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Law For Business Students aims to provide for the needs of students following a wide variety of courses. It is a suitable sole text for many certificate-level courses and, with appropriate additional directed reading, meets the needs of HND students and business studies undergraduates. Some suggestions for such additional resources are to be found in the first appendix. The book was prompted, in no small part, by observing the problems faced by students who have to study a wide variety of law subjects as part of the requirements of their course. Such students are not necessarily initially enthusiastic about having to study law at all. While there is no substitute for an enthusiastic teacher, reading remains an essential part of successful study. Many texts use inaccessible language and are often unwelcoming. Others convey information with reasonable clarity but, as one student told me, ‘lack atmosphere’. Many texts present legal principles without any indication of their relevance in a business context. Over thirty years of teaching has helped me to grapple with the problem of conveying complex legal concepts in a variety of legal disciplines in simple language, while endeavouring not to lose essential subtlety and without clouding nice distinctions. As far as possible I have tried to make relevant such areas as the court system and the law of tort, which are not necessarily perceived by the student as part of the business world. The occasional joke may also be perceptible to the careful reader. Hopefully this approach will increase motivation as well as understanding in its student readers. While Law for Business Students was written primarily for use by students, it may also be useful to any lecturer faced – as many of us are – with the unenviable task of teaching a syllabus including components which we have not studied for years, or (even worse) have so far managed to avoid completely. Hopefully it can be used as a revision aid or an introduction to further research in these circumstances. Lecturers may also find it helpful to use the book in class. For example, the quizzes at the end of each chapter are a useful method of checking that the students are able to understand and apply relevant principles. Homework could be selected from the assignments in the text. This Lecturer’s Guide contains diagrams and charts from the book, together with new charts and handouts, which can be used as visual aids to class teaching, for example as overhead projector transparencies. There are also a number of suggested solutions additional to those in Appendix 2 of the book.

Law for Business Students by Alix Adams © Pearson Education Limited 2000


Suggested solutions

Chapter 5, Assignment 4 (a) Consideration, which is essential to the existence of a binding contract, has been defined as the price to be paid for another party’s promise or act (Dunlop v Selfridge). It has also been described as a benefit or a detriment (Currie v Misa). Such terminology indicates that consideration must be of material value and amount to a new obligation for the party providing it. In general, therefore, it is true to say that a party does not provide valid consideration by agreeing to perform an existing contractual obligation in return for a promise of extra payment. Exceptions to this general principle have, however, been acknowledged by the courts. The general principle is illustrated by Stilk v Myrick. Here a ship’s captain, whose crew had become depleted, promised the remaining crew members extra wages in return for their performance of the duties of the missing men. It was held that the sailors were not entitled to enforce this promise, which lacked consideration from them. Such extra work was to be anticipated as part of their existing contractual obligation. The courts have acknowledged that consideration may be found in anything additional to the existing contractual obligations. In Hartley v Ponsonby the facts were similar to those in Stilk v Myrick, but the crew was much more depleted and the voyage home much longer. Here the captain’s promise was enforceable, since the crew had taken on a much more hazardous task than that intended by the original contract. In Williams v Roffey the Court of Appeal stressed that the element of benefit to the promisor was crucial. If performance of the contract by the promisee was of some special benefit or even (as here) it permitted them to avoid a disadvantage, it might represent valid consideration, provided that the promise of extra payment had not been obtained by economic duress. Here the defendant, a building contractor, wished to avoid paying liquidated damages to his client for delayed completion. He promised to pay the claimant (his sub-contractor) extra money to complete a carpentry contract. The claimant was experiencing severe financial difficulties. Without the promise of extra money, the claimant would have gone out of business, preventing him from completing the work, with resulting delay to the defendant. Note that here the claimant was doing no more than the original contract required. The fact that the defendant avoided a disadvantage indirectly relating to the contract had provided consideration, making the promise to the claimant enforceable. Arguably, such exceptions may be criticised as clouding the concept of consideration and making it difficult to predict the enforceability of such promises. However, they may provide a just outcome and often, as in the case of Williams v Roffey, reflect common business practice. (b) Although Bernard’s promise to accept a reduced rent is not contractually binding, Albert may Law for Business Students by Alix Adams © Pearson Education Limited 2000


well be able to use Bernard’s promise as a defence to Bernard’s claim for the balance of the rent up to the point when Wendy was told that she was permanently unfit to work. He might be able to stretch it to cover the full 12 months. After that Bernard’s original rights will be restored. Bernard’s promise to Albert is gratuitous: Albert is giving nothing in return and therefore it is not contractually binding. Under The Rule in Pinnel’s Case, part payment of a debt does not discharge the debt. Therefore, at common law Albert’s obligations remain unchanged by Bernard’s promise and he is liable for all the rent arrears and must pay the full rent in future. However, if the equitable principle of promissory estoppel is applicable, Albert may have a good defence to at least part of Bernard’s claim. Under this principle, developed by Denning J in Central London Property Trust v High Trees House, a party to a contract who agrees to a variation in its terms may be effectively bound by it if it would be inequitable to the other party if the variation was withdrawn. In Coombe v Coombe, Denning LJ stressed that the principle provided a ‘shield and not a sword’. It did not make a gratuitous promise contractually binding, but where it applied would enable a promisee to use the promise as a defence if he or she were sued for breach of the original contract. When using this equitable principle, the court examines the nature of the promise as well as the circumstances of the individual case, including the moral rights of the parties, to determine a fair outcome. Therefore, it is crucial that Bernard gave his promise entirely freely. If there was any unfair pressure by Albert this would be evidence that it would be inequitable to enforce the contract (D & C Builders v Rees). How far Albert has relied upon the promise may be relevant, as well as the current financial circumstances of the parties. The nature of the promise is crucial here. The courts have generally taken the view that such promises suspend rather than completely extinguish the promisor’s rights (Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd). It is evident that Bernard only intended to suspend his rights to full rent for 12 months at the most. We may assume that Albert’s financial problems were perceived as temporary by both parties at the point when Bernard made the promise. The court would, therefore, not think it fair to deprive Bernard permanently of his full rights under the contract, even though Wendy will never again contribute to the family income. Therefore, the only issue is when Bernard may assume his full rights. He will argue that he is entitled to do so at the point when it is known that Wendy will never work again, because he would never have made the promise if he had known that this would be the outcome. Albert will argue that he was relying on 12 months’ grace to accommodate his financial difficulties. In making their decision the court will take into account Albert’s conduct: any attempt to conceal the true position from Bernard would go against him. The nature of the caravan’s use is also relevant. If it is Albert and Wendy’s home rather than merely holiday accommodation, the court might be more inclined to allow them 12 months’ relief. In conclusion, the rights of the parties will be determined by the application of the equitable doctrine of promissory estoppel. Bernard’s contractual rights to rent arrears may be deemed to have been suspended for at least three months by his gratuitous promise to Albert, if it would be unduly oppressive to Albert to permit Bernard to renege on it. Possibly Albert might be allowed the full 12 months’ relief if this is deemed the fairest solution to both parties.


Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 7, Assignment 6 (a) A misrepresentation may be defined as an untrue statement of fact made by one party prior to the formation of a contract, which induces the other party to enter the contract. Whether fraudulent, negligent, or wholly innocent, its usual effect is to make the contract voidable by the innocent party: they may choose to opt out of it or continue with its performance. They may also be entitled to damages for losses resulting from the misrepresentation. A statement of fact may be verbal, pictorial or derived from conduct. In Gordon v Sellico it was held that the seller of a house, who concealed a structural defect with a piece of furniture, had misrepresented the state of the premises to the buyer. A mere sales puff is not treated as a statement of fact; nor generally are statements of opinion or statements of future intention. A party who states a personal opinion from a position of ignorance will not be deemed liable for the statement (Bissett v Wilkinson). However if facts indicate that the misrepresentor could not reasonably hold the opinion, it can make the contract voidable. In Smith v Land & House Property Corporation a landlord who described a tenant in arrears with his rent as ‘most desirable’ was held to be making a statement of fact. A statement of future intention may be treated as a statement of fact if the maker has no actual intention of carrying it out. In Edgington v Fitzmaurice company directors invited applications for debentures, intending to use the money to pay off debts, though their prospectus said that the business was to be expanded. A forecast of future performance may be treated as a statement of fact where it comes from an authoritative source. Thus in Esso Petroleum v Mardon, predictions of sales for a filling station were treated as statements of fact when made by Esso’s experienced representative. A misstatement of the law is not treated by the courts as a statement of fact. However, a misrepresentation of the legal rights attached to property may be. Telling a vendor that premises automatically attract planning permission would be a statement of law, but it was held in Lawrence v Lexcourt Holdings that misrepresenting the extent of planning permission that had actually been granted was a statement of fact. Failing to make a statement is not usually a misrepresentation. Questions should be answered truthfully and sufficiently fully to give a true picture: Nottingham Patent Brick & Tile Co Ltd v Butler. Information must be updated if it changes before acceptance (With v O’Flanagan). A duty to volunteer information is rare but is also found if the contract involves a fiduciary relationship (see part (b) below). To make a contract voidable, the statement must effect the mind of the misrepresentee and be a principal (though not necessarily the only reason) for their entering the contract. Therefore, if they did not know of the statement prior to acceptance (Re Northumberland & Durham District Banking Co, ex parte Briggs), or they checked the information (Attwood v Small), it is not actionable. The victim of misrepresentation is usually entitled to the equitable remedy of rescission and damages if suing in fraudulent misrepresentation, where they must prove that the defendant lied or made the statement recklessly, not caring whether it was true or false. However, provided a contract has resulted, they are usually better off suing under the Misrepresentation Act 1967, which covers all forms of misrepresentation. Section 2(1) allows a misrepresentee to Law for Business Students by Alix Adams © Pearson Education Limited 2000


obtain rescission and damages where the misrepresentor is unable to prove that they had a reasonable belief in the truth of the statement. This puts the burden of proof on the misrepresentor, and covers both fraudulent and careless statements. Section 2(2) covers any statement not made fraudulently, and therefore relates to careless and bona fide statements. It enables the court to award either rescission or damages, choosing the remedy that seems most just in the circumstances. The Court of Appeal in William Sindall v Cambridgeshire County Council held that rescission should be withheld if the effect of the misrepresentation was minor and could be justly compensated with a small sum of damages. (b) It is possible that the insurance company may refuse to pay Mort’s widow on the grounds that the contract is voidable because of Mort’s misrepresentation. Mort gave some, but not all, of the relevant information. Telling less than the whole truth may amount to actionable misrepresentation in any contractual situation, but is likely to be particularly influential in an insurance contract. Such contracts are examples of contracts of the utmost good faith, since they involve a fiduciary relationship that requires complete honesty from both parties. Failure to declare any information which a prudent insurer would wish to consider before entering the contract makes it voidable. In Hood v West End Packing failure by an insured to tell the company that his goods would be transported on the deck of a ship instead of in the hold entitled the insurance company to refuse to pay out for their loss. Clearly the risk of loss was much greater if the goods were transported in this way. In Mort’s case the situation is less clear cut. The company might well have wanted to find out more about why the other companies refused Mort. The limited information given makes it impossible to predict the outcome accurately, but Mort’s widow could be denied her payment, if the court deems the missing information crucial to a prudent insurer.


Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 12, Assignment 11 Healing should be advised that they may claim against Oswald or Grinders in private nuisance. They may also claim in negligence against Grinders on the grounds that it is vicariously liable for Ned’s behaviour. The private nuisance claims Private nuisance protects the occupier against reasonably foreseeable and unreasonable interference with peaceful enjoyment of land. Healing, as occupier of the premises affected, is entitled to sue Oswald because it is his land from which the alleged nuisance emanates. It is irrelevant that Oswald did not cause the nuisance personally, provided that he should reasonably have foreseen the damage. In Sedleigh-Denfield v O’Callaghan the defendant occupier was liable for a flood on his neighbour’s premises which resulted from pipe laying on the defendant’s land by a third party. The defendant knew that a flood risk had been created. Oswald instructed Grinders to do the work; therefore it can be argued that Oswald should reasonably have foreseen the resulting disruption. Grinders is also potentially liable since it has caused the noise and dust. Actionable damage in private nuisance falls into two categories: tangible and intangible. Healing has suffered tangible damage to the swimming pool pump. It has also suffered intangible damage: the dust on the pool makes it unusable and the noise has driven away its customers, depriving Healing of income, so its enjoyment of the land has been reduced. In Andreae v Prudential Bank dust and noise caused by building operations were deemed actionable. In Lyons v Gulliver, the claimant obtained an injunction against the defendant when queues outside the defendant theatre blocked access to the claimant’s teashop, thus depriving him of customers. However, in order to succeed, Healing will have to prove that the interference it has suffered is unreasonable with regard to all the particular circumstances. Healing’s claim relating to the broken pump is likely to succeed: interference that causes physical damage is usually proof of unreasonable interference. Suitability of locality for the defendant’s activity may indicate that it is reasonable, where intangible damage is caused, but in St Helen’s Smelting Co v Tipping, the House of Lords held that it was irrelevant where the damage is tangible. Mr Tipping’s claim for damage to his trees, caused by fumes from the defendant’s iron works, was successful although he lived in an industrial area. The dust making the swimming pool unusable is likely to be regarded as intangible damage unless it necessitates expensive cleaning operations. In an agricultural area it could be argued that some inconvenience from dust at harvest time is to be expected but the court would require proof that all practicable precautions had been taken by Grinders to keep it within reasonable limits. It would probably be better for Healing to claim compensation for this as part of the claim for the broken pump, since loss of use of the pool would be a reasonably foreseeable consequence of damage to the pump. To decide whether noise is unreasonable, the court will look at its frequency, duration and intensity. Given the locality and time of year, noise from harvesting equipment is reasonably to be expected. Three weeks may be a reasonable duration on a big farm. We are not told how many hours a day it continues, but quite long working hours might reasonably be anticipated at harvest time. The precautions taken by Grinders to reduce the noise will be relevant. Law for Business Students by Alix Adams © Pearson Education Limited 2000


Whether the noise is unreasonable will be judged by the needs of the ordinary inhabitant of the area and is not dictated by the needs of the sensitive plaintiff (Robinson v Kilvert). Healing will not get special consideration because of any special need for peace and quiet for their clients. The negligence claim Ned appears to have been negligent in disposal of his cigarette end. Under the rule in Donoghue v Stevenson he owes a duty of care to anybody he should reasonably foresee is likely to be affected by his behaviour. Dropping a lighted cigarette end in a field of stubble is clearly potentially dangerous to occupiers of adjoining premises and suggests the necessary failure to take reasonable care. The necessary causative link exists since, but for his behaviour, the summerhouse would not have been destroyed. Healing should sue Grinders, as it will be readily identifiable as a party and has the financial resources to cover the legal costs and compensation. As Ned’s employer, Grinders is vicariously liable for torts committed by Ned in the course of his employment. Smoking is likely to be treated as coincidental to his duties: a careless way of doing his authorised job: Bayley v Manchester, Sheffield & Lincolnshire Railway. Even if he were breaking Grinder’s rules, the company would still be vicariously liable: in Century Insurance v NIRTB an employer was liable for damage resulting from its tanker driver smoking against orders while delivering petrol. Conclusion Healing is likely to succeed in an action for private nuisance against Oswald or Grinders for the damage to the swimming pool pump, but is less likely to succeed in its claim concerning lack of use of the swimming pool, unless this is treated as a reasonably foreseeable effect of the pump being out of action. The noise claim is doubtful, given that Healing’s expectations of peace and quiet may be unreasonably high in that location at that time of year. Healing is unlikely to have any problem in its claim for the summerhouse. Grinders will be vicariously liable for Ned if his behaviour is found to be negligent.


Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 14, Assignment 13 (a) Under the Supply of Goods (Implied Terms) Act 1973 the party to whom goods are supplied under a hire-purchase contract has similar rights in relation to the quality of the goods to those of the buyer in a sale of goods contract. A buyer using a credit card has the rights of a buyer under the Sale of Goods Act 1979 against the supplier of the goods. Since the Consumer Credit Act 1974 the buyer also may have similar rights against the credit card company. A party who ‘buys’ goods under a hire-purchase contract gets them from a supplier but pays for them by instalments to the finance company. In law, they are hiring the goods from the finance company, though with an option to purchase once all instalments have been paid. There is generally no contractual relationship between the hirer and the supplier of the goods; only between the finance company and the buyer. To ensure that the customer is properly protected, the Supply of Goods (Implied Terms) Act 1973 provides that the finance company is liable if the goods are not suitable for their normal purpose, or for any particular purpose specified to the buyer before the contract was made. Suitability for purpose is a condition of the hire-purchase contract and, therefore, breach of the condition entitles the hirer to reject the goods within a reasonable time of their receipt. It is irrelevant that information about suitability came from the supplier, as under s 56 of the Consumer Credit Act 1974 the supplier is treated as the agent of the finance company, which is therefore liable for those misrepresentations. A party who purchases goods with his or her credit card often has dual legal rights if the goods are not fit for their purpose. By buying the goods, the buyer forms a contract of sale with the supplier which gives the buyer rights to reject the goods under the Sale of Goods Act 1979 if they are not suitable for their purpose (s 14(3)). The customer is entitled to assume that the goods will be suitable for any purpose to which such goods are usually put. If they have been specifically informed that the goods are suitable for a particular purpose, they are also protected if this turns out to be untrue, even if this use is not usual. The credit card user also has a contract with the credit card company and under s 75 of the Consumer Credit Act 1974 this may provide the customer with the same rights against the credit card company. Provided that the cash value of the item is between £100 and £30 000, the customer can enforce against the card company any rights relating to a breach of contract or misrepresentation committed by the seller. This can be very advantageous to a customer from a firm which has ceased to trade. (b) Alan may claim that Ghettoblaster, as a party selling goods by way of business, is in breach of its obligations under s 14(2) of the Sale of Goods Act 1979, as amended by the Sale and Supply of Goods Act 1994, to supply goods of satisfactory quality. His rights to make a similar claim against Lowcost under s 75 of the Consumer Credit Act 1974 are more problematic. Section 14 of the Sale of Goods Act requires goods to be of satisfactory quality. The Act indicates that a variety of factors are relevant to determining such quality, and specifically refers to safety. Since one of the items appears to have caused a fire shortly after installation, this indicates that it was already defective when supplied, which makes Ghettoblaster liable for the damage to Alan’s lounge. The fact that the equipment is second-hand does not prevent liability. A buyer of such goods may not be entitled to the same quality of finish or performance as the buyer of new goods, but all buyers are entitled to assume that the goods will be safe. Law for Business Students by Alix Adams © Pearson Education Limited 2000


Under s 75 of the Consumer Credit Act, as explained above, a credit card purchaser may have the right to pursue similar rights against the credit card company. However, Alan’s rights will be determined by how the issue of the cost of the equipment is assessed. We are told that the system’s overall cost was £320, which brings it safely within the lower limit of £100. The specifically defective item was priced at only £75. Unless a court is prepared to treat the contract as one for the whole system, composed of a number of items, as opposed to one of separately-priced items, a claim against Lowcost would fail. The Consumer Credit Act 1974 was intended primarily to provide adequate protection for the consumer against the credit provider and, therefore, a court might be prepared to interpret the contract in Alan’s favour. However, this uncertainty means that Alan would be better advised initially to pursue a claim against Ghettoblaster.


Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 16, Assignment 15 A purchaser in a contract for the sale of goods is protected as regards quality of goods by s 14 of the Sale of Goods Act 1979 (as amended by the Sale and Supply of Goods Act 1994). This makes satisfactory quality a condition of the contract, provided that the goods are sold by way of business. The seller’s freedom to exclude liability for breach of this condition is radically limited. Section 14(2) of the SGA 1979 states that goods supplied by way of its business to a purchaser must be of ‘satisfactory quality’. Under s 14(2A) this means that the goods must meet a standard which would be regarded as appropriate by the reasonable buyer. The court must take an objective view of the average buyer’s expectations, taking into account all the attributes of the goods, including their normal use. Price and description are also relevant. Section 14(2B) specifies a number of factors that may need to be considered, such as the appearance and finish of the goods, freedom from defects, and their safety and durability. Goods which do not work at all, or which are dangerous, are clearly not of satisfactory quality. The fact that they are second-hand or sale goods is irrelevant. However, a buyer of second-hand goods, or goods described as ‘seconds’ cannot expect the same quality of finish, or perhaps performance, as the buyer of new top-of-the-range goods. Even with new goods, the price paid is indicative to some extent of quality. The basic and therefore cheaper item may reasonably be of lesser quality than the luxury model. A Rolls-Royce runs more quietly than a Lada car. If the packaging and instructions that come with the goods are defective, that may also be a breach of s 14(2). Goods may also be deemed unsatisfactory because, although of adequate quality in themselves, they contain foreign bodies rendering them dangerous. In Wilson v Rickett Cockerell coal was deemed not to be of appropriate quality because it contained traces of explosives used in the mining process. Section 14(3) states that, where the goods are sold in the course of business, they must be suitable for the purpose to which such goods are normally put. They must also be suitable for any purpose specified by the seller, provided that the buyer has relied on the seller’s expertise. Such reliance is implicit where the buyer purchases the goods without asking any questions, or without carrying out a knowledgeable inspection. There are limits to the protection of s 14. Under s 14(2) the seller is not liable for any defects of which the buyer knew or reasonably should have known. The seller may display a notice on the goods specifying a defect. If the buyer chooses to inspect the goods, the seller will not be liable for any defects that should have been noticeable to the buyer, given the nature of the inspection. A superficial look at a car engine, for example, will not reveal latent defects. The extent of the buyer’s knowledge is also relevant. If the buyer has no technical skill, some defects would be invisible to him/her. A buyer who uses the goods for an unsuitable purpose or in an inappropriate fashion, or fails to follow the instructions, will also not have a claim under s 14 if problems result. The protection in s 14 is specifically limited to sales by way of business. The buyer from a non-trader has no statutory protection in relation to the quality of the goods, unless he or she can prove, as in Beale v Taylor, that the issue of quality overlaps with the seller’s obligation to ensure that the goods match their description. Under s 13 this an implied condition in all sale of goods’ contracts, regardless of the status of the seller.

Law for Business Students by Alix Adams © Pearson Education Limited 2000


Provided that breach is proved, liability is strict under s 13 and s 14. It is irrelevant that the seller did not personally attach the description, or cause or know of the defect. A breach of condition entitles the buyer to reject the goods at any time before acceptance and recover the price plus compensation for any other damage arising from the breach. Under s 35 the buyer is not deemed to have accepted the goods without adequate time to inspect them. In practice this may be interpreted as meaning time to find out their latent defects. If a new washing machine refuses to work within a couple of weeks, the buyer would be unlikely to be treated as having accepted it. If it was of satisfactory quality when it was sold, it should still be working properly. Section 35(6) says that agreeing to have the goods repaired is not necessarily evidence of acceptance. This is to protect the unfortunate purchaser of a ‘Friday afternoon model’ who initially agrees to the repair of an apparently minor defect, only to find that others follow swiftly, depriving him of the use of his goods for weeks on end. The buyer’s entitlement to satisfactory quality is further safeguarded by The Unfair Contract Terms Act 1977. Section 6 totally prevents the seller by way of business from excluding liability under SGA s 14 against a consumer buyer. If the buyer is not a consumer, liability may be excluded or limited so far as is reasonable. Green v Cade Brothers illustrates the court’s approach to determining reasonableness. A consumer buyer may also be protected by the Unfair Terms in Consumer Contract Regulations 1994 if he is able to show that the seller’s actions amount to a breach of good faith. A consumer buyer purchasing from a seller who is a trader has very comprehensive legal protection of rights to the satisfactory quality of goods. The non-consumer buyer is also adequately protected. However, when buying from a non-trader, the purchaser cannot take quality for granted and should take care to ask relevant questions and to carry out a proper inspection, since s 14 of the SGA does not protect the purchaser in these circumstances.


Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 18, Assignment 17 An employer owes both common law and statutory duties to take care of the health and safety of employees. Breach of these duties may lead to liability in civil or criminal law. How effective such regulation of employers may be depends not only on the employer’s awareness of the relevant obligations but also on the extent to which the liability is enforced. An implied term of the contract of employment makes the employer personally responsible for the safety of employees. The employer must take reasonable care to provide reasonably safe working conditions. Action for breaches of this duty are usually brought in tort. Liability is fault based. The employer is liable for failure to take reasonable care to prevent a hazard of which he knew or reasonably should have known. The duty is made up of three interdependent branches: the provision of (a) competent staff, (b) safe plant and equipment, and (c) a safe system of work. Staff who are not properly qualified and/or trained may a danger to others. In Hudson v Ridge Manufacturing, a practical joke by one employee caused injuries to another. Previous incidents should have alerted the employer to this risk and consequently the employer was liable for the damage. In Pagano v HGS the claimant was injured through failure of his employer to maintain works vehicles in a roadworthy condition. Safe working procedures are also crucial to employee safety, for example when handling dangerous materials or working off the ground (for example window cleaning or tree felling), but an office floor may be dangerous if not kept free from hazards. Most injuries at work are physical, but stress resulting in mental illness may also be actionable (Walker v Northumberland County Council). Apart from personal liability, an employer may also be vicariously liable for the torts of employees, provided that they were committed in the course of employment. The behaviour must have been incidental to the performance of authorised tasks. This may provide the route to a successful claim where the employer is not personally liable because he was not aware of the danger. In Harris v Michelin Tyre Co Ltd a practical joke committed by an employee in the course of employment injured the claimant, making the employer vicariously liable. There were no previous instances of such behaviour by the employee and the employer was not personally liable. An employee may also sue for damage caused by a breach of statutory duty by the employer, provided that this is expressly or impliedly permissible under the terms of the legislation, for example regulations made under the authority of the Health and Safety at Work Act 1974 (HSAWA). The claimant must show that he/she is a member of the class of persons protected by the legislation and that the damage he/she has suffered is of the relevant kind. The damage must also be shown to have arisen from the breach of duty. The liability imposed by legislation may be fault-based or strict. Fault-based duty is often limited to what is reasonably practicable. The likelihood of accidents, the seriousness of injury and the resources of the employer are all relevant to determining breach in such cases. Employees therefore have a variety of ways in which they might seek compensation from their employer for injuries at work. How effective this legal protection is, in practice, will be dependent on a number of circumstances. It is up to the employee to initiate proceedings. Employees may be unaware of their rights or fearful of exercising them. In a non-unionised workplace, access to legal advice and assistance may be a problem. The employer is also subject to criminal and administrative legal regulation through HSAWA, and to a huge variety of statutory regulations, many of which have been prompted Law for Business Students by Alix Adams Š Pearson Education Limited 2000


by compliance with EC Directives, for example the Management of Health and Safety at Work Regulations 1992. The HSAWA s 2 imposes a general duty on employers to ensure ‘so far as is reasonably practicable the health, safety and welfare of all their employees’. The employer with a work force of five or more must have a written and up-to-date health and safety policy, and employees must be properly notified about it. Employees are required by s 7 to take reasonable care for their own health and safety and that of others and to co-operate with the employer to enable them to carry out their statutory duty. The Health and Safety at Work Executive [HSE] was created by the Act and is empowered to supervise and inspect workplaces to check that all relevant safety legislation is complied with. Section 21 enables an inspector to issue an improvement notice requiring an employer to correct defects within time limits. If there is a danger of serious personal injury, s 23 enables an inspector to issue a prohibition notice to prevent continuance of the danger. Criminal prosecution of an employer for breaches of statutory duty or any other relevant crime is also possible. Death of an employee might therefore result in manslaughter proceedings against an employer. How well the HSAWA and other legislation protect employees depends on a number of factors. Responsible employers will be glad of guidance about current legislation and do their best to comply. However, not all employers are responsible and can only be brought into line by adequate policing. The HSE has been criticised for having insufficient inspectors and for being unwilling to use criminal sanctions, even where deaths of employees have occurred. If manslaughter charges are brought, the law currently makes it very difficult to impose liability effectively on corporations. It is unrealistic to expect hazardous conditions to be prevented by chance inspections; therefore, unless the employer’s behaviour is reported to the HSE, dangers may continue. In a unionised workplace the matter may be resolved internally or, in extreme cases, be reported. Elsewhere employees may well be reluctant to act as ‘whistle blowers’.


Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 20, Assignment 19 Entitlement to a redundancy payment is governed by the Employment Rights Act 1996. The employee must prove that he or she has been employed for a requisite minimum period, is within the statutory definition of an employee and has been dismissed because of redundancy as specified by the Act. In the event of a dispute with the employer about entitlement, the employee may bring a case before an employment tribunal. Claims must generally be brought within six months of the date when the employee’s notice expired, but the tribunal may be prepared to grant a time extension if this is deemed fair in the circumstances. Under the Unfair Dismissal and Statement of Reasons for Dismissal (Qualifying Period) Order 1999, an employee must have worked for the relevant employer for at least one year prior to receiving notice of redundancy. Not all ‘employees’ in the lay sense of the word are entitled to claim. They must have been employed under a contract of service or apprenticeship. Even then, under the Act, certain types of employee are ineligible, including people over retirement age. The employee must prove that he or she was dismissed actively or constructively within the definition given by s 136. In the context of redundancy, dismissal would be constructive if the employer died or was a company that had been wound up. It could also arise from relocation. Dismissal does not occur where an employee has warning of the threat of possible redundancies and leaves in advance of actually being dismissed. The cause of the dismissal must have been redundancy. Section 139 states that this may occur in three separate types of circumstance. First, where the employer stops carrying on the business operation in which the employee was engaged. Second, where the employer ceases to carry on business at the location where the employee works. Third, where the employer reduces the size of the workforce by restructuring or changing production methods. Redundancy of an employee does not automatically occur in such circumstances, as the employer may attempt to provide redeployment. An employee who is dismissed after refusing an offer of suitable redeployment cannot claim for redundancy (s 138(1)). The issue of what is suitable is a question of fact. It is determined by the tribunal in the light of the particular circumstances, such as travelling distance, the new job description and payment as compared with the previous employment. An employer is expected to act sensitively but there are limits to this. Thus in Fuller v Stephanie Bowman a secretary who refused to transfer to a nearby office because it was located above a sex shop was deemed to have refused suitable redeployment. Lastly, redundancy may result from relocation of business premises, though again this is not automatically so. The terms of the contract of service may permit the employer to require the employee to work at any of the employer’s places of business. Even if there is no relevant contract provision, relocation may not be treated as a cause of redundancy, unless compliance would place an unreasonable burden on the employee. The need to move house or undertake an unreasonably lengthy journey to work will be relevant here. In O’Brien v Associated Fire Alarms an employee was deemed to be constructively dismissed by reason of redundancy. He had previously worked in Liverpool and when that operation was scaled down by his employer he refused to be relocated in Barrow-in-Furness. Under s 138(2) an employee who takes up an alternative post has at least four weeks to decide if it is workable without prejudicing rights to redundancy pay.

Law for Business Students by Alix Adams © Pearson Education Limited 2000


Provided that the employee is able to prove that he or she has been made redundant under the ERA 1996, they will be entitled to a statutory redundancy payment. The extent of entitlement depends on the age of the employee and the number of years of service with the relevant employer. Within these limits the payment is calculated on the basis of the value of a week’s pay, which is currently subject to a maximum of £220. For example, a person of between 41 and 64 is entitled to one-and-a-half weeks’ pay for each year’s service up to a maximum of 20 years. An employee may also be entitled to any compensation available to an unfairly dismissed employee, if he or she can show that they were unfairly selected for redundancy (s 105), for example because of trade union involvement. Alternatively, they may claim that the selection methods used by the employer were unfair under s 98. Such methods must operate, for example, subject to objective and reasonable criteria. Appropriate consultation must be involved, including reasonable attempts to provide redeployment. An employee who loses his or her job because their employer reduces the size of the workforce or restructures the undertaking cannot, therefore, automatically claim to be entitled to redundancy payment. Provided that they fulfil the requirements of the ERA 1996, they are only entitled to a relatively small payment, unless they can also provide that their redundancy arises from unfair dismissal.


Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 21, Assignment 20 If Sharp and Cool’s business is doing well it could be in their interests to incorporate it as a limited company. This need not be a complex or expensive task. On incorporation, their business enterprise becomes a legal entity with a separate existence from them, with its own property and sole responsibility for its legal liabilities. It can provide them and any other company members with limited liability for future business debts. Incorporation could help the expansion process in the long term by facilitating the raising of capital. Incorporation is a formal process, governed by the Companies Act 1985 (as amended). It also involves on-going statutory duties, like making an annual return to the Companies Registry, and holding an annual general meeting. However, deregulation permits a small private company to opt out of some of these requirements. When they originally set up their business partnership, Sharp and Cool did not have to fulfil any prescribed legal formalities; setting up a company is rather more complex. Incorporation of a company involves registration with the Companies Registry, which investigates all proposed companies to ensure that, for example, they are likely to be financially viable, they are reasonably likely to succeed and they exist for a legal purpose. The promoters must present certain documentation for inspection, including the memorandum and articles of association. Fees are payable for registration. Sharp and Cool may need the services of a solicitor to assist in drawing up the relevant documents, but it is possible to complete the formalities themselves. They could also save themselves time, effort and cost by buying a dormant company from an ‘off-the-shelf’ provider. Such companies are usually registered as a ‘general commercial company’ and fit the objects of any business. Sharp and Cool would only have to register themselves as directors and change the company name. As Sharp and Cool have been operating a relatively small business, and have no immediate access to large amounts of capital, they will initially only be able to register as a private company. This is one with capital of less than £50 000, the shares in which are usually held by the previous partners and perhaps their family or associates. The ability to transfer such shares is restricted by the articles of association, which generally require permission from the shareholders. The shares of a private company cannot be advertised for sale to the public and cannot be sold through the Stock Exchange. Generally a shareholder is not entitled to transfer their shares without permission from the others. Therefore, unless Sharp and Cool have a number of wealthy associates prepared to become substantial shareholders, they will not obtain immediate access to more capital from shares. On registration all shareholders may enjoy limited liability. This is indicated by the abbreviation ‘Ltd’ following the private company’s name. This means that their financial liability for the company is limited to the value of their shares. Consequently, if the company should fail, the shareholders, while losing the value of their shares, do not have to make any further contribution to pay off the company’s creditors. This is clearly an advantage to Sharp and Cool, who as partners will so far have been jointly and severally liable for all the business debts. It also means that, if the way they run the company results in a breach of contract or tort, they will not be personally liable. After incorporation, the company’s property becomes its own as opposed to being held in joint ownership by partners. This provides some tax advantages for Sharp and Cool. Also, they could obtain a loan by issuing a debenture to a willing lender. This is a loan secured by a charge on the Law for Business Students by Alix Adams © Pearson Education Limited 2000


company’s property which entitles the debenture holder to interest and repayment at a later date. However, for Sharp and Cool, as directors of a small company, this advantage may be more notional than real. If they obtain a loan from a bank they will almost certainly be asked to mortgage their homes to secure the loan, just as if they were still merely partners. If, after incorporation, the business continues to expand, Sharp and Cool may be able to turn their business into a public company. This is possible if the company has limited liability and the authorised capital is at least £50 000 of which at least 25 per cent has been paid up. The memorandum of the company will have to be altered to indicate the new status, and agreement for this will need to be obtained from the shareholders at a general company meeting. The company may then be re-registered as a public company with consent from the Companies Registrar. It will then be known as Sharp & Cool Computers plc. This step would greatly facilitate raising capital, as the shares and debentures of a public company may be advertised for sale to the public and may be transferred on the Stock Exchange. As Sharp and Cool seem very concerned about attracting outside capital, they should, however, be aware that incorporation may not provide a solution in the short term. Sharp and Cool should appreciate that, if they incorporate their business, knowledge of its affairs becomes public property. Particulars of the company in the registration documents, like the names of the directors and the location of its registered office, can be inspected at the Companies Registry by any member of the public. The Companies Act 1985 requires these particulars to be updated on an annual basis (the annual return). This includes providing a copy of the company’s annual accounts. The Act also refers to the need for a company to hold an annual general meeting and appoint auditors on an annual basis. However, Sharp and Cool need not be too daunted if their business is merely in effect an incorporated partnership. The Companies Act 1989 brought in a measure of deregulation to assist small businesses. For example, it is possible for a small company to decide to opt out of these particular requirements. In conclusion, if Sharp and Cool’s primary motive for considering the incorporation of their business is to obtain access to outside finance, they may be disappointed in the short term at least. However, provided that their business is currently sufficiently viable, it may be incorporated with limited liability, which provides Sharp and Cool with protection against responsibilities for the company’s finances or legal liabilities. In the fullness of time a change in status from private to public company would open up wider opportunities for obtaining capital.


Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 25, Assignment 24 (a) The rights of shareholders to requisition company meetings An extraordinary general meeting should only be called where the matter is so urgent that it cannot wait until the next annual general meeting. Section 368 of the Companies Act 1985 enables shareholders to requisition an extraordinary general meeting in certain circumstances regardless of the requirements for the calling of meetings in the company’s articles. The shareholders seeking the requisition must jointly hold at least 10 per cent of the paid-up share capital. They must deliver notice of the requisition to the registered office of the company, indicating why the meeting is being called. This must be signed by all the relevant shareholders. This obliges the directors to issue notice of the meeting, which must take place within no more than 28 days of the notice being issued. If they fail to do so, the requisitioning shareholders (or any of them who represent at least half the total voting rights of the whole group) are then personally entitled to convene the meeting. The expenses of doing so may be recovered from the company, which then deducts the relevant sum from the directors’ fees. Where the company articles make no provision for members to call meetings, under section 170(1) any two or more shareholders with at least one-tenth of the issued share capital may call a meeting without the requisitioning formalities. We are not told how big Wye & Co is. If it is a large company, concerned shareholders may have difficulty and suffer considerable expense in contacting the others to find out whether there is sufficient support to enable the requisition to take place. (b) Rights of shareholders to control the powers and duties of the board of directors The directors are responsible for the day-to-day running of the company. Their powers and duties are specified by company legislation and by the company’s articles and memorandum. Directors’ decisions may be successfully challenged by a majority of shareholders through resolutions at general meetings. If only a minority of shareholders has concerns, this may be problematic. Voting power may be dominated by the board of directors, who may be the majority shareholders. The shareholders of Wye & Co must remember that they have no automatic legal right to a dividend. The directors must recommend payment before members are able to consider using their powers to declare a dividend by ordinary or written resolution. Given that the Company has been trading at a loss, the directors may be justified in not recommending a pay-out. However, the failure of the company to thrive may indicate failure of the directors to fulfil their legal duties to the company. Even if the poor performance of the company may be otherwise justified, the huge rise in the managing director’s salary provides grounds for shareholder intervention. Such a decision by the directors may be evidence of negligence or a breach of their fiduciary duty. It is difficult to believe that the decision was made in good faith, since this appears to be in direct conflict with the company’s interests. The contract is voidable by the company on these grounds if challenged successfully by the shareholders. The rights of minority shareholders to challenge the directors’ behaviour is limited and largely ineffective at common law. The rule in Foss v Harbottle effectively prevents the individual Law for Business Students by Alix Adams © Pearson Education Limited 2000


shareholder from challenging a director’s behaviour where this is potentially damaging to the company’s interests. The rationale for this rule is that the company has the right to take action to protect itself, which makes action by the individual on the company’s behalf a redundant exercise. However, it leads to injustice where the directors have the voting power to prevent intervention by shareholders. To succeed in a legal action against the company the shareholders would have to prove that the directors have acted ultra vires (exceeded their powers), or failed to comply with the procedures laid down in the company’s articles, or acted fraudulently. Fraud is only successful where an intention to deceive, or reckless behaviour, have been proved. None of these circumstances are apparent on the face of the given facts. Statute provides some limited rights for a dissatisfied minority but most of these are irrelevant to the case of Wye & Co. If there is proof of serious abuse by the directors of their powers, the shareholders may (Companies Act 1985 s 431) seek a Board of Trade investigation, provided that a minority of at least 200 shareholders or those holding at least one-tenth of the issued shares wish to take this action. This investigation may lead (s 124A of the Insolvency Act 1980) to a petition from the Secretary of State to wind up the company on just and equitable grounds. The Companies Act 1985 s 459 may be more helpful. This enables a company member to petition the court, on the grounds that the company’s affairs are being managed in a way that unfairly prejudices the interests of the shareholder. Proof that the director’s financial interests are being prioritised at the expense of the company and its individual members may well be sufficient proof. If the claim is successful, the court may issue various orders, including one to regulate or restrict those involved in the management of the company. If Wye & Co is a listed company, it is subject to the advisory Combined Code imposed by the Stock Exchange. This requires the Company to put in place open and transparent procedures for determining the remuneration of the executive director and inform the shareholders of these. The Code also requires that the level of remuneration should be determined by the policy of a committee of non-executive directors. Failure to comply with the Code may be additional evidence of unfair prejudice, as it points to a breach of prescribed good practice. Action under s 459 seems the best strategy for the shareholders, since even if they requisition a meeting the weight of voting power may still be against them.


Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 26, Assignment 25 Copyright, which is regulated by the Copyright, Designs and Patents Act 1988, is a form of intellectual property which protects its owner (the copyholder) for at least 70 years against the unauthorised reproduction of a large variety of original works. The Act gives a copyholder a number of rights, including that of licensing the use of their work by others, and enables them to take action at civil law if their work is reproduced without their consent. No work of any kind attracts copyright while it is purely an idea in the mind of the creator. Once it is drawn or written down, or on film, audio tape, video tape or computer disk, it exists in a permanent form. Provided that it falls within the criteria explained below, it is then capable of being protected by copyright. Under s 1 of the Act, copyright covers the following: original literary, dramatic, musical and artistic works, sound recordings, films, radio and TV broadcasts or cable programmes, and typographical arrangement of published works. To obtain copyright protection the work, whatever form it takes, must be ’original’ within the meaning of the Act. This does not mean that the work must be unique, though it is essential that it is not a copy of somebody else’s creation. Originality derives from the degree of the independent efforts of the creator, who may well be presenting an account of factual events already available elsewhere. For example, an historian or biographer will not be in breach of copyright unless their account of, for example, the Civil War or the life of Martin Luther King, too closely mirrors the form of words used by a previous author. There is a wide variety of street and road atlases all of which convey identical information, but have originality because of the way the information is presented. Other definitions of words in this part of the Act require some explanation. ’Literary’ does not just cover books. Anything written, including letters, computer programs, statistical compilations and other tables, is included. ’Artistic’ does not just relate to works of art like pictures and statues, but refers to a wide variety of graphic forms, including maps, diagrams and designs. A design (e.g. for clothing) may attract additional statutory design rights to its owner, which relate to reproduction of items made to the pattern of the design. These rights are quite distinct from copyright. ’Dramatic and musical works’ include play scripts, musical scores and also choreography for ballet and dance. Where a work is performed, rights other than copyright may exist, as the participants in a performance of any of these may claim performance rights. Such rights are, for example, breached if the performance was copied without their consent, by means of illicit video or audio recording. Copyright is created informally and automatically exists, provided that the work has sufficient connection with the UK. This will exist merely because first publication of the work takes place in the UK. It can also arise because of the author’s UK nationality, or domicile or residence. The duration of copyright depends on the form of the work. Literary, artistic, dramatic and musical works are protected for 70 years from the death of their author. The other relevant works are protected for 70 years from release into the public domain. It is important to understand that the copyholder is not necessarily the creator of the work. Usually the creator is the original owner, but a copyright, like any other form of property, is freely transferable by its owner, who may sell it, or make a gift of it during his/her lifetime or by his/her will. Ownership may also be lost involuntarily if the owner becomes bankrupt, since copyright will form part of their assets. As long as the copyright lasts, the new owner benefits from it. However, it is quite common for the creator of a work not to be the Law for Business Students by Alix Adams © Pearson Education Limited 2000


owner of the copyright. If the work is created by an employee, the copyright usually belongs to the employer, even if the work was created on the employee’s own initiative in their spare time, as long as it is sufficiently related to the scope of the employee’s work. Copyright in works created by Crown employees belongs to the Crown and lasts for 125 years under s 163 of the Act. The copyholder has exclusive rights to control all reproduction of the work and its adaptation or public presentation. Any relevant activity without the copyholder’s permission may be an infringement of their rights under the Act. For example, adapting a novel, which is still within copyright, as a screenplay is an infringement. Publishing a photograph of somebody else’s original picture may also be a breach of copyright. The issue of profit for the copy maker is irrelevant; taking an unauthorised photocopy for purely private purposes is still capable of being a breach. Taping a CD for a friend, or letting them put the computer program which you have bought on to their PC, are still capable of being infringements. Limited defences are, however, provided by the Act, to cover private study activities or to produce limited quotations for certain purposes like a critical review. The infringements described so far are defined as direct infringements. The Act also provides rights for the copyholder in the event of secondary infringements. These occur where copyright has been exploited commercially and concern, for example, the sale or importation of infringing items like bootlegged computer software. A copyholder may licence reproduction of their work. They may be prepared to allow limited reproduction free of charge in a good cause. For example, a playwright might permit their play to be performed in order to raise funds for charity. A fee can also be charged where a contractual licence is granted – for example where an author sells the screen rights in their work to a film company. Where a breach of copyright occurs, the copyholder is entitled to take civil action. If successful, they may be entitled to an injunction to prevent the breach occurring or continuing. If they have suffered any loss from the breach, they may be entitled to financial compensation in the form of damages. It can be seen, therefore, that copyright protection attaches to a wide variety of original written and graphic work, as well as musical compositions, film, video and other broadcasts. The copyholder has extensive legal rights, for a limited period of time, to control reproduction of their work and also to obtain compensation from a party who infringes their copyright.


Law for Business Students by Alix Adams © Pearson Education Limited 2000


These pages may be photocopied. They are taken from the following pages in Law for Business Students:

Fig 1.1 Fig 2.1 Fig 2.2 Chapter 6 Chapter 6 Chapter 10 Fig 10.1 Fig 12.1 Fig 14.1 Fig 14.2 Chapter 15 Chapter 20 Chapter 21 Fig 26.1 Fig 26.2

Page 3 13 15 70 71 127 134 163 183 183 192 264 287 332 346

Fig 1.1

Classification of English Law

English law

Public law

Constitutional and administrative law

Private (civil) law

Criminal law

Family law



Property Probate


Company and partnership law

Nuisance Land

Damage to business interests

Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Intellectual Chattels

Fig 2.1

The criminal court structure

House of Lords

Divisional Court of Queen’s Bench

Court of Appeal Criminal Division

The Crown Court Appeals


Magistrates’ Court

Law for Business Students by Alix Adams © Pearson Education Limited 2000

Trial of indictable offences

Fig 2.2

The principal civil courts and appeal routes

House of Lords

Court of Appeal Civil Division

Leap-frog procedure

The High Court Queen’s Bench Division

Chancery Division

County Court

Law for Business Students by Alix Adams © Pearson Education Limited 2000

Family Division

Chapter 6

Determining the status of an innominate term

Cehave NV v Bremer Handelgesellschaft (The Hansa Nord) CA 1975

1 The parties specify intention

2 Statutory rights

3 Trade practice

4 Extent of damage

Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Chapter 6

When are exclusion clauses binding? 1 When incorporated in the contract If sufficient notice by offeror when contract made.

2 When clearly expressed The contra proferentem rule: ambiguity interpreted in the way least favourable to the party seeking to enforce the exemption.

3 When effective under UCTA 1997 Protects consumer and non-consumer buyers. Business seller.

4 When comply with Unfair Terms in Consumer Contract Regulations 1994 Protects consumers only. Standard form contracts. Business seller.

Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Chapter 10




Buyer v Seller

Buyer/User v Manufacturer

Sales of Goods Act 1979 Liability – strict

Liability – fault

Dangerous or defective in quality

Losses caused by dangerous goods

Including pure economic loss

Pure economic loss very unlikely

Law for Business Students by Alix Adams © Pearson Education Limited 2000

Buyer only


Goods – breach of ss. 13, 14, 15 SGA 1979 Goods and services – breach of s 4 & s 5 SGSA 1982 Goods – like SGA Services – lack of reasonable care and skill, reasonable timeliness and reasonable charging

Any loss or damage to buyer as long as not too remote, including purchase price

Goods – strict Services – fault Civil only

Who can sue?

Who can be sued?

What must be proved?

Damage compensated


Fault Civil only

Any loss or damage to injured party as long as not too remote; excluding purchase price and other pure economic loss

(i) Duty of care (ii) Breach of duty (iii) Consequent damage

Manufacturer of goods Servicer of goods Supplier – if duty to inspect

Injured party (ultimate consumer)

Tort Negligence

Law for Business Students by Alix Adams © Pearson Education Limited 2000

Contract Sale of Goods Act 1979 Supply of Goods and Services Act 1982

Liability for defective products

Area of law

Fig 10.1

Strict Criminal liability also possible

Death/personal injuries Damage to land, goods (over £275)

(i) Product defective and unsafe (ii) Damage suffered as result

Producer of product Manufacturer Own brand labeller Importer Supplier

Injured party (private user)

Tort Consumer Protection Act 1987

1957 Act

Person(s) in control of premises

Lawful entrants

On defendant’s premises

Personal injuries, damage to goods

State of premises

Failure to take reasonable care of visitor’s safety

Potential defendant

Potential claimant

Where damage occurred

Type of damage

Cause of damage

Nature of liability

Failure reasonably to foresee damage to claimant

State of premises and activities taking place there or obstructing highway

Personal injuries, damage to property, interference with enjoyment of premises

Anywhere outside defendant’s premises

Any member of public suffering special damage

Owner/tenant/creator of nuisance

Public nuisance

Law for Business Students by Alix Adams © Pearson Education Limited 2000

Failure to take reasonable care to avoid causing injury to trespassers

State of premises

Personal injuries only

On defendant’s premises


Person(s) in control of premises

1984 Act

Failure reasonably to foresee damage to claimant

State of premises and activities taking place there

Damage to property, interference with enjoyment of premises, possibly personal injuries

On premises occupied by claimant

Occupiers of adjacent premises

Owner/tenant/creator of nuisance

Private nuisance

The occupier’s civil legal liability for premises

Legal area

Fig 12.1

Fig 14.1

Contractual relationships in credit card sales


Contract of sale

Customer (debtor)

Pre-existing agreement

Regulated consumer credit agreement

Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Credit card company (creditor)

Fig 14.2

Contractual relationships in hire-purchase contracts

Contract of sale

Creditor (finance company)


Contract of hire-purchase

Negotiates and informs


Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Chapter 15

Creating an agency relationship 1 Agreement ● Formal: deed ● Informal: written/spoken ● Implied: relationship of parties

2 Estoppel ● Principal allows third party to believe the relationship exists ● Agent has apparent or ostensible authority

3 Necessity ● Emergencies only ● Action taken by one party to safeguard goods for benefit of owner

4 Ratification The relationship is created after the event

Law for Business Students by Alix Adams © Pearson Education Limited 2000

Chapter 20

Justification for dismissal: ERA 1996 s 98 Proof by the employer that the employee was dismissed for any of the following reasons may indicate that the dismissal was fair:

1 Lack of qualification or capability

2 Misconduct

3 Redundancy

4 Illegality

5 Some other substantial reason

Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Chapter 21

Differences between partnerships and companies




Agreement of partners: deed usual

Registration under the Companies Act 1985



Single person company possible. No maximum.

Legal personality

Not a legal person

A legal person once incorporated

Members' liability


May be limited: shares/guarantee

External supervision


Companies Registry


Agreement, death, mental disability or bankruptcy of partner.

Statutory winding-up procedures

Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Fig 26.1

Classification of different types of intellectual property Statutory intellectual property rights



The Design Right


Registered Designs

Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Trade Marks

By owner on creation, no formalities

Maximum: 70 years from author’s death




Voluntary, compulsory, Crown

Original, literary, dramatic and artistic works


Property rights

Copyright, Designs and Patents Act 1988, Parts I & II


Max: 25 years (5-year renewal)

Registration: Design Registry

New design with eye appeal, includes shape, pattern and ornamentation

Registered Designs Act 1949

Registered design

Max: 20 years

Registration: Patents Office

New thing/process, inventive step, industrial application

Patents Act 1977


Voluntary, compulsory Crown Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Voluntary, compulsory, Crown

Voluntary, compulsory, Crown

Personal property: transferable by assignment, will, intestacy, operation of law

Max: 15 years (5-year renewal)

By owner on creation, no formalities

Original design for 3D functional items

Copyright, Designs and Patents Act 1988, Part III

Design right

Types of intellectual property and protection


Fig 26.2

Voluntary only

Renewable indefinitely (10-year renewal)

Registration: Trade Mark Registry

Distinctive identifying symbol for goods or services

Trade Marks Acts 1994

Trade marks


Law for Business Students by Alix Adams Š Pearson Education Limited 2000

Lecturers guide  
Lecturers guide  

Handbook of materials for lecturers