The Difference between the Common Law and the Consumer Legislation Provisions - Essay Example

Business law Program Supervisor April 23, Business law Advice on available forms of business organizations that he can establish An individual forms, owns, operates, and dissolves a sole proprietorship at will. It lacks legal personality status. These identify advantages such as easy and fast decision-making and authority over operations and profits but disadvantages such as limited capital base, financial risk, and burden of suffered losses, and lack of sustainability. Transfer also terminates ownership. Personal savings, gifts, donations, and loans are the sources of capital (Miller 2012, p. 496). Partnership is formed by agreement among partners who contribute capital. It exist as a separate legal entity, no legal requirements govern its formation, and owners have unlimited liability and equal decision making rights, unless specified (Miller 2012, p. 496). Limited partnership requires submission of certificate of limited partnership, acquisition of a charter for business operations, and a general partner and a limited partner while a limited liability partnership requires submission of a qualification for limited liability status (City Law School 2008, p. 31, 32). These identify such advantages as shared losses and pooled resources, and disadvantages such as long decision-making process, shared profits, unlimited liability, termination against a partner’s wish, and financial risk due to limited capital base (Mann and Roberts 2013, p. 678, 679). Agreement among owners, issuance of a charter, and submission of legal documents subject to Companies’ Act 2006 (Appendix 1) form a limited liability company (City Law School 2008, p. 23). It is a separate entity, as the case of Salomon v A Salomon & Co Ltd illustrates (McLaughlin 2015, p. 82). Limited liability and veil of corporation are some of the legal consequences of incorporation (Appendix 2) and transferable share capital and debentures are sources of capital. It therefore enjoys such advantages as wider capital base, expertise management, sustainability, transparency availability of accounts for inspections, and limited liability, but disadvantages such as slow decision managing and possible lost authority over the business. Information on limited company The doctrine of corporate veil governs operations of a limited liability company. It provides that liabilities are limited to the entity and shareholders and corporate members are lot liable for any right or duty of the entity, unless factors to piercing of the veil exist, subject to the case of Woolfson v Strathclyde Regional Council [1978] SC (HL) 90 (Dignam and Hicks 2011, p. 116). A private limited company can however not sell its shares to the public for raising its capital and its maximum number of shareholders is limited (The Institute of Leadership & Management 2013, p. 15). The owners agree on initial and future capital contribution and a company pays dividends to its owners. Loans, to which debentures are paid, are other sources of capital. For operations, owners make decisions through voting but can delegate or share these roles with corporate members of the company. Directors are the first class of corporate members, are appointed by shareholders to work on the shareholders’ behalf, and are expected to act in the company’s best interest and in good faith. Some of the responsibilities of directors are executive management of the entity and control of specific activities in a company (City Law School 2008, p. 23, 59, 62; Dignam and Hicks 2011, p. 116; Bailey 2005, p. 376). The company’s secretary is another corporate member and is responsible for legal correspondences such as filling returns and managing formalities while the auditor ensures compliance with accounting regulations and integrity in the company’s accounts. Decisions are made in general or special meeting that a notice, issued between 10 and 60 days into the meeting, convenes and powers for questioning directors’ decisions and actions are based on members’ shares. Annual general meetings formal but general meetings may be held at shareholders’ request or by management’s request to deliberate on operations (McLaughlin 2015, p. 78). Appendix 4 discusses rules on the meetings (The National Achives n.d., p. 1). Essential elements of a legally binding contract Offer and acceptance constitutes an agreement, one of the elements. An offer must be precise based on Gurthing v Lynn case, must be communicated, and must be distinguished from “invitation to treat” subject to the case of Fisher v Bell, statement of information, puff, and communication of intent (Jones 2011, p. 92). It remains enforceable unless it is terminated, stipulates terms that must not be too vague, and exclusion clauses aid clarity. Acceptance must be unqualified, based on the case of Brogden v Metropolitan Railway Company (1877), must be communicated, and when stipulated, must follow specified means of communication (p. 92- 112). Contracting parties must also have legal capacity to contract. Minors, mentally ill, or intoxicated people lack contractual capacity, unless under legal exceptions. Contracts that aim at benefiting a minor without imposing unnecessary burden, subject to the case of Clement v London and North Western Railway Co [1894], those that are not detrimental, and those for supply of necessaries are examples of the exceptions (Marson 2013, p. 35- 39). Consideration, a legal substance in exchange for an offer, is another element. It must be sufficient, must not be past, must be transferred to the offerer based on request, may be waived explicitly or under promissory estopel doctrine, but is necessary when no new obligations exists. Agency allows for third party offer of consideration (Clarkson, Miller, and Cross 2014, p. 260- 262; Clarkson 2011, 73, 74). Parties to a contract must also have intentions to establish legal relationships. Generally, agreements made in the scope of business are assumed to have intentions for legal relations, unlike domestic and social agreements (Marson 2013, p. 28). Legality of the subject matter is another element but vitiating factors such as duress, undue influence, mistake, and misrepresentation exist (Jones 2011, p. 193). Some types of contracts need to be in writing but contracts that can be performed within a year and those for subjects whose values are less $ 500 (Miller 2012, p. 185). Types of contractual terms Terms can be conditions, warranties, or innominate (Koffman and Macdonald 2010, p. 142). Conditions go to the root of a contract and their breach attracts termination of the contract or damages, based on decision on Fercomental Sarl v Mediterranean Shipping Co SA, while warrantees are less significant to a contract and breach only grants damages (Charman 2013, p. 109). Innominate terms are those that appear minor but their breach have great consequences that can only be determined after the breach (Koffman and Macdonald 2010, p. 142; Charman 2013, p. 109). Terms can be express or implied terms. Express terms are made with intention during formation of a contract, based on the Symons & Co. v Buckleton (1913). Amount of consideration and delivery dates are examples of express terms. An implied term is one that was not expressed in a contract and can be implied by fact and based on the “business efficacy test” or “offender bystander test” as was demonstrated in the Moorcock case in 1889. Laws such as the Consumer Protection Act, (1987) that implies a seller’s liability over harm caused by sold defective product, Sale of Goods Act (1979) that implies quality of sold goods, or customs are examples that illustrate implied terms (Macdonald and Atkins 2014, p. 90- 109, 128). Exclusions clauses limit liabilities from terms and subject to the Unfair Contract Terms Act (1977) are different from expressions on parties’ obligation. Such clauses must however be communicated and are subject to limitations. The Unfair Contract Terms Act (1977), for example, limits exclusion of negligent liability that results from injury and death, and requires reasonableness of conditions. The Unfair Terms in Consumer Contract Regulations (1999) also limits exclusion clauses its effects undermines good faith, if the consumer did not negotiate the contract, and if it disadvantages the consumer. The law also provides that type of products and environment in which the contract was made informs the reasonableness test (Bradgate and White 2012, p. 134, 162, 163, 223). Advice to Peter Common law provides for privity of a contract that restricts third parties’ claims. The Contract (Third Parties Act) 1999 excludes the privity provisions if parties to a contract extend rights to third parties (Bradgate and White 2012, p. 80). Such a provision did not exist and Rupert has no right. Negligence doctrine and the Consumer Protection Act (1987) offer sufficient ground for liability. Negligence exists where a duty of care is owed, the duty is breached, and the breach leads to an injury, subject to the case of Donoghue v Stevenson (1932) (Bradgate and White 2012, p. 135). Existence of a contract is not necessary for a negligence charge (Harpwood 2009, p. 21). The Consumer Protection Act (1987) that establishes liability on an importer into the EU for injury that arise from defective commodities imported into the region identifies Combat’s duty of care that was breached in importation of defective product, leading to the injury (Bradgate and White 2012, 174, 175). In addition, the Sale of Goods Act 1979 provides that goods must meet satisfactory quality and must be reasonable for the intended use and is consistent with provisions of Sale and Supply of Goods Act (1994) that define satisfactory condition of goods and imposes strict liability on the seller (Bradgate and White 2012, p. 134, 162, 163). Restricting liability for injury also requires reasonableness test (Murphy 2007, p. 212). The supplied termination tank therefore failed to meet the requirements of satisfactory condition and the damage limits exclusion of liability on reasonability grounds. Combat Ltd. is therefore liable to Rupert for breach of terms of a contract and damages. The difference between the common law and the consumer legislation provisions is the burden of proof. Common law requires proof of breach of a contract that includes third party rights in the contract while consumer legislation only requires prove of duty of care and breach into injury. Reference list Bailey, S 2005, Cases, materials and commentary on administration law, Sweet & Maxwell, London. Bradgate, R and White, F 2012, Commercial law2012, Oxford University Press, Oxford. Charman, M 2013, Contract law, Routledge, Oxon. City Law School 2008, Company law in practice, Oxford University Press, London. Clarkson, K 2011, Study guide for Clarkson/Cross/Miller’s business law: Text and cases- Legal, ethical, global, and corporate environment, 12th Ed, Cengage Learning, Hampshire. Clarkson, K, Miller, R, and Cross, F 2014, Business law: Text and cases, Cengage Learning, Hampshire. Dignam, A and Hicks, A 2011, Hicks & Goo’s cases and materials on company law, Oxford University Press, Oxford. Harpwood, V 2009, Modern tort law 7/e, Routledge, Oxon. Jones, L 2011, Introduction to business law, Oxford University Press, Oxford. Koffman, L and Macdonald, E 2010, The law of contract, Oxford University Press, Oxford. Macdonald, E and Atkins, R 2014, Koffman & Macdonald’s law of contract, Oxford University Press, Oxford. Mann, R and Roberts, B 2013, Business law and the regulation of businesses, Cengage Learning, Mason. Marson, J 2013, Business law concentrate: Law revision and study guide, Oxford University Press, Oxford. . McLaughlin, S 2015, Unlocking company law, Routledge, Oxon. Miller, R 2012, Fundamentals of business law: Summarized cases, Cengage Learning, Mason. Murphy, J 2007, Street on torts, Oxford University Press, Oxford. The Institute of Leadership & Management 2013, Understanding organizations in their context, Routledge, Oxon. The National Achives n.d., Companies’ Act 2006, The National Achives, Retrieved May 7, 2015, < http://www.legislation.gov.uk/ukpga/2006/46/contents >. Appendixes Appendix 1: Requirements for formation of a limited liability company subject to Companies Act 2006 Memorandum of Association This is a formal document that that communicates owners’ desire to establish a company under the Company’s act (2006). The document also conveys the owners’ commitment to being stakeholders to the company and to own the company’s shares should they be offered. Each of the owners must approve of the memorandum of association. Articles of Association The document stipulates regulations for the proposed company. The act however allows some models of companies to apply its default article of association. Application for R egistration This is another required document for registration and states name, location of the registered office, the limited liability status, and the private nature of the company. The document may also contain article of association, provisions for shareholding, and provisions for proposed officials. Statement of Capital and Initial Shareholding The statement specified number of offered shares, total share value, specifications of number of shares and rights attached to the shares for each category of shares, and total share value for each class. The document also specifies paid and outstanding amount and amount of shares for each shareholder. Statement of Proposed Officers The statement identifies proposed officers, and their consent to participate in the proposed capacities. Statement of Compliance The statement of compliance indicates that the application for registration has adhered to provisions of the Companies Act (2006). (City Law School 2008, p. 23; The National Achives n.d., p. 1) Appendix 2: Limited liability and veil of corporation for a limited liability company Limited liability and the veil of corporation are legal implication of incorporating a company. Liabilities of owners are limited to value of their shares while the veil of corporation limits personal liabilities of corporate members to the extent that they act within their scopes of duty and in good faith. Conflict of interest pierces the veil of corporation and renders the corporate members liable for their actions (Dignam and Hicks 2011, p. 116). Appendix 3: Rules for general meetings of a limited liability company A simple majority passes ordinary resolutions, unless specified in the articles of association, and the resolutions are documented. A 75 percent majority and notice are however necessary for special resolutions and by a 75 percent quorum. Voting rights are proportional to number of shares. Resolutions are also circulated to shareholders. Directors can call for meetings, based on their authority, or upon request by shareholders. In addition, a court order can call for a meeting. A 14-day notice is required for general meetings, unless articles of association states otherwise, and must state time and venue. One member, for a company owned by one person, and two members forms quorum for meetings, and any member may be appointed to chair the meeting (The National Achives n.d., p. 1). Read More