Lawyers Working With Business - Essay Example

? Lawyers working with business Introduction The concepts discussed in the paper are the essential factors for the establishment and management of a business. These concepts are instrumental in the success of an enterprise and provide a clear understanding of working with a business. It is essential for a business to put into consideration these factors to ensure productivity and efficiency in its business operations. The discussion provides a clear overview of these concepts which include franchise, essentials of contracts, the zero hour contracts and the concept of leasing. Emphasis, therefore, placed on the benefits of these concepts but at the same time highlighting the shortcomings where necessary. Franchise A franchise is a method of distributing products and services, which allows for rapid expansion while at the same time spreading the cost of expansion. This concept allows different business owners to share a single name relating to the brand in question. Essentially the parent company allows other business owners to use its trademarks and strategies. In exchange of this, there is an initial fee by the franchisee and subsequent submission of revenue based royalties. In order to become successful a franchisor must sell franchises and the franchisees have to sell the products and services. For a business to qualify it has to be attractive in order to attract franchises who consider buying a franchise and must be operational in concern with its customers. The current business should be something people will buy. This concept is a cheaper and faster form of expansion of a business compared to opening branches since the other outlets operate and fall under the ownership of a third party. The key components put into consideration in setting up a franchise should have a regard to the finances available for the franchise. It is necessary to put into consideration this factor as they cover the start up cost, which involves certain costs incurred during the set up of any other new business. The finances also ensure that there is financial ability to run the operations and the prospective franchise business. Industry regulators also check the financial ability before approving any franchise.1 Other factors to put into consideration include the identity of the business, which should have distinguishable factors in the market place such as trademarks and service marks. It is also essential to protect the identity of the business by registering the trademarks and service marks. Experience is also a decisive factor as it shows the viability of the business concept as well as provides credibility among the franchises. Profitability is also essential as the main goal in business is to make money profitable businesses are, therefore, attractive. Furthermore, the franchisee requires to submit royalties to the parent company based on the revenue. It is essential to, therefore, to ensure that the franchisee is capable of running a sound business in order for the parent company to benefit. Business plans as well as marketing plans are essential components in this process as they ensure that the prospective franchise businesses have an operational framework.2 Other factors that are essential in setting up franchise include the training necessary for the franchises. Significant amount of training in necessary in these instances so that the franchises operate on the same standard as the parent company and training plays a crucial role in this respect. The concept of franchising faces some drawbacks that must be put into consideration by any business contemplating the concept of franchising. These drawbacks include the reduced amount of control over the franchise in terms of products and services which may subsequently lead to a variety of quality across stores. The potential of earning revenue also reduces as the parent company entitlement is only a portion of the revenue from the franchisee. It is, however, noteworthy that there is a higher potential for growth and success of franchising businesses in emerging markets due to the increased consumer potential. This is because these markets exhibit underdevelopment and, therefore, have substantial growth opportunities. The concept of franchising here is eminent as the franchisee will have an advantage in the local market as contrasted to the parent company. This is so in terms of the language and understanding of the process required to set up a business. Key issues in making contracts. For a contract for the supply, sale, and services to be valid, it must include the four essential components required by any contract, which are offer, acceptance, an intention to create legal relations and a consideration. An offer is an indication that the individual is willing to engage in a contract with respect to that good or service.3 The offer must be relayed in a manner that acceptance can be done. The offer must not offer general intent to enter into a contract. This only serves as a mere invitation to treat but not an offer. The offer must be definite and clearly stated. Acceptance, on the other hand, provides that only the goods or services offered be accepted. This implies that the goods must be accepted the way the offer provides in order to amount to acceptance. An alteration of the offer terms or attachment of a condition of the terms of the offer amounts to a counter offer. Acceptance brings the negotiations to and end. An acceptance can be oral, in writing of inferred by actions through the performance of the contract. In order for the accepted contract to be, binding there must be the intention to create legal relations. This ensures that the obligations the parties owe each other are legally enforceable. The most essential thing in a contract is the consideration attached to that contract. Consideration is the exchange of value for the goods or services offered usually attached to money.4 A consideration need not be adequate as this upon the discretion of the parties involved, but the consideration must be sufficient. Sufficiency here implies the exchange of something of value. The contracts for supply require the supplier to supply the goods or services to the purchaser as required by the contract at a specified time. A contract for sale, on the other hand, requires a transfer of the property in the goods to the buyer while a contract of service requires the supplier to render services to the buyer. It is necessary to differentiate between a contract for sale, and that of services since the remedies available in case of breach vary. In a contract for the supply or sale of goods, the goods are subject to quality while, in a contract for services, the test applied is that of reasonable care. The test application in differentiating between a contract for services and a contract for sale or supply of goods is the substance of the contract. If the substance is the skill and labor of the supplier, then the contract is that of services while if the substance is goods then it is a contract for supply or sale of goods. A Romalpa clause, on the other hand, is a provision relating to the retention of the title by the seller until a given condition occurs. This clause avoids the presumption that the ownership of the goods passes to the buyer upon delivery. The clause stipulated with the economical expectation that where the merchandise are sold on credit the seller becomes entitled to repossess the goods in the event that the buyer fails to meet the consideration attached to the goods. The importance of this clause is that it protects the unpaid seller against the loss of the unpaid goods in the circumstance of insolvency on the part of the buyer. The clause also helps the goods against any claims as they identify the seller as the owner until all the fulfillment f he conditions set out. This aspect is crucial especially in recovering from an insolvent buyer in which case the seller gives priority over the goods which the clause attaches. The preposition is that where the buyer resells the goods before the satisfaction of the condition the buyer does so on behalf of the seller and, therefore, accountable to the seller for the proceeds of the sale. Zero contracts A zero hour contract is a contract arrangement between an employee and an employer where the worker has made an agreement to be available for work when provided. This arrangement, therefore, implies that the employer is not under any obligation to provide work and only calls upon the employee when work is available. The aim of this contract in contrast to the standard employment contract is to use and pay workers only as and when required. On the other hand, a standard employment contract is an engagement with, and payment of employees to provide work for a specified number of hours. In essence, the mutuality of obligations as contained in the standard work contract is not available in the zero contracts. The contract does not provide for a number of working hours. Zero hour contracts ensure occasional earnings for the employee and in regard to the employer it provides a pool of workers for the business. The individual employed under this form of contract may be required to work zero hours since the employer may not require the services of the employee at given times and becomes efficient, therefore, not to pay the employee during such times. This design of the contract facilitates an on call arrangement between the employer and the employee. Regardless that, the employer is not under any obligation to provide work the arrangement is that when the employer provides work the requirement is that the employee accepts, but there is no contractual obligation to accept.5 The idea here is that the employer’s guarantee to provide work diminishes since the employee is not under any obligation to work. It is, therefore, appropriate for the employee to maintain a sufficient pool of workers so that when one individual declines the work provided there is always someone else to take up the work. The employers use this system to retain a pool of employees to work as work arises. The zero hour contract acts as a global contract that covers the period of employment. The zero hour contact provides flexibility as well as informality especially for the employee. This contract is flexible because the implication is that regardless of the requirement of the arrangement the employee should be available to work, it does not imply that the worker has any contractual obligation to accept the work and is free to decline it. This is necessary where the employee has other commitments. The informal concept here seen in the contract for service between the parties, in comparison to a contract of service where the requirement is that the employee should obey the employer and accept all work. A contract for service, on the other hand, reduces this formality. A zero hour contract is, therefore, used where there is a fluctuation of business operations where the employer may occasionally need to raise the population of employees to meet the needs of the business. A zero hour contract, however, diminishes the rights of the employees as these contracts specifically drafted to avoid any form of employment obligations between the parties. This implies that the individuals working under these contracts do not qualify to be employees and, therefore, the employee rights such as a right to a redundancy payment and maternity rights are nonexistent. Zero hour contracts common especially to the low paid jobs which require less skill and where the organizations using them require cheapness and flexibility. Zero hour contracts cannot be applied to highly skilled whiter collar professions and has affiliation to jobs like catering, security and cleaning. Leasing Leasing is a concept that ensures that a business obtains the use of some fixed assets in payment of cost within a contractual period. The acquisition of operational assets is crucial to any business, and the manner of acquiring these assets is vital to put into consideration the productivity of the business. Rather than paying for the asset outright leasing spreads t cost within a flexible period and with good timing to ensure that the income obtained by the business facilitates the acquisition of the asset. Leasing is the most viable source for medium financing in the acquisition of business assets. This is because it increases the purchasing power of the business by allowing the business to finance the required equipment for the business operations without using the available capital. Furthermore, in respect to the leased equipment, the leasing company still owns the equipment until the clearance of all the payment is made. This implies that the company has better security for the business financing and no further security required to start a leasing contract. It becomes clear, therefore, that there are higher chances of a business to pass the credit check with leasing than with any other credit lines. This concept of asset financing is paramount in starting up a business. It is because it allows for the acquisition of the required assets while leaving capital finances available for growth and expansion.6 Leasing also preserves the businesses’ credit line by taking care of capital equipment financing while leaving the credit lines for other uses. It ensures the payment of these assets with future profits and not with the working capital. Leasing embraces the idea of balancing the use and the cost of the equipment by creating returns that exceed the cost of the equipment. It allows for a fixed periodical payment for using the equipment that provides returns exceeding the payment; therefore, there is certainty of the profitability of the equipment and service of the purpose intended also achieved. Essentially leasing ensures payment of assets as they contribute and the business creates revenue through the use of the equipment and not through its ownership. The idea here is that it is not economically productive for the company to use up cash for the purchase of equipment. This is because it is equivalent to paying up front for the equipment which the benefit will not be realized until later. Spending cash, therefore, on the equipment reduces the businesses working capital and renders the business less liquid and leasing preferred for the acquisition of equipment as it does not affect the capital.7 Leasing eases the budgeting process of the company as the lease payments fixed initially and forecasting the cash and budgeting requirement becomes easier. The lease cost can be incorporated into the business budgets more easily due to the regular occurrence and allows a better control into the business cash flow. Seasonal or skip payments can be arranged in this scenario to reduce the time and financial constraints. Leases also facilitate tax benefits as it establishes flexibility in gaining tax benefits from various situations, therefore, facilitating a reduced cost in the equipment. Leases usually considered as operating costs and often deducted from the taxable profits of the business. When properly structured, a lease agreement allows for tax benefits passed on to the Lessee due to competitive rates and lower fees. Leasing allows the equipment to pay for its cost through production and acts as an edge against inflation. This is because the payments in regard to the equipment are on the basis of the use of the equipment and not the ownership for the constantly depreciating equipment. The fixed rate financing option attached to leases is also desirable. The periodical payments can be negotiated upfront and, therefore, eliminate the increase in interest rates applicable as a result of market fluctuations. It is also arguable that leasing provides an out of the balance sheet financing where the business obligations to pay the lease in not included in the balance sheet. This obligation, which is a liability to the business, does not reflect on the balance sheet and affects the solvency of the business as the liability of the equipment not included.8 Because this lease liability does not reflect in the business balance sheet, the measure of financial leverage according to the balance sheet improves. The ratio of total l liabilities to equity improves, therefore, resulting in better credit ratings and ultimately low interest rates on finances towards the business. Leasing can be structured to run for the entire useful term of the leased equipment thus ensuring that the equipment pays off throughout its entire lifespan. There is also the flexibility in regard to the growing and evolving needs of the business, and as such the lease provides the flexibility required to add and upgrade the equipment easily and quickly. Bibliography Andrews N, Contract law (1st, Cambridge University Press, 2011) Beale H G, Bishop W D, Furmston M P, Contract (5th, Oxford University Press, 2007) Coyle B, American Management Association, Leasing (1st, Glenlake Pub, 200) Keup E, Franchise Bible: How to Buy a Franchise Or Franchise Your Own Business (7th, Entrepreneur Press, 2012) Klinger M, Haley T., Bachrach J., The Surety's Indemnity Agreement: Law and Practice (2nd, American Bar Association, 2008) Read More