable third party:
An offer for a unilateral contract cannot be revoked once the offeree has commenced performance
communication of a withdrawal is effective when it could be read rather than when in fact read

Question 49

Q

Termination of an offer (recap) (7)

Answer

A

By acceptance
By rejection (includes making a counter offer)
By revocation (withdrawal) of an offer
By lapse of time
When reasonable length of time has passed
By failure of a precondition
Death of the offeree

Question 50

Q

Offer (diagram)

Question 51

Q

Recap on the rules of communication for offer & acceptance

Answer

A

Acceptance by post or telegram = effective when posted
Acceptance by an instantaneous method of communication = effective when received
Offers and revocations of offers = offer and revocations of offers are only effective when received regardless of the method of communication used.

Question 52

Q

What are the two main sources of English Law

Answer

A

Legislation passed by parliament (statutory law)

Law created and developed by the courts (common law/case-law)

Question 53

Q

Case law examples

Adams v Lindsell
Legal principle: An acceptance by post take effect when it is ______ rather than when it is ________________

Felthouse v Bindley
Legal principle: silence cannot amount to _____________. A __________ act is required for acceptance to be ___________.

Answer

A

Adams v Lindsell
Legal principle: An acceptance by post take effect when it is posted rather than when it is communicated

Felthouse v Bindley
Legal principle: silence cannot amount to acceptance. A positive act is required for acceptance to be effective.

Question 54

Q

System of judicial precedent

Lower courts need to _________ the ________ of ________ _______

Higher courts can ________ or _______ the ________ of ________ ________

Answer

A

Lower courts need to follow the decisions of higher courts

Higher courts can reverse or overrule the decisions of lower courts

Question 55

Q

How do address a problem question (PQ)?

4 steps?
What method do we use?

Answer

A

A good answer requires:

An identification of the key issues raised by the given facts;
A clear explanation of the relevant points of law;
An application of the relevant law to the given facts;
An indication of the likely outcome.

(Also known as the IRAC method – standing for Issue, Rule, Application (or Analysis), Conclusion)

Question 56

Q

How to address a PQ – Example (2)

On Monday Ben writes to Ann. “You can have my car for £10,000. If you want it, email me by the end of the working day on Friday”. On Tuesday Ben sells his car to Martha. On Wednesday, Ann learns of the sale from Jennifer a friend of Martha’s. Ann then sends immediately an email to Ben to tell him, he accepts the offer. Advise Ann.

[Issue] Is there a valid agreement? (Analysis in terms of offer + acceptance)

[Relevant law] An offer may be __________at any time before it is __________(Routledge v Grant). However, the _________of an offer must be ___________to the offeree (Byrne v Tienhoven). Even by a reliable third party (Dickinson v Dodds).

[Apply the law to the facts of the case/Analysis] Here, Ben makes an offer to Ann which is open until the end of Friday. Ann replies to the offer on Wednesday by accepting it. The question is, therefore, if the offer has been effectively revoked or not. For an offer to be revoked it must be communicated to the offeree (Routledge v Grant). The communication of the revocation can be made by the offeror, which is not the case here, but also by a reliable third party (Dickinson v Dodds). This may be the case since Ann learned from Jennifer before communicating her acceptance that Ben had already sold the car.

[Conclusion] If Jennifer is a reliable third-party then the revocation is effective. If Jennifer is not a reliable third party, then there is no revocation and Ann may be ___________ to _________

Answer

A

On Monday Ben writes to Ann. “You can have my car for £10,000. If you want it, email me by the end of the working day on Friday”. On Tuesday Ben sells his car to Martha. On Wednesday, Ann learns of the sale from Jennifer a friend of Martha’s. Ann then sends immediately an email to Ben to tell him, he accepts the offer. Advise Ann.

[Issue] Is there a valid agreement? (Analysis in terms of offer + acceptance)

[Relevant law] An offer may be withdrawn at any time before it is accepted (Routledge v Grant). However, the revocation of an offer must be communicated to the offeree (Byrne v Tienhoven). Even by a reliable third party (Dickinson v Dodds).

[Apply the law to the facts of the case/Analysis] Here, Ben makes an offer to Ann which is open until the end of Friday. Ann replies to the offer on Wednesday by accepting it. The question is, therefore, if the offer has been effectively revoked or not. For an offer to be revoked it must be communicated to the offeree (Routledge v Grant). The communication of the revocation can be made by the offeror, which is not the case here, but also by a reliable third party (Dickinson v Dodds). This may be the case since Ann learned from Jennifer before communicating her acceptance that Ben had already sold the car.

[Conclusion] If Jennifer is a reliable third-party then the revocation is effective. If Jennifer is not a reliable third party, then there is no revocation and Ann may be entitled to damages

Question 57

Q

How to address a PQ – Example (3)

On Tuesday Gemma sends an email to Jasmine offering to sell her signed by J.K. Rowling Harry Potter book at a knock price of £200 for a quick sale. Jasmine sends a letter back the same day accepting the offer. On Friday, before Jasmine’s letter arrives, Gemma agrees to sell the book to Jane.Advise Gemma.

Gemma has made an _________ offer to Jasmine which she has not ________. The question is, therefore, if Jasmine’s acceptance is __________. The general rule is that acceptance takes effect when communicated (Entores Ltd v Miles Far East Corporation). However, the exception to this is the postal rule (Adams v Lindsell).
The postal rule provides that when an acceptance letter is sent through the post, it is effective when posted rather than when communicated. On the facts of our case, it seems that Jasmine has effectively accepted the offer by post. There is no indication that Gemma specified a method of acceptance that could have negated the application of the postal rule (Holwell Securities v. Hughes). Hence, it is likely that by selling the book to Jane, Gemma is in breach of contract, and she might need to pay damages to Jasmine.

Answer

A

On Tuesday Gemma sends an email to Jasmine offering to sell her signed by J.K. Rowling Harry Potter book at a knock price of £200 for a quick sale. Jasmine sends a letter back the same day accepting the offer. On Friday, before Jasmine’s letter arrives, Gemma agrees to sell the book to Jane.Advise Gemma.

Gemma has made an effective offer to Jasmine which she has not revoked. The question is, therefore, if Jasmine’s acceptance is effective. The general rule is that acceptance takes effect when communicated (Entores Ltd v Miles Far East Corporation). However, the exception to this is the postal rule (Adams v Lindsell).
The postal rule provides that when an acceptance letter is sent through the post, it is effective when posted rather than when communicated. On the facts of our case, it seems that Jasmine has effectively accepted the offer by post. There is no indication that Gemma specified a method of acceptance that could have negated the application of the postal rule (Holwell Securities v. Hughes). Hence, it is likely that by selling the book to Jane, Gemma is in breach of contract, and she might need to pay damages to Jasmine.

Question 58

Q

How to approach a PQ - The Do’s

Answer

A

Read the question carefully (do not skim read)
Identify the key issues raised by the given facts;
Apply the relevant law to the given facts;
Provide a clear and legible answer;
Be specific: e.g. ‘George might be liable to pay damages because a contract has been formed between him and Anna and George has breached the contract…’;
Provide a reasoned conclusion.
Think yourself as a lawyer or professional adviser.

Be neutral, do not take sides. Explain what the legal position is to the party you are asked to advise

Question 59

Q

How to approach a PQ - The Dont’s

Answer

A

Repeating huge chunks of the question with no law in the middle of the repetition
Avoid formulation such as “I believe…” or “I feel…”
No need to rehearse the facts of the question at the start of your answer
Never do this: ‘Dr Christidis said in the lecture that X was the law”
Or this: “In order for a misrepresentation to be actionable the statement must be false…(Jones, p.170)”
If you do not know the law, do not try to write a huge chunk of irrelevant things just in case you make something up
Do not give the facts of the case-law in detail – you do not need them.

Question 60

Q

The formation of a Valid Contract

5 things leading to a contract

Answer

A

An agreement = Offer + Acceptance
Consideration
Intention to Create Legal Relations
Certainty
Capacity

Question 61

Q

Defining ‘consideration’

Does NOT mean that the parties have to consider each ________‘_ _________

Essential element to show agreement should be ________ _________

Began to be defined in the 19th century in terms of ________ and __________

E.g. Thomas v Thomas (1842): ‘some detriment to the plaintiff or some benefit to the defendant’

Modern definitions more about ___________.

Answer

A

Does NOT mean that the parties have to consider each other’s feelings!!!

Essential element to show agreement should be legally binding

Began to be defined in the 19th century in terms of benefit and detriment

E.g. Thomas v Thomas (1842): ‘some detriment to the plaintiff or some benefit to the defendant’

Modern definitions more about exchange.

Question 62

Q

Example

If Amy promises to give her new phone to Bea and Bea promises to give nothing in return, then Amy’s promise is not enforceable because it is not supported by consideration. Bea has not given anything in exchange for the promise of Amy to give away her new phone. This mean that if Amy changes her mind, Bea has __ _____ ______ to _________ Amy’s promise. The promise made by Amy to Bea in the scenario is called a __________ promise and is not ________ _________.

Conversely, if Amy promises to give her new phone to Bea and Bea promises in return £20 or a book, then Amy’s promise is supported by the __________ of ____________. Each party has given something is return for each other’s promise. Therefore, if Amy changes her mind, Bea will be able to _________ that promise and _____ _______.

Answer

A

If Amy promises to give her new phone to Bea and Bea promises to give nothing in return, then Amy’s promise is not enforceable because it is not supported by consideration. Bea has not given anything in exchange for the promise of Amy to give away her new phone. This mean that if Amy changes her mind, Bea has no legal means to enforce Amy’s promise. The promise made by Amy to Bea in the scenario is called a gratuitous promise and is not legally binding.

Conversely, if Amy promises to give her new phone to Bea and Bea promises in return £20 or a book, then Amy’s promise is supported by the element of consideration. Each party has given something is return for each other’s promise. Therefore, if Amy changes her mind, Bea will be able to enforce that promise and vice versa.

Question 63

Q

Promisor & Promisee

In most contracts two promises will be exchanged, so each party is both a promisor and a promisee.

E.g. Ann contracts to paint Ben’s bathroom and Ben promises to pay Ann £200.

Ann is both the __________ to paint the bathroom and the __________ to be paid £200

Ben is both the ___________ to pay Ann £200 and the ___________ to have his bathroom paint.

Answer

A

In most contracts two promises will be exchanged, so each party is both a promisor and a promisee.

E.g. Ann contracts to paint Ben’s bathroom and Ben promises to pay Ann £200.

Ann is both the promisor to paint the bathroom and the promisee to be paid £200

Ben is both the promisor to pay Ann £200 and the promisee to have his bathroom paint.

Question 64

Q

‘Executory’ and ‘Executed’ consideration

What is executory consideration?

What is executed consideration?

Answer

A

Executory consideration: Both parties promise to do something in the future.

Executed consideration: One party promises to do something in return for the act of another

Answer 61

A

A. Consideration must not be past:

Exceptions to this rule:

If the act was done at the promisor’s request and there was an understanding that the requested act was going to be remunerated.

B. Consideration must be sufficient but need not be adequate

Sufficient= must be real, tangible and have some recognisable value;

Adequate= must be of roughly equal value to the other parties’ consideration;

i.e. Consideration must be of some economic value, but not of the same value as that provided by the other party.

C. Performing an existing public duty cannot amount to consideration

BUT
If promisee is under public duty but does something which goes beyond what they are bound to under that duty, that extra act can amount to consideration.

D. Performing an existing contractual duty does not amount to consideration

…unless (1) the promisee takes duties beyond those in the original contract

unless (2) the promisor has received an extra practical benefit

E. Contractual duties to pay debts

Agreements to accept a lower sum is not binding unless supported by fresh consideration:

Where someone owes another money and cannot pay the full amount, they will sometimes offer to pay a smaller sum, on condition that the creditor promises to accept it as full settlement for the debt.

Even if such agreement is made, it is only binding if the debtor provides some consideration for it by adding some extra element.

The Pinnel’s Case (1602) rule:
Payment of a smaller sum will not discharge the duty to pay a higher sum

Answer 62

A

1. Exceptions to this rule under principle of accord and satisfaction:(3)

A. Agreeing to accept lesser sum paid earlier
B. Agreeing to accept something other than money
C. Agreeing to pay in a different way.

2. Promissory estoppel (when a promisee relies on a promise to his or her detriment)

In order to prevent a party from going back on a promise and promissory estoppel to apply:

There must have been an obvious and unambiguous promise by the promisor that he will not enforce his full legal rights;
The debtor must have relied on that promise;
It would be inequitable and unconscionable to go back on what was promised.

Rules of Promissory Estoppel:

It arises in an existing contractual agreement from a promise made by one party to the other party, where the other party has given no consideration
It varies rights within a contract
It cannot be used to create new rights but only to prevent the enforcement of rights
already held
It normally suspends rights for a period of time rather that extinguishing them altogether
It is an equitable principle and therefore the courts will only allow a defendant to use it if it is just to do so in all the circumstances

Agreement by deed

There is one other way in which a promise can be made binding without consideration: it can be put into a document called a deed.

Answer 63

A

Existing contractual duties and promises to pay more

Merely performing an existing contractual duty does not amount to good consideration (Stilk v. Myrick)
An exception to this rule is where something extra is given (Hartley v Ponsonby)
In addition, when the promisor receives a practical benefit and the promisee has relied in his promise (Williams v Roffey)
That practical benefit can amount to good consideration provided there is no economic duress (where a person is forced or coerced to act against his or her will by threats of harm, illegal imprisonment, or other means) (William v Roffey)

Existing contractual duties and promises to pay less

The same applies for contracts regarding the part-payment of debts (Pinnel’s case; Foakes v Beer): payments of a smaller sum will not discharge the duty to pay the full amount if no consideration is given by the promisee.
When an extra element is added, the part-payment of debt can amount to good consideration under the principles of accord and satisfaction
The rule in Williams v Roffey does not apply to promises to pay less.
Hence, for instance, an agreement to pay a debt by instalments to accommodate the debtor does not amount to good consideration (Re Selectmove)…
…But the doctrine of promissory estoppel may operate to make promises to pay less enforceable provided that the promisee has relied on that promise and it would be inequitable to enforce strict legal rights.

Answer 64

A

For business agreements, there is a presumption of intention to create legal relations:
For social, domestic and family arrangements there is a presumption that the parties did not intend to be legally bound by an agreement.

Rebutting the presumption that friends and family members did not intend to create legal relations.

Answer 65

A

Terms - the binding content of the contract that state the parties rights and obligations

Answer 66

A

The terms of a contract must be sufficiently certain; they must not be too vague or incomplete.
However, it may be possible to infer details that make otherwise incomplete or vague terms definite enough to be enforceable.

Answer 67

A

a) Conditions: A term which is clearly an important one, in the sense that a breach of it would have very significant consequences for the innocent party, will usually be regarded by the courts as a condition.

b) Warranties: The word warranty usually describes a contractual term which can be broken without highly important consequences.

Why is the distinction between conditions and warranties important?

Because of the impact that a breach of these terms has on a contract;

Where a condition is breached, the innocent party is entitled to regard the contract as repudiated, and so need not render any further performance, and
can also sue for damages;
Where a warranty is breached the innocent party can claim damages for loss suffered but must continue with the performance of the contract.

c) Innominate terms

Also known as ‘intermediate terms’, these are terms which can be broken with either important or trivial consequences, depending on the nature of the breach. If the effects of the breach are serious, the term will act as a condition; if they are minor it acts as a warranty.

Answer 68

A

Statements made prior to the contract may be either:

a) Terms: This is statement that forms part of a contract;
b) Representations: This is a pre-contractual statement;
c) Mere sales ‘puffs’: not meant to be taken seriously. Traders’ hype. (E.g. “this computer package is incredible value” or “a washing powder that washes whiter
than white”).

Distinguishing between a term and a representation

Factors include:
1) The importance of the statement to the parties
2) The knowledge and skill of the party making the statement
3) Timing of the statement
4) Agreements in writing

Why is the distinction between terms and representations important?

Because of the different remedies available:

Representations:

these are pre-contractual statements that, if found to be untrue, may give rise to a remedy for MISREPRESENTATION but not for breach of contract

Statements that become part of a contract:

are treated as terms, which if breached, will give rise to a claim for damages for breach of contract

BUT distinction less important since Misrepresentation Act 1967.

Answer 69

A

a) Express terms: terms contained within the offer, which become part of the contract once accepted.

b) Implied terms

Implied by statute: e.g. Sale of Goods Act 1979 & Consumer Rights Act 2015
Terms implied by custom: Terms can be implied into a contract if there is evidence that under local trade custom they would normally be there
Terms implied by the Courts (implied in fact)

A term can be implied into a contract to make the contract work – to give it business efficacy

A term will only be implied into a contract by the courts where it is strictly necessary to make a contract workable. A term will not be implied into a contract to make the contract fairer.

Terms implied by the Courts (implied in law)

The courts may imply a term into a contract as a matter of law.

Answer 70

A

These are clauses in a contract that attempt to exclude or limit one of the party’s liabilities to the other party;

Exclusion clause: When the exemption clause attempts to exclude all legal liability;
Limitation clause: When the exemption clause attempts to limit legal liability.

Validity of Exemption Clauses

Three stage test
1. Is the exemption clause incorporated into the contract?
2. Is the exemption clause clear and unambiguous?
3. Is the exemption clause in compliance with statutory law (the
Unfair Contract Terms Act 1977 or the Consumer Rights Act 2015)?

1. Incorporation of Exemption Clauses

Party signing a document will be bound by its contents;
Form of Notice: For unsigned documents, must show that a reasonable person would think it to be part of the contract
Notice of the exemption clause must be given before or at the time the contract was made
Attempts to incorporate the exclusion clause later will be ineffective
Incorporation by previous course of dealings

2. The Exception Clause must be clear and unambiguous

The contract contained a clause excluding all conditions, warranties and liabilities implied by statute, common law or otherwise’

Courts will take strict approach to interpretation and if in doubt, interpret against the party seeking to rely on it: (contra proferentem rule).

3. Statutory control of Exemption clauses (1)

Business-to-business exemption clauses covered by Unfair Contract Terms Act 1977 (UCTA)

Exemption clauses covered by UCTA are either rendered void or made subject to a test of reasonableness;

S.2(1): cannot exclude liability for death or personal injury through negligence;
S.2(2): can only exclude liability for other types of loss or damage from negligence where reasonable (the test of ‘reasonableness’).

Reasonableness test under UCTA

In order for a term to be regarded as reasonable, the term must be fair and reasonable taking into account the circumstances that were known, or ought reasonably to have been known or in the contemplation of the parties when the contract was made
Section 11(2) refers to Schedule 2 to UCTA which lays down a number of factors that the court may consider when deciding whether a term is reasonable

3. Statutory control of exclusion clauses (2)

Exemption clauses in consumer contracts covered by Consumer Rights Act 2015 (CRA);

S.2(3): consumer means an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.

S.65: a trader cannot restrict liability for death or personal injury resulting from negligence by a term in a consumer contract or consumer notice;
Other exclusion/limitation clauses fall under CRA s.62 on unfair terms more generally.

Unfair contractual terms and notices

Some terms are automatically unenforceable;

As well as s.65 CRA 2015 dealing with exclusion of liability for death or personal injury through negligence, also includes:

S.31 CRA 2015: trader cannot exclude or restrict consumer rights or remedies in contracts to supply goods to a consumer.

Other contractual terms in consumer contracts subject to a test of fairness and good faith

S.62(4): a term is unfair if, contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.
Under s.62(5), fairness is to be determined:
(a) Taking into account the nature of the subject matter; and
(b) By reference to all the circumstances existing when the term was agreed and to all the other terms of the contract or of any other contract on which it depends.

Answer 71

A

CRA only applies to consumer contracts between a trader and a consumer;

Other contracts covered by Sale of Goods Act 1979

Terms included in Consumer Contracts (CRA)

S17- right to supply the goods
S11 - in contracts to supply goods by description, goods will match the description
S9 – the quality of goods supplied is satisfactory
S10- the goods supplied are reasonably fit for purpose;
S13- the goods supplied by sample will match the sample

Terms included in Non-consumer Contracts (SOGA)

S12 - right to sell the goods
S13 - goods sold by description shall correspond with the description
S14(2) - goods must be of satisfactory quality
S14(3) – goods must bereasonably fit for their purpose
S15 - goods sold by sample must correspond with the sample

Answer 72

A

Valid = legally binding contract
Void = never a contract in the first place
Voidable = a contract comes into existence. The innocent party can choose whether or not to end the contract

Answer 73

A

Misrepresentation: renders the contract voidable
Mistake: renders the contract void
Duress & Undue Influence: renders the contract voidable
Illegality: renders the contract void

Answer 74

A

There must be an untrue statement

The statement can be in any form, spoken, written or by conduct
The statement must be false
Keeping silent about the change of circumstances can amount to misrepresentation
If one party makes a statement which is itself true, but which misrepresents the whole situation because of what is left unsaid, the statement may amount to misrepresentation.

It must be statement of fact, not mere opinion
It must have induced the innocent party to enter the contract

Answer 75

A

Fraudulent misrepresentation: a false statement that is made ‘(i) knowingly, or (ii) without belief in its truth, or (iii) recklessly as to whether it be true or false’;
Negligent misrepresentation: defined by s2(1) Misrepresentation Act 1967 as a false statement made by a person who believes that the statement is true but has no reasonable ground for such a belief;
Wholly innocent misrepresentation: a false statement made honestly believing it to be true. It covers misrepresentations that are made entirely without fault.

Answer 76

A

A misrepresentation renders the contract voidable (by means of rescission) and it may also give rise to a right of damages depending on the type of misrepresentation that has occurred.

Damages = aim to compensate the innocent party by putting it back in the position that it would have been had the misrepresentation not taken place.

Fraudulent misrepresentation = damages for the tort of deceit (burden of proof lies with the claimant)

Negligent misstatement = damages in tort (burden of proof lies with the claimant)

Negligent misrepresentation under statute = amages under s.2(1) of Misrepresentation Act 1967 (burden of proof reversed to the defendant)

Innocent misrepresentation = s2(2) of Misrepresentation Act 1967 in lieu of rescission.

Answer 77

A

Rescission = equitable remedy designed to restore parties to pre-contractual position. Available for all 3 types of misrepresentation.

Bars to rescission:

Affirmation
Lapse of time
Impossible to return to pre-contractual position
Third party has acquired rights.

Answer 78

A

Used to only include violence or threats of violence, which rarely came to court;
BUT can now include economic duress too:

Answer 79

A

If a promise to pay extra for performing an existing contractual duty, results in a practical benefit to the promisor (or the avoidance of a disbenefit), then that benefit is capable of being consideration for that promise provided that the promise was not obtained by economic duress
A condition for this rule to apply is that there was no economic duress involved which compelled the promisor to agree on an additional payment

Answer 80

A

A misrepresentation is an untrue statement of fact by one party which has induced the other party to enter into the contract.

Answer 81

A

Performance
Agreement
Frustration
Breach

If a contract is breached, the injured party may seek remedies for the damage they have suffered.

Answer 82

A

In general, parties to a bilateral contract must fully carry out what they agreed

Exceptions to entire performance rule:

A. Substantial Performance

Still paid for performance minus the minor defects

B. Severable contracts

Contract is split into multiple parts

C. Voluntary acceptance of partial performance

Partial performance must be freely accepted - the party making the promise must have genuine choice in order for a contract to be discharged

D. Prevention of performance by the other party

Where one party performs part of the agreed obligation, and is then prevented from completing the rest by some fault of the party, a quantum meruit can be used to claim the cost of the work done

Answer 83

A

In some cases, the parties will simply agree to terminate a contract so that one or both parties are released from their obligations

A distinction is generally made between:

Bilateral discharge = both parties receive a benefit from the discharge
Unilateral discharge = where the discharge of the contract is made for the benefit of one party only - usually involves issues of consideration & formalities

Answer 84

A

If after the contract is made, through no fault of either party, a change of circumstances may make the contract either:

A. Impossible to perform
1. Destruction or unavailability of something essential/ fundamental for contract’s performance
2. Contracts requiring personal performance will be frustrated if either party falls ill or is imprisoned, providing that the non-availability of that party substantially affects the performance

B. Illegal to perform
If after a contract is formed, a change in the law makes its performance illegal, then the contract will be frustrated

C. Contact becomes radically different
A contract can be frustrated where there has been such a drastic change in circumstances that the contract becomes essentially different from that which was originally agreed.

Limits to frustration

A particular event will not frustrate a contract if:

The event occurs before the contract has been entered into
The contract make provisions for such an event
The event merely renders the contract more onerous or expensive
It was foreseen of foreseeable
It was due to the fault of one of the parties (‘self-induced frustration’)

Answer 85

A

Actual breach = A contract is said to be breached when one party performs defectively from the agreement, or not at all

Anticipatory breach = One party indicates in advance that they will not be performing as agreed. In this case the other party can sue for breach straight away. It is not necessary to wait until performance falls due

Effect of breach

Any breach of contract will entitle the innocent party to sue for damages, but not every breach allows the wronged party to choose the discharge the contract. If the contract is not discharged, it will still need to be performed.

Breach of condition = the innocent party may treat the contract as a substantial failure to perform. He may then claim damages and regard the contract as discharged
Breach of warranty = the innocent party can claim damages for loss suffered but must continue with the contract
Serious breach of an innominate term = the impact is the same as a breach of a condition
Not serious breach of an innominate term (it does not undermine the benefit of the contract) = the impact is the same as a breach of warranty

Answer 86

A

Most common remedy sought is damages

Aim to put the injured party (claimant) in the same position as if the contract had been performed. This is often described as the protection of the claimant’s expectation on performance interest.

When a contract has been breached a party may suffer financial pecuniary loss and damages aim to compensate the innocent party for their financial losses that result from not receiving the performance bargained for.

Damages for non-pecuniary loss (eg. feelings) are generally not recoverable unless the contract has the major object of pleasure, relaxation and peace of mind

Awarding damages

2 key questions to be addressed when awarding damages:

Is the damage too remote?
Can the damage be quantifiable?

1. Remoteness of Damage (how obvious were the damages going to be)
Injured party can recover damages for:

Loss which would arise naturally, ‘according to the usual course of things’, from the breach
Loss ‘as may reasonably be supposed to have been in the contemplation of the parties at the time when they made the contract, as the probable results of the breach of it’.

2. Quantification of damages

Expectation loss = aim to put the claimant in the position they would have been in if the contract had been performed

Reliance loss = aim to put the claimant in the position they were before the contract was made

The duty to mitigate:

The claimant must take steps to reduce his losses. He cannot claim damages for losses which he could have reasonably have avoided. The burden of proving the claimant did not mitigate his loss is on the defendant.

Answer 87

A

Damages not always adequate remedy

Most important of these include:

A. Specific Performance

An order to force a party to carry out their contractual obligations
Is only granted when damages alone would be an inadequate remedy
A court will not order specific performance to cases where it could cause hardship or unfairness
Specific performance will be refused where a contract has been obtained by unfair means
Specific performance is never available for contract of employment

B. Injunction:

An injunction normally orders the defendant NOT to do a particular thing

Answer 88

A

Limited Liability

Limited to the unpaid amount on shares or the guaranteed amount as stated by the member

Tax Treatment

Corporation tax by the Company on the profits
Tax on dividend by the shareholders (depends on the threshold limit)
Directors receive salary

Perpetual Succession’

Members and directors can come and go, but the company remains
Remains unaffected by the changes in directors and shareholders

Common Seal

An official seal used by a corporate body for the purposes of authenticating and executing legal documents (such as a contract or deed).
The formalities for affixing a corporation’s seal will usually be prescribed by its AOA
s.45 (1) - A company may have a common seal, but need not have one.

Contractual Capacity

As the company is a person, it can enter into contracts with persons inside and outside the company.

Lee v Lee’s Air Farming Ltd[1961] (the workmen’s compensation case)

When he died in a crash, the question arose whether he was a ‘worker’ for the company. The Privy Council ruled that he was, establishing the principle of legal personality, where a company and its owner are separate entities. This allowed Mrs. Lee to claim compensation for her husband’s death.

Principle

As the company is a legal person, it can enter into binding contracts, with persons inside the company, as well as those outside the company.

Ownership of assets

Assets belong to the company
Separation between the property of the company and the property of the members
Macaura v Northern Assurance Co Ltd (the timber yard case)

Macaura, the sole owner of a timber company, insured the company’s timber in his name. After a fire, the insurance company refused to pay, arguing the timber belonged to the company, not Macaura. The House of Lords agreed, reinforcing the principle of separate legal personality, where a company and its owner are distinct entities

Suing and Being Sued

As a legal person, a company can take action to enforce its legal rights and can be sued for breach of its legal duties
Unlike unincorporated structures where ‘representative action’ is the only recourse.

Transferable Shares

Freely transferable by the shareholder
Subject to any constitutional restrictions

Borrowing

Creating a ‘floating charge’: This is like creating a safety net. It’s a type of security that a company gives for a loan.
The charge ‘floats’: Imagine a cloud floating over everything the company owns. This cloud is the ‘charge’, and it can turn into a storm if the company doesn’t pay back the loan.
Crystallised as fixed: The floating charge can become a ‘fixed charge’ at certain times, like when the company fails to repay the loan. This is like the floating cloud turning into a storm and raining down on specific assets.
Chargor not restricted: The company can still sell its assets in the normal course of business, just like you can still live your life even though there’s a cloud in the sky.
Security to lenders: This gives comfort to the people who lend money to the company. It’s like having an umbrella ready for when the storm comes.
When the Fixed charge is impracticable: Sometimes, it’s not practical to have a fixed charge on specific assets (like if the assets keep changing). In such cases, a floating charge is like having a cloud that can rain down anywhere, instead of a storm that only hits one place.

Answer 89

A

a company limited by shares, or limited by guarantee and having a share capital, whose certificate of incorporation states that it is a public company – s. 4(2)
Limited to the amount unpaid on the shares of the shareholders
share capital of £50,000or more, of which at least 25% must have been paid up before the company can begin trading.
At least 2 directors and a company secretary
All listed companies – PLCs
offered to the public via Initial public offer (IPO) or Private placement

Answer 90

A

Any company that is not a public company
share capital and the liability of each member is limited to the amount, if any, unpaid on their shares.
cannot offer its shares for sale to the general public or be listed or traded
Raising capital – family, bank loans, venture capitalists, angel investors, etc.

Answer 91

A

Members ‘guarantee’ a certain amount
To be recovered at the time of liquidation
No investment at the time of incorporation
Similar regulations like the company limited by shares
Widely used by charitable and analogous organisations (e.g. schools, colleges, etc.)
membership-based organisations and clubs like sports associations, workers’ cooperative

Answer 92

A

Public Company

Suffix required- PLC
A qualified Company Secretary
At least have 2 directors (at least one director must be an individual)
Shares can be listed on stock exchange
Can offer to sell its shares to the public at large
Heavily regulated
Must be limited. It is impossible to create an unlimited public company
Minimum allotted share capital requirement - £50,000

Private Company

Suffix required - Ltd
No such requirement, if there is one, does not need to be qualified
At least 1 director (must be an individual)
Shares cannot be listed on stock exchange, or advertised for sale
Cannot offer to sell its shares to the public at large
Less stringent than public company
Can be limited or unlimited, although the vast majority are limited
No minimum capital requirement

Answer 93

A

Not many
Unlimited liability
Formal liquidation - shareholders responsible for all outstanding liabs irrespective of their initial investment
Low-risk approach to management
Not required by law to submit annual accounts to Companies House

Answer 94

A

Purpose - benefit of the community
Distribution to the company’s members and payment of debenture interest is subject to a cap
Can be limited by shares or guarantee
Company’s assets are ‘locked in’
Therefore, investors in CIC have less incentive to exercise control because the potential rewards are more limited than an ordinary co.
housing associations, community development trusts, leisure centres

Answer 95

A

Directors’ duties are now codified in the Companies Act 2006

A duty to act within powers:

 - If they act beyond powers, company will still be bound by the transaction if third party has acted in good faith 
 - When they act outside their powers, shareholders can retrospectively ratify the transaction

A duty to promote the success of the company:

 - But in some circumstances the law requires the directors to primarily consider the interest of creditors
 - E.g. Where a company is insolvent, the directors may be liable for wrongful trading!

A duty to exercise independent judgement
A duty to exercise reasonable skill, care, and diligence
A duty to avoid conflict of interest
A duty not to accept benefits from third parties
A duty to declare an interest in any proposed transaction or arrangement with the company

If a director breaches any of those duties he will be required:

to make up any losses suffered by the company
Any secret profit gained can be claimed by the company
Any contract entered by the director where he failed to disclose interest will be voidable (i.e. company can rescind it).
If property has been taken by the director and has not passed to an innocent third party, this should be returned.
Where breach is continuing or breach has not yet occurred (but it has been made clear that the director intends to commit) the company can seek an injunction
If more than one of the directors is in breach of their duties, liability is joint and several
The articles of a company can impose more onerous duties

Answer 96

A

An amalgam of two prior common law duties namely –

the duty to act in accordance with the company’s constitution, and
the duty to exercise powers only for the purposes for which they are conferred.

Eclairs Group Ltd v JKX Oil & Gas plc - The directors used power in the company’s articles to disenfranchise a group of shareholders, who were due to vote against the company at the upcoming AGM. The proper purpose rule would apply to provisions in the articles. Exercising the power to disenfranchise members is not a proper purpose.

Answer 97

A

Enlightened shareholder value’ – prioritize members but take into account wider factors and other stakeholders

Two components –

The Director must act in good faith to promote the success of the company for the benefit of the members as a whole.
Director must consider the non-exhaustive factors to which Director must “have regard to” in s172(1) CA 2006:

Long Term Consequences; Interests of Employees; Fostering Business Relationships; Impact on Community & Environment; Reputation; Act fairly between Member

Mutual Life Insurance Co of New York v Rank Organisation Ltd

shareholders claimed discrimination when Rank Organisation Ltd excluded them from a share offer. However, the court dismissed the complaint, ruling that the directors had acted in good faith and in the company’s interest, and that the shareholders’ rights had not been affected.

Answer 98

A

Akin to the common law duty placed upon directors not to fetter their discretion when exercising their powers

The duty is not breached if:

the directors act ‘in accordance with an agreement duly entered into by the company that restricts the future exercise of discretion by its directors’
director acts in a way that is authorized by the company’s constitution
Any agreement in contravention will be voidable at the co.’s instance
Directors obligated to indemnify

Answer 99

A

Similar common law duty was subjective, hence, incompetent, unskilled, and inexperienced directors used their deficiencies as a shield against liability

The level of care, skill, and hard work expected from a director is based on what a reasonably diligent person would have. This includes:

- The basic knowledge, skill, and experience that anyone in the director’s position is expected to have. This sets a minimum standard of care.
- The specific knowledge, skill, and experience that the director personally has. This can raise the standard of care, especially for directors with professional backgrounds like accountants or lawyers. Re Barings plc (No 5) [2000]

Barings Bank collapsed due to the activities of a rogue trader. Disqualification proceedings were brought against three former directors based in London for serious management failures

Answer 100

A

Avoid a situation that directly or indirectly causes or may possibly cause conflicts of interest
E.g. Helping a competing company, corporate opportunity doctrine, using the company’s property to benefit financially, a director is also a major customer, supplier, or creditor of that company.
duty arises in particular to ‘the exploitation of any property, information or opportunity’ and it is irrelevant whether or not the company wishes or is able to take advantage of the property, information, or opportunity.
Irrelevant if the profit is negligible or substantial

No breach if the interest is declared and authorized by the BOD

 - For public companies, authorization is only valid if the constitution so provides
 - For private companies, authorization from BOD is sufficient - unless the constitution provides otherwise

Applicable even to former directors
does not apply to transactions between a director and the company

Bhullar v Bhullar

established that directors must avoid conflicts of interest, particularly regarding corporate opportunities. A director bought an adjacent property without informing the company, breaching his duty to communicate opportunities

Answer 101

A

a director must not accept from a third party a benefit conferred by reason of his being a director, or by doing (or not doing) anything as a director.
Maybe monetary or non-monetary benefit
E.g. to influence his decision by offering a bribe
Motive is irrelevant and will not be a defence for the director to argue that he acted in good faith
NOT BREACHED - where ‘the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest’
the duty only arises in relation to benefits that are likely to give rise to a conflict of interest.

Answer 102

A

If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors.
only applies to transactions/arrangements that are likely to give rise to a conflict of interest, and
as the duty covers indirect transactions/arrangements, the director does not actually need to be a party to the transaction/arrangement in order for the duty to be breached.
the director who made the declaration cannot generally participate in the board resolution, nor will he generally count towards the quorum during that resolution.
Only covers ‘proposed’ transactions, for ‘existing’ transactions

Answer 103

A

If a director breaches any of those duties he will be required:

to make up any losses suffered by the company
Any secret profit gained can be claimed by the company
Any contract entered by the director where he failed to disclose interest will be voidable (i.e. company can rescind it).
If property has been taken by the director and has not passed to an innocent third party, this should be returned.
Where breach is continuing or breach has not yet occurred (but it has been made clear that the director intends to commit) the company can seek an injunction
If more than one of the directors is in breach of their duties, liability is joint and several
The articles of a company can impose more onerous duties

Grounds for disqualification:

Disqualification for general misconduct in connection with companies
Disqualification for unfit behaviour
Disqualification for engaging in fraudulent trading or wrongful trading
Based on the gravity of the aforementioned grounds, the directors can be disqualified for 2 to 15 years.

Answer 104

A

If a company has been doing business in a dishonest or illegal way, the person in charge of closing the company can ask the court to make the current and past directors pay some money. This is usually done to cover the company’s debts.
Lifting the corporate veil – Prest v. Petrodel Resources Ltd.

It confirmed the principle of corporate personality but allowed piercing the corporate veil in limited circumstances, such as when assets are held on trust

Answer 105

A

The law gives the court choices when it seems fair to say that the directors kept doing business to cheat someone while the company was being closed down.
If the person in charge of closing the company asks, the court can say that any director or person who knowingly took part in the dishonest business has to take responsibility.
The people who have to take responsibility only need to pay as much money to the company as the court thinks is right. This money is usually used to pay off the company’s debts.

Answer 106

A

To prove fraud, it must be very clear and the person closing the company must show that they knew about the fraud. Because this is hard to do, successful cases of fraudulent trading are not common.

That’s why the idea of wrongful trading was brought in:

It can lead to legal consequences.
If a director is found guilty of wrongful trading, the court can make them pay money to help the company’s finances.
The court can also ban the director from being a company director for up to 15 years.

Re Produce Marketing Consortium Ltd

The directors were held liable for wrongful trading, as they should have realized the company’s liquidation was unavoidable

Answer 107

A

Fraudulent trading is a criminal offence
In addition, if the company is being closed down or managed by someone else, the people who are responsible might have to pay money to help the company’s finances. The amount they have to pay is decided by the court
A person convicted of fraudulent trading is liable to a fine and/or imprisonment for up to 10 years.
A director found to have engaged in fraudulent trading, may face a disqualification order for a maximum period of 15 years.

Answer 108

A

The essence of a wrongful trading claim is that:

The company is being closed down or managed by someone else because it can’t pay its debts.
Before the company started being closed down or managed, its director knew or should have realized that the company couldn’t avoid being in this situation. This is sometimes called the ‘insolvency point’.
After reaching the insolvency point, the director didn’t do everything they could to try and reduce the possible loss to the people the company owes money to. They should have done this.

Answer 109

A

The corporate veil is a legal concept that separates the identity of a corporation from its shareholders, employees, and officers. This separation provides protection to these individuals, shielding their personal assets from the liabilities of the business. In other words, they are generally not personally responsible for the company’s debts and other obligations. However, in certain circumstances, such as cases of fraud or misconduct, courts may “pierce” or “lift” the corporate veil, holding shareholders or officers personally liable

Answer 110

A

Does the defendant have a duty of care to the claimant?
Has the defendant fallen below the reasonable standard of care?
Is there a causal link between the damage/loss and the defendant’s breach of duty?

There is a claim in negligence (but remember to consider defences!)

Answer 111

A

Donoghue v Stevenson (1932, HL)

Claimant became ill after drinking ginger beer with a snail at the bottom. Her friend had bought the drink, so had no contract with the café.

Established that every person owed a duty of care to his ‘neighbour’ who was somebody that a person could reasonably foresee would be injured by his acts or omissions.

Lord Atkin’s neighbour principle

States that one must take reasonable care to avoid acts or omissions that could reasonably be foreseen as likely to injure one’s neighbour

Three stage test for establishing ‘duty of care’:

Was the harm or loss caused reasonably foreseeable?

(Margereson v JW Roberts (1996) pulmonary illness - asbestos)

The court ruled that the defendant, owner of an asbestos factory, should have foreseen the risk of pulmonary injury due to asbestos dust exposure. This ruling held the company liable

Was there a sufficient relationship of proximity between the claimant and the defendant for a duty to be imposed?

Proximity expressed in terms of relationship between the defendant, and the activity which caused harm to the claimant

West Bromwich Football Club Ltd. v El-Safty (2006) – football club- doctor proximity

The court ruled that Mr. El-Safty, who treated a player from West Bromwich Albion Football Club, did not owe a duty of care to the club and no contract existed between them¹. This reinforced the principle that a doctor’s primary duty of care is to the patient, not the employer

In all circumstances is it fair, just, and reasonable that the law should impose a duty on the defendant?

It is usually referred by the courts when there are public policy reasons for denying a claim
(Robinson v Chief Constable of West Yorkshire Police (2018)

This case clarified the police’s liability to the public. An elderly woman was injured by police officers during an arrest attempt. The court ruled that the police owed her a duty of care, applying ordinary negligence principles, and rejected any special police immunity

The three Caparo factors very often overlap. They are ‘facets of the same thing’.

The more foreseeable the harm is, the more likely it is that proximity will be found between the parties, and the closer the proximity and the more foreseeable the harm, the more likely it is that imposing a duty will be considered just and reasonable.

The courts have restricted claims using the ‘proximity’ requirement and/or the fair, ‘just and reasonable requirement’ in three areas:

Claims against public bodies – particularly the police
Claims for psychiatric injury
Claims for economic loss

Answer 112

A

If the court finds that the defendant owed the claimant a duty of care, the next question is whether the defendant breached that duty.

A breach is a failure on the part of the defendant to “discharge” their obligations under the duty.

What are the defendant’s obligations?

The duty is to take “reasonable care”

What amounts to a failure to discharge these obligations?

There must be a failure to take “reasonable care”.

The standard of “reasonable care” is what the standards of the “reasonable person” in the defendant’s position which sets an objective standard

No allowance is made for the defendant’s particular level of experience/ resources/ competence (Nettleship v Weston (1971)

a learner driver crashed during a lesson, injuring the instructor. The court ruled that learner drivers should meet the same standard of care as qualified drivers.

Exceptions to standard of the “reasonable person”:

children depending on age
professional depending on profession

Orchard v Lee

a school dinner lady was injured when a 13-year-old boy ran into her while playing tag. She sued for negligence. The court ruled that the boy, behaving as a typical child of his age, had not breached his duty of care

Phillips v Whiteley Ltd

a woman’s ears were pierced by a jeweller, leading to an infection. The court ruled that the jeweller was not liable as they were not expected to meet the standard of a surgeon. The standard of care was that of a jeweller performing such work

What determines whether the defendant has fallen short of this standard?
The courts may use a form of “cost-benefit analysis”

Would preventing a foreseeable risk of harm have been less costly than letting it happen?
If so, the defendant probably should have prevented it.

What factors are relevant to this calculation?

The probability of harm (Bolton v Stone)

a cricket ball from a nearby field injured a woman outside her home. The court ruled the cricket club was not negligent, considering the low likelihood of harm

The potential seriousness of the damage (Paris v Stepney Borough Council)

a one-eyed garage worker was blinded in his remaining eye due to a workplace accident. The court ruled that the employer was negligent for not providing safety goggles, considering the worker’s known vulnerability

The practicality/cost of protection – cost of avoiding harm is not disproportionate- easier to take precautions (Latimer v AEC Ltd)

factory worker slipped on a flooded floor, injuring his ankle. The court ruled that the employer, AEC Ltd, had taken all reasonable precautions to minimise risk, including mopping up and spreading sawdust, and was not negligent

The potential benefits of the risk - reasonable risks during emergency situation (Watt v Hertfordshire County Council)

a fireman was injured when a heavy jack fell on him during an emergency rescue. The court ruled the council was not negligent, considering the urgency of the situation, the high social utility of saving a life, and the relatively low risk of injury

Common practice in the relevant field.

Answer 113

A

Factors in favour of the defendant (5)

The damage was not very likely to happen
The damages was not very likely to be serious
It would have been difficult and/or expensive to take precautions against the risk
The precautions taken were in line with common practice
The risky activity has social benefits

Factors in favour of the claimant (5)

The damage was very likely to happen
The damages were likely to be serious
Taking precautions against the risk would have been simple and inexpensive
It was common practice to take precautions against the risk
There were no social benefits associated with the risky activity

C must prove ‘on the balance of probabilities’ (civil claim) that the defendant breached their duty of care;

How do you prove that?

Section 11 of the Civil Evidence Act 1968 – A conviction for a criminal offence is proof that the offence is committed, therefore, the claimant may rely on the defendant’s conviction for careless driving in a road accident.
Res ipsa loquitur’ - the thing speaks for itself. Ward v Tesco Stores (1976) – yoghurt spilled on the floor of the store)

the court applied the doctrine of res ipsa loquitur, ruling that the accident was more likely due to negligence than anything else. The burden of proof was on Tesco to show the spill hadn’t been there long enough to be dealt with

Answer 114

A

If the claimant can prove breach of duty, the court will then ask whether the breach caused the claimant’s loss or damage.

Causation has three aspects:

Factual causation: Did the defendant’s breach of their duty of care cause the claimant’s loss or injury as a matter of fact?
Legal causation: Even if the defendant’s breach of their duty of care caused the claimant’s loss or injury as a matter of fact, should it be treated as the cause as a matter of law?
Remoteness of damage: The type of damage must have been foreseeable.

Factual Causation

The courts usually apply the “but for” test:

“But for” the defendant’s act, would the claimant have suffered the harm?
If the answer is “no”, causation is established.
This test may not always be conclusive, as when the defendant fails to provide a warning of a risk and there is no certainty as to how the claimant would have responded (Chester v Afshar (2004)

The doctor had failed to inform her of a small risk associated with the surgery. The court ruled that even though the patient might have consented to the surgery at some point, the doctor was liable for not informing her of the risks

Multiple causes: When there is more than one possible cause of injury, causation can be proved if the claimant can show that the defendant’s negligence materially increased the risk of injury occurring (McGhee v National Coal Board)

worker contracted dermatitis after his employer failed to provide washing facilities, causing prolonged exposure to brick dust. The court ruled that the employer’s negligence materially increased the risk of the worker developing dermatitis, satisfying causation

Legal Causation

If factual causation is established, the court will then consider whether the defendant was the “legal” cause of the claimant’s harm.
What is relevant here are so-called “intervening acts” or a “novus actus interveniens”
These are treated as breaking the chain of causation, absolving the defendant of liability.

These fall into three categories:

An unforeseeable act of a third party
An act of the claimant
An act of God

Remoteness of Damage

Finally, the loss or damage that the claimant has suffered must not be too “remote”:
The courts have imposed this additional requirement somewhat artificially as an additional control on potential liability in negligence
It is designed to call a halt to liability at a sensible point

The test was specified in The Wagon Mound (no.1) (1961)

It involved an oil spill from a ship, leading to a fire when the oil was ignited. The court ruled that the defendant was not liable for damages that were not reasonably foreseeable

Answer 115

A

If a victim has a particular susceptibility or weakness (a thin skull or a weak heart, for example) and suffers a greater injury than a normal person, the defendant will be liable to the full extent of the claimant’s injuries

Smith v Leech Brain

an employee suffered a burn that led to cancer due to a pre-existing condition. The court applied the “eggshell skull” rule, holding the employer liable for all consequences of their negligence, regardless of the victim’s vulnerability

Answer 116

A

Even though a claimant may be able to prove all the necessary requirements of a tort, he will be unsuccessful in his action or have his damages reduced if the defendant is successful in providing a defence.

The burden of providing a defence is on the defendant.

Partial defences: reduce the extent of the defendant’s liability;

Complete defences: extinguish completely the defendant’s liability

Three general defences in the Tort of Negligence:

Contributory negligence;
Consent (Volenti non fit injuria);
Illegality (ex turpi causa)

Answer 117

A

This is a partial defence

Regulated by the Law Reform (Contributory Negligence) Act 1945

To take advantage of this defence, the defendant has to establish that the claimant did not take reasonable care, and contributed to his own loss

If successfully raised, the amount of compensation will be reduced to ‘such extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage’

Froom v Butcher – failure to wear a seatbelt – damages reduced by 20 per cent

Answer 118

A

This is a full defence;

Volenti non fit injuria – no wrong is done to one who consents
Applies where the claimant has in some way consented to what was done by the defendant;

The test of consent is objective: whether the behaviour of the defendant was such that it was reasonable to think that there was consent

(Smith v Baker (1891) – defence of consent failed – drilling holes in a quarry –injured by the stone above

ICI v Shatwell (1965) – The court ruled that the employer could rely on the defence of volenti non fit injuria (consent to the risk) as the brothers knowingly disobeyed instructions and mandatory precautions

Answer 119

A

This is a full defence;

The basic reason for this defence is public policy: a person committing a crime should not sue for damages if they were injured as a result of doing so

(Ashton v Turner (1980) –. The court dismissed the claim, stating that one participant in a crime does not owe a duty of care to another

Illegality and public policy:

Revill v Newbery (1996) – shotgun-intruder- disproportionate but the trespasser’s damages were reduced due to his contributory negligence

Answer 120

A

No statutory definition of who constitutes an employee (“contract of service)
No definition of how to distinguish an employee from an independent contractor (“contract for services”)

The distinction is important because an employee enjoys enhanced rights for example

 - right to claim unfair dismissal, 
 - right to strike action, 
 - right to holiday pay, 
 - maternity and paternity rights etc…). 
 - It is also important because of liability issues (remember vicarious liability!)

Courts have developed a variety of different tests to determine whether works under a contract of service (employee) or a contract for service (IC)

Answer 121

A

the control test

It requires the court to inquire about the extent of supervision

Questions raised:

   - To what extent does the individual work under the direction of the employer?
   - To what extent does the individual have control over their own work?
   - Who decides what work is done, when it is done and where it is done
   - Is the individual required to obey the orders of the employer?

The more evidence of control provided to the court or tribunal, the more likely it is to decide that an individual is an employee working under a ‘contract of service’

the integration test

Questions raised:

  - How much is the work fully integrated into the core activities of the employing organisation?
  - Is the work performed done as an integral part of the business or is it only accessory to it?
  - Is the individual included within the remit of personnel policies such as disciplinary and grievance procedures?

The more integrated the individual, the more likely it is that he or she is working under a ‘contract of service’

The economic reality test

This tests looks at the relationship from the opposite angle

It look for evidence of self-employment rather than employment

Questions raised:

It asks, how far it can be said that the individual is ‘in business on his own account’
What are the payment methods used?
Is money transferred through a payroll or invoices sent by the individual?
Is tax deducted at source?
Who own and/or maintains the equipment that is used to carry out the work?
Who has power to fix or approve the time of holidays?
Are holidays paid?/ Is sick leave paid?
Is the individual free to substitute to carry out the work in their absence?
Does the individual take any personal financial risk, for example if work is completed late?

The more evidence of economic independence is found, the less likely it is that a contract of service exists.

The mutuality of obligation test

Central idea to this test is that the individual concerned must be required to accept work that is offered by the employer
If it is possible for the individual to turn down an offer of work and not suffer a detriment as a result, then mutuality of obligation does not exist
If the individual who refuses an offer for work finds that no further such offers are made in the future, then mutuality of obligation probably does exist

This is because there is evidence that the employer, at least, expected the relationship to be ongoing

the multiple test

Ready Mixed Concrete v Minister of Pensions and National Insurance (1968)

The court found that the driver had enough freedom in performing his duties, such as choosing the vehicle and managing fuel, which indicated he was an independent contractor, not an employee

A contract of service exists if 3 conditions are fulfilled:

The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some task for his master
There is a sufficient degree of control
the other provisions of the contract are consistent with its being a contract of service

Answer 122

A

Warner Holidays Ltd v Secretary of State for Social Services (1983)

This case concerned the status of some entertainers who worked at a holiday camp for the summer season, developed the economic reality test and they were deemed as employees, not ICs

In determining that they were employees, the court provided a list of contractual terms that should be considered at the third stage of the Ready Mixed Concrete test:

Provision of tools
Salary (whether regular or not?)
Tax (who pays tax on earnings?)
Benefits (e.g., sick pay)
Who bears the benefit and burden of any profit/loss? (if remuneration is linked to the profitability of the purported employer, this can be evidence of self-employment)
Hours of work (whether flexible or static)
Exclusivity
Mutuality of obligations to work/provide work
Labelling (but note that labels in contracts are not conclusive)

Answer 123

A

An employee has a statutory right to a written statement of reasons for dismissal on termination of employment.
An employee must give at least one week’s notice if employed for more than a month and “reasonable” notice if employed for less than a month.
The parties cannot agree to reduce these minimum notice periods but can agree to extend them.

Answer 124

A

Any dismissal in breach of the employment contract can potentially amount to wrongful dismissal.
An example of wrongful dismissal that occurs often is when someone is dismissed without being given the notice they are entitled to under their contract of employment. Therefore, the manner of their dismissal breaches their contract.
Another example of a dismissal in breach of contract might be if there are specific procedures of dismissal in staff handbook such as requirement to give verbal warning but such is not given.
Another example is the dismissal of employees in temporary or fixed-term contracts before the end period of these contracts.

Answer 125

A

Claims for unfair dismissal are the most common type of claim to be brought before an employment tribunal

ERA s.108 states that is available to employees (full time or part time) with at least two years’ service (but there are exceptions to this)

The tribunal will need to address the following three questions to determine the fairness of a dismissal:

Has the employee been dismissed?

The exception is where the employees alleges “constructive dismissal”

What was the reason for the dismissal?

These fall into three categories:

Potentially fair reasons for dismissal

  - Dismissal for one of these reasons is capable of being fair, but the fairness or not depends on whether dismissal was reasonable in the overall circumstances. Reasons are:
  - Capability
  - Conduct
  - Redundancy
  - Statutory bar
  - Taking part in industrial action past 12 weeks of such action
  - Some other substantial reason

Automatically fair reasons for dismissal

  - There are two reasons for dismissal that are automatically fair (a dismissal for these reasons cannot be effectively challenged). 

  - These are rare in practice.

  - Where the employee has taken part in unofficial industrial action (i.e. where the trade union does not abide by the procedures required by the Trade Union and Labour Relations (Consolidation) Act 1992).
  - Where the dismissal is for the purpose of protecting national security.

Automatically unfair reasons for dismissal

  - An employee who can show they have been dismissed for one of these reasons is automatically entitled to a remedy.
  - This is the case even if the employer had an understandable motive for the dismissal.

  - NB: Unlike ordinary unfair dismissal claims, claims for automatically unfair dismissals may be brought be employees who have not yet completed 2 years’ service
  - The automatically unfair reasons are:
  - Pregnancy/maternity (s.99 ERA)
  - Paternity or adoption leave (s.99 ERA as amended)
  - Health and safety reasons (e.g. refusal to work in an unsafe environment)
  - A “spent” criminal conviction
  - Refusing to work on a Sunday (betting or retail workers only)
  - A trade union reason (i.e. for belonging to one)
  - Taking part in official industrial action for 12 weeks or less
  - Making a flexible working request
  - Asserting a statutory right (e.g. asking to be paid the National Minimum Wage)
  - Following the transfer of the business (or a section of the business) to a new owner, where there is no valid organisational, technical or economic reason for dismissing the employee (there are certain rules under TUPE Regulations 2006 for such transfers)

Did the employer handle it in a reasonable way?

The test is known as the “band of reasonable responses” test and gives employers considerable leeway.

If it is possible to describe the employers’ actions as being reasonable, the dismissal will be fair, and the employee will have no claim.

If not, however, the dismissal will be unfair, and the employee will have a claim and be entitled to a remedy.

There are three broad issues to consider:

The procedure used in effecting the dismissal must be fair
The consistency of the employer
Whether dismissal was the appropriate sanction in the circumstances

Tribunals will also be able to adjust any awards made in relevant cases by up to 25 per cent for unreasonable failure to comply with any provision of the Code. This means that if the tribunal feels that an employer has unreasonably failed to follow the guidance set out in the Code they can increase any award they have made by up to 25 per cent. Conversely, if they feel an employee has unreasonably failed to follow the guidance set out in the Code they can reduce any award they have made by up to 25 per cent’.

Answer 126

A

This reason concerns the employee’s ability to do their job.

There are three possible issues here:

Lack of qualifications:

An employee may not have the right qualifications for the job. But the employer should be able to justify requiring them

Incompetence:

An employee may not be competent, making a series of small errors or a major one
But the employer should be able to justify dismissal as the appropriate response compared to giving a warning and/or ensuring proper training

Poor health:

An employee who is frequently off work sick may become too much of a burden on the employer
If the employer has considered all reasonable steps to help the employee, and these have failed, it may be fair to dismiss them.
This will depend on the size and resources of the employer.

Answer 127

A

A dismissal for misconduct is potentially fair.

Misconduct falls into two categories:

Ordinary misconduct
It is not usually fair to dismiss for a first instance, but more likely to be fair for repeated misconduct after warnings.
Gross misconduct
An employer is usually entitled to dismiss an employee for a single instance of gross misconduct as long as the employer takes reasonable steps to ensure that the employee is in fact responsible.

Answer 128

A

Defined in the ACAS code of practice
’23. Some acts, termed gross misconduct, are so serious in themselves or have such serious consequences that they may call for dismissal without notice for a first offence. But a fair disciplinary process should always be followed, before dismissing for gross misconduct.’

The employer should take all reasonable steps to discover whether the employee has actually committed misconduct.

If these steps are taken and the employer honestly believes the employee has committed misconduct, the dismissal will be fair.

Burchell v British Home Stores (1980)

The employer believed the employee was guilty
The employer had reasonable grounds for believing that
The employer had carried out as much investigation as possible in the circumstance

Answer 129

A

Redundancy

If the employee’s job is redundant, it may be fair to dismiss them so long as redundancy is the real reason for dismissal and proper procedures are followed.

This is defined by the Employment Rights Act 1996 (s.139):

When a business is closing
When a workplace is closing
Where there is a reduced need for employees to do a particular kind of work

Where there is an apparent dismissal for redundancy, an employee may make a claim for unfair dismissal on the basis that:

The dismissal was not in fact for redundancy
The employer has failed to pay the proper redundancy payment
The manner or procedure of the redundancy was unfair

The case of Murray v Foyle Meats (2000) gives the test for redundancy:

Has the employee been dismissed?
Has there been a reduction in the need for employees to do the particular kind of work?
Is the dismissal wholly or mainly because of this reduction?

Answer 130

A

Law does not specify procedure that employers use to effect redundancies.

However, it is important for employers to have procedures in place that should contain two main elements –

1) consultation and 2) fair selection criteria (see ACAS advice on redundancy)

Consultation should include (see also here):

Reasons for redundancy
Why certain individuals have been selected over others
Possible ways of avoiding redundancy
Possible alternative work

Selection a two-stage process is generally required

Identify those “at risk” of redundancy to establish a “pool” of candidates who then should be consulted.
Select from the pool using a fair method of selection (see also here ACAS advice on redundancy)

Answer 131

A

Statutory bar

If it would be unlawful to employ the person, then he/she may be dismissed fairly.
However, an employer should check whether it would be possible to keep the employee on with other duties.
Taking part in official industrial action
After 12 weeks of striking (or other official action) an employee may be dismissed

Some other substantial reason

The business is being reorganised in a way that doesn’t fit the definition of “redundancy”.
Third party pressure, for example if a major client refuses to work with an employee
An employee is causing distress or a bad atmosphere in the workplace, causing other staff to consider leaving.

Answer 132

A

Constructive dismissal is defined in the ERA S.95(c) as situation which:

“the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct”

It is therefore a resignation and not a dismissal, but one which take place because of unacceptable conduct on the part of the employer concerned.
The purpose of this type of dismissal is to make sure that employers could not effectively get around the requirements of unfair dismissal law by treating any employees they wanted to fire so badly they would resign without the need to be dismissed
Therefore, resignations which occurred in such circumstances would be treated by the tribunals as if they were dismissals and that they would be subject to the same scrutiny as would potentially unfair dismissal.
As a result, only those who can bring claims for unfair dismissal (i.e., employees with over two year’s continuous service) are entitled to bring claims of constructive dismissal.

Answer 133

A

Wrongful dismissal: damages based in breach of contract (usually low). No other remedy available.

Unfair dismissal/Constructive dismissal:

Reinstatement: An employee who is reinstated can go back to his previous job as if he had never been dismissed. For obvious reasons, this is very rarely awarded

Re-engagement: A tribunal can order that an employee is re-engaged by the employer, but this is not necessarily into exactly the same job or on the same terms and conditions. Job has to be comparable to the old one. Not a very common remedy

Compensation:
Basic award: (same for redundancy pay)
Compensatory award: The maximum compensatory award is (currently) £93,978 where the effective date of termination is on or after 6 April 2022. There is an additional cap of 52 times the claimant’s weekly pay, which will apply if this is lower than the overall cap of £93,978
* there is no maximum if the dismissal is automatically unfair (such as for health and safety reasons or whistleblowing)

Answer 134

A

Applies at the time of advertising for jobs, interviewing, during a job for terms and conditions, training, promotion, and termination.
Employees, workers, and contract workers
Regulated by the Employment Equality Act 2010

Equality and Human Rights Commission:

Duties - encourage equality and diversity, eliminate unlawful discrimination, protect and promote human rights.
Powers – conduct inquiries and formal investigation

Cases brought by individuals – Employment tribunal
Compensation is unlimited and dependent on the severity of the case

For example unfair discrimination happened to a person working at the nhs and received a compensation of £1 million

Answer 135

A

Age
Disability
Gender reassignment
Marriage and civil partnership
Pregnancy and maternity
Race
Religion or belief
Sex
Sexual orientation

Answer 136

A

O’reilly v BBC - won her age discrimination claim after being dropped from the show when it moved to a prime-time slot. The tribunal upheld her claims for age discrimination and victimisation

Answer 137

A

Acceptable to treat them favourably
Mental or physical impairment
the impairment has a substantial and long-term adverse effect on P’s ability to carry out normal day-to-day activities.
Expected to last at least 12 months
Sight and hearing loss, HIV, clinical depression
Covers reoccurring impairment
Prohibited to ask questions about their health if unrelated to their role.

Reasonable adjustments

Changing the way things are done
Modifications to the premises to accommodate disabled people
Providing auxiliary aids

Environmental Agency v Donnelly (2013) – parking place

The Employment Tribunal found the Environmental Agency guilty of discrimination for not providing a parking space, harassment via email, and unfair dismissal.

Answer 138

A

If the person has proposed, started, or completed a process to change their sex.
Women- men
Medical intervention is not a prerequisite, intention is sufficient

Answer 139

A

Does not apply to engaged, divorced, or dissolved civil partnership
Prohibiting married couples to work at the same place - discriminatory

Answer 140

A

Positive discrimination i.e. ‘unfavourably’ not ‘less favourably’ thereby doing away with the comparator
It covers pregnancy-related illnesses

South West Yorkshire Partnership NHS Foundation Trust v Jackson (email about potential redundancy not accessible by the person on mat leave)

Direct discrimination –e.g. failure to renew fixed term contract due to pregnancy
S. 18 does not explicitly prohibit indirect discrimination or harassment on grounds of mat leave or pregnancy

Answer 141

A

First characteristic to be recognized as a factor deserving of protection
Includes colour, nationality and ethnic or national origins
A racial group – 2 or more racial groups

Answer 142

A

Section 10 Religion or belief
(1)Religion means any religion and a reference to religion includes a reference to a lack of religion.
(2) Belief means any religious or philosophical belief and a reference to belief includes a reference to a lack of belief.

More than one characteristic e.g. Jewish

Not cults involved in illegal activities

R v Registrar General of Births, Deaths and Marriages (2013)

wished to marry in a Church of Scientology chapel. The court ruled that the chapel could be recorded as a “place of meeting for religious worship”

Answer 143

A

Both women and men
Sexual orientation means – persons of the same sex, persons of the opposite sex, persons of either sex
it is not necessary for the employee to be actually gay, lesbian, or bisexual, i.e. discrimination on the basis of a perception that the employee is gay, bisexual, or a lesbian is also prohibited.

English v Thomas Sanderson Blinds Ltd (stereotypes – homophobic comments – harassment)

Answer 144

A

Direct discrimination

This is when you face unfair treatment based on a protected characteristic.
Comparator – real or hypothetical, someone who does not belong to the same group

Amnesty International v Ahmed (2009) – Sudanese woman denied a position due to her ethnic origin (researcher for Sudan – conflict of interest)

Occupational requirements (modelling, rape victim counsellor, deaf person employed for sign language counsellor)
Associative (e.g. wife is of a particular religion to which the employer has an objection)and prescriptive (perceive or believe, e.g. thinks an employee is gay) discrimination

Indirect discrimination

This is when you face unfair treatment because of a practice, policy, or rule that breaches a protected characteristic.
Provision-criterion-practice that applies equally to all employees but makes compliance difficult on one group in comparison to others.

London Underground Ltd v Edwards

Edwards, a single parent and train driver, claimed indirect sex discrimination when London Underground changed its rostering system

Objective justification for a legitimate aim
Under three circumstances:
(1) It has a legitimate objective, such as a genuine business objective
(2) It is necessary to achieve that objective; and
(3) It is an appropriate way of achieving that objective.

e.g. health & safety (banning jewellery(including religious ones) to prevent accidents), business requirements (female social workers in female refugee centers), business efficiency (physically fit people for laborious tasks)

Harassment:

This is when you face unwanted conduct from others based on a protected characteristic.

Unwanted conduct based on protected characteristics that leads to an intimidating, hostile, degrading, humiliating or offensive workplace environment. E.g. racist jokes, physical abuse, verbal abuse etc.
Unwanted conduct of a sexual nature e.g. sexual comments about female colleagues
Treating someone less favourable because they submitted to or rejected sexual harassment. E.g. turning down sexual advances and losing promotion
Online harassment – e.g. colleagues making offensive jokes on online chatrooms
Employer vicariously liable if reasonable steps are not taken

Victimisation:

This is when you’re treated unfairly because you’ve raised a complaint relating to a protected characteristic.

Making complaint about discrimination or supporting someone in their complaint
Such an act is done in ‘good faith’
Complaint must involve discrimination against a protected characteristic
E.g. IVF treatment – the line manager makes comments about the potential dismissal of pregnant employees, and the employee makes a complaint to senior manager owing to their fear of losing the job.
Discrimination and victimisation doesn’t only count if it happens during work hours. It counts if it happens outside of the workplace or at work-related events. The claim simply needs to relate to the workplace.

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