Legal Aspects of Business - Case Study Example

Legal Aspects Of Business Part A Since Alf failed to deliver the chain saw to the at the mutually agreed time of a Saturday morning and instead delivered it in the afternoon, that too after being reminded over phone, there is a clear case of breach of contract. The customer has all the rights to break the contract without any notice and make another contract with another supplier in the market place. The customer did the right thing by hiring the chain saw from someone else. It was wrong on the part of Alf to insist on the contract and deliver even when the customer says he has hired it from someone else. Not only this there is no point in delivering the hired product late as time is of great essence in the kind of business Alf is engaged in. He should always comply with the deadline. Failure to do so makes all his efforts fruitless. So though he delivered the product it was of no value to the customer as he had run out of time and had made other arrangements. In the case provided it's not mentioned that the contract between Alf and the customer was written or not. If the contract is written then legal action can be taken against Alf. Since verbally the customer has mentioned that he cannot work other than the stipulated time, he has all rights to take action against Alf. The written agreement between both the parties with a clear mention of the time makes Alf's case weaker. However if the customer does not have a copy of the written agreement between him and Alf then his case becomes weaker. Also if somewhere in the contract if it's mentioned that the shopkeeper is in no way responsible for any delays in delivery then too, the customer can not take any action against Alf. So though verbally Alf and the customer know about their agreement, if the customer has a written document then Alf's action can be proved a legal offence. So for the sake of law it is advisable that Alf does not impose the contract forcefully on the customer. In the second case the customer was unable to work with an electric drill since the first day of the purchase. Alf should be obliging enough to refund the customer immediately. Every electric gadget has a warranty for a specified period of time. If the product does not work due to manufacturing defects, the customer has all rights to return it and ask for a refund within that stipulated warranty period. After inspecting the gravity of the defect, the seller should replace the product, repair the fault or in extreme circumstances even refund the money if the customer is not ready for either replacement or repair. But he cannot say 'no' to the customer. Hence legally the customer can take action against Alf for not complying with the guidelines of selling electronic gadgets. In such circumstances it is advisable for Alf to refund, as he himself will not have to suffer any losses because the sellers have back-to-back service and maintenance contract with manufacturers. According to Kolah if the customer claims that the purchased product is not working properly then "Such a claim will require the interpretation of the defendant's obligations under the terms of the contract. This is because there may be express terms of an agreement the claimant and defendant concerning the purpose and standard of the product." (2002, p. 52) If it's not this, then to ensure that the product is fit for the purpose made known to the seller, in the contract terms, the law implies that the product is of good quality and is appropriate for the buyer. In the third case too, Alf has the similar legal bindings as in the second case. Alf assured the customer at the time of sale that the saw he is selling is meant to cut anything, even steel bars. Since the saw broke down on the first day of its use, the case of misrepresentation of facts by the seller can be charged on Alf. He is liable for refund or replacement and if he is not willing to do so then the customer has all rights to drag him to court. If the seller is making a statement to the potential buyer, like in this case, according to Kolah (2002), he should be aware that a duty to take care that the statement about the reliability of product he is making is correct, has been placed upon him by law. If the statement he made turns up to be incorrect then the breach of the duty to make correct statements, placed upon him by law might lead to a claim of tort made against him by the buyer. So if Alf is refusing to refund then the customer is entitled to take action for damages in order to compensate for the loss suffered by him. Putting up a sign up stating "No refunds given" is extremely unprofessional on the part of Alf, as he should know that as per consumer law every product has a warranty period depending upon its life span. Any product, which is reported to have defects, has to be replaced or repaired. The seller is a link between the manufacturer and the buyer. On behalf of the buyer the seller has the duty to get the repair or replacement done from the manufacturer. By doing so the seller does not have to incur any losses, in fact these are the times when he can develop good PR skills and make his customer base stronger on the basis of the quality of the after sales services he provides. If mentioned in the sale contract the buyer has the right to opt for a refund. Any personal commitment or over commitment made by the seller has to be fulfilled. If Alf is not interested in doing so then all his customers have the right to go to the consumer forum by taking up the issue of breach of contract. Therefore Alf has no option but to obey the rules and regulations laid down by the commercial and mercantile law. He should do exactly that. Part B As far as the legal status of a sole trader is concerned he is engaged in the simplest form of business organisation when compared to partnership and limited company. This is because in the establishment of sole proprietorship, the legal formalities Are comparatively less onerous. According to the English law there is infact no legal formalities for a sole trader to start his business. H e can begin his business as soon as he can. However he has to comply by the Business Names Act 1985 before beginning the business. This is because if the sole trader is engaged in a business which is not in his name then he has to follow certain legal formalities. Suppose Alf's shop's name is 'This and That' then he will have to ensure that his name appears in all the documentations related to his business like invoices, orders for goods and services, business letterheads etc. Apart from this he will also have to get the name under which he is operating his business recorded in the commercial register. If he does not pay attention to this legal aspect then there is risk of his business not being recognised as his own business. Since he will not have full legal status there is also risk of not being able to take any genuine legal action if required. Therefore it is always advisable to obtain all the necessary documentation to avoid any unforeseen risks. Though engaging in the profession of a sole trader looks hassle free it has its own drawbacks too. The most prominent drawback is that the sole trader has to shoulder the unlimited numbers of liabilities of his business. This is because the identity of the trader and the identity of his business are inseparable. Therefore the sole trader gets fully liable on legal obligations and contracts undertaken on behalf of the business as he is trading on his own account. During testing times of the business lack of a team is burdensome. The partnership business has been recognised in both common law jurisdiction as well as civil law jurisdiction. In the partnership business, two or more people jointly run an organisation and share the losses and profits. Since two or more partners are involved, it is less burdensome than the sole proprietorship as the liabilities are divided among the partners. In comparison to limited company the formalities involved in creating and running a partnership is less stressful. There are personal tax advantages in this kind of business for all the partners as the profits of the business are taxed only once unlike the limited companies which are taxed twice. It is easy to keep all the financial information private in this kind of business when compared to limited companies. . However the risk of running partnership business erupts if there is no written agreement that states that all the partners would jointly manage the sale and divide both the profit and losses. The smaller the number of partners, the better is the teamwork in partnership business. With the increase in the number of partners there is risk of absence of intimacy required to successfully run this kind of business. Where there is lack of bond between the partners there is risk of slow down of the business's growth. Unlike general partnership, limited partnership requires to be registered by an appropriate government authority. In this type of partnership there is at least one general partner who has unlimited liabilities while other partners have limited liabilities depending upon their amount of investment in the assets of the partnership. Bringing forward the risk factor in this kind of businesses, Nayler (2006, p. 146) stated "Given that the negligence of one partner - for instance, in giving advice to a client in respect of a major corporate acquisition - could incur liability for the firm on an unimaginable scale, the risk exposure which this presents for individual partners might be unacceptable." The limited company is the most common form of business in most of the jurisdictions. Unlike sole trading businesses, this kind of business possesses a legal personality, which is distinct from the people who administer and control it. Hence the company has its own rights and obligations and can make contracts on his own behalf. The limited company can also sue or be sued in its own name and can invest in properties in its own name. It is different from the partnership business as the personal liabilities of all its members are limited. If the members of this business have paid their full share, then their liabilities are over even when the business assets are insufficient. Many people prefer to be a part of a limited company as in this kind of business they get the opportunity to protect their personal assets as they can distance themselves from the risks involved. But according to the Insolvency Act 1986, personal liabilities can be imposed on the members of the company that is either going to be winded up or is becoming insolvent. This is so because there is risk of fraudulent trading and wrongful trading in this kind of business. The risks of dishonesty are more in limited company when compared to sole proprietorship and partnership. The directors of this kind of business are the ones who are at highest risk of a court order being taken against them. The shareholders and employees too are under risk for being pursued because of fraudulent or wrongful trading. Whether the limited company is a private or public company it has to be registered with the Registrar of Companies. The registration and other formalities involved in limited companies are greater than partnership and sole proprietorship. Word count: 1988 References Kolah, A. (2002). Essential Law for Marketers. Oxford: Butterworth-Heinemann. Nayler, P. (2006). Business Law In The Global Marketplace: The effects on international Business. Oxford: Elsevier Butterworth-Heinemann. Weitz, B.A., Castleberry, S.B., Tanner, J.F, Jr. (1992) Selling: Building Partnerships. USA: IRWIN. Turner, L. (2003). Advanced Psychology: Atypical Behaviour. London : Hodder & Stoughton. Read More