Business Law

Final Review

Subject Areas
The exam covers the areas we have looked at since the midterm Employment Law Negligence (Tort) Agency Partnership Company Law
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Contract of Employment
A person who does work in terms of a contract of service is an employee. A contract of service is a contract of employment A person who does work in terms of a contract for services is not an employee They are an independent contractor Therefore, they have no rights as an employee

Contract of Employment (cont.)

The relationship between employer and employee is governed by a contract of employment It is very important to know if a person is an employee because only employees have certain rights in Employment Law

Discrimination Unfair dismissal Redundancy Notice on termination of employment

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

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Contract of Employment (cont.)

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

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

Sex Discrimination
The law relating to sex discrimination in employment is in the Sex Discrimination Act 1975 It applies to people who seek employment under a contract of services, or those employed under a contract of services

Direct Discrimination
Direct discrimination occurs where a person is treated less favourably because of his/her sex or marital status. In order to show that you have been discriminated against, you have to compare yourself with a person of the opposite sex

Sexual Harassment
Sexual harassment is a form of direct discrimination Harassment occurs where someones actions have the purpose or effect of violating another persons dignity, or create a hostile, degrading or offensive environment Sexual harassment includes physical behaviour, sexual banter, pornographic images, etc

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

For example, Price v. The Civil Service Commission To get a particular job in the Civil Service, applicants had to be between 17.5 and 28 years old Price complained that this condition was indirect discrimination as women between those two ages were more likely to be temporarily out of the labour market because they were having children or were looking after young children The court agreed
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Race Discrimination
The law relating to race discrimination in employment is in the Race Relations Act 1976 Discrimination is unlawful if it is based on racial grounds Racial grounds is defined in the Race Relations Act as any of colour, race, nationality, or ethnic or national origins
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Direct Discrimination
Direct discrimination occurs where a person is treated less favourably because of his/her race. In order to show that you have been discriminated against, you have to compare yourself with a person of another race

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Racial Harassment
Racial harassment is a form of direct discrimination Harassment occurs where someones actions have the purpose or effect of violating another persons dignity, or create a hostile, degrading or offensive environment Racial insults are a form of harassment
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Indirect Discrimination
Indirect discrimination occurs where there is behaviour which does not seem to treat people differently, but the effect of the behaviour is discriminatory This occurs where some condition or practice is applied to people of different races equally, but which puts some races or ethnic groups at a disadvantage when compared with other people
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Indirect Discrimination (cont.)

For example, if an employer requires its female employees to wear skirts, Muslim women will not be able to follow this rule as their religion requires them to keep their legs covered However, it is not indirect discrimination if the employer can show that the condition or practice is justified
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Unfair Dismissal
Under the Employment Relations Act 1996, employees have the right not be unfairly dismissed That means the employer has to show that it was reasonable to dismiss the employee The Act provides greater protection and more remedies than Common Law
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Qualification
Protection under the Employment Relations Act is limited to employees ie people employed under a contract of service This is one times when it may be important to know if a person is an employee or not In addition, the employee must have at least 1 years continuous employment
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Constructive Dismissal
One of the most important protections for employees in the area of unfair dismissal is the idea of constructive dismissal This means that the behaviour of the employer gives the employee no choice but to resign This is intended to prevent situations where the employer does not dismiss the employee directly, but makes life so unpleasant for him/her that s/he is forced to quit
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Negligence
Negligence is a kind of tort which aims to give compensation to an injured party In order to make a successful claim in negligence, the claimant must show
1.
2. 3.

a duty of care owed by the defendant a breach of that duty by the defendant the breach resulted in injury/damage to the claimant

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

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Foreseeable Consequences
A defendant is not liable for consequences which are too remote A defendant can only be liable for foreseeable consequences It is not necessary for the defendant to foresee how severe the injury could be Nor does the defender have to foresee the exact way in which the injury could be caused
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Novus Actus Interveniens

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

This is the problem of a new and intervening cause (in the cases this is often expressed in Latin as nova causa The technical name for this is novus actus interveniens. Clearly if it had not been for Davids negligence Calum would not have been in the ambulance and would not have suffered further injuries.
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Novus Actus Interveniens (cont.)

There are 3 categories where a new act can break the chain of causation A natural event An act of a third party An act of the claimant

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Defences
The defendant may be able to reduce his liability or avoid liability altogether by pleading one of the following defences Contributory Negligence
This is where some action by the claimant contributed to his injury This only reduces the amount of compensation which the defendant has to pay

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Volenti Non Fit Injuria

Volenti Non Fit Injuria
This means that the claimant consented to his injury or to the risk of injury However, this does not mean that the defendant can behave recklessly

Must observe the rules, for example

If the court accepts this defence then the defender will not be liable in negligence to the claimant
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Employers Liability
Employers Liability is a special kind of Negligence It gives employees the right to sue the employer if they are injured at work due to the negligence of their employer arising out of the course of employment

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Employers Liability (cont.)

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

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Vicarious Liability
Vicarious Liability means that an employer can be held liable for the negligence of an employee To make a claim based on vicarious liability, you need to show the following 1. The person who injured you was negligent 2. The person was an employee (that is, s/he had a contract of service) 3. The employee caused your injury during the course of their employment

Includes things which are incidental to employment, like toilet breaks

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Agency
Definition:
An

agent is a person who is authorised to represent another person, who is called the principal. The agent creates a legal relationship between the principal and a third party.

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Creation of Agency
The principal/agent relationship can be created in several ways Express Appointment Ratification Implication Necessity Estoppel
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Implied Actual Authority

This authority covers the situation where a third party is entitled to assume that the agent has been given the power to do something by his principal, even though the agent may not have been give that power expressly In other words, a third party can assume that someone has the powers which a person in the agents position usually has, whether or not the agent has been given those powers expressly
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Implied Actual Authority (cont.)

For example, in Watteau v Fenwick, the new owners of a hotel employed the previous owner as the manager They expressly told him that he could not buy certain things, including cigars However, the manager bought cigars from a third party The third party sued the owners for payment as the manager was their agent
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Implied Actual Authority (cont.)

The court held that buying cigars was within the usual authority of the manager of a hotel If the owners wanted to limit the managers authority in buying things then they would have to tell third parties of the limits of his authority

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Partnership
Partnership is one of the three ways of owning a business The Partnership Act 1890 defines a partnership as the relationship between two or more persons carrying on a business in common with a view to profit

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Partnership (cont)
A partnership does not have a separate legal identity from its partners However, a partnership can have its own name and sue and be sued in that name Partners are agents for their firm and the other partners, so the rules from the law of agency apply

especially implied authority

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What is a Company?
A company is a body corporate or corporation Because of this, companies have their own separate identity This concept of separate legal personality has several consequences Limited liability of members for company debts Perpetual succession
A company does not end due to the death or bankruptcy of its members
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1. 2.

What is a Company? (cont.)

3. 4.

Business property is owned by the company and not its shareholders Court actions and Contracts
A company can sue and be sued in its own name A company can enter into contracts in its own name

5.

Liability in tort and crime

A company can be vicariously liable for the negligence of its employees Companies can be convicted of crimes

6.

The rule in Foss v Harbottle

A majority of shareholders must agree to take action to protect their company
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Comparison of Ownership
It is useful to compare the advantages and disadvantages of the three forms of business
Sole trader Partnership Company

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Sole Trader - Advantages

No legal filing requirements or fees and no professional advice is needed to set it up. You just literally go into business on your own. Simplicity one person does not need a complex organisational structure.

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Sole Trader - Disadvantages

The disadvantages are that it is not a particularly useful business form for raising capital (money). For most sole traders the capital will be provided by personal savings or a bank loan. Unlimited liability the most important point to note in terms of comparing this form to the company in that there is no difference between the sole trading business and the sole trader himself. As a result he has personal liability for all the debts of the business.
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Partnership - Advantages
No formal legal filing requirement involved in becoming a partnership beyond the minimum requirement that there be two members of the partnership. Easier to obtain capital as there can be up to 20 members of the partnership, all of whom could pool their investment within the partnership.
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Partnership Advantages (cont.)

If you are aware of the problems the Partnership Act can cause (see disadvantages) then you can draft a partnership agreement to vary these terms of the Act The partnership agreement can therefore be used to provide a very flexible organisational structure although this usually involves having to pay for legal advice.

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Partnership - Disadvantages
A partnership will end on the death of a partner. If you are unaware of this when the partnership is formed, the Act may not reflect the intention of the partners. The partners are jointly and severally liable for the debts of the partnership. This means that each partner can be sued for the total debts of the partnership
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Company - Advantages
Companies are designed as to make it easy to raise capital. Companies have the ability to subdivide their capital into small amounts, allowing them to draw in huge numbers of investors who also benefit from the sub-division by being able to sell on small parts of their investment. Limited liability also minimises the risk for investors and is said to encourage investment.
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Company Advantages (cont.)

It is also said to allow managers to take greater risk in the knowledge that the shareholders will not lose everything. The constitution of the company provides a clear organisational structure which is essential in a business venture where you have large numbers of participants.

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