Legal & Regulatory Regulations - Essay Example

Question 2. Peggy and Nancy run a small juice bar in Brighton. Business is good and they are thinking of expanding their premises and staff and hope ultimately to branch into different parts of the country. They recognize a need to seek outside finance to assist cash flow. They have received conflicting advice from business associates on the question of whether they should trade through a limited company or continue to trade through a partnership. Advise Peggy and Nancy. (650 words) Traditionally a partnership involves less legal formalities,- including the absence of formal deeds, business accounts auditing, and the necessity to observe a complex set of rules,- than a limited company. However, the same perceived advantages of a partnership, if enjoyed without caution, lead to a loss of credibility both in the eyes of prospective employees and prospective financers. There are myriad advantages and disadvantages to both the business forms seen from any angle that may have a bearing upon the choice of business structures. However, one thing is certain that it is next to impossible to run a company without qualified professional help,- and associated costs,- if benefits are to be obtained and penalties to be avoided. The principal advantages of a company are of course, the vaunted limited liability, greater flexibility in tax planning, a greater social perception of credibility, and an ability to raise funds formally through the sale of equity shares. Partnerships that maintain detailed auditing and have themselves audited by professionals are on the same footing as start-up limited companies with respect to an external loan, - for any financier, including a bank, would want personal guarantees from the directors of a new company in order to give a loan, just as they would demand collaterals from the partners of a partnership. Further, as research has shown, there is almost no discrimination shown by banks between male and female owned businesses when it comes to a loan (Carter & Shaw 2006). The principal difference in approach is that "While female applicants are required to demonstrate evidence that they understand the nature and implications of business ownership, male applicants are required to demonstrate trustworthiness through social stability, evidenced by marriage." (Carter & Shaw, 2006, pg 65). We know our subjects' mindset is entrepreneurial, that they have started with a small business, and have put it into running with economic viability. They have set short term (expansion of premises and staff) and long-term goals (countrywide expansion), and are working only with the product with which they have gained experience. Thus, they seem to understand the nature and implications of business ownership. That they are receiving conflicting opinions from "business associates" does not rule out the possibility of having accountants or lawyers as business associates. The abundance of contested litigation in the country is proof enough that professionals quite often, and with regularity, hold differing opinions upon the same issues. Thus, what remains is to assess the non-financial capital of Peggy and Nancy before choosing the business structure appropriate to their situation and for their needs. Their cast is of typical woman entrepreneurs (Carter & Shaw, 2006) as their choice business of a fruit juice bar and choice of structure as a partnership shows a low level of overall capitalization at start-up. including low requirements for (a) start-up and ongoing funding (financial capital); (b) attributes and skills (human capital); (c) tangible assets including facilities and equipment (physical capital); (d) organizational relationships, structures, routines, culture and knowledge (organizational capital); (e) technological knowledge or process based skills and experience (technological capital); and (f) relationships and network, social, professional, political, etc. (social capital). Their business is dependent upon personal clients rather than corporate clients, and they have no previous business experience of debt-finance, - for it is now that they recognize a need to seek outside finance. Thus, their good business is insufficient to provide them with the kind of business experience needed to fulfil either their long-term goal, or their short-term goal if it is targeted towards their long-term goal. The kind of human resources needed to fill the gap cannot be attracted by a partnership, as also the huge finance needed to fulfil their long-term goal. If they are serious about their business, then they should form a limited company, for the initial hardships of extra professional fees paid out would be more than offset by seeing their dreams realized. Question 3. Graham is an accountant who charges an average of 750 per year for producing annual accounts for taxation purposes. Two of his clients are struggling to pay their bill and have proposed the following. a. Angela cannot pay any of the bill. She is a landscape gardener and has offered to tidy Graham's garden and get rid of all the weeds. Reluctantly, Graham agrees to this proposal. Six months later, Angela has tidied most of the garden but she hasn't cleared all the weeds. Graham decides that Angela has broken their agreement and wants her to pay her bill. b. Brenda can pay 500 and promises to pay the remainder next year with that year's bill. Graham agrees to this proposal. However, she then decides to get another accountant so that Graham cannot do the next years accounts. Advise Graham as to the legal position in both cases. (650 words) a. Once Graham has accepted Angela's proposal, a simple contract comes into being. There is no indication that the contract was in writing, nor is there any indication of any time being fixed for Angela to complete her work. Therefore, in any action brought immediately against Angela, Graham can fail since time, which is the essence of a contract remains unfixed. Graham can try to prove the point of reasonable time by calling expert witnesses and may or may not succeed. Further, Angela has made part-performance of her part of the bargain, and to a major extent has completed her work. That means she has done substantial performance. Therefore, Graham cannot ask Angela to pay her original bill. If he wants to recover any money, the value of the work done by Angela would first have to be assessed and subtracted from her bill and he would receive the remainder. Assessment of the value of Angela's work may prove to be quite challenging. We do not know the size of Graham's garden. If it is unreasonably big then Angela might also have the protection of variation of circumstances making it impossible to perform the contract, i.e., weeds growing up in one corner of the garden while the other corner was being cleared. Since her offer of work is personal, and since the conception of the contract is based upon her paucity of funds, her inability to hire help to get the work done may well be accepted to her favour. In this case, Graham's first action should be to send Angela a notice asking the time within which she intends to complete the work. Continued lack of response on Angela's part would give Graham a cause of action to go to Court, and if Angela decides to answer, she will either provide a timeline, or express her inability. Further action by Graham should follow accordingly. b. On a simple reading in this case it seems that Graham has no other option but to attempt to recover the balance 250 pounds that Brenda owed him. He did not suffer any material loss, nor had he given any further service to Brenda. However, Brenda has made a promise to Graham, which she had no intention to perform. The new contract that had come into being with Graham accepting Brenda's offer to receive the balance amount with next year's bill was that he received the appointment to do Brenda's accounts for the next year against allowing her to delay the payment of his balance fees until the next bill. On his part, Graham had performed the first of his obligations in allowing Brenda to delay the payment of his fees, but Brenda prevented him from fulfilling his further part of the contract, by appointing a new accountant. The doctrine of frustration is applicable here and Graham has been prejudiced and frustrated from performing his part of the contract by the action of Brenda who prevented the happening of a specific event, i.e., submission of accounts to Graham next year. Accordingly, Graham has suffered loss of expected profit and can sue Brenda both for recovery of the balance fees of previous year, as also for speculative damages, or loss of expected profit from which Brenda's action excluded him. Question 4. a. Ken a college lecturer in information technology obtains permission to use the college library on Sundays for research. One Sunday he lets himself in, locking the main door behind him. He leaves his briefcase by the door taking with him only a couple of notebooks to the IT section. Rufus a student who had broken into the premises and slept overnight following eviction by his landlady, entered the library, fell over the briefcase and fractured his skull. Comment on the legal position here for both Ken and Rufus. (400 words) b. When proving that a breach of duty has arisen, the claimant must prove that the defendant has done so under certain criteria. Discuss what these criterions would be. (250 words) a) Ubi jus ibi remedium, wherever there is a wrong there is a remedy, and though Rufus is a trespasser, he certainly did not merit the fracturing of his skull and it seems that he has suffered a wrong. A statute, the contravention of which by itself does not give rise to any legal or criminal proceeding except under the statutory authorities prescribed by the Act is the Health and Safety at Work etc. Act 1974. Here Ken has a duty under section 4 sub section (2) where it says "It shall be the duty of each person who has, to any extent, control of premises to which this section applies or of the means of access thereto or egress therefrom . . . to take such measures as it is reasonable for a person in his position to take to ensure, so far as is reasonably practicable, that the premises, all means of access thereto or egress therefrom available for use by persons using the premises . . . are safe and without risks to health." If the University building is under the purview of this Act, then Ken has clearly contravened statutory provisions by failing to take due care. However, this law treats this only as a statutory offence whose effects are controllable by the State Secretary, i.e., the executive, and is penal in nature. It doesn't bring any personal relief to Rufus. Therefore, we turn to the common law of torts, and the age-old doctrine of res ipsa loquitur. Ordinarily, mere proof that an event or accident, the cause of which is unknown, has happened is no proof of negligence. The principle of res ipsa loquitur shifts the onus of proof, in that a prima facie case is assumed to be made out, throwing on the defendant the task of proving that he was not negligent. This maxim applies to cases where the peculiar circumstances constituting the event or accident proclaim that the negligence of somebody is the cause of the event or accident. In the first place, the event or accident must be of a kind which does not happen in the ordinary course of things if those who have management and control use due care; secondly, it must also be shown that the event or thing which caused the accident was within the defendant's control. The control need not be exclusive provided the evidence shows outside influence a remote possibility.(Llloyde v. West Midlands , 1971). The maxim means that an accident may by its nature be more consistent with its being caused by negligence for which the defendant is responsible than by other causes, and that in such a case the mere fact of the accident is prima facie evidence of such negligence. So, Rufus can definitely seek redress in the civil courts relying upon this principle against Ken for having committed negligence, and it would be Ken's burden to prove that he was not negligent, not Rufus' burden to prove Ken as negligent. The circumstances will speak for themselves. b) Criterion of breach of duty to care: It is now established law that in a suit for damages for negligence the plaintiff as already seen must establish first, a duty to take care, secondly, a breach of that duty, and thirdly, that such breach was the proximate cause of the loss or injury to the plaintiff. After the plaintiff has shown that the defendant owed a duty to him, the plaintiff to succeed in his claim for negligence needs to show that the defendant was in breach of this duty. The test for deciding this is the test of a reasonable or prudent man. The question that needs to be answered is whether the defendant omitted to do something that a reasonable and prudent man under the ordinary course of events would have done, or has he done something that that a reasonable and prudent man would not have done (Davis v. Radcliffe, 1990). The standard that determines breach of duty is digression from the conduct of a prudent man in the particular situation with the amount of care, skill, diligence or the like, varying according to the particular case. The amount of care can vary, but the standard that determines the breach of duty remains the same and does not vary. REFERENCES Carter, S. & Shaw, E.(2006), Women's Business Ownership: Recent Research And Policy Developments: Report to the Small Business Service, November 2006 available at www.sbs.gov.uk/SBS_Gov_files/researchandstats/WomensBusinessSummary.pdf, retrieved December 5, 2006. Davis v. Radcliffe, (1990) 2 All ER 536 (PC), p. 540. Llloyde v. West Midlands (1971) 1 WLR 749 (CA). Read More