Business Law and Contract Essentials

This assignment provides a detailed overview of business law, covering its sources, corporate laws, and essential requirements for forming a public company versus a private company. It also delves into the fundamentals of contract law, including the need for minimum allotted capital in public companies and the essentials required for a valid contract. The importance of contracts to businesses is highlighted, along with a brief explanation of GDPR, regulations, standards, and laws.

BUSINESS LAW

Table of Contents
INTRODUCTION...........................................................................................................................3
ACTIVITY 1 ...................................................................................................................................3
Sources of law .......................................................................................................................3
Role of government in law making process and an explanation regarding how common and
statue ......................................................................................................................................5
Assessment of how company, employment and contract law has a potential impact upon
business. .................................................................................................................................7
Legal formation of different kinds of organisations.............................................................10
How business organisations are managed and funded ........................................................11
Recommendation of legal solution for resolving disputes ..................................................12
CONCLUSION..............................................................................................................................13
REFERENCES .............................................................................................................................15

INTRODUCTION
Business law is one of the branch of civil law which provides the legislation for
commerce and business in a country. This legislation covers both private and public law. It
governs how to establish and run a business entity. They consist of federal laws and regulations
relating to administration. The main purpose of business law is to establish standards, maintains
order and protection of rights and freedom of each individual (Schulman, Moscow and Lesser,
2017). The present project report is going to discuss about the sources of law, the laws which a
business entity must comply for running the business in accordance with law and order.
Further, the study will highlight the role of government in the process of law making and
in the justice courts, these common laws and statutory are applied for passing the decisions. The
report will includes issues such as the potential impact on organisation due to company,
employment and contract law. What could be an appropriate solution for different business
problems and justifications for such legal solutions will be studied in the project report.
ACTIVITY 1
Sources of law
United Kingdom has obtained its business law mainly from four sources. They are
discussed below :
Common law : It can be defined as that part of British law that has been derived from
judicial precedents that is decisions passed by appellate body of country in earlier hearings
becomes law for subordinate courts. Common laws are also based long followed customs within
the country.
Legislation : Statute is a law which is created by the legislative body of a country.
Parliament being the legislative body of UK based in London, acts passed by Parliament
becomes the statue or legislation. The law making body has the power of establishing new laws,
amending the existing laws and repealing the old laws. Companies Act 2006, English Contract
Law, various employment laws are all the acts of parliaments which has collectively formed
business law (Bell, 2018).
European Union : Being a member of European Union, the country's business law is
based on the rules and regulations of EU as the laws of EU gets preference over UK law.

International treaties and conventions : When international treaties or agreements are
ratified by the country , then such international treat/ connection gets incorporated into the statue
of the nation. For example, Salvage Convention that gave rise to Merchant Shipping Act 1995 in
the nation (Dunoff, Ratner and Wippman, 2015).
Equitable justice : This is another major source of business law which takes precedence
over the common law. This is based on the equitable principles such as trust, fairness, honesty
and equitable remedies. There are various equitable maxims that exists and which plays a great
role in passing of a decision in favour of either party.
An organisation has to comply with various laws that are described below :
Employment Law 1996 :
It is an act passed by the Parliament of United Kingdom. It was passed for the purpose of
codifying the then existing law relating to individual rights in Labor Law of UK. This legislation
has granted some rights to employees in respect of inappropriate dismissal, dismissal, leave for
child care. Some of the significant rights provided to employees through this act are as follows: The right of being provided with particulars of employment : This act stated that the
major terms between employer and employee must be given in writing within the period
of 2 months of beginning of employment. Disclosures and Detriment : This provision of the employment act provides that
employee must not reveal any confidential or material information of organisation to
other outsider.
 Dismissal : Notice has to be given before the termination of employment contract. This
condition is binding upon both employer and employee. The act also protects the
employees from getting inappropriately dismissed from employment services. A
reasonable ground is necessary for terminating an employee which shall also be
communicated to the concerned employee.
Company Act 2006 :
It is an act of Parliament of UK which is one of the major source of country's company
law. This act lays down the provisions related to the formation of company both public and
private, appointment, duties and powers of directors, constitutional documents such as articles of
association and memorandum of association. Other matters covered in the act are :
 shareholders communication

 Liability of auditors
 Distribution of profits other than in cash
 Share capital requirements for public and private companies
 Capacity of company
 Provisions relating to annual general meetings, board meetings
General Data protection regulation 2018 :
These regulations have replaced the Data Protection Directive 95/46/ec. The regulations
came into force on 25 May 2018 (A definition of gdpr (general data protection
regulation),2019). The provisions of the GDPR are as follows:
 Companies would require to obtain the consent of subject matter for processing the data.
 Anonymizing the gathered for preventing the privacy.
 Facilitating the data breach information.
 Handling the data safely in the event of cross border transfer of information.
Health and Safety at work act 1974 :
This act of British parliament provides the employers shall ensure that employees get
safest working environment. The act lays down the duties of employers for maintaining safety at
work. Employers must provide training, instructions and supervision upto a reasonable level for
employees safety.
These are some of the legislations that are to be followed by the companies operating in
United Kingdom.
Role of government in law making process and an explanation regarding how common and
statue
There is a well defined process of law making in United Kingdom through which the
legislation is established and comes into effect. Parliament of the country comprises upper and
lower houses namely House of Commons and House of Lords..
Bills can be of two types which could be presented in Parliament. These are :
Public bill : These are government bill where the government of company seeks to amened
existing laws in the public interest.

Private members' bill : Such bill are presented by member of Parliament which are matter of
concern of corporates, local interest or even an individual, which affects organisations, group of
society , persons or localities (Haigh, 2018).
Law making process
Drafting of bill : A bill is officially drafted by draftsmen before it is presented in the
Parliament of United Kingdom.
First reading : At this stage, the bill presented is read by the member of Parliament after
which it is published. It is basically bill's formal journey of going through House of Commons.
This reading is done in the absence of any debate. First reading of a bill can be done at any time
in a particular parliamentary session.
Second Reading : In this phrase, the debate related to the bill takes place in the House of
Commons. Every aspect of the bill is discussed including strengths and weaknesses of bill by the
member of parliament. This session dissolve with a vote on the subject matter of bill so
presented before it is sent to the committee.
Committee level : At here, the bill is studied and examined in detail by the committee
member. After thorough examination, amendments might be recommended on the bill.
Report stage : When any amendments are suggested for the bill, a report stage is
required in which vote is taken on such amendments. The speaker of the House can choose for
the debate on subject matter of amendments.
Third Reading : This phase is the last reading of the presented bill where the members
of parliament gets the last chance of voting on bill (Zander, S2015).
House of Lords proceedings : The proceedings in the House of Lords starts after the
House of Commons is done with the Third Reading. The procedure for the proceeding is same as
to that of House of Commons. If the Lords think that the bill needs some amendments, it is sent
back to the lower house. This activity of sending the bill to houses of Parliament continues till
cohesion is not achieved.
Royal Assent : Once the bill is passed from both the houses of the Parliament, it is finally
sent for attaining the assent of Royalty. If the assent is received, the proposed bill becomes an act
of Parliament.

Common law and statutory law applied in courts :
Application of common law :
Supreme court is the appellate body of United kingdom. It is subordinated by court of
Appeal and the High court. Common laws are those written judgements of superior courts that
acts as precedents for judgement on the similar cases in the future. Decisions, orders and decrees
of Supreme Court are the case laws or common law that are to be followed by the lower courts of
the country.
Application of statutory law : Statutory legislation is applicable on every citizen of the
country. Therefore, the provisions of such legislation are applied equally on all. However, proper
and thorough interpretation of the legislation is required which is done by the jury to draw out
the essence of the enacted law. Such an interpretation helps the courts in passing more
appropriate and fair decisions relating to a subject matter.
Assessment of how company, employment and contract law has a potential impact upon
business.
Contract law is an agreement between two parties who focus on proving protection to
both buyer and the seller. It is a lawful agreement created between parties who are legally
enforceable by law. There are some essential elements that makes a contract valid which means
that it can be enforceable by law. These elements are :
 There must be an offer by a person to another person
 The offer must be accepted by the other person.
 There must have an intention of developing legal relationship
 the contract must possess legal and lawful consideration (Poole, 2016).
 Agreement must have lawful object. This means that purpose for which the contract is
created must be lawful.
 Parties between whom the contracted has been made must be competent in terms of age,
mental condition and criteria that could make them disqualified by law.
 The consent of the parties must be free.
 Meeting of the minds

 The performance of the contract must be certain and it shall not be impossible
Impact of contract law on business :
Possessing a written agreement implies that what, when , how and to whom the
conditions of contract have to be performed. The potential impacts on the business entity are : Protection to both the parties in case of dispute : Contract is treated as conclusive
evidence. Thus, parties to the contract are prevented from the non performance from
other party. Certainty of business increases : When a proper contract is created, misunderstandings,
disputes and other issues are solved more conveniently. This helps in increasing the
certainty of the business organisation. In the event of lack of performance : When the contract is not performed by any of the
party, it serves other part a right to sue the other party. In the absence of this, no suit can
filed and it would result in losses for the parties to contract.
If the contract is missing :
 It increases the chances of uncertainty in the business. When the contract terms are
ambiguous, it adversely affects the financial condition of a firm and results into high
level of uncertainty which can hamper the prosperity of business. either of the party to contract cannot file suit (Adriaanse, 2016)
For example : If firm A has entered into contract with firm B for selling 100 tonne of cereals at
the price of $20 per tonne. The contract serves as a proof that A will sell at this rate only and B
will give this amount in lieu of 100 tonne cereals. In the event of non performance, either party
can go to court to enforce the contract. This would help in reducing the uncertainty factor from
business.
Company law :
This is the legislation which is concerned with the governance of rights, conduct persons,
businesses, corporations, relations. It involves every aspect of corporation right from creation of
a company to its liquidation. Every activity has to be conducted in accordance with the corporate

law. For this, a Companies Act, 2006 is enacted in UK that provides the provisions relating to the
formation, operation and liquidation of the organisations.
Impact of corporate law on business : The provisions of companies act has treated the
company as separate legal entity. This means that company can acquire property in its name, can
enter into contract, etc. This makes the owners of business to be a distinctive person other than
the company which leads to their limited liability in business (What is the Importance of
Contracts to a Business, 2019).
Example : In the event of liquidation of company, owners can be asked to pay only the
unpaid amount on shares as per the provisions of Companies Act 2006. Company cannot go ask
for any other amount other than this, this shows the limited liability of owners.
Employment law :
This body of law is concerned with the protection of employees at the workplace from
any kind of discrimination, fair wages, proper and safe working conditions, right of demanding
leave for child care, redundancy, notice before termination, data protection of the employees,
customers etc (Olsen, 2015).
Impact : The companies are required to follow all the employment laws. Non compliance
of which would lead the organisation in the legal troubles. No employees can be discriminated
on the basis of caste, colour, sex, disability etc. as per Equality Act 2010. Proper adherence to
legislation would help the business entity in maintaining peace with its own activities and law&
order. It will positive impact on the prosperity of business.
Example : As per the Employment law in UK, workers are entitled to get 5.6 weeks of
paid holiday every year. These provisions have to be considered by companies while designing
holiday structure for its employees. Organisation cannot deny this right and in the event of such
thing, employees can bring a legal action against the company.
Difference between legislation, regulations and standards
Standard can be defined as a document which is sanctioned by consensus by authoritative
body which facilitates the common use, guidelines or the material information contained in the
legislation. Regulations are the specific necessity within the law. It is concerned regarding how
the legislation established shall be enforced. Legislation on the other hand is a system of rules

which is created by government. These statues are applicable on every citizen of country (Laws
vs. Regulations vs. Standards, 2019).
Legal formation of different kinds of organisations
Companies Act 2006 provides for the formation of companies in United Kingdom. There
are certain requirements for each type of organisation that are discussed below:
Public companies : These are the types of company which are listed on public stock
exchange, where its securities are bough and sold in capital market.
Requirements as per Law :
 They have to be listed on one or more recognised stock excahnge.
 Use of plc word after company name
 shall have minimum allotted capital of £50,000
 registration with House of companies
 Shall have at least 2 directors
 Mandatory Company secretary
 Limited liability Compulsorily holding of annual general meeting (AGM)
Advantages :
 Larger resources than private company
 Better options for availing funds from market
 More opportunities for expansion
 higher confidence of public Shares are easily transferable mere by delivery
Disadvantages :
 Higher degree of legislation, regulations and governance
 Compulsion of having initial capital investment

 More prone to takeovers and acquisitions Disclosures and transparency
Public companies : These are those entities whose shares cannot be traded publicly.
Requirements as per Law:
 Registration with House of Companies
 Minimum of 1 director
 Cannot have more than 50 shareholders shares cannot be transferred by merely delivery it to another person (Richard, 2017).
Advantages :
 Owners have limited liability
 No requirement of using plc
 No need of hiring company secretary
 No legal requirement of having minimum capital investment No legal need of holding AGM every year
Disadvantages :
 Lesser resources than private company
 Less access to capital
 Lack of freedom in share transferability
 Lack of public confidence
How business organisations are managed and funded
Public company
Boards of directors are the representatives of public company who are selected by owners
that is shareholders for the daily operations of the company. BOD are responsible for all
operations of company and accountable to shareholders and other stakeholders (Johnsson,
2017).

They are various sources from which public companies can arrange its funds such as by
selling its shares through IPOs, capital markets, issue of debentures, commercial bank loans,
advances from public financial institution.
Private company :
This type of company is managed by the people who formed them. No representative are
required to be chosen in this type of organisation. The sources available to private company to
get its fund are advances from friends an family, loans from bank, angel investors who are
typically high net worth people, crowdsourcing which is more popular in setting up of start-ups
(Mičudová, 2017).
Recommendation of legal solution for resolving disputes
For example, if a company say A has to terminate the contract as other party B breached
the terms of the contract. The contract was of supplying 200 tonne of edible oil by B to A at $
50. A wants to terminate the contract because other party did not supplied the oil of specified
quality and refused to deliver the oil of demanded quality.
As per contract law, a contract can be put to an end in the following cases:
 breach of contract
 in the event of fraud
 multilateral mistakes
 rescission of contract is allowed in times of misrepresentation, coercion, undue influence both parties agrees to terminate the contract
Application in present case : A can terminate the contract on the basis of breach of terms
contract. It has several remedies available :
 to cancel the contract and return the oil provided by B
 to ask for the specific performance to file suit and claim for the damages due to non performance of contract.

Conclusion : Court held that Party B shall perform the contract by supplying the quality
demanded by the party A. This decree was given on the basis that sometimes specific
performance is the only way of compensating the damages suffered by aggrieved party.
Alternative legal resolutions for settling disputes : There are other ways of settling disputes
because legal proceedings is extremely lengthy procedure which instead of providing relief could
detain the patience of aggrieved party. Other methods are :
 Arbitration : An arbitrator can be fixed by parties to contract who is an independent and
unbiased person and can present the case in front of him. The decision of the arbitrator
would be binding upon the both the parties. Also, from this solution method, the decision
would be more quick and less expensive than the court proceedings.
 Negotiation : It is another way of resolving disputes where parties themselves attempt to
make peace through the negotiation. However, this method is sometimes not very
effective because parties do not agree at the same thing.
 Mediation : It is a private legal solution where a mediator tries to convince both the
parties to reach to the terms of settlement. Even courts prior to trial needs conferences of
settlement done by mediators.
t is advisable that parties can go for the Arbitration method of resolving their dispute. It is
recommended because this way is more quick, an independent arbitrator is chosen by both the
parties who is not biased. Also, the method is cost effective than judicial proceedings.
CONCLUSION
From the above project report, it can be summarised that business law is that governing
body of country which controls the aspects of business and commerce. It derives its base from
common law, statutory laws, international treaties, EU conventions, equity. There are different
corporate laws which organisations in UK have to comply such as employment law, companies
law, contract law. It was concluded that for forming a public company, minimum allotted capital
of 50000 pounds is required by law while there is no such thing required in private company.
Moreover, for forming a valid contract,, several essentials are there without which the contrct
cannot be enforced in the court.

REFERENCES
Books and Journals
Adriaanse, M. J., 2016. Construction contract law. Macmillan International Higher Education.
Bell, J., 2018. Sources of Law. The Cambridge Law Journal. 77(1). pp.40-71.
Dunoff, J. L., Ratner, S.R. and Wippman, D., 2015. International Law: Norms, Actors, Process.
Wolters Kluwer Law & Business.
Haigh, R., 2018. Legal English. Routledge.
Johnsson, L., 2017. EU’s regulatory competition in the field of limited liability companies and
the effects thereof.
Mičudová, K., 2017. The structure of limited liability companies with low registered
capital. European Financial Systems 2017, p.61.
Olsen, T. D., 2015. Law, Business and Human Rights: Bridging the Gap, edited by Robert C.
Bird, Daniel R. Cahoy and Jamie Darin Prenkert. Cheltenham, UK: Edward Elgar Press,
2014. 269 pp. ISBN: 978-1782546610. Business Ethics Quarterly. 25(4). pp.590-593.
Poole, J., 2016. Textbook on contract law. Oxford University Press.
Richard, M. P., 2017. An Analysis of the Structural Failings of Corporate Governance in
Nigeria: the UK Companies Act and US Sarbanes Oxley Act as Models for Reform of the
Regulatory Framework of Corporate Governance under the Nigerian Companies Act and
Governance Code (Doctoral dissertation, University of Essex).
Schulman, S. H., Moscow, C. and Lesser, M. R., 2017. Michigan Corporation Law & Practice.
Wolters Kluwer.
Zander, M., 2015. The law-making process. Bloomsbury Publishing.
Online
A definition of gdpr (general data protection regulation).2019. [Online]. Available through
<https://digitalguardian.com/blog/what-gdpr-general-data-protection-regulation-
understanding-and-complying-gdpr-data-protection>

Laws vs. Regulations vs. Standards.2019. [Online]. Available through <
https://www.focusstandards.org/standards-vs-regulations-vs-laws/>
What is the Importance of Contracts to a Business.2019.[Online]. Available through
<https://smallbusiness.chron.com/importance-contracts-business-906.html>