Business Law and Ethics: Formation of Contractual Relationships and Enron Fraud Scandal

Business Law and
Ethics

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
Formation of contractual relationships........................................................................................3
TASK 2............................................................................................................................................6
Enron fraud scandal.....................................................................................................................6
Corporate Governance................................................................................................................9
Sarbanes-Oxley Act, 2002..........................................................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business law refers to the basic standards of the behaviour which is expected by the
companies and other business forms to follow. It is also called the commercial or corporate law
that applies to rights, obligations, conduct and relations of the person and business which is
engaged in trade, sales, merchandising and commerce. Business ethics are different from law as
the former refers to the principles and guidelines that tell people as to how to behave and the
later are the rules and regulations which are binding on people (Haugh, 2019). Contract law is a
part of corporate law which regulate the contracts between different people and businesses and
tells the rights and obligations of the parties. This report shall deal with the case study on
formation of contractual relationships and further it will cover Enron fraud scandal.
TASK 1
Formation of contractual relationships
A contract law may refer to the rules and regulations that govern and regulate the legal
contract between the parties. It states the rights, obligations, conduct and relation of the parties
who have entered into a contract. In case of breach of contract, the law provides the remedies to
the aggrieved party to compensate the damages resulted from breach.
An agreement which give rise to the legal obligations between 2 or more parties is a
contract. It must be enforced and recognised by the law to have a legal binding effect. Under
common law, for creating a contract, three essentials are needed, that is, an agreement,
consideration and the contractual intention to enter into a contract (Andrews, 2016). A contract
may include express or implied terms. The former means those terms which are set by the parties
in their agreement and the later refers to those terms which are either created by any custom and
usage or by any statute or law.
For reaching an agreement, it is necessary that one party must make an offer which
should be accepted by the other. An offer must be defined as an expression to willingly enter into
a contract on some specified terms. It is made with an intention that once accepted by the other,
it will be binding on the parties. An acceptance may be referred to as the final assent to the offer
and all its terms must be accepted for a valid acceptance.

Consideration under common law refers to the value of something to make a promise
enforceable. A consideration must not be adequate and be sufficient. It must be given by the
promisee in order to fully accept the offer.
A legal intention is necessary to create a contract if the agreement is supported by the
consideration. In simple words, the parties shall have an intention to create a legal binding
contract with each other.
The administration of justice in England is administered by the sub-ordinate and superior
courts. Each court is responsible to hear the civil and criminal cases. The superior court in
English legal system are the Supreme Court, High court and Court of Appeals. The Supreme
Court is the highest court of appeal for all kinds of case. Before 2005, this task was entrusted to
the House of Lords but after the Constitutional Reform Act of 2005, Supreme Court was
established and it replaced the former court (ALPA, 2019). Other superior court is the High
Court of Justice which functions as the appellate court for civil and criminal cases and also act as
civil court of first instance. It has three divisions mainly Chancery, Queen's Bench and Family
divisions. The last is Court of Appeals which is entrusted to hear appeals from tribunals and
other courts. It has two divisions, that is, criminal which hears appeal from Crown court while
civil division hear appeal from County courts and High court. The Crown Court hears both
appeals and original criminal cases and is also responsible to hear civil cases of limited amount.
The sub-ordinate courts include County Courts, Family Court, Magistrate Court and
Youth Courts. The County Court has a civil jurisdiction which is presided by the Circuit or
District judge. The Family Court has jurisdiction to deal with family matters. The Magistrate
Courts hear the criminal cases and is the first court where criminal proceedings are initiated. The
Youth Courts hear criminal cases of offenders who are aged between 10-17 years.
Under the given case scenario, the parties are advised to file a case in County Court if
their claim is minor and in case of large amount, they are advised to file a suit in High Court of
Justice. Any party, if aggrieved by the decision of sub-ordinate court may file an appeal to the
Court of Appeals (Downe, 2020).
For the contract between Hilary and Eleanor, Hilary made an offer to general public
through advertisement to sell the printing press for £15000. In response to the above offer,
Eleanor counter offered to buy it at £10000 to which Hilary again offered Eleanor to purchase it
at £13000. Eleanor did not responded and Hilary accepted the former offer to sell it at £10000