Business Law Flashcards

Question

The routes for civil and criminal courts

Answer 1

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.

Answer 2

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.

Answer 3

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…”

Answer 4

Treaties Customary International law

Answer 5

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

Answer 6

UK joined EEC in 1973 following passing of the European Communities Act 1972; EU has 4 main institutions: 1. The Council 2. The European Commission 3. The European Parliament 4. The European Court of Justice (CJEU)

Answer 7

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

Answer 8

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

Answer 9

- 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.

Answer 10

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.

Answer 11

Tribunals ADR: Arbitration Conciliation Mediation Ombudsmen

Answer 12

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 ❌

Answer 13

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.

Answer 14

Cost ✔ Speed ✔ Expertise ✔ Relief of congestion in the ordinary courts✔ Privacy✔ Lack of openness ❌ Unavailability of state funding ❌

Answer 15

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

Answer 16

1. 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. 2. Simple contracts.

Answer 17

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

Answer 18

1. Advertisements: Partridge v. Crittenden (1968) 2. 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 3. 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 4. 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)

Answer 19

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

Answer 20

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…’

Answer 21

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

Answer 22

1. 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’. 2. 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. 3. 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

Answer 23

1. By acceptance 2. By rejection (includes making a counter offer) 3. By revocation (withdrawal) of an offer 4. By lapse of time 5. When reasonable length of time has passed 6. By failure of a precondition 7. Death of the offeree

Answer 24

- 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.

Answer 25

Legislation passed by parliament (statutory law) Law created and developed by the courts (common law/case-law)

Answer 26

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.

Answer 27

Lower courts need to follow the decisions of higher courts Higher courts can reverse or overrule the decisions of lower courts

Answer 28

A good answer requires: 1. An identification of the key issues raised by the given facts; 2. A clear explanation of the relevant points of law; 3. An application of the relevant law to the given facts; 4. An indication of the likely outcome. (Also known as the IRAC method – standing for Issue, Rule, Application (or Analysis), Conclusion)

Answer 29

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

Answer 30

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.

Answer 31

- 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

Answer 32

- 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.

Answer 33

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

Answer 34

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.

Answer 35

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.

Answer 36

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.

Answer 37

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 38

**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 39

**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 3. 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 40

**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 41

1. For business agreements, there is a presumption of intention to create legal relations: 2. 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 42

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

Answer 43

- 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 44

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 45

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 46

a) Express terms: terms contained within the offer, which become part of the contract once accepted. b) Implied terms 1. Implied by statute: e.g. Sale of Goods Act 1979 & Consumer Rights Act 2015 2. 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 3. 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. 4. Terms implied by the Courts (implied in law) The courts may imply a term into a contract as a matter of law.

Answer 47

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 48

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 49

1. Valid = legally binding contract 2. Void = never a contract in the first place 3. Voidable = a contract comes into existence. The innocent party can choose whether or not to end the contract

Answer 50

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

Answer 51

1. 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. 2. It must be statement of fact, not mere opinion 3. It must have induced the innocent party to enter the contract

Answer 52

1. 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’; 2. 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; 3. Wholly innocent misrepresentation: a false statement made honestly believing it to be true. It covers misrepresentations that are made entirely without fault.

Answer 53

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 54

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 55

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

Answer 56

- 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 57

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

Answer 58

1. Performance 2. Agreement 3. Frustration 4. Breach If a contract is breached, the injured party may seek remedies for the damage they have suffered.

Answer 59

- 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 60

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: 1. Bilateral discharge = both parties receive a benefit from the discharge 2. Unilateral discharge = where the discharge of the contract is made for the benefit of one party only - usually involves issues of consideration & formalities

Answer 61

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: 1. The event occurs before the contract has been entered into 2. The contract make provisions for such an event 3. The event merely renders the contract more onerous or expensive 4. It was foreseen of foreseeable 5. It was due to the fault of one of the parties ('self-induced frustration')

Answer 62

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. 1. 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 2. Breach of warranty = the innocent party can claim damages for loss suffered but must continue with the contract 3. Serious breach of an innominate term = the impact is the same as a breach of a condition 4. 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 63

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: 1. Is the damage too remote? 2. 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 64

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 65

**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 66

- 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 £50,000 or 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 67

- 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 68

- 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 69

**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 70

- 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 71

- 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 72

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 73

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 74

- Enlightened shareholder value’ – prioritize members but take into account wider factors and other stakeholders Two components – 1. The Director must act in good faith to promote the success of the company for the benefit of the members as a whole. 2. 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 75

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 76

- 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 77

- 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 78

- 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 79

- 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 80

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 81

- 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 82

- 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 83

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 84

- 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 85

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 86

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 87

1. Does the defendant have a duty of care to the claimant? 2. Has the defendant fallen below the reasonable standard of care? 3. 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 88

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’: 1. 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 2. 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 3. 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 89

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? 1. 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 2. 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 3. 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 4. 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 5. Common practice in the relevant field.

Answer 90

**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 91

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: 1. An unforeseeable act of a third party 2. An act of the claimant 3. 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 92

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 93

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: 1. Contributory negligence; 2. Consent (Volenti non fit injuria); 3. Illegality (ex turpi causa)

Answer 94

- 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 95

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 96

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 97

- 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 98

**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: 1. 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 2. There is a sufficient degree of control 3. the other provisions of the contract are consistent with its being a contract of service

Answer 99

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 100

- 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 101

- 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 102

- 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: 1. Has the employee been dismissed? The exception is where the employees alleges “constructive dismissal” 2. 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) 3. 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: 1. The procedure used in effecting the dismissal must be fair 2. The consistency of the employer 3. 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 103

This reason concerns the employee’s ability to do their job. There are three possible issues here: 1. Lack of qualifications: - An employee may not have the right qualifications for the job. But the employer should be able to justify requiring them 2. 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 3. 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 104

A dismissal for misconduct is potentially fair. Misconduct falls into two categories: 1. Ordinary misconduct It is not usually fair to dismiss for a first instance, but more likely to be fair for repeated misconduct after warnings. 2. 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 105

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 106

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): 1. When a business is closing 2. When a workplace is closing 3. 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 107

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 1. Identify those “at risk” of redundancy to establish a “pool” of candidates who then should be consulted. 2. Select from the pool using a fair method of selection (see also here ACAS advice on redundancy)

Answer 108

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 109

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 110

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 111

- 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 112

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

Answer 113

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 114

- 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 115

- 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 116

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

Answer 117

- 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 118

- 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 119

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 120

- 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 121

**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.