ACCA Paper F4 CORPORATE AND BUSINESS LAW (ENGLISH)

Contents Structure Of The Legal System..................................................................................9 Civil Law................................................................................................................. 9 Criminal Law...........................................................................................................9 Distinction between Civil and Criminal Law (Tip Dec 09).......................................10 Sources of Law........................................................................................................ 10 Case Law.............................................................................................................. 10 Common Law.....................................................................................................10 Judicial Precedent...........................................................................................11 Ratio Decidendi...........................................................................................11 Obiter Dicta.................................................................................................11 Equity................................................................................................................ 11 Advantages of case law.....................................................................................12 Statute Law / Legislation.......................................................................................12 Forms of legislation...........................................................................................12 Advantages of statute law.................................................................................12 Disadvantages of statute law............................................................................12 Delegated Legislation........................................................................................12 Advantages / Importance of delegated legislation..........................................13 Disadvantages of delegated legislation..........................................................13 Parliamentary procedure...................................................................................13 COURTS - Hierarchy of the Courts............................................................................13 European Court of Justice (ECJ).............................................................................13 Supreme Court (SC) (previously know as House of Lords (judicial capacity)).........14 Court of Appeal (C of A)........................................................................................14 High Court (HC).................................................................................................... 14 Crown Court (Crown C) ........................................................................................14 County Court (County C).......................................................................................14

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Magistrates Courts (MC).......................................................................................14 Tribunals .......................................................................................................... 14 Tracking............................................................................................................... 14 Statutory Interpretation Rules (Kaplan Jun 09 Mock Q1)........................................15 Literal rule ........................................................................................................ 15 Fisher v Bell.............................................................................................15 Golden rule........................................................................................................15 Re Sigsworth / Whitely v Chappell / Adler v George (1964).......................15 Mischief rule......................................................................................................15 Purposive rule................................................................................................... 15 Gardner v Sevenoaks RDC (1950)............................................................15 Eiusdem Generis............................................................................................... 15 Expressio unius est exclusio alterius .................................................................15 Noscitur a socis................................................................................................. 15 In pari material..................................................................................................16 Statutory Interpretation Presumptions..................................................................16 Aids to Interpretation.........................................................................................16 Intrinsic.......................................................................................................... 16 Extrinsic......................................................................................................... 16 Interpretation Act 1987.....................................................................................17 Contract Law (Invitations, offers and acceptance)....................................................17 Essential elements of a contract...........................................................................17 Offers................................................................................................................... 17 Termination of Offer..........................................................................................18 Counter-offer / Rejection ...............................................................................18 Death (personal services)...............................................................................18 Notification of death (non-personal services)..................................................18 Failure of a condition precedent ....................................................................19 Notice of revocation may be communicated through a reliable third party ....19 Request for information..................................................................................19 Privity of contract...........................................................................................19 Page 2 of 62

Acceptance...........................................................................................................19 Communicated by a reliable third party ............................................................20 Powell v Lee (1908)..................................................................................20 Business agreements (ex-gratia) ......................................................................20 Binding in honour only ......................................................................................20 Invitation to treat..................................................................................................21 Consideration....................................................................................................... 21 Adequacy.......................................................................................................... 22 Sufficiency.........................................................................................................22 Executed .......................................................................................................... 22 Executory ......................................................................................................... 22 Past consideration ............................................................................................23 Exceptions to past consideration....................................................................23 Letter of comfort.................................................................................................. 23 Letter of intent..................................................................................................... 23 Privity of Contract.................................................................................................23 Exceptions to the rule that third parties cannot enforce contracts;....................24 Pinnell and its exceptions (part payment of debt).................................................24 Promissory Estoppels Doctrine;.........................................................................24 Combe v Combe......................................................................................25 D & C Builders v Rees..............................................................................25 Intention to Create Legal Relations.......................................................................25 Domestic Arrangements....................................................................................25 Commercial Arrangements................................................................................25 Voidable contracts................................................................................................25 Contractual Terms................................................................................................25 Condition........................................................................................................... 26 Warranty........................................................................................................... 26 Innominate Terms.............................................................................................26 Sources of Terms...............................................................................................26 Page 3 of 62

Express.......................................................................................................... 27 Implied........................................................................................................... 27 Exclusion Clauses..............................................................................................27 Incorporated by Notice...................................................................................28 Incorporated by Signature..............................................................................28 Misrepresentation of Clause (exception).........................................................28 Consistent course of dealings.........................................................................28 Contra-Proferentum........................................................................................28 Unfair Terms Legislation (Unfair Contract Terms Act (UCTA 1977).....................29 Template Answer Exclusion Clause..............................................................29 Signature.................................................................................................... 29 Notice......................................................................................................... 29 Conra-poferuntum rule................................................................................30 Course of dealing........................................................................................30 Unfair Contract Terms Act...........................................................................30 Breach of Contract............................................................................................30 The Mihalis Angelos.................................................................................31 Common Law Remedies....................................................................................31 Damages........................................................................................................32 Remoteness ...............................................................................................32 Measure...................................................................................................... 32 C & P Haulage v Middleton.......................................................................32 Ruxley Electronics v Forsyth....................................................................33 Other common law remedies......................................................................33 Equitable remedies.....................................................................................33 Mitigate loss................................................................................................33 Tort.......................................................................................................................... 33 Trespass to land................................................................................................... 33 Trespass to person...............................................................................................33 Nuisance.............................................................................................................. 34 Defamation...........................................................................................................34 Page 4 of 62

Deceit................................................................................................................... 34 Passing-off............................................................................................................ 34 Negligence........................................................................................................... 34 Loss of damage as a result of the breach..........................................................35 Defences against claim for negligence..............................................................35 Contributory negligence.................................................................................35 Sayers v Harlow UDS (1958)....................................................................35 Volenti non fit injura ......................................................................................35 Professional Negligence.................................................................................35 Duty of care..........................................................................................................35 Proximity........................................................................................................... 36 Breach of Duty of Care......................................................................................36 Res ipsa loquitur.............................................................................................36 Employment Law..................................................................................................... 36 Contract of Employment.......................................................................................36 Employee............................................................................................................. 36 Dismissal and Redundancy...................................................................................37 Notice and termination of contract by breach....................................................37 Constructive Dismissal......................................................................................37 Reduction in pay............................................................................................37 Industrial Rubber Products v Gillon (1977)...............................................37 Change in nature of job .................................................................................37 Ford v Milthorn Toleman Ltd (1980).........................................................37 Failure to follow disciplinary procedure..........................................................37 Post Office v Strange (1981)....................................................................37 Failure to provide suitable working environment............................................37 Waltons & Morse v Donnington (1997) ....................................................37 Failure to implement proper procedure..........................................................37 WA Goold (Pearmak) Ltd v McConnell & Another (1995)...........................37 Suspended without pay..................................................................................37 Summary Dismissal...........................................................................................38 Unfair dismissal.................................................................................................38 Page 5 of 62

Remedies for unfair dismissal.........................................................................38 Criteria for unfair dismissal.............................................................................38 Wrongful Dismissal............................................................................................38 Justifiable reasons for dismissal;.....................................................................38 Potentially fair reasons for dismissal...............................................................39 Automatically Fair reasons for dismissal.........................................................39 Automatically Unfair reasons for dismissal.....................................................39 Criteria to obtain compensation for unfair dismissal.......................................39 Exceptions to one years continuous service..................................................40 Remedies for wrongful dismissal....................................................................40 Criteria for obtaining wrongful dismissal.........................................................40 Redundancy...................................................................................................... 40 Employed v Self-Employed................................................................................40 Employee....................................................................................................... 40 Self-Employed................................................................................................40 Reasons for distinction...................................................................................41 Employment Control Test..................................................................................41 Employment Integration Test............................................................................41 Economic Reality............................................................................................41 Employment Relationships................................................................................42 Job Existence.....................................................................................................42 Agency / Partnership................................................................................................42 Actual Authority....................................................................................................42 Express Authority..............................................................................................42 Implied Authority...............................................................................................42 Ostensible Authority.............................................................................................43 Types of Agent..................................................................................................... 43 Agency workers.................................................................................................43 Partnerships......................................................................................................... 43 Retiring Partners............................................................................................... 43 Sleeping Partners..............................................................................................44 Company Law.......................................................................................................... 44 Page 6 of 62

Advantages of forming a company as compared to a partnership.........................44 Disadvantages of forming a company as compared to a partnership....................44 Formation of company..........................................................................................45 Memorandum of Association..............................................................................45 Articles of Association........................................................................................45 Form 10............................................................................................................. 45 Form 12............................................................................................................. 45 Alteration to articles..........................................................................................45 Effect of articles................................................................................................ 46 Restrictions to alterations of articles..................................................................46 Company Auditor..................................................................................................46 Appointment......................................................................................................46 Termination.......................................................................................................47 Duties................................................................................................................ 47 Rights................................................................................................................ 47 Company Secretary..............................................................................................48 Appointment......................................................................................................48 Responsibilities..................................................................................................48 Qualifications.................................................................................................... 48 Ostensible Authority .........................................................................................48 Powers of Company Secretary...........................................................................49 Dividends............................................................................................................. 49 Directors............................................................................................................... 49 Appointment.....................................................................................................50 Removal............................................................................................................50 Powers..............................................................................................................50 Fiduciary Duties.................................................................................................51 Statutory Duties................................................................................................51 Remedies for breach of directors duties...........................................................51 Page 7 of 62

Weighted voting rights......................................................................................52 Shadow directors...............................................................................................52 Executive director.............................................................................................52 Non-Executive Director......................................................................................52 Difference between Executive and non-Executive directors............................53 Management Director........................................................................................53 Company Meetings...............................................................................................53 Annual General Meeting....................................................................................53 General Meeting................................................................................................53 Class Meeting....................................................................................................53 Company Resolutions...........................................................................................54 Key Terms...............................................................................................................55 Structure of the legal system................................................................................55 Binding precedent.............................................................................................55 Purpose of Binding Precedent.........................................................................55 Advantage of Binding Precedent.....................................................................55 Disadvantage of Binding Precedent................................................................55 Avoidance of Binding Precedent.....................................................................55 Indictable offences ..............................................................................................57 Summary offences................................................................................................58 Capital Maintenance.............................................................................................58 Corporate Governance..........................................................................................58 Knowledge Gap................................................................................................. 58 Importance of good corporate governance...........................................................59 Cross....................................................................................................................59 Insider dealing......................................................................................................59 Law...................................................................................................................... 59 Lifting the veil.......................................................................................................59 By statute..........................................................................................................59 To prevent evasion of obligations......................................................................60 Page 8 of 62

Group Situations................................................................................................60 Limited by Shares.................................................................................................60 Limited by Guarantee...........................................................................................60 Money Laundering................................................................................................60 Plaintiff................................................................................................................. 61 Postal rule............................................................................................................ 61 Presumption......................................................................................................... 61 Rebuttal................................................................................................................ 61 Transfer of undertakings.......................................................................................61 List of cases............................................................................................................. 62 Legal Personality.................................................................................................. 62 Quasi Partnership..............................................................................................62 Tips......................................................................................................................... 62 Terms...................................................................................................................... 62

Structure Of The Legal System

Civil Law
Private law To settle disputes between individuals No concept of punishment, if liable, then compensation payable Objective is to compensate the wronged party Need to prove on the balance of probability Plaintiff (claimant) and defendant Personal action brought by the aggrieved party Court may award an equitable remedy if damages are inappropriate Example case: Carlill v Carbolic

Criminal Law
Public law A wrongdoer has broken the law

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A wrong done to society If guilty, then punished (community service, fine or imprisonment) Prosecutor and accused Need to prove beyond reasonable doubt Police decide whether to prosecute, this decision is reviewed by the Crown Prosecution Service Example case: R v Jones (Regina v Jones) / Sale of Goods Act (1979)

Distinction between Civil and Criminal Law (Tip Dec 09)

It is not the act or event which creates the distinction but the legal consequences. The proceedings can be made clear as the below 3 facts are different; 1. The courts where the case is heard 2. The procedures (objective) 3. The terminology All other differences can be picked up from civil law and criminal law details mentioned above

Sources of Law
Case Law
Forms of case law include;

Common Law
Introduced the system of precedent The only remedy was damages a monetary award Rigid and inflexible

Development started with effect from 1066 Kings representatives attended local courts, then met in London on a regular basis to discuss Over a period of 200 years, law was commonised Common Law Cornerstone of Common Law is judicial precedent (Ratio decidendi and obiter dicta) With commonisation came recognition of deficiencies Highlighted the need for alternative remedies Equity Common Law courts were separate from court of equity until the late nineteenth century

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Judicial Precedent
Ratio Decidendi
Ratio is the reason for the decision Definition Any rule of law expressly or impliedly treated by the judge as a necessary step in reaching his conclusion, having regard to the line of reasoning adopted by him, or a necessary part of his direction to the jury (cross). Ratio is binding on future judges in similar cases of equal or lower courts. And it is only persuasive for courts higher in the hierarchy Ratio not binding if too obscure made without care (per incuriam) in conflict with a basic principle of law in conflict with European law too wide

Obiter Dicta
Obiter are words in a judgement which are said by the way. They do not form part of the ratio decidendi and are not binding on future cases but merely persuasive.

Equity
Began as a form of appeal More flexible than common law Introduced new discretionary remedies such as injunctions and specific performance Concerned with fairness

Grew from the recognition of deficiencies of Common Law If a monetary award of damages was not appropriate, there was nothing else to offer In fourteenth century, Aequitas Chancellors court Early seventeenth century, Earl of Oxfords case (1615) - Where equitable rules conflict with common law rules, then equitable rules will prevail Confirmed by 1873 1875 Judicature Acts Main remedies: Specific performance, Injunction, Rescission or Rectification Remedies are given at Courts discretion Only given if damages are inappropriate Main remedies for Equity;

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Specific Performance Injunction Recission Rectification

Advantages of case law

Certainty Clarity Flexibility Detail Practicality

Statute Law / Legislation

Statute may be fresh legislation or it may be a consolidation of existing statutes and their amendments, i.e., CA (2006), or it may be a codification of existing statutory and case law, i.e., Sale of Goods Act (1979) Parliament passes laws (statutes), and only parliament can change / repeal those laws

Forms of legislation
Direct Legislation, i.e., Acts of Parliament Indirect legislation, i.e., delegated legislation (see below)

Advantages of statute law

The house of common is elected at intervals of not more than 5 years, hence the law making procedure is theoretically responsive to public opinion; Statute law can in theory deal with any problem; Statutes are carefully constructed codes of law; A new problem in society or some unwelcome development in case law can be dealt with by passing an Act of Parliament

Disadvantages of statute law

Bulky; Parliament often lacks time to consider draft legislation in sufficient detail; A substantial statute can take up a lot of parliament time; Statute law is a statement of general rules. Those who draft it cannot anticipate every individual case which may arise

Delegated Legislation
Rules of law, often of a detailed nature, made by subordinate bodies to whom the power to do so has been given by statute. Statutory instruments (responsible ministers)

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Bye laws (Burnley) i.e., no ball games Rules of Court (made by judiciary) Professional regulations (ACCA) regulation by the professional body of the conduct of its members Orders in Council (Privy Council very rare)

Advantages / Importance of delegated legislation

Saves parliamentary time Greater Flexibility regulations can be altered later without the need to revert to parliament Allows general principles to be written into statute, with fine detail added later by minister with consultation with professional bodies Allows very quick passing of statute in cases of e.g. national emergency Prevents parliament from being overwhelmed with excessive work-load

Disadvantages of delegated legislation

There are concerns over the accountability of parliament. Individual MPs and their civil servants effectively become the source of law Because delegated legislation can be produced in bulk, individual MPs and the public find it difficult to keep up-to-date with developments

Parliamentary procedure
Green paper - A proposal for new law White paper - After comments received a draft for the new law First reading - Introduction to the House Second reading - Debate about the merits of the proposed legislation Committee stage - All-party committee discussion and amend the draft Report stage - The amended draft then presented to the House for approval Third reading - Final approval by the House Same procedure in the other house Royal Assent

COURTS - Hierarchy of the Courts

European Court of Justice (ECJ)
Binds all English courts not bound by anyone, not even itself

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Supreme Court (SC) (previously know as House of Lords (judicial capacity))

Binds all English courts, but not itself bound by ECJ

Court of Appeal (C of A)
Binds all lower courts, bound by ECJ, SC and itself - unless Unless two similar decisions conflict must then decide which to follow; Earlier decision conflicts with a later SC decision; Earlier decision made per incuriam

High Court (HC)

3 divisions (Queens Bench Division, Chancery & Family). Binds all lower courts, bound by all higher courts and itself. A single judges decision is not binding on cases where multiple judges reside on.

Crown Court (Crown C)

Criminal cases, binds no-one, not even itself, bound by all higher courts

County Court (County C)

Civil cases, binds no-one, not even itself, bound by all higher courts. Civil cases appealed to C of A. a bankruptcy case appealed to HC (Chancery Division)

Magistrates Courts (MC)

Binds no-one, not even itself, bound by all higher courts

Tribunals
(i.e., Employment Tribunal) - Less formal procedures, quicker, hears disputes between employees and employers, can appeal to; Employment Appeal Tribunal (EAT) - Equal status as SC, can further appeal to C of A, but only on a point of law, not on a matter of fact

Tracking
3 types of tracking: small claims, fast & multi track Small claims track claim < 5,000, quick, informal, no need for legal representation Fast Track claim 5,000 < 15,000, trial will last < 1 day, less formal court procedures, claim will be determined within 30 weeks Multi Track claim 15,000, full court hearing, but management conference held to encourage alternative dispute resolution, which are faster and cheaper

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Statutory Interpretation Rules (Kaplan Jun 09 Mock Q1)

Literal rule
Ordinary everyday meaning, even if it produces undesirable outcome, unless;

Fisher v Bell

Golden rule
If literal rule would lead to absurd results, chose a result which produces the least absurd result. This is an extension to the literal rule

Re Sigsworth / Whitely v Chappell / Adler v George (1964)

Mischief rule
What mischief is the statute trying to control? Gorris v Scott the spread of contagious disease only

Purposive rule
What is the purpose of the act / Rule?

Gardner v Sevenoaks RDC (1950)

Eiusdem Generis
The Euisdem Generis rule follows the premise that statutes often list a number of specific things and end with more general words. In that case the general words are to be limited in their meaning to other things of the same kind as the specific items which precede them

Evans v Cross (1938) charged with driving his car in such a way as to
ignore a traffic sign (driving on the wrong side of the road) house, room or other place

Powell v Kempton Park Race Course Co (1899) prohibited betting in a

Expressio unius est exclusio alterius

To express one thing is by implication to exclude anything else

Noscitur a socis
It is presumed that words draw meaning from the other words around them. For example, childrens books, childrens toys, and clothes, would mean childrens clothes

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In pari material
If the statute forms part of a series which deals with similar subject matter, the court may look to the interpretation of previous statutes on the assumption that Parliament intended the same thing. Purposive approach, for example, civil partnerships Cannot interpret statute which would lead to conflict with European Law

Statutory Interpretation Presumptions

As well as being bound by rules, judges are also bound by presumptions, which include; Statute is not to alter existing common law Where statute deprives a person of his property, statute does not operate retrospectively Statute does not bind the Crown Statute is not to deprive a person of their liberty Statute operates throughout the UK, but not in conflict with Europe Unless perfectly clear, statute is not to create an offence of absolute liability Statute is not to conflict with existing statute

Aids to Interpretation
2 types: Intrinsic and Extrinsic

Intrinsic
Intrinsic aids are those words contained in the Queens printers copy of the statute. The title of the statute may give an indication of its objective E.g. Anzac (Restriction on Trade Use of Word) Act 1916. The preamble the introduction to the statute at the start of the document Interpretation section within the statute Margin notes (summary notes in the margin)

Extrinsic
Extrinsic aids are those found elsewhere (other than the Queens printers copy of the statute) Reports of committees Hansard Dictionary Books of authority

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Interpretation Act 1987

Contract Law (Invitations, offers and acceptance)

An invitation must be distinguished from an offer is not capable of acceptance is inviting another person to make an offer Goods in a supermarket are invitations (Pharmaceutical Society of Great Britain v Boots Cash Chemist (1952)) Goods in a shop window are invitations (Fisher v Bell (1961)) Adverts are normally invitations (Partridge v Crittenden (1968)) Very occasionally, adverts may be taken to be offers (Carlill v Carbolic Smoke Ball Company (1893)) Mail catalogues are invitations (Grainger v Gough 1896) The process of an auction sale constitutes the auctioneer inviting offers to be made (Barry v Davies (2000)) An advert offering a reward is an offer, not an invitation (Williams v Carwardine, R v Clark, Carlill v Carbolic)

Essential elements of a contract

Offer and Acceptance Consideration Intention to create legal relations

Offers
A definite promise to be bound on specific terms Must be certain (Gunthing v Lynn (1831)) - Horse if lucky. Offer was too vague, and contract could not be formed Half of the agreement An expression of willingness to be bound on specific terms Carlill v Carbolic Smoke Balls (1893) - 100 reward for anyone who contracts influenza after having used the smoke ball three times, claimant used the smoke ball as prescribed but still caught influenza, offer valid, as 100 already deposited in the bank Must still exist when accepted Must be distinguished from invitations Must be distinguished from statements of intent (Harris v Nickerson (1873)) advert to say an auction is taking place. If auction doesnt take place, potential buyers cannot sue

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A response to a request for information is not an offer (Harvey v Facey (1893)) - A mere statement of a min price one would consider. The telegram was not an offer Bigg v Boyd Gibbons (1971) - However, if the vendor states the lowest price he will accept for a sale, that statement may be an offer which can be accepted A request for information is not a counter offer (Stevenson v McLean) Revocation must actually be communicated to the offeree (Byrne v Van Tienhoven) May be made to the world at large (R v Clark, Williams v Carwardine)

Termination of Offer
An offer may only be accepted while it is acceptance, an offer may be terminated in Rejection Counter-offer Lapse of time Revocation by the offerror (must be Failure of a condition to which the Death of one of the parties still open. In the absence of an any of the following ways;

communicated to offerree) offer was subject

May be revoked at any time before acceptance, revocation must be communicated to the offeree Postal rule does not apply

Lapse of time
Ramsgate Victoria Hotel v Montefiori (1866) - The defendant applied for
shares in June and paid deposit, the acceptance by the company was sent in November and asked for the balance due. The defendant contented that the offer had expired and could no longer be accepted. The offer was for a reasonable time, and five months was much more than that. The offer had lapsed

Counter-offer / Rejection
Hyde v Wrench (1840) - Original offer of 1,000 was terminated by the
counter-offer of 950 A counter-offer is a final rejection of the original offer. If a counteroffer is made, the original offerror may accept it, but if rejected, the original offer is no longer available for acceptance.

Death (personal services) Notification of death (non-personal services)

Bradbury v Morgan (1862) The death of the offeree terminates the offer.
The offerors death terminates the offer, unless the offeree accepts the offer in ignorance of the death, and the offer is not of a personal nature

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Failure of a condition precedent

Financings Ltd v Stimson (1962) Contract stated that agreement will not
be binding unless signed by claimant. The claimant signed the agreement after the car was stolen, hence the defendant was not bound to take the car

Notice of revocation may be communicated through a reliable third party

Dickinson v Dodds (1876) Property offered for sale until specified time,
before the end of time, the defendant sold the property to a third party who had been an intermediary between Dickinson and Dodds, that intermediary informed the claimant of the sale, the claimant sent a formal letter of acceptance before the end of the deadline. The defendant was free to sell, as the claimant was reliably informed of the sale.

Request for information

Stevenson v Mclean (1880) Defendant offered to sell iron at a specified
price, open till Monday. The claimant enquired whether he would agree to deliver over two months. The defendant did not reply and within the stated time sold the item to a third party. The claimant accepted the original offer, and was able to sue as the request was merely for information

Privity of contract
Tweddle v Atkinson (1861) Only a person who is party of a contract has
enforceable rights or obligations under it

Acceptance
A positive act by a person to whom an offer has been made which, if unconditional, brings a binding contract into affect The other half of the agreement Acceptance must be complete and unconditional Acceptance must be an unqualified agreement to the terms of the offer and must not introduce new terms Acceptance cannot vary the original offer. That would be a counter-offer (Northland Airlines v Dennis Ferranti Meters) The offer must still be open at the time of acceptance (Hyde v Wrench) Acceptance can be express (oral or written) or implied and must be communicated to the offerror unless offeror waives the need of communication (Carlill v Carbolic) Acceptance must be communicated to the offeror, but offeror may waive the right of communication (Carlill v Carbolic)

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Communicated by a reliable third party

Powell v Lee (1908)

Business agreements (ex-gratia)

Edwards v Skyways (1964) ex-gratia payment as part of a larger
negotiation is binding

Binding in honour only

Jones v Vernon Pools (1938) the conditions stated that the transaction
should not give rise to any legal relationship, but be binding in honour only

Acceptance may be by conduct

Brogden v Metropolitan Railways Co (1877) - Actions of the parties. Had
been dealing with each other for a number of years, claimant suggested they should have a written agreement. Defendants agent sent a draft for consideration, but no-one signed it. The parties applied their dealings to the terms of the draft agreement. The conduct of the parties was only explicable on the assumption that they both agreed the draft agreement.

Silence is not enough

Felthouse v Bindley (1862) Defendant wrote to his nephew offering to buy
his horse, adding if I hear no more about him, I consider the horse mine. The nephew instructed the auctioneer to sell the horse, the horse was sold, the uncle sued the auctioneer, and he failed.

Postal rule applies

Acceptance must be made within a reasonable time (Household Fire Insurance Co v Grant (1879)) the defendant handed a letter of application for shares in the claimants company agent. The companys acceptance of application never arrived. The defendant called up the money for shares, the defendant had to pay as the contract had been formed when the acceptance was posted.

Adam v Lindsell (1818) acceptance occurs as soon as the letter is posted

Acceptance by prescribed means

Yates Building Co v R J Pulleyn & Sons (York (1975)) the offer called for
acceptance by registered or recorded delivery. The offerree sent an ordinary letter, which arrived on time and the offerror suffered no disadvantage, hence acceptance was valid

Advert offering reward

Williams v Carwardine (1833) Plaintiff (Mrs Williams) gave evidence for a
case, but did not disclose everything she knew. Sometime later the victims brother placed an advert asking for more information; she came forward and gave the additional evidence. She was entitled to the reward as it was apparent that after the first murder trial, Mrs Williams had been savagely beaten by Mr Williams

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Invitation to treat
An indication that a person is prepared to receive offers with a view to entering into a binding contract.

Partridge v Crittenden (1968) placed an advert to sell birds, which were

supposed to be preserved. RSPCA failed to bring a case against him, as it was an invitation to treat.

Pharmaceutical Society of Great Britain v Boots Cash Chemist (1952)

drugs which had to be supervised were placed in a self-service shop. Customers could still reject the goods at the till.

Fisher v Bell (1961) shop owner being prosecuted for displaying an

offensive item for sale. Shelf displays are only invitation to treat.

Grainger v Grough (1896) circulation of price list

Consideration
Consideration is what each party brings to the contract Consideration need not be adequate but must be sufficient A valuable consideration in the sense of the law may consist either in some right, interest profit or benefit accruing to one party, or some forbearance, loss or responsibility given, suffered or undertaken by the other Every contract must be supported by consideration. Consideration is a two-way thing in simple / Parol contracts (only one-way is necessary in specialty contracts/deeds)

Currie v Misa (1875) / Dunlop v Selfridges

Consideration must be legal and possible

Privity of contract

- Consideration must move from the promisee

Courts may imply an implied promise to pay a reasonable sum (Lampleigh v Braithwait) Courts will not look at the adequacy of agreed consideration Consideration must have some value (sufficient) (Chappell v Nestle) Not sufficient if in accordance with a natural duty already owed (White v Bluett) Not sufficient if in accordance with a legal duty already owed (Collins v Godefroy) Not sufficient if in accordance with a contractual duty already owed (Stilk v Myrick) 2 crew members deserted, captain unable to recruit substitutes, and promised the remaining crew that they would share the deserters wages. Upon arrival at Bombay, the captain refused the additional pay, and werent liable, as the crew did not give consideration for the promise of extra pay.

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If over and above a

natural duty, OK (Ward v Byham) legal duty, OK (Glasbrook v Glamorgan) contractual duty, OK (Hartley v Ponsonby)

Williams v Roffey Carlill v Carbolic Smoke Ball Co (1893) - 100 reward for anyone who
contracts influenza after having used the smoke ball three times Consideration is what each side brings to the contract. Mrs Carlill gave consideration by using the smoke ball

Adequacy
It is presumed that each party is capable of serving his own interests, and the courts will not seek to weigh up the comparative value of the promises or acts exchanged

Thomas v Thomas (1842) widow to occupy house for 1 rent per annum.
Compliance with the husbands wishes was not valuable consideration (no economic value attached to it), but the rent was sufficient consideration.

Sufficiency
Consideration is sufficient if it has some identifiable value. The law only requires an element of bargain, not necessarily that it should be a good bargain

Chappell & Co v Nestle Co (1960) defendant offered to supply a record to

anyone who sent in a postal order for 1s 6d and three wrappers from 6d bars of chocolate. The wrappers were part of the consideration, as they had commercial value to the defendant.

Executed
An act in exchange for a promise That which takes place at the present time. Thus in a contract for the sale of goods, the consideration is executed if the price is paid at the same time that the goods are delivered.

Executory
A promise (to perform an act at a future date) in exchange for a promise (or an act) That which is to take place at some future time. The consideration for the delivery of goods would be executory if it is a promise to pay at a future date.

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Past consideration
Re McArdle, Roscorla v Thomas - There is no consideration. Children were
entitled to mothers house after her death. One of the childrens wives made improvements and the others agreed in writing to pay her, but at the mothers death, they refused to pay her. The work on the house had been done before the documents were signed, so promise not binding Something which has already been done at the time the promise is made. An example would be a promise to pay for work already carried out, unless there was implied promise to pay a reasonable sum before the work began.

Exceptions to past consideration

Bill of exchange Request for service it may be implied that the person will pay for them

Letter of comfort
Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd (1989) letters
of comfort to creditors are not binding

Letter of intent
A letter of intent is a means by which one party gives a strong indication to another that he is likely to place a contract with him.

Privity of Contract
Only a party to a contract may sue to enforce it, but there are exceptions A person entitled to benefit under third party motor insurance can sue the insurer A principal may sue to enforce a contract entered into by his agent A holder-in-due-course of a bill of exchange can sue all prior parties

Beswick v Beswick - Where a special relationship exists; for example, an

executor may sue to enforce a contract entered into by the deceased

Keech v Sandford / Shamia v Joory - A beneficiary may sue a trustee

A manufacturer of goods may be sued by the ultimate consumer (Donahue v Stevenson) An employer may be sued for the negligent acts (tort, not contract) of its employees

Tulk v Moxhay - Restrictive covenants on land apply to subsequent owners

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Exceptions to the rule that third parties cannot enforce contracts;

Where the contract has been validly assigned to the third party Beswick v Beswick (1968) - Where they act in another capacity widow suing as deceased husbands admin Shanklin Pier v Detel Products Ltd - Where the contract is a collateral contract Linden Garden Trust Ltd v Lenesta Sludge Disposals Ltd (1994) - Where there is foreseeable loss to a third party a third party in the contemplation of both parties when contract was made

Collateral Contracts
A contract where consideration is provided by the making of another contract. For example, if there are two separate contracts, one between A and B and one between A and C, on terms which involve some concerted action between B and C, there may be a contract between B and C. An injured party can sue even though the other party is not a party to the contract (Shanklin Pier Ltd v Detel Products Ltd (1951) defendant gave assurances that the paint was satisfactory and durable if used to paint the claimants pier. Claimant had an agreement with X to use the defendants paint, which was the consideration for a contract between the claimant and the defendant)

Unilateral Contracts
A contracts where the terms of the offer are fulfilled by the actions of the offerree.

Regina v Clarke (1927) no acceptance without knowledge of offer.

Information given on the arrest and conviction of a murderer. of the reward. Acceptance was related to the offer.

Williams v Carwardine (1833) provided info about criminals with knowledge

Pinnell and its exceptions (part payment of debt)

General principle part payment of a debt does not achieve full settlement (Pinnells case) Illustrated by Foakes v Beer, but there are exceptions Receiving something different to which you were not already entitled Goods instead of cash; settlement before the due date Arrangement with creditors generally that collectively they agree to accept only part payment Payment by someone other than the debtor (Welby v Drake); payment at a different location than originally agreed

Promissory Estoppels Doctrine;

Central London Property Trust v High Trees House (1947) reduced
rent during war time, then wanted to reclaim the reduction. The agreement had estopped any claim

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Combe v Combe D & C Builders v Rees

Intention to Create Legal Relations

May be express or implied Presumed unless rebutted

Domestic Arrangements
Presume no intention to be legally bound

Balfour v Balfour - husband and wife, living together, monthly allowance. Merritt v Merritt / Spellman v Spellman presumption rebutted, as husband
and wife separated / living apart and wife

Simpkin v Pays / Jones v Padavatton / Parker v Clark - other than husband

Commercial Arrangements
Presume intention to be legally bound

Rose & Frank v Crompton (1923) - claimant appointed distributor for USA,
when order placed, defendant terminated agreement. Claim for breach of contract failed, but damages for non-delivery of goods succeeded because the order was accepted when placed.

Jones v Vernon Pools / Appleson v Littlewoods - Express exclusions

binding in honour only. Wording of contract stated binding in honour only. Therefore, no intention to be legally bound Presumptions assumed until proved otherwise Rebuttal disproving a presumption

Carlill v Carbolic payment of 1,000 into bank account

Voidable contracts
These may be cancelled by one party if they choose to. They may continue as a valid contract if the affected party chooses to.

Contractual Terms
As a general principle, the parties to a contract may include in their contract, whatever terms they choose. The agreement reached on the terms must be complete in order to be legally binding and those terms must be sufficiently clear and precise (Scammell v Ousten (1941))

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Condition
A term which is a condition is fundamental to the contract Breach of a term which is a condition allows the injured party to treat the contract as discharged and sue for damages

Poussard v Spiers (1876) opera singer unable to appear on the opening

night due to illness.

Warranty
A warranty is superficial to the contract Breach of warranty allows the injured party to claim damages only But the contract is not discharged

Bettini v Gye (1876) opera singer did not arrive for rehearsal 3 days
before opening night (out of a possible 6) due to illness. Rehearsal was subsidiary to the main purpose.

Innominate Terms
Bunge Corporation v Tradax SA (1981) - The courts will seek to construe
what was the intention of the parties at the time of the contract as to whether a broken term was to be a condition or warranty

Innominate terms are those where it is not clear, until breached, whether they are fundamental or merely superficial Remedy depends on the effects of the breach

Hong Kong Fir shipping Co Ltd v Kawasaki Kisa Kaisha Ltd (1962)

claimant to provide a ship that was in every way fitted for ordinary cargo, ship was only available for 17 out of 24 months

The Hansa Nord some of the ships cargo arrived in poor condition. Buyer
rejected the whole cargo. Held only remedy was damages.

Sources of Terms
May be express or implied Term Condition Fundamental to contract Warranty Superficial to contract Innominate Not clear until breached Representation Induces contract Does not become part of the contract Routledge v McKay (1954)

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Express
Express terms are those agreed by the parties and may be written into the contract or simply agreed orally and the court will ascertain whether any oral statement constitutes a term of the contract or simply a representation

Les Affreteurs v Walford (1919) - Express terms override any terms that are
implied by custom

Implied
Implied terms may be judicially or statutorily implied by the nature of the contract, by custom & usage Judicially implied terms - business efficacy (The Moorcock (1889)) (Express Newspapers v Silverstone) trade custom (Hutton v Warren (1836)) the defending landlord gave notice to the claimant to vacate the farm, the claimant should continue to farm the land during the notice, and was entitled to a fair allowance for seeds and labour from which the received no benefit course of trade (Hillas v Arcos) Statutorily implied terms, e.g., Sale of Goods legislation Powers of partners / MDs to bind partnerships / company Limited ability to exclude statutorily implied terms Term re title cannot be excluded in ANY contract Others from Sale of Goods legislation cannot be excluded in a consumer contract Implied covered by statute company secretary ordered a van for hire Express oral or written o Terms put on top of the contract. Contractually binding part of contract. Generally written. Poussard v Spiers (opera singer failed to attend opening night) - Conditions Essential, goes to the heart of the contract Bettini v Gye (opera singer failed to attend rehearsals) Warranties subsidiary term of contract. Contract can be performed with adjustments, i.e., new car delivered which was not cleaned. Generally oral. Breaching party liable to pay damages only. The Hansa Nord (some cargo arrived in poor condition) Innominate Terms cannot determine if condition or warranty. Breach insufficient to justify treating contract as ended o Representations throw away inducements do not form contract

Exclusion Clauses
Must be incorporated into the contract either by signature, notice or previous dealings.

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Definition a clause in a contract which purports to exclude liability altogether or to restrict it by limiting damages or imposing other onerous conditions. They are sometimes referred to as exemption clauses. Used in contracts in an attempt to eliminate or limit the extent of a breaching partys liability

Incorporated by Notice
Olley v Marlborough Court Hotel - Must be communicated to the other party
at the time the contract is entered into sign in a hotel room not incorporated as it is not seen until after the contract is made

Thompson v LMS Railway - Should be brought to the attention of the other

party elderly lady asked niece to purchase train tickets. Exclusions printed on the back of the ticket, stating that the ticket was issued subject to conditions contained in the companys timetable excluding liability for injury. Conditions adequately communicated, therefore accepted.

Incorporated by Signature
LEstrange v Graucob - Where a document apparently has a legal affect,
should make sure before you sign it slot machine sold under condition which excluded the claimants normal rights under the Sale of Goods Act (1893) conditions binding as she signed the contract, even if she didnt read or understand it

Misrepresentation of Clause (exception)

Curtis v Chemical Cleaning Co - Oral statements by an employee can destroy
the effectiveness of an exclusion clause shop floor assistant stressed the exclusion of the damage to beads and sequins, dress badly damaged in dry cleaning, so defendant liable.

Consistent course of dealings

J Spurling v Bradshaw (1956) - Where parties have a history of trade, other
party may be deemed to be aware of the exclusion clause customer never read the terms and conditions. He gave a few barrels to be stored they were returned empty. Defendant not liable.

Hollier v Rambler Motors (1972) - But this course of trade should be more

than 3 or 4 occasions in the previous 5 years used garage 3/4 times over 5 yrs, car damaged in fire by negligence of garage employees. Defendant (garage) liable, as there was no evidence to show that the claimant knew of and agreed to the condition as a continuing term.

Hardwick v Suffolk more than 100 times in a 3 year period

Contra-Proferentum
Andrews v Singer - Any ambiguity will be read strictly against the party
seeking to rely on it

Photo Productions v Securicor (1980) - Possible to exclude liability for

fundamental breach one of the defendants security guards deliberately

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started fire on the claimants premises that he was guarding. The exclusion clause stated that the defendants were not liable for any damage caused to the property or to its contents however caused. Claimants claim failed, as this was before the Unfair Contract Terms Act (1977) came into force.

Unfair Terms Legislation (Unfair Contract Terms Act (UCTA 1977)

Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contract Regulations 1999 Restricts or limits the extent of liability for negligence in consumer contracts Some are void, others are subject to a test of reasonableness Cannot exclude liability for negligence resulting in death or personal injury Cannot exclude liability for partial or incomplete performance by the seller Cannot have a term which binds the consumer but allows seller to avoid the contract Reasonable? S11 UCTA 77 takes account of : Relative bargaining power. Any inducement offered, or normal trade custom Special ordered goods Fair and equitable treatment of the consumer by the seller Extent of ability to cover by insurance Regulations apply to terms which have not been separately negotiated A consumer is a natural person who is acting for purposes outside his business An unfair term is any term which causes a significant imbalance in the parties rights and obligations to the detriment of the consumer

Template Answer Exclusion Clause

Exclusion clauses can be incorporated into contracts by; Signature Notice A course of dealing (for the court to decide)

Signature
Signatory is taken to know of the terms even if he could not read them (LEstrange v Groucob (1934))

Notice
With regards to notice, it must be shown that the person seeking to rely on the exclusion clause has taken reasonable steps to bring the existence of the clause to the attention of the other party at the time the contract was made (Olley v Malborough Court (1949))

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Conra-poferuntum rule
In deciding what an exclusion clause means, the courts interpret any ambiguity against the person seeking to rely on the exclusion clause. This rule would be applied if there is any ambiguity or if the terms are particularly unusual or wide

Course of dealing
Where the parties deal frequently under the same terms, the exclusion clause is taken to be incorporated in the previous dealing, even if the claimant never read it (Spurling v Bradshaw (1996)). The position is not so straight forward if the dealings have not been on a consistent basis (Hollier v Rambler Motors (1972))

Unfair Contract Terms Act

Even if the clause is incorporated and can be interpreted to cover the loss, statute imposes some very important restrictions on the use of exclusion clauses. These are covered under the Unfair Contract Terms Act (1977), which divides these clauses into two; 1. Those which are void 2. Those which are valid only as far as they are reasonable Void Cannot exclude liability for negligence resulting in death or personal injury Cannot exclude liability for partial or incomplete performance by the seller Cannot have a term which binds the consumer but allows the seller to avoid the contract

Valid if reasonable Relative bargain power Any inducements offer to the buyer the ability of the party to insure against the liability Fair and equitable treatment of customer whether the buyer knew or ought to have known of the existence and extent of the term

Breach of Contract
May be during or anticipatory

Anticipatory

One party gives notice, before the contract start date that they will not go ahead with their obligations Anticipatory breach can be; Express one party declares they have no intention of performing the contract Implied one parry does something which makes performance impossible

Hochster v De La Tour (1853) - Injured party may sue immediately claimant

was informed by the defendant before his European tour started that he was no

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longer needed. Claimant entitled to sue as soon as the anticipatory breach occurred.

White and Carter Councils v MacGregor (1961) - Or ignore, go ahead with

their obligations, and then sue claimants provided free bins, as the defendant contracted to pay them for advertising space, the defendant wrote to claimant to cancel the contract, but the claimant continued and was entitled to sue. Or wait, and hope the other party will change their minds

Avery v Bowden - But if they choose to wait, they could lose their right
to sue To be able to achieve full compensation, the injured party must have been in a position to complete their obligation at the date the contract was due to start

The Mihalis Angelos Hochester v De La Tour (1853) tour guide sent confirmation that he will
not be able to attend

Repudiatory / Actual (aka During)

One party refuses to continue Becomes apparent at or after the time set for performance Definition a repudiatory breach occurs when a party indicates, either by words or by conduct, that he does not intend to honour his contractual obligations or commits a breach of condition or commits a breach, which has very serious consequences for the injured party. It usually occurs when performance is due. Injured party may treat the contract as discharged (if a breach of condition) and sue for damages immediately Types of repudiatory breach; Refusal to perform (renunciation) Hochster v De la Tour (1853) one party renounces his contractual obligations by showing that he has no intention to perform them Failure to perform an entire obligation complete and precise performance is a precondition Incapacitation a party prevents himself from performing his contractual obligations Breach of condition Breach of innominate term -

Common Law Remedies

Monetary compensation, not punitive

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Damages
Damages are a common law remedy intented to restore the party who has suffered loss to the same position he would have been in if the contract had been performed.

Liquidated Damages
Enforceable by the courts

genuine pre-estimate of expected loss.

Penalty Clause

threatens large damages for breach. Unenforceable

2 parts to damages- Remoteness and Measurement It is not intended as a punishment

Remoteness
The Wagon Mound (1961) oil leaked out of defendants boat and ignited
when it came in contact with cotton waste defendant not liable, as possibilit too remote Only awarded if the damage suffered should have been in the reasonable contemplation of the ordinary man Loss suffered should either arise as a natural consequence of the breach or, The breacher was aware of the special circumstances of the injured party

Hadley v Baxendale (1854) mill-shaft broke, contract made with the

defendant to transport the broken milk-shaft to serve as a pattern for making a new shaft. Delayed in transport caused the mill to be out of action for longer, the defendant was not made aware of the fact that the mill will be idle until the new shaft was delivered to the mill

Victoria Laundry (Windsor) v Newman Industries (1949) Defendant

contracted to sell boiler for immediate use, and boiler broke down causing the claimant to lose a lucrative contract. As the defendant was not made aware of the abnormal profits from the lucrative contract, only the normal profits were recoverable

Jarvis v Swan Tours cant usually recover for loss of enjoyment, unless
contract is one designed to give enjoyment

Measure
Courts determine how much award is necessary to put the injured party into the position they would have achieved if there had been no breach

C & P Haulage v Middleton Thompson v Robinson - May take account of speculative loss Anglia Television Ltd v Reed (1972) - But may not. Actor pulled-out at the
last minute, and project was abandoned. Claimants claim for expenditure such as hiring other actors and research were granted. Had the claimed for loss of profits, they would not have succeeded

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Alexander v Rolls Royce - But may not

If the cost of repair far outweighs the loss suffered, courts may make an award based on loss of amenity

Ruxley Electronics v Forsyth

The injured party has a duty to mitigate their loss

Other common law remedies

Action for price Retail price of item Quantum Meruit calculation of value of item Specific Performance return your item back. Cannot use in personal service contracts, i.e., individuals. Equitable remedy

Equitable remedies

Injunction through the courts order someone to do or not to do something Recission Rectification Mareva Injunction

Mitigate loss
Mitigation Reducing your loss

Payzu Ltd v Saunders (1919) contract for the supply of goods and for the
payment to be in instalments. The claimant failed to make the first payment when due, and the defendant stopped further delivery, then the price rose. The claimant should have mitigated the loss by accepting the sellers offer of delivery against cash.

Tort
Trespass to land
Entering land Remaining on land Placing objects

Trespass to person
Battery intentionally bringing of a material object into contact with another

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Assault intentional act of putting another in reasonable fear or apprehension of immediate battery False imprisonment unlawfully arresting, imprisoning or preventing a person from leaving

Nuisance
Causing distress to another by, e.g., noise, smell, etc Private unlawful interference with a persons use or enjoyment of land or some right or in connection with it Public acts of omissions that materially affect the reasonable comfort and convenience of the life of a class of Her Majestys subjects

Defamation
Libel refers to visible acts such as writing, pictures and even effigies. This is a criminal act. Slander refers to spoken acts or gestures. This is a civil injury, where damage must be proved.

Deceit
Deliberately misleading another into a detrimental position

Passing-off
Use of a name, mark or description by one business that misleads a consumer to believe that their business is that of another

Ewing v Buttercup Margarine Co Ltd (1917) using a similar name to an

established margarine retailer.

Negligence
Carelessly carrying out an act and breaking a legal duty of care owed to another causing them loss or damage. This is the most important modern tort. The claimant must prove that; The defendant had a duty of care to avoid causing injury, damage or loss There was a breach of that duty by the defendant In consequence, the claimant suffered injury, damage or loss

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Loss of damage as a result of the breach

Barnett v Chelsea & Kensington HMC (1989) negligent doctor sent patient
home, but the patient would have dies anyway

Defences against claim for negligence

Contributory negligence
A court may reduce the amount of damages paid to the claimant if the defendant establishes that the claimant contributed to their injury or loss

Sayers v Harlow UDS (1958)

Volenti non fit injura

Voluntary acceptance of the risk of injury / unless expressly consented to risk i.e., boat race case

Professional Negligence
Caparo Industries v Dickman & others (1990) the auditors duties does not
extend to potential investors nor to existing shareholders increasing their stakes.

ADT Ltd v Binder Hamlyn advising on takeovers. Binder Hamlyn was held to
have specifically assumed responsibility for its statements at a meeting held to discuss the audited results, which made it liable outside the usual sphere laid down by Caparo.

Candler v Crane, Christmas & Co (1957) special relationship Barings Plc v Coopers & Lybrand (1997) auditors liable for group
companies Auditors not liable to potential investors Foreseability Proximity Fairness

Duty of care
A person might owe a duty of care to another with whom he had no contractual relationship.

Was the harm reasonably foreseeable Was there a relationship of proximity between the parties Considering the circumstances, is it fair, just and reasonable to impose duty of care

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Is it just and reasonable that they should be relying on your info just for shareholders, but not investors and shareholders wanting to increase their stake

Donoghue v Stevenson (1932) a purchased a bottle and B drank from it,

which contained the remains of a decomposed snail, and became ill. Defendant responsible.

Richley v Fould (1965) - car skidded to the other side of the road. Careless
driving

Proximity
Special relationship. Legal neighbour. Does that person have a close enough relation to you to rely on your advice?

Breach of Duty of Care

Res ipsa loquitur

The facts speak for themselves. If an accident occurs which appears to be most likely caused by negligence, the court may apply this maxim and infer negligence from mere proof of the facts. Applies in circumstances where the cause of the injury was under the control of the defendant and that the incident would not have occurred if they had taken proper care.

Mahon v Osbourse (1939) - The burden of proof is reversed and the

defendant must prove that s/he was not negligent.

Employment Law
Contract of Employment
A contract of employment is a contract of service or apprenticeship, whether express or implied, and (if it is express) whether it is oral or in writing An independent contractor is a person who contracts to provide services for another party (contract for service)

Employee
An employee is an individual who has entered into, or works under a contract of employment (ERA 1966) Someone employed by an employer under the terms of a formal contract of employment (a contract of service)

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Dismissal and Redundancy

Notice and termination of contract by breach
An employment contract is terminated by breach of the following; Summary dismissal Constructive dismissal Employer unable to continue Employee repudiates contract

Constructive Dismissal
This is when employer, although willing to continue the employment, repudiates some essential term of the contract, for example by the imposition of a complete change in the employees duties, and the employee resigns. The employer is liable for breach of contract. This is where the employer commits a breach of contract, thereby causing the employee to resign. By implication, this is also dismissal without notice

Reduction in pay
Industrial Rubber Products v Gillon (1977)

Change in nature of job

Ford v Milthorn Toleman Ltd (1980)

Failure to follow disciplinary procedure

Post Office v Strange (1981)

Failure to provide suitable working environment

Waltons & Morse v Donnington (1997)

Failure to implement proper procedure

WA Goold (Pearmak) Ltd v McConnell & Another (1995)

Suspended without pay

Western Excavating (ECC) Ltd v Sharp (1978) defendant suspended for
misconduct, this caused him financial harm, and was also refused advance holiday pay, so he left. Employer had not repudiated the contract, so no dismissal.

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Summary Dismissal
This is when the employer dismisses the employee without notice. He may do this if the employee has committed a serious breach of contract and, if so, the employer incurs no liability.

Wilson v Racher (1974) a gardener swore at his employer. The employees

case for wrongful dismissal succeeded, as the employers actions provoked the outburst.

Unfair dismissal
This is a statutory concept introduced by employment protection legislation. As a rule, every employee has the right not to be unfairly dismissed Correspondingly, fair dismissal is a statutory concept where a person has been dismissed as a result of a fair reason under legislation The distinction between wrongful and unfair dismissal is in the remedies available.

Massey v Crown Life Assurance (1978) employee became self-employed for

some role, then got sacked, then sued for unfair dismissal, claim to be a dismissed employee failed

Remedies for unfair dismissal

Compensation o Limited to 60,600 Re-instatement same job without break Re-engagement new employment with terms specified in the order by the court very rare

Criteria for unfair dismissal

Continuously employed for > 1 yr Have been dismissed (inc constructive dismissal) Have been unfairly dismissed

Wrongful Dismissal
This is common law concept arising in specific circumstances. It gives the employee an action for breach of contract, i.e., where insufficient notice has been given

Justifiable reasons for dismissal;

Wilful disobedience of a lawful order Misconduct Dishonesty (where the employee is in a position of particular trust) Incompetence or neglect, where an employee fails to use the skills he claims Gross negligence, depending on the nature of the job

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Immorality (if it will affect the performance of duties/reputation of the business) Drunkenness (in aggravated circumstances or repeated)

Generally, the only effective remedy for wrongful dismissal is to claim for damages based on the loss of earnings.

Potentially fair reasons for dismissal

Capability or Qualifications of employee for performing the work of the kind which he was employed to do Conduct of employee Redundancy Legal Prohibition restrictions preventing the employee from lawfully working in the position which he held Other substantial reasons o Refusal to accept changed work practices agreed by majority of workforce, this also includes change of shifts o For the above to be fair, there must be evidence of employers reasonable conduct in this regard, which would be consultation with the employee to determine the area of difficulties, allowing a reasonable time for improvement, providing training if necessary and considering all alternatives to dismissal The employee was married to a competitor

Automatically Fair reasons for dismissal

Taking part in unofficial industrial action Being a threat to national security (to be certified by the government)

Automatically Unfair reasons for dismissal

Pregnancy Spent conviction Trade union membership On transfer of undertakings (new ownership) Takings steps to avert health and safety problems Exercising certain rights under minimum wage, working time, Sunday trading or public interest disclosure acts

Criteria to obtain compensation for unfair dismissal

Have been in continuous employment for one year whether full-time or part-time Have been dismissed. This may have to be determined by the tribunal, for example if the employee resigned claiming constructive dismissal Have been unfairly dismissed. Dismissal may be unfair even though it is not a breach of contract by the employer

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Exceptions to one years continuous service

Where the matter concerns a safety representative being penalised for carrying out legitimate health and safety activities Where an employee is being denied a statutory right (for example an unlawful deduction from wages) Where the employee is pregnant

Remedies for wrongful dismissal

Damages based on loss of earnings Wronged party to mitigate loss by seeking other work

Criteria for obtaining wrongful dismissal

Insufficient notice given (i.e., summarily dismissal)

Redundancy
A dismissal is treated as redundancy if the main or the only reason for dismissal is; The employer has ceased, or intends to cease, to carry on the business in which the employee has worked The requirements of that business for employees to carry on the work done by the employee have ceased or diminished Redundancy is unfair if based on the membership of a trade union membership or activities, but redundancy notice is fair and no redundancy is payable if employee is on strike action (pg 173 & 177 of s/txt). When an employee is laid-off or kept on short-term they may claim redundancy by informing the employer of their intention to do so Payment must be claimed with 6 months Calculations are the same as unfair dismissal basic award

Employed v Self-Employed

Employee
Someone employed by an employer under the terms of a formal contract of employment (a contract of service)

Self-Employed
Someone who contracts to provide services for another party (contract for service)

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Ferguson v John Dawson & Partners (1976) was self-employed but

employers controlled what he did and when, so he was an employee and could sue for the accident at work.

Ferguson v John Dawson & Partners (1976) Express intentions of parties

not necessarily conclusive. Builder paid gross, his employer could dismiss him, decide on which site he would work on, so he was employed.

Reasons for distinction

Legislation may offer employment protection to employees under a contract of service Benefits & statutory sick pay entitlement Employed taxed under Schedule E whereas self-employed taxed under Schedule D Employer may be vicariously liable for tortuous acts by employees In the case of liquidation, employees hold preference over selfemployed for outstanding salaries and redundancy payments

Employment Control Test

Massey Docks & Harbour Board v Coggins & Griffiths (Liverpool) (1947)
crane operator hired from Harbour Board, who caused an accident by negligence, Harbour Board liable, as they were the general employer

Employment Integration Test

Cassidy v Ministry of Health (1951) surgeon employee Mersey Docks & Harbour Board v Loggins & Griffith (Liverpool) Ltd (1947) - control Cassidy v Ministry of health (1957) Integration. Hospital
disclaiming responsibility of surgeons carelessness in carrying out an operation Economic reality (multiple) see below

Economic Reality
OKelly v Trusthouse Forte Plc (1983) waiter working on a casual basis not
permanent, so no contract

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Ready mix concrete (south east) v Ministry of pensions & national insurance (1968) employer trying to avoid paying employers NI
contributions as claiming the employee is paid gross

Employment Relationships
Ferguson v John Dawson & Partners (1976) builder paid gross salary, but
employer controlled his work, hence employed

Massey Docks & Harbour Board v Coggins & Griffiths (Liverpool) (1947)
crane operator self-employed employer lacked sufficient control

Job Existence
North Riding Garages v Butterwick (1967) a garage reorganised its
working arrangements so that the workshop managers duties involved more administrative work. He was dismissed when it was found he could not perform these duties. His claim for redundancy pay must fail since it was not a case of redundancy.

Agency / Partnership
If an agent acts within the limits of his authority, any contract he makes on the principals behalf is binding on both parties. The extent of the agents authority may be express, implied or ostensible. An agent is a person who is authorised to act for another, the principal, in the making of legal relations with third parties. The relationship can arise in a number of ways;

Actual Authority
Express Authority
This is a matter between principal and agent. This is authority explicitly given by the principle to the agent to perform particular tasks, along with the powers necessary to perform those tasks.

Implied Authority
Watteau v Fenwick (1893) previous hotel owner ordered cigars even though
he didnt have authority. Hotel owner liable, as the change of manager should have been communicated to the cigar seller. Where there is no express authority, authority may be implied from the nature of the agents activities or from what is usual or customary in the circumstances. An agent who exceeds their ostensible / apparent authority will have no liability to the principle, but the agent will be liable to the 3rd party for breach of warranty of authority.

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Ostensible Authority
Freeman & Lockyer v Bukhurst Part Properties (Mangal) (1964) a
director acting as MD. Company liable under the principle of Holding out (or estoppel) Company secretaries have this authority. An agents apparent / ostensible authority may be greater than his express or implied authority. This occurs where a principle holds it out to be so to a third party, who relied on the representation and altered his position as a result. It may be more extensive than what is usual or incidental.

Panarama Developments Ltd v Fedelus Furnishing Fabrics (1971)

Types of Agent
Partners Directors Auctioneers Brokers (shares, insurance, etc) Promoters (Directors are not agents) Factors Estate Agents

Agency workers
Frank v Reuters Ltd (2005) Length of service. Agency worker had been
providing services for some 6 years, was so integrated as to be indistinguishable.

Motorola v Davidson and Melville Craig (2001) Control (client or agency).

Motorola had sufficient control over Davidson to make them the employer.

Partnerships
The relationship which subsists between persons carrying on a business in common with the intention to making profit

Retiring Partners
Is liable for debts incurred by the partnership prior to retirement

Contract of Novation
Discharges retiring partners from existing liabilities. Creditors and remaining partners agree to discharge the retiring partner and liabilities are passed to the remaining partners o Until creditors do not agree to the contract of novation, the retiring partner is not discharged from their liabilities prior to retirement Notice to existing customers must also be given

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If new suppliers have good reason to believe that the retiring partner was actually a partner, then the retiring partner will also be liable for the debts of the partnership, unless notice was given to the supplier

Sleeping Partners
Law does not recognise sleeping partners Personally liable for the debts of the partnership

Company Law
Advantages of forming a company as compared to a partnership

Salomon v Salomon - Separate legal personality

Limited liability Perpetual existence Raising finance Ownership of property Number of members Transfer of interest is easier

Disadvantages of forming a company as compared to a partnership

Legal implications personally liable for debts o o o o o o Formation Audit Share issue Meetings and resolutions Liquidation Proper accounting records

Expense Publicity and disclosure

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o o

Details of directors and remunerations Business details

Formation of company
The following 4 forms are needed for a company to be incorporated (formed);

Memorandum of Association

Is the primary document Regulates the companys activities with the outside world, i.e., company objectives, powers, co name, capital structure, whether it is public / private, whether it enjoys limited liability, etc; This gives the internal management, affairs and running of the company; Each subscriber to the shares should sign this; At least 2 people should sign this document Signatures to be witnessed by a third person

Articles of Association

Is the secondary document Regulates companys internal affairs and management Covers the issuing & transferring of shares Voting and dividend rights attached to different classes of shares Board and shareholder meeting conduct This states the company name, the situation of the Registered Office (to be England and Wales, Scotland or Wales), the objects of the company and its Liability Includes rights of shareholders and directors The appointment, dismissal, powers and responsibilities of directors Communication with members Documents and records

Form 10

Details of Directors, Secretary and registered office Registered office (England, Wales, etc) Contains details of 1st directors and secretary including service address Subscribers must sign this also

Form 12
Declaration of compliance with Companies Act 2006

Alteration to articles
Articles can be altered by special resolution (75%) for public company, or written resolution (75%) for private company;

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The basic test is whether the alteration is for the benefit of the company as a whole; Alterations must be filed with the registrar within 15 days of the passing of the special resolution; A company can entrench provisions into their articles. This means specific provisions may only be removed or amended if certain conditions, which are more restrictive than a special resolution are met; A member or a group holding up to 15% of the voting rights can apply to the courts to cancel the variation to the articles; For an alteration to be valid, the majority should honestly believe that it is in the interest of the company as a whole (subjective test) and it would be in the interest of a hypothetical individual member (objective test) o Greenhalgh v Arderne Cinemas Ltd (1950) Increase in share capital

Effect of articles

Binds the company and its members Thus binding contract between company and its members Hickman v Kent companys articles were enforceable by a company against one of its shareholders Eley v Positive Government Security Life Assurance Co (1876) the articles do not constitute a contract with any 3rd party

Restrictions to alterations of articles

Even after the passing of a special resolution, alterations to the articles may be restricted by the following principles; If in conflict with CA; To protect a minority, the court may order that an alteration be made; Alterations to certain class rights correct rights variation procedure needs to be followed to obtain the consent of the class; The minority who approve the alteration, did not act in a bonafide manner in what they deem to be the interests of the company as a whole

Company Auditor
A person independent to the company. They are not permitted to be a company officer by law and by the rules of their recognised supervisory bodies (i.e., ACCA)

Appointment

First or casual vacancy by directors (only valid until the conclusion of the 1st accounts meeting (AGM)) Normal course of business by shareholders (members) Secretary of state if members fail to appoint an auditor, the company must within 28 days of the meeting give notice to the Secretary of State, who has the power to appoint auditors

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Termination
Removal by ordinary resolution (50%) with special notice (28 days) for this both the members and auditors must be informed Auditors rights on removal; o o o Submit a statement of circumstances surrounding removal Written statement to members Speak at general meeting

Resignation in writing to registered office; o o o Circulate written statement to members Requisition (demand) a general meeting to explain their reasons Speak at general meeting

Non-seeking election; o A written statement of circumstances or a statement to say there are non, is required

Auditor not re-elected when term expires o Special notice must be given of any resolution to appoint different auditors

Duties

Give a true and fair view of the results for the year, and state of affairs of the company; Confirm if the accounts have been properly prepared in accordance to Companies Act (CA) 2006

Rights

Access to the books and records of the company Information and explanation from the company officers as they consider necessary for the performance of their duties Attend any general meeting Be heard at general meeting Right to receive notice of any written resolutions

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Company Secretary
Appointment
Every public company must have one A sole director cannot be company secretary Directors of a public company must take all reasonable steps to ensure that the secretary is suitably qualified by knowledge and experience

Responsibilities
Not defined by Companies Act, but laid down by the Companys board of directors Statutory registers and returns (annual accounts) Organising board meetings and general meetings Charged with ensuring the company and its officers comply with statutory and regulatory requirements Ensuring accounts kept in accordance with requirements of companies act Maintaining the register of members

Qualifications
Member of one of a list of qualifying bodies, i.e., ACCA Qualified as a solicitor or barrister in the UK Appears to the directors to be capable of the post

Ostensible Authority
Company secretaries have ostensible authority to enter company into contracts connected with the admin of the company A company can have 2 or more secretaries A corporation can fulfil the role of company secretary to a company

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Powers of Company Secretary

Has apparent / ostensible authority to bind the company, unless the company has denied him that authority and the other party has notice of the restriction

Panorama Developments Ltd v Fedelus Furnishing Fabrics (1971) company

secretary order cars for hire. Company liable for the secretary had apparent authority.

Dividends

May only be paid by a company out of profits available for the purpose Every company has implied powers to declare dividends although express powers may be contained in the articles Dividends are usually payable on the paid-up amount of share capital Distributable Profits o Accumulated realised profits, so far as not previously utilised by distribution or capitalisation, less accumulated realised losses, so far as not previously written-off in a reduction or reorganisation of capital duly made. o Only profits up to the b/s date should be taken into account o Losses likely during the period, or between the y/e date and the date the a/c sign-off date, or even losses likely to arise should be taken into account Undistributed Reserves o Comprise of share premium, capital redemption reserve, revaluation reserve and any reserve which the company is prohibited from distributing by statute or its own constitution If dividends are paid in contravention, then directors may be liable to make good to the company the amount unlawfully distributed o Although relief may be available if the directors acted honestly and reasonably o If members receive dividend knowing its unlawful or have reasonable grounds to believe it, then they will be liable to pay the unlawfully paid amount back to the company

Directors
Must be over 16 years of age; A minimum of 1 for a private, and 2 for a public company; A company must have at least 1 natural person as a director; At a companys AGM, half the directors resign, and are re-appointed by an ordinary resolution (automatically re-appointed, unless the meeting decides otherwise). MDs are exempt from having to resign at AGMs; o So essentially, a director has a 2 year contract of service Bamford v Bamford - A directors election can be challenged if they exercise their powers for improper purposes or not in what they honestly believe to be in the best interests of the company.

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Appointment

Ordinary resolution (50% or more of the votes counted) Send form 10 to appoint a director of a new company If you want to appoint a director during AGMs, then fellow directors bring that new director on board (as long as the powers allow this must be in the articles), then s/he gets approved by the shareholders are the next AGM 1st directors will be those named in the particulars delivered to the registrar of companies on incorporation the company must notify companies house within 14 days of new appointments and any changes in particulars

Removal

Ordinary resolution (50% or more of the votes counted) at a meeting of which special notice (28 days) has been served Special resolution (75% or more of the votes counted) at a meeting of which ordinary notice (14 days) has been served o When a resolution is being voted on, the director has a right to submit a memorandum of reasonable length to the members, and they can attend the meeting Disqualification struck-off because of breach of statutory duties, i.e., bankruptcy, or enters into agreement with creditors o Company Directors Disqualifications Act (CDDA) (1986) introduced to control individuals who persistently abused the various privileges given to directors Resignation by written notice Death Insanity Retirement o Plc - automatic retirement at retirement age o Ltd - Re-appointed every year Rotation forced to retire o Can put themselves forward again at the same meeting Dissolution of the company Infringement to the articles i.e., not holding enough qualifying shares; Absent for 3 consecutive months from board meetings without leave from the other directors By not putting themselves for re-election

Powers
Charged with managing the business of the company; Powers are conferred on the directors collectively and not upon individual directors (in most cases) These powers are defined by the companies articles Members are essestially responsible for giving directors their powers, as they have the vote with the special resolutions Directors are not agents (only MDs are) Matters that the directors are solely responsible for include; o Capital reduction; o Voluntary liquidation; o Declaration of an interim dividend

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Freeman & Lockyer v Buckhurst Park Properties Mangal Ltd (1964) 1

director acting as MD, the others knew of his actions, but did nothing to stop him. Company bound by the contract

Howard Smith v Ampol Petroleum Directors irregular use of powers to

allot shares

Greenhalgh v Arderne Cinemas Ltd (1950) Increase in share capital

Fiduciary Duties

Smith v Fawcett Ltd (1942) - Act within powers in a bonafide manner Hogg v Cramphorn (1966) - Exercise powers for a proper purpose
Avoid conflict of interest

Statutory Duties

S171 Act within powers in a bonafide manner Powers given within acts, cannot be ultra-vires (act beyond the powers) S172 Promote success of the company S173 Independent Judgement S174 Duty to use reasonable skill care and diligence Tort of negligence. Skill and care you reasonably expect of a person of that knowledge. Objective test (act in a manner reasonably expected Subjective test S175 Avoid conflict of interest if gifts disclosed and transparent, then OK S176 Not the accept benefits i.e., bribes S177 Declare interest in proposed transactions or arrangements transparency The above can be remembered as A P I D A N D

Remedies for breach of directors duties

Damages or compensation where the company has suffered loss; Restoration of the companys property; An account of profits made by the directors; Rescission of a contract where the director failed to disclose an interest

Regal (Hastings) Ltd v Gulliver (1942) a company who owned a cinema, had
the opportunity to acquire 2 more cinemas through acquisition of a subsidiary. The company didnt have the money, but the directors, the chairman (acting as a nominee of the persons) and the company solicitor subscribed to the shares The decision was that the directors were accountable to the company. The chairman was not accountable as he did not obtain the shares for himself. The solicitor was not accountable as he is not a director

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Industrial Development Consultants Ltd v Cooley (1972) MD realised that

the company is unlikely to win a contract, but noticed that if he were to setup his own company then he will have a chance to obtain the contract.

He gave notice to the board to say e was ill and needed to be discharged from his service agreement. On ceasing to be a director, he obtained the contract on his own The decision was that the MD for accountable to his old company for the profits of the contract

Weighted voting rights

Bushell v Faith (1970) weighted voting rights for directors under attack

Shadow directors
A person might seek to avoid the legal responsibilities of being a director by avoiding appointment as such, but using their power, say as a major shareholder, to manipulate the acknowledgement of the board of directors

Company law seeks to prevent this abuse, by extending several statutory duties to shadow directors

Executive director
A director who performs a specific role in a company under a service contract which requires a regular, possibly a daily involvement in management

Must be a

member of the board manager with management responsibilies as an employee

Non-Executive Director
Does not have a function to perform in the companies management, but is involved in its governance.

Contributes an independent view Helps the board provide effective leadership Ensures the continuing effectiveness of the executive directors Ensure high standard of probity on the part of the company

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Difference between Executive and non-Executive directors

The executive directors have the power to manage the company The non-executive directors have the power to Direct and Control the company

Management Director
One of the directors of the company, appointed to carry out overall day-today management functions A company can have 1 or more MD

Company Meetings
Annual General Meeting
Timing public companies must AGM within 6 months following their financial year end. Private companies are not required to hold an AGM Failure the company and every officer can be fined if an AGM is not held within the time limits Notice 21 days notice required unless every member entitled to attend and vote agrees to a shorter period Business usual business includes considering accounts, appointment of auditors, elect directors and declare dividends Resolutions members holding at least 5% of the voting rights (not just shares), or at least 100 members holding an average 100 paid-up capital have the right to propose a resolution and require the company to circulate details to all members

General Meeting
Timing held whenever required Notice at least 14 days Business the person who requisitions the meeting sets the agenda

Class Meeting
Purpose meeting of a class of shareholders, usually to consider a variation of their class rights Procedure notice, etc as general meetings

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Quorum two persons holding or representing by proxy at least 1/3 in normal value of the issued shares of the class in question

Company Resolutions
Type Special Ordinary Written (private co only) % required to pass 75 Simple majority Same majority as required in GM To Registrar? Yes within 15 days Only if required by statute Yes if 75% majority required Purpose of resolution Alter name, objects or articles. Reduce share capital. Wind up company Used whenever the law or articles do not require a special resolution The purpose can be anything apart from resolutions requiring special notice. Members cannot revoke their agreement. The date of the resolution is the date when the necessary majority has been reached. The resolution must be passed within 28 days from its circulation

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Key Terms
Structure of the legal system
Binding precedent
Binding precedent is the same as stare decisis

Young v Bristol Aeroplane Co (1944) - court of appeal bound by its own

decisions, unless two previous cases conflict Criminal cases Appeals can be by way of case stated law misinterpreted by magistrates / hence heard by QBD of High Court

Purpose of Binding Precedent

Coherency Consistency Predictability Fairness

Advantage of Binding Precedent

Certainty law is decided fairly and predictably Clarity following the reason of the ratio decidendi should lead to statements of general legal principles Flexibility the system is able to change with changing circumstances Detail precedent states how the law applies to facts and should be flexible enough to allow for details to be different Practicality case law is based on experience of actual cases brought before the courts. This is an advantage over legislation which can be found wanting when tested.

Disadvantage of Binding Precedent

Rigidity & Inflexibility the system can limit judges discretion Uncertainty finite no. of precedent Unconstitutional judges can make law not just act on it Complexity level of detail in material makes application of judges decisions unnecessarily difficult and complicated

Avoidance of Binding Precedent

The courts may decline to follow an apparently binding precedent by; Distinguishing the facts Declaring the ratio decidendi obscure Stating the previous decision was made per incuriam (carelessly) Stating it is in conflict with a fundamental principle Declaring an earlier precedent too wide

Reversing

higher court reverses lower courts decision in same case

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Overruling
case

higher court overrules lower courts decision in a different

Distinguishing
facts

court avoids earlier precedent by distinguishing the

Recission The act of cancelling, i.e., cancelling a treaty Fiduciary A trustee, i.e., charity trustee Indictment Chargeable, indictable offence Bonafide In good faith Mitigate Reduce, i.e., mitigate loss Repudiatory During, i.e., repudiatory breach Cease Comes to an end / closes down, i.e., company ceases trading Indemnity Compensation, reimbursement, guarantee Rescind cancel Ultra-vires Act outside powers, i.e., Directors acting as MD Ostensible Apparent Requisite Demand Codification Collection into 1 body of the principle of a system of law (still left in its separate volumes) Consolidation Combining Repeal law Revoke, quash, nullify Alteration to articles Objective test It would be in the interest of a hypothetical individual member Subjective test The majority should honestly believe it is in the interest of the company as a whole

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Appellate cases Law of or relating to appeals Per incuriam Made without care Stare decisis Binding precedent Dissipate To exhaust Gratuitous promises Promises given for no return Plaintiff Claimant Prima facie At first sight Renunciation Refusal to perform (breach of contract) Purportedly Apparently Convenant Convenient Doctrine of restituition Restore the party to the place they would have been in if the contract had been performed as agreed (Breach of contract) Volenti no fit injuria Voluntarily acceptance of the risk of injury (boat case) Proximity Sufficiently close, so that it is reasonably foreseeable Res ipsa Loquitor The facts speak for themselves Nouus actus intervieniens Other events, which are outside the control of the defendant Exonerate Completely free Quasi partnership Partners fall out, and one or more seeks to remove the rest Quantum meruit How much is it worth (remedy for breach)

Indictable offences
Serious offences, which cannot be heard in magistrates courts, only start at crown court

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Summary offences
Heard in magistrates courts

Capital Maintenance
The rules which dictate how a company is to manage and maintain its capital exists to maintain the delicate balance between the members enjoyment of limited liability and the creditors requirement that the company shall remain able to pay its debts The company shall not make payments out of capital because this threatens creditors Basic Principle: ltd companies should not be allowed to make payments out of capital Exception to Basic Principle: reducing share capital (need power in articles, special resolution, confirmation from court, who will seek to protect the interest of creditors) Private companies can avoid going to court by issuing a solvency statement Solvency Statement: o A declaration by the directors, provided 15 days in advance of meeting where the special resolution is to be voted on o It states that there is no ground to suspect that the company is currently unable or will be unlikely to be able to pay its debts for the next twelve months.

Corporate Governance
Corporate governance is simply a term used for the way that companies (corporate) are run and operated (governed). Corporate governance is the system by which companies are directed and controlled (governed) The 1992 Cadbury Report identified the role of directors as; The directors are responsible for the corporate governance of the company

Knowledge Gap
In owner-managed companies, as the directors and shareholders are the same people, they have access to the same information and are in a position to direct company policy. In non-owner-managed companies this isnt the case, and it creates a knowledge gap. This gap in the shareholders knowledge may cause difficulty for investors, who will want to be assured that their investment is being managed correctly and in accordance with their wishes as owners. Company law and practice have adopted various measures to attempt to bridge this gap by the introduction of, i.e.; Financial statements Annual general meetings Corporate governance codes

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Importance of good corporate governance

Shareholders and managers (Directors) are usually separate in a company and it is important that the management of the company deals fairly with the investments made by the owners

Control the controller (system will control the controller)

Cross
This is the same as Jury

Insider dealing
Insider dealing is the statutory offence of dealing in securities while in possession of insider information as an insider, the securities being price affected by the information Section 52 of the Criminal Justice Act 1993 (CJA) sets out the three distinct offences of insider dealing: An individual is guilty of insider dealing if they have information as an insider and deal in price-affected securities on the basis of that information. An individual who has information as an insider will also be guilty of insider dealing if they encourage another person to deal in priceaffected securities in relation to that information. An individual who has information as an insider will also be guilty of insider dealing if they disclose it to anyone other than in the proper performance of their employment, office or profession. Section 56 defines inside information as: Relating to particular securities, Being specific or precise, Not having been made public and Being likely to have a significant effect on the price of the securities.

Law
Law is a formal mechanism of social control David Kelly (Examiner)

Lifting the veil

By statute
Trading without trading certificate Fraudulent and wrongful trading Disqualified directors Abuse of co names

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To prevent evasion of obligations

Quasi partnerships Evasion of liabilities Evasion of taxation Public interest Evasion of legal obligations

Group Situations
Adam v Cape Industries (1990) Subsidiary acting as agent for the holding company The group is to be treated as single economic entity The corporate structure is being used as a sham

Limited by Shares
Liability is usually limited by shares. This is the position when a company which has share capital states in its constitution that the liability of members is limited

Limited by Guarantee
The companys constitution contribute in a winding up against a member under his pay up under his guarantee states the amount which each member undertakes to (AKA liquidation). A creditor has no direct claim guarantee, nor can the company require a member to until the company goes into liquidation

Charities or trade associations are usually limited by guarantee These companies do not have share capital

Money Laundering
A term given to attemps to make the proceeds of crime appear respectable. It can refer to any process by which criminals seek to hide the source and ownership of the proceeds of criminal activities. The process usually involves; Placement Actual disposal of the proceeds of the initial illegal activity Layering Transfer of money from business to business, in order to conceal the original source Integration having been layered the money takes the appearance of coming from a legitimate source Money laundering was recognised as a criminal offence in the UK under the Drug Trafficking Act (1986), which is now regulated by Crime Act 2002 Criminal offences under proceeds of Crime Act 2002; Laundering Acquisition, possession or use of proceeds of criminal conduct Failure to report failure to disclose knowledge or suspicion of money laundering

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Tipping-Off disclosing information to any person if disclosure may prejudice an investigation into Drug trafficking, drug money laundering, terrorist related activities or laundering the proceeds of criminal conduct.

Plaintiff
A person who brings suit in a court. This is the same as claimant, who is fighting a case against the defendant

Postal rule
Adam v Lindsell - Where the use of the post is in contemplation of both
parties, the acceptance is completed and effective as soon as a letter is posted, even though it may be delayed or even lost altogether in the post Termination of offer cannot be complete until received by the offerree, if the offer is still open

Presumption
An assumption of facts accepted by the courts until disproved

Rebuttal
If a presumption is disproved or outweighed

Transfer of undertakings
When a business is transferred, so that an employee works for a new employer, this change represents no break in continuous service of employee

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List of cases
Legal Personality
Salomon v Salomon & Co Ltd (1897) company a separate entity. An
individual not liable for the debts of the company, even though Salomon was the sole owner

Quasi Partnership
Ebrahimi v Westbourne Gallaries Ltd (1973) The courts are willing in
such cases to treat the central relationship between the directors as that of partners, and rule that it will unfair therefore to allow the to continue with only some of its original members. An application to a company on the just and equitable ground under the Insolvency Act being company windup 1986

Dunlop Pneumatic Type Co Ltd v Dunlop Motor Co Ltd (1907) - If however,

the two companies businesses are different, confusion is unlikely to occur.

Tips
When answering scenario based questions, answer with an either or, so if the facts are true in the scenario, then A B & C, otherwise D E & F Always have an introduction for any question before going into the specifics of the questions Dont use bullet points, always elaborate Scenario based questions on; o Contract o Employment o Company Open tuitions tips (June 09) o Partnerships o Money laundering o Termination of partnership o Meetings company o Directors remuneration Answer scenario based questions as ISAC; o Issue / Identify o State the law o Apply the law o Conclusion relate to the facts of the case

Terms
Novation Incorporation of company (Pg 223 s/txt)

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