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Section A

Legal structure

Types of Classification Definition Legal Tax Liability Example

Business of Business Entity
Organizations Organization
1. Sole trader Unincorporated is a business Same as Personal Unlimited Photographer
businesses owned and owner income tax liability s
managed by an
individual
2. Partnerships Unincorporated is a type of Same as Personal Unlimited A solicitors,
businesses enterprise in owners income tax liability accountants
which at least 2
members are the
joint owners of
the company
3. Private Limited Incorporated It is a type of Separate Corporation Limited Retailers,
Company businesses small, privately legal tax restaurant
held business. entity for
Ownership: non- its owner
governmental and
private
4. Public Limited Incorporated A company was Separate Corporation Limited Bank
Company businesses able to offer its legal tax
own registered entity for
shares to the its owner
public.

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Types P4 P5
Legal Formation Management Fundings
1. Sole trader First, you need to choose a name, In a sole trader Bank loans
then register with HM Revenue and company, the owner Own money
Customs (HMRC), then register for a is not subject to the Friends
tax number for the company and control of the board Family
declare the annual rental of directors and Sale of inventory and property
partners and can run
the business the way
the owner likes. And
still, have to do the
necessary work
POCCC (Planning,
Organizing,
Commanding,
Coordinating and
Controlling)
2. Partnerships Select the right working partner, and All partnership Bank loan
then establish an appropriate written partners who set up a Venture investment
agreement with the selected partner. company can Savings, bonds, and stocks
Next after choosing is to name the participate in the Small Business Subsidies
company, and go to register the management, and crowdfunding from pubic
company establishment at HM they divide POCCC
Revenue and Customs (HMRC), (Plan, organize,
then register a separate tax code for command,
the company and file a tax return. coordinate, and
control) tasks among
the partners.
3. Private Choose the right business name, then Shareholders in the Debt capital : bank loans,
Limited select the right executive and company will appoint personal loans, credit card debts
Company secretary from a review of the appropriate bonds
4. Public shareholder and guarantor decisions. director through Equity capital:
Limited Through the decisions of voting. The new  Private Ltd Company:
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Company shareholders and guarantors, identify director will set the some private investors or
people with good control and goals, vision, venture capitalists
management ability. And finally, mission, and including friends,
prepare all documents related to the regulations for the family,... (Sylla, 2016)
company such as AOA and MOA company. The  Public Ltd Company: the
and go to register with the director will make a sale of shares of stock
Management Authority of the decision to allocate (Sylla, 2016)
company (with SIC code and daily work to
company address) employees and
implement work
according to POCCC
(Plan, organize,
command,
coordinate, and
control)

Types of Advantages Disadvantag Assessment Factors Example Critical

business es review,
organisation evaluation,
and
conclusion
1.Sole traders - Freedom - Difficult to The company is Maximum This type of
In a
and raise capital easy to set up, business company is
transaction
flexibility - Unlimited low cost, easy to control suitable for
such as the
- Fewer liability manage and people who
development
fixed costs - Lack of make decisions want to have
of a project,
- Maximum credibility by 1 person but full control
the leader
business (George, difficult to raise over their work
can decide
control 2017) capital and and do not like
whether to
(George, decisions may to share it with
implement
2017) not be anyone else
the project
satisfactory for
or not
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 everyone
without
consulting
others
2. - Easy to - Unlimited It is easy to set Unlimited The partner This type of
Partnerships establish liability up a company liability must use all company is not
- Start-up - Loss of with low his own suitable for
costs are autonomy establishment personal those who
low - Lack of costs, but assets to want to protect
- Share the stability disagreements in repay the their personal
burden (Morse, decisions and company's assets and
(Morse, 2015) the absence of debt if the want to keep
2015) partners cause company personal assets
instability for cannot and company
the company afford it assets separate
3. Private - Limited - Limited Private limited Business Private Ltd The type of
Limited liability number of liability privacy company company
Company - Business shareholders companies have does not suitable for
privacy - Difficult restrictions on have to people who do
- Tightly registration stock exchanges. disclose not like control
organized process Besides, the their from the
(Przeworski - Division of company is less employment government or
, 2010) ownership complicated and history, from the public
(Przeworski, costly, but time- financial media
2010) consuming to set statements,
up etc. their
own to the
public
whenever
required
4. Public - Expand - Equires a Public limited Difficulty When there Public limited
Limited shareholder higher level company is making is an company is not
Company base and of easier to raise decisions important suitable for

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 spread risk transparency capital by decision, the someone who
- Raising - Difficulty issuing shares public wants
capital making without limited complete
through decisions limitation company decision-
issuing - High initial must hold a making power,
shares financial meeting of suitable for
- Limited commitment shareholders someone who
liability (Robert, and the does not want
(Robert, 2016) decision is to take all risks
2016) made and has little
through the capital
number of
votes that
the
shareholders
cast.

Section B

1. Scenario 1: Authur vs Brian

Facts: In January, Arthur rented a house to his friend Brian for £400 a month. In May, Arthur
reduced the rent to £250 because Brian and his wife Cathy were struggling and kept it up
until Brian worked it out. In October, Brian's wife Cathy received £20,000 from her uncle,
but still only paid £250 in rent. In December, Arthur found out and demanded that Brian pay
the rent in full from October onwards.

Issues:

 Is Arthur's promise to reduce his rent from £400 to £250 a contract?

 Is Arthur's promise to reduce rent clear?

 Is Brian's wife Cathy a party to the contract?

Rules:
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Promissory estoppel: The principle of Promissory estoppel prevents those who promise not
to exercise strict legal rights from withdrawing under unfair circumstances. When all the
elements of this principle are met, even if the promise is not supported by either party, it can
lead to the promise not being fulfilled (Lerner, 2015).

Element:

 Clear and unequivocal promise

 Reliance by the promisee
 Element of inequity
Unsupported Fresh Consideration: The unsupported fresh consideration is that if a contract
already exists and one party makes a new commitment, no new contract will be formed. The
rule is a promise without consideration, not a binding contract (Paul, 2012).

Privity of Contracts: Privity of contract is a doctrine of common law that states that one
cannot enforce an interest of or be liable for any obligation under a contract to which he or
she is not a party. A contract may not confer rights or impose contractual obligations on a
party other than a party (De Serres, 2016).

Applications & analysis:

Promissory Estoppel: The principle of “promissory estoppel” applies, according to the

principle that a promise is enforceable under the law even if it is made without any formal
consideration. In this case, it was Authur who promised to reduce Brian's rent to £250/month
when Brian was in financial difficulty and when the financial problems were resolved, Brian
had to pay the rent in full to Arthur. So Brian needs to follow through on the above promise.
This is a prime example of the Promissory estoppel principle, as an example of Central
London Property Trust Ltd v High Trees House Ltd, 1947 (refer to appendix 1, p18).

Unsupported fresh consideration: Arthur and Brian signed a £400/month lease in January. In
May, when Brian was having a hard time, Arthur promised to reduce it to £250/month.
Applying the principle of "Consider fresh not to support", Arthur made another promise when
there is a previous contract and this promise is not a binding contract so the latter promise
will not be valid. This is a good example of the “Unsupported fresh consideration” principle,
as exemplified by Stilk v Myrick, 1809 (refer to appendix 2, p18).

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Privity of contract: The principle of “Materiality of Contract” applies, in this case, the
executor of this contract is Arthur and Brian and Brian's wife Cathy is not executors.
however, Cathy lives with Brian in the house that Arthur has rented to them and Cathy also
benefits from Arthur's promise. Therefore, Cathy is also responsible when Arthur asks Brian
to pay the full amount of the rent. This is a good example of the “Privity of contract”
principle, as exemplified by Tweddle v Atkinson, 1861 (refer to appendix 3, p19).

Conclusion:

Promissory Estoppel: In this situation, Arthur would be able to claim and recover the full
rental amount of $400 per month from October onwards. Because Arthur's promise is to
reduce the rent until Brian solves the problem, Brian needs to make good on his promise,
paying Arthur's rent in full when the problems have been resolved, specifically is from
October.

Unsupported fresh consideration: In this case, Authur has the right to claim and recover the
entire rent of £400/month from October onwards, even if Brian is in financial difficulty.
Because there is already a lease, when Arthur only makes a new promise of reduced rent and
is not supported, the promise is not treated as a new lease and Brian still has to pay in full
enough rent for Arthur according to the old contract.

Privity of contract: In this case, Arthur has the right to demand and recover the entire rent of
£400/month from October onwards from Brian and his wife. Brian and his wife must strictly
perform the priority of the contract, Brian's wife Cathy is the beneficiary of the contract,
related to the contract, and promise to be responsible for the contract and his wife's promises.
Her husband is to pay the rent for Arthur in full when financial difficulties are over.

Legal Advice: Arthur should seek legal advice through Citizens Advice and Law Centers

Legal Solution: Arthur should choose to settle disputes by Negotiation and Arbitration

2. Scenario 2: Trumpet Workshop v Authur

Facts: Arthur's car had an engine failure and Arthur took it to Trumpet Workshop for repair
for an agreed fee of £500. When Arthur came to pick up the car, he was informed by Trumpet
Workshop that they had changed one of Arthur's car tires because it was not good. Arthur
promised to pay an extra £300 for Trumpet Workshop, but then Arthur refused to pay.

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Issues:

 Did Arthur keep his promise to pay more for Trumpet Workshop?

Rules:

Past Consideration: The past consideration is used to refer to a promise or an action that was
made or performed before the contract was concluded. The rule is that actions taken before
the contract is signed will not be considered (Enriques, 2017).

Applications & analysis:

Past Consideration: Applying the "Past Consideration" principle, in this case, Trumpet
Workshop fixed the tire before Arthur promised to pay an additional £300. The act of
changing a tire is an action that happened before the promise, so it will not be considered in
that promise. This is a good example of the “Past Consideration” principle, as an example of
Pao On v Lau Yiu Long, 1980 (refer to appendix 4, p19).

Conclusion:

Past Consideration: Trumpet Workshop has no right to demand payment of £300 from
Arthur. Arthur makes his promise once the tire repair is completed, as a principle of past
consideration activities that occurred prior to the signing of the contract will not be
considered. It is not binding that Arthur must pay an additional £300 for the Trumpet
Workshop.

Legal Advice: Trumpet Workshop can get legal advice at the Citizens and Law Counseling
Center.

Legal Solution: Trumpet Workshop can solve this problem by Negotiation and Mediation.

Mediation

3. Scenario 3: Boffin v Sweeties

Facts: Boffin worked at Sweeties Ltd and learned how to make Sweeties Ltd's secret toffee
in the UK. In his employment contract, it is stated that if he quits at Sweeties, he will not be
able to work in toffee or other candy companies in the UK and USA for 1 year.

Issues:
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  Is the 1-year work ban reasonable?

 Is it reasonable to ban Boffin from working in the UK or US?

 Is it reasonable for Sweeties to ban Boffin from working in Toffee and other
confectionery ?

Rules:

Restraint of trade : Restraint of trade is a legal concept related to individual rights.

Individuals are free to do business or engage in various professions without restriction. Non-
compete agreements are not illegal as long as they are reasonable and do not violate
commercial human rights. Courts consider three factors to determine whether a contract
contains commercial restrictions. The three factors are length of time, geographic and scope
of work (Tignor, 2014).

Length of Time: The time that the employer restricts the employee from competing must not
exceed the time reasonably necessary to protect the interests of the company (Tignor, 2014).

Geographic: The location and area of the competition-restricted area must not be too large
(Tignor, 2014).

Scope of work: The scope of work must be reasonable, not too broad (Tignor, 2014).

Applications & analysis:

 Length of Time: 1 year (reasonable)

 Geographic: UK or US (unreasonable)

 Scope of Work: Toffee and other confectionery (unreasonable)

In this case, the period that Sweeties barred Boffin from working in the candy factories was 1
year, which is a short period of time compared to the period required by this doctrine.
However, Sweeties company banned Boffin from working at a candy factory in the UK or
US, which is not reasonable, because Sweeties currently has a candy factory in the UK, so
Sweeties does not have a candy factory in the UK. the right to ban Boffin from working in
the US. In addition, it is also not reasonable to ban Boffin from working in Toffe and other
confectionary factories, because Boffin only learned how to secretly make Toffee, not how to
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make other candies, so Sweeties' job It's not right to ban Boffin from making candies other
than Toffee. This is an example of a “Restraint of Trade”, eg Brothers Robert and Brown,
1980 (refer to appendix 5, p20).

Conclusion: Boffin does not need to perform this trade restriction contract, as it is
unreasonable in this case to restrict trade in both the area and the Scope of work because
Sweeties cannot provide any evidence to support demonstrating the need for these to protect
the business. Therefore, this contract is illegal and cannot be. The trade restriction could
modify the area of application to apply only to the UK and ban the production of Toffee
excluding other sweets for 1 year.

Legal Advice: Boffin can seek advice at Trade unions and Law Centres

Legal Solution: Boffin can resolve disputes by Negotiation and Litigation

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Examples Advice P6 P6 M4 M4 D3 D3
given to
(Legal Advice) (Legal Solution)
person
Recommendation Recommendation Similaries Differences Similaries Differences Legal advice Legal Solution
for Legal Advice for Legal Solution Effectiveness Effectiveness

Case 1: Authur Citizens Advice Negotiation Citizens Citizens Citizens Arbitration of In this case, In this case,
Authur vs Advice Advice can Advice can use settlement options Arthur can Arthur should
Law Centres Arbitration
Brian and Law use online online advice is legally binding use citizen choose the
Centres advice and and Law and Negotiation is Advice to get method of
both Law centers centers must not legally binding. online legal solving the
provide must go to a go to a law advice if he problem, which
Negotiation is that
free and law center center for doesn't want is Negotiation.
the two parties will
independe for advice advice to spend time In this way, the
come to an
nt law going out, but problems are
agreement and
advice this way may resolved
make a decision on
not be peacefully,
All legal their own, while
specific and a inexpensively
advice on the Abirtration side
bit confusing compared to
the law has an arbitrator
in each case. other methods.
who makes
Centers for
decisions from the
advice on
issues raised.
issues in
dispute, there
will be a
specific and
clear
consultant for
Arthur at the
center rather
than online
consultation.

Case 2: Trumpet Citizens Advice Negotiation Citizens Citizens Both are Negotiation In this case, In the matter,
Trumpet Workshop Advice Advice can consensual, not involves only the Trumpet Trumpet
University Law Mediation
Workshop and use online confrontational parties, and Workshop Workshop
Clinics
vs Authur advice , and only offer Mediation includes can choose should choose
University
while solutions if the intervention University the mediation
Law
University both parties and assistance of a Law Clinics method, because
Clinics
Law Clinics agree third party to be able to the issues in this
offer free
have to (mediator) as a assist you dispute need
legal
come to the facilitator in the with your someone who
advice
place for parties' dispute dispute more understands the
advice resolution efforts. quickly and legal issues to
clearly solve this
In negotiation, the
problem
parties come to an
agreement with
each other, and in
Mediation, the
mediator must
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 come up with a
solution to solve it
for both parties.

Case 3: Boffin Trade unions Negotiation Both Trade Both methods Negotiation deals In this case, In this problem,
Boffin vs Trade unions only involve with issues based Boffin should Boffin can use
Law Centes Litigation
Sweeties unions and advise resolving on a peaceful choose Trade the Litigation
Ltd Law employees disputes resolution and only unions for method to
Centers in between two two parties do not legal advice, clearly solve the
offer free companies parties dispute, while because in problem,
legal on labor Litigation is a Trade unions, because the
advice and contract dispute and employees in Sweeties
offer matters, adjudication the company company has
effective while Law involving many will be made a contract
solutions Centers parties. protected to prohibit
to advise their rights Boffin from
Negotiation costs
problems everyone and interests working, they
less and less time,
and in all in the best will not accept
while Litigation is
fields way mediation or
cumbersome,
negotiation
expensive, and
time-consuming

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APPENDIX

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