Business Law and Ethics: Enron Scandal and Sabane-Oxley Act

This document discusses the Enron scandal in relation to ethical corporate governance and the Sabane-Oxley Act of 2002. It explores the fraud committed by Enron and the measures taken to prevent such incidents. The document provides insights into the importance of business law and ethics in maintaining a fair and transparent business environment.

Business Law and Ethics

Table of Contents
INTRODUCTION...........................................................................................................................................3
PROJECT 1....................................................................................................................................................3
Define contract law and describe all the blue prints of a contract..........................................................3
Explain the court system in relation to the English legal system and advise the parties above which
court(s) action to pursue.........................................................................................................................4
Advise Hilary as to whether binding contracts exist between herself and each of the following people:
Eleanor, Amy and Olivia. .........................................................................................................................5
Explain and discuss the various remedies available to the parties..........................................................6
CONCLUSION...............................................................................................................................................6
REFERENCES................................................................................................................................................7
PROJECT 2....................................................................................................................................................8
INTRODUCTION...........................................................................................................................................8
Discuss case in relation to ethical corporate governance and the Sabane-Oxley Act of 2002.................8
CONCLUSION.............................................................................................................................................11
REFERENCES..............................................................................................................................................11

INTRODUCTION
Business law and ethics is a wider concept which covers number of law and regulation. It
is necessary for any of the entity or the individual that law and regulation must be followed as
per the specific decision taken by them. Some of the laws which comes under business law are
contract law, company law, law of tort, property law and many more. It depends upon the
situation that which of the following law and regulation must be followed so that desire goals can
be accomplished.
In context of the assignment, it will be based on two different projects. Discussing about
the first project, it is related with the case study which relates contract law. Whole of the case
study will be solved according and it will be necessary to suggest each of the party involved
within the case so that proper conclusion can be obtained. On the other side project two will be
based on Enron Fraud scandal where Sabane-Oxley Act of 2002 will be considered in it for
discussing the question in detail.
PROJECT 1
Define contract law and describe all the blue prints of a contract.
Contract Law: It is defined as the law and regulation which simply discusses about the
process of entering into a valid contract. It is necessary that whenever any of the party tries to
enter into the contract, they must be able to follow proper guidelines of the law. Any of the
contract can be formed on the basis of offer and acceptance where inclusion of consideration
should be there. If in any of the circumstance any of the party fails to perform as per the
requirement of law then in that particular situation legal action can be taken by the innocent party
which will be related to breach of contract. Whenever any of the breach of contract occurs then,
it becomes the liability of innocent party to present the fact and data in order to claim any of the
damages (Bu, 2019). In addition, any of the contract cannot be formed with minor and unsound
person as those contracts will be void in nature.
Blue Print of the Contract: After analysing the above case study it has been analysed
that there was different contract which has been formed within the case. The first blue print was
between Hilary and Elanor. Here, Hilary advertise that he wants to trade journal for the price of
£15,000 where counter offer was made by Eleanor that he would like to pay only £10000.

Looking at this Elanor reply that she would sell it for £13000 where Eleanor didn’t reply at all.
After this, she replied that she accepted to sell it for £10,000 where Eleanor said that she is no
more interested in it.
The second blueprint was between Hilary and Amy where Hilary was willing to sell
office computer at the price of £1000. Here, Amy reply that she agrees to buy it at the same price
and posted the letter. Later, she changed her mind and fax Hilary that ignore that letter which she
will receive as she is no more interested in it (Cortez, 2018).
Third blueprint was seen between Hilary and Olivia. Here, it was found that Hilary wants
to have a grand summer sale at her art gallery. He put the notice on window that valuable
painting by Trumpeter will be available for £1 only for the first customer and even free signed
print of another Trumpeter will be given. At the time of starting the sale Hilary told Olivia that
painting for sale is no more available.
Explain the court system in relation to the English legal system and advise the parties above
which court(s) action to pursue.
English Legal system is among well defined legal system where huge role is being played
by Judiciary body where role among different court system has been discussed. The structure of
UK legal system is based on Civil and criminal proceedings. Further, judiciary system has been
discussed below:
Civil Proceedings: This are the proceedings in which it is discussed that how any civil
matter can be resolved. In order to resolve any of the legal issue related to civil cases, court has
been classified into number of forms and they are county courts, magistrates’ courts, high court,
court of appeal and supreme court. Almost each of the case in civil litigation, cases are solved
through county courts and in only exceptions other court procedure are followed to find out the
right justice (Hall and et. al, 2018).
Criminal Proceedings: It is court procedure where only offensive nature of crime is
solved. Criminal offence is those offence where person create problem for other just for personal
benefits. In order to resolve any of the criminal case, proper court structure has been formed by
English Legal system. The court process to solve any of the criminal case starts with
Magistrates’ court followed by crown court. Then there is court of Appeal which is for criminal

division and finally there is House of Lords for obtaining the final judgement if any of the
problem arises.
As per the scenario of the case if any of the party tries to take legal action to resolve the
issue, disputed party can take help from county court. It is among the most important court for
resolve any of the case related to contract or agreement where most of issues can be seen. The
time process to solve cases under county court is quit less as compared to any other court
procedure. But, if in case parties are not satisfied with the decision which is declared within the
county court then in that respective condition appeal can be made to other court. This will
certainly incur higher charges along with time but it is said that there is more chances to obtain
satisfying result in it.
Advise Hilary as to whether binding contracts exist between herself and each of the following
people: Eleanor, Amy and Olivia.
In the given case study, it was found that Hilary had tried to form contract with three
different parties but it is necessary to identify whether all of those contracts has been formed or
not. In order to identify about it, detail discussion has been mentioned below:
In context of Hilary & Eleanor: There was not any of the binding contract between this
parties as it was found that only offer and counter offer was made between the parties. Here,
Hilary was not satisfied with counter offer at initial level but after that she agreed to sell the same
journal at £10,000 but at that point of time Eleanor was not ready at all (Luetge, Armbrüster and
Müller, 2016). It was the main reason which can help to understand that there was no binding
contract between Hilary and Eleanor.
In context of Hilary & Amy: In this particular section, there was no binding contract
between involved parties because it was found that Amy had already Fax Hilary to ignore the
acceptance letter which has been posted as she was not willing to enter into the contract.
In context of Hilary & Olivia: Looking at the scenario of the case, it can be easily said
that there was a binding contract between the party. It is because Hilary had advertised about the
grand sale on which Olivia had shown her interest. At the time of completion of agreement, it
was found that Hilary had breached the contract by saying that she is not willing to complete
their part of work at last moment after entering into the contract (Madden, 2019).

Explain and discuss the various remedies available to the parties
According to the contract law, it is necessary that each of the terms and condition of the
contract law must be followed once involved party enters into the contract. Failure in performing
respective work according the contract law which create the situation of breach of contract. Here,
innocent party has the remedies in different form such as monetary damages, Specific
performance and many more (Mayer, 2017). After analysing the above case, it can be easily
understood that what are those situations where remedies are available with the party.
In first situation of the case, there is not legal remedy is available for Hilary as contract
was not formed between the parties. It is because party was only willing to enter into the contract
when Hilary was not able to accept counter offer. So, there was legal contract between the parties
which means remedy will not exist in this particular scenario.
In case of second scenario, it is necessary to understand that party didn’t want to enter
into the contract and even she informed Hilary to just ignore the acceptance letter which is not
received. In this particular situation, there is not contract between the party which means there
will not be any of the contract. So, remedy will not be available for Hilary in this particular
section as well.
The third and final section had a legal contract between Hilary and Olivia. Here, it was
seen that advertisement had been done by Hilary where acceptance was shown by Olivia. It
means that there is a legal contract between Hilary and Olivia so it means that breach of contract
will also exist if contracted party will fail to perform their part of work. The remedy which is
available for Olivia in this respective scenario is that Hilary should be able to deliver the painting
of trumpeter at the price of £1 and even signed painting by Trumpeter should be provided. It will
fall under the category of specific performance.
CONCLUSION
After analysing the first project, it can be easily concluded that business law and ethics
have a huge important within the entity as it guides that how organisation needs to perform their
work in a systematic manner. It is crucial that whenever any of the contract is being formed
proper guidelines must be followed and offer and acceptance along with acceptance should be
there to make any of the legal contract.

REFERENCES
Books & Journals
Luetge, C., Armbrüster, T. and Müller, J., 2016. Order ethics: Bridging the gap between
contractarianism and business ethics. Journal of Business Ethics, 136(4), pp.687-697.
Mayer, D., 2017. The law and ethics of CEO social activism. JL Bus. & Ethics, 23, p.21.
Cortez, N., 2018. The Evolving Law and Ethics of Digital Health. In Digital Health (pp. 249-
269). Springer, Cham.
Hall, M. A. and et. al, 2018. Health care law and ethics. Wolters Kluwer Law & Business.
Bu, Q., 2019. Reassess the law and ethics of heritable genome editing interventions: Lessons for
China and the world. Issues L. & Med., 34, p.115.
Madden, T. M., 2019. Law and Strategy and Ethics. Geo. J. Legal Ethics, 32, p.181.

PROJECT 2
INTRODUCTION
Business law and ethics are those kind of laws that has been helping an organization to
establish itself in proper manner. Also these laws has been making an organization deal with
issues that has been emerging in terms of activities taking place in an organization. Both laws
cover wider scope as they cover various aspects of business. This file is based over a case study
of Enron scandal that was one of the biggest fraud in America and resulted into downfall of Wall
Street also. Further in this file corporate governance is being covered in relation to case study
and SOX Act 2000 has been explained regarding the case study.
Discuss case in relation to ethical corporate governance and the Sabane-Oxley Act of 2002.
CASE SCENARIO: Enron Corporation - At the end of 2001, it was revealed that
Enron's reported financial condition was sustained by an institutionalised, systemic and
creatively planned accounting fraud. Further in this case Shares of the Enron also decreased for
ninety dollar to one dollar. This resulted into making company reach to a state of bankruptcy.
The investigation was done by SEC and till the time judgement is being passed by Supreme
Court Enron lost its market value also but was able to pay little bit amount to shareholders.
Ethical Corporate Governance: It is explained as the process where entity is required to
maintain balance between economic and the social goals (MCLAUGHLIN, 2018). It is said that
it is the responsibility of organisation to use resources in effective manner but at the same time
they must be able to do some of the effective work so resources which has been used do not
create problem for any of the person. On a daily basis organisation needs to conduct their
business activity which means that there are number of decision and actions which are required
to be taken. But it is necessary that those decisions should not affect any of the person so that
future goals can be accomplished easily. This governance if followed in proper manner helps in
smooth running of all factors existing in an organization. Further such governance exists to
identify those factors which impacts growth in proper manner. Following the rules and regulation
and performing according to the requirement of law is quite necessary in current scenario and if
in case entity fails to do so then there are different problems which can be created easily

Sabane-Oxley Act of 2002: It is defined as the law which has been commenced by the
U.S. Congress on 30th July 2002. The main purpose behind the commencement of the law was
just to ensure and protect any of the investor from presenting any of the fraudulent financial
reporting by the entity. This law is also known as Corporate Responsibility Act of 2002. This act
ensures that any of the entity performing within the market should be able to conduct Audit on
timely basis were true and fair report must be presented (McLean, 2017). If in case organisation
fails to present fair data then legal action can be taken against them with immediate effect. The
main purpose of commencing this particular law was identify the scandals which are mainly seen
within the corporate sector. In simply words, this law has made strong law against where
maintaining the record will be the primary responsibility of the organisation and even strict rules
has been formed for accountants, auditors & corporate officers. Even penalty has been increased
for any of the default performed by the entity. This act come into existence in a way to deal with
factors that has been impacting financial tendency of an organization and result into fraud.
Further this acts has various provisos that has been amended for providing harsh punishment
over the person trying to commit fraud or has committed fraud.
The case of Enron Corporation was among one of the popular cases which was the main
reason behind the commencement of the law Sabane-Oxley Act of 2002. The case of Enron
Corporation had created lots of problem because of the accounting statement and financial
reports which has been presented by them. It is said that entity was able to perform their part of
work as per their requirement. It was one of the American based organisations where they drew
attention to accounting and corporate fraud due to which their shareholder had to lost $74 billion
and even company was found as one of the bankrupted organisations (NOBLE, 2019). Even there
was a fraud in pension benefit of employees where it was found that employee connect had to
lost billion of money. It was one of the 7th largest corporate corruption & accounting fraud. Also,
employees had to lost their job which was the major concern within the case. In this respective
case, Jeffrey Skilling who was onetime chief of the organisation was sentenced for 24 years.
Discussion of the case in terms of Corporate Governance and ethics
If whole of this case is required to be discussed in the context of ethical corporate
governance then it can be assumed that management was just trying to earn personal benefit. In
any of the situation they were not willing to present the facts about the company and how well

organisation is able to perform in the market. This was one of the main reasons that public at
large was willing to show their interest towards the organisation. According to corporate
governance and ethics, company should have been able to take those decision due to which
anyone would not have to suffer. It is the responsibility of higher authority to review each and
every thing about the organisation before taking any of the financial decision but it was found
within the case that entity was not able to present which increases the overall debt amount.
Ethics always says that Enron Corporation must have through about their employee benefit and
pension but they even didn’t consider this particular factor (Swanson and Frederick, 2016). It
means that organisation has breached ethical terms as well which didn’t allow them to continue
their business for longer time period. Also, corporate governance always discusses that company
should take only those decision which in the favourable for entity as well as for all other
stakeholder who are connected with organisation. But, it was one of the case were company
always try to take higher risk as compared to the situation which was the major reason for their
failure.
Discussion of the case in terms of Sabane-Oxley Act, 2002.
The enforcement behind the act was the scandal which was found with Enron
Corporation. It is necessary to understand that whenever perform their business activity they
should be aware that how they are going to handle any of the situation but company like Enron
Corporation was unable to do so. The act says the accounting statement has the major key role as
it generally guides the shareholder that whether company is performing well on not in the
market. Here, shareholders were totally unaware that how organisation is performing in current
scenario and they totally relied upon the accounting statement which were presented by the
management of the company.
After the commencement of the law, the role and responsibility of accountant, auditor has
increased significantly but before whole of this scandal came out it was found that main default
was performed by auditor and accountant who was granting the permission that organisation is
able to perform well but in reality organisation was even not able to maintain their position
within the market. The liability was increasing as compared to assets of the company.
In current scenario, the law of Sabane-Oxley Act 2002 is quite effective because this will
force auditor and the financial department of the company to prepare each of the accounting

statement in true and fair manner. Also, this law will force higher authority to check each of the
statement in appropriate manner (Thompson, 2017). Once whole of this process is followed then
only report can be presented in front of the stakeholder who always play the crucial role for the
organisation. As there is corporate officer in the entity it means that he will be liable if similar
form of scandal take place within the organisation. In addition, following law and regulation
along with corporate governance always play the crucial role in attaining the goals and target.
CONCLUSION
The second project simply explains that Sabane-Oxley Act 2002 is among the most
important law in current scenario because it is said that it guides that how organisation perform
their work in fair manner even by considering corporate governance. Also in this file corporate
governance has been explained that deals with activities taking place in an organization. This
governance maintains balance within an organization in ethical manner also. Secondly, proper
accounting statements should prepare which needs to be approved by auditors of the company. In
this case corporate governance would have played very important role in eradicating unwanted
factors impacting companies overall performance.
REFERENCES
Swanson, D. L. and Frederick, W. C., 2016. Denial and leadership in business ethics
education. Business ethics: New challenges for business schools and corporate leaders,
pp.222-240.
McLean, S. ed., 2017. Medical law and ethics. Routledge.
Thompson, D. B., 2017. Teaching the Business Law and Ethics of Arbitration After
Concepcion. Journal of Legal Studies Education, 34(1), pp.63-88.
MCLAUGHLIN, J., 2018. LAW, BUSINESS & ETHICS.
NOBLE, T., 2019. JOURNAL OF LAW, BUSINESS & ETHICS.