Understanding Business Law Essentials

This assignment delves into the core principles of business law. It examines the significance of business law in establishing harmony within organizations and providing legal safeguards. The document highlights various legal sources for understanding a country's legal system and emphasizes the distinction between self-employed individuals and employees regarding employment laws. It also stresses the concept of separate legal entity for companies and encourages analyzing different organizational types before making a decision. Finally, it discusses alternative dispute resolution methods as viable solutions for business conflicts.

Business Law

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2............................................................................................................................................3
TASK 3............................................................................................................................................5
TASK 4............................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business law is the body of law which is applicable on commercial transactions entered
into ordinary course of business. The contracts, practices in an organization, selling and buying
are regulated through their individual acts. It is a branch of civil law which deals with matter of
disputes and conflicts in of commercial dealings (Besley, 2015). It is also called mercantile or
commercial law. The setting up a business, their management and conduct of operations, hiring
employees, winding up and many more areas are governed through business law. The report
covers English legal system and division of law, discussion of employment law by distinguishing
between employed and self employed. Furthermore, registered company, duties of directors and
other types of organizations have also been mentioned. Furthermore, various types of legal
solutions have been defined which can be applied in number of situations.
TASK 1
 Introduction to English legal system
English legal system is divided into three jurisdiction viz. England and Wales, Scotland
and Northern Ireland. There are laws and courts in every division of this legal system.
Furthermore, UK does not have a completely written constitution, however, parliament has
passed legislation for articles provided in a written form. Furthermore, the parliament is the
highest authority and Crown make decisions in certain occasions (Adams, 2012).
 Division of law: It is bifurcated into two laws viz. Criminal and civil law which has been
provided below:
Criminal law- It provides offences, their prevention and outcomes. It deals with matters
of wrong conduct which is against the whole community. Legal provisions have been enacted
tom protect people by punishing the culprits and giving justice to innocent (Kraakman, 2017).
Police, courts and prisons are part of criminal law and each of them plays a major role in
providing security and safety. Criminal Law Act, 1967 is passed by Westminster Parliament
which extends to whole UK. Rules are there to help with effective implementation. A crime is
defined as wrongdoing or offence which needs punishment and classified by state or federal
government. Murder, rape, careless driving, money laundering, drug dealing, sexual assault etc.
are some of the examples of criminal nature.
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Civil law- The law applicable on rights and properties of an individual or entities are
considered under civil law. These can not be treated with criminal law. The disputes or conflicts
arising between a individuals and organizations are settled under this law. Furthermore, legal
remedies are available in the form of compensation. The main element considered in civil cases
is whether defendant had a duty of care towards petitioner. It does not send a person behind the
bars, instead, correct remedy is is sought to resolve case. Matters of family disputes, personal
injury, breach of contract are resolved under this law. Usually, a civil case is applied by private
parties.
 Sources of law: Information about laws are gathered from various sources which are as
follows:
Custom- It is the primary source of law which is used majorly. The behaviour of people
living in the society reflects in the law prevailing in a particular area. It is the perception of
which is taken into account as a positive law (Wilson and Wortley, 2018).
Common law- The cases in UK judiciary are decided on the basis of principle of judicial
precedent whereby, future cases are determined on the basis of previous case.
European Union law- EU provides directives which are followed by UK for being one of
the members. It comprises of laws and regulations which have potential influence on individuals
and organizations in UK. In case of disputes, EU law shall prevail.
 Stages of a bill: A bill is transformed into an act after passing through number of stages
and becomes a law on getting royal assent from the queen. The procedure of a bill has
been provided as under:
First reading- This is the first step in which bill is presented to House of Commons and
House of lords.
Second reading- Voting is held on the bill presented which includes amendments made
on bills provided by government.
Committee stage- After passing second stage, in the House of Commons, they are
referred to an independent standing committed for examination. It comprises of various MPs and
chaired by Chairman who casts his vote in case of a tie (Baker, 2019).
Report stage- The committee is under an obligation to present the report of examination
to House of Commons. It is provided within two weeks for the purpose of making amendments.
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Third reading- The draft of bill prepared is evaluated. At this stage, a bill can not be
amended further.
Royal assent- Last stage in passing the bill is getting Royal Assent from the Queen. This
is assumed that a bill has completed all stages and can now be implemented as a law.
Figure 1: Process of Bill Passing
in UK Parliament (Process of bill passing, 2018)
TASK 2
Gig economy: It is a free market in wherein individuals perform work on freelance basis
as opposed to permanent contract employment. Under this, workers get the freedom to travel
from job to job so that they could get a flexibility the work, place and employer . UK had never
experienced this before the landmark case of Pimlico Plumbers took place. This case has
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provided a clear distinction between employed and self-employed. This case has defined
meaning of a worker and self-employed which is as follows:
Difference between self-employed and employed
Basis Self-employed Employed
Meaning A person who works independently. A
self-employed person does not work for
a single particular employer. For
example, independent contractors etc.
They deal directly with clients.
Individuals appointed by a specific
employer by entering into
employment contract. There exist a
relationship of employer and
employee and personnel carries work
according to instructions of
employer.
Tax The tax is paid on annual assessment
basis from which expenses can be
claimed (Zander, 2015).
The income earned by employee is
taxed on monthly basis.
Authority Self-employed works with absolute
control on his activities.
Employee is accustomed to act as per
the instructions given by employer.
Flexibility This factor is huge. There is a freedom
to choose work to be performed along
with place and with whom.
No flexibility as employer has the
ultimate power and everything during
employment will be governed
through service contract.
Regularity of
income
The work is on contract basis, thus
accrual of income is not regular (Self-
employed employee, 2019).
The salary is paid on monthly basis
which is continuous.
Example Maids, farmers, construction labours,
managers etc.
Nurses, teachers, pilots, staff at hotels
etc.
Employment law: Laws for employees are required to protect and govern them so that
each activity is done within the legal limits. UK has many laws for employment such as
Employment Act, 2002 which consists provisions regarding appointments, leaves, dismissal and
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many more areas are covered. This governs rights of employees and provide remedies for
conflicts and disputes. Similarly, Equality Act, 2010 is enacted which states that all the people
working in the organization should be treated equally. This helps in making an environment
which is fair and just.
Pimlico Plumbers case- In the case of Gary Smith v. Pimlico Plumbers, peitioner had
served in defendant for 6 years. In which he filed a case stating that, he should be treated as
employed instead of self-employed and his rights should be governed according to employment
laws. Whereas, Pimlico was in the opinion of treating him as self employed. The case was filed
in Employment tribunal which dismissed it and Gary lost the case. However, it was forwarded to
Supreme court, which held that, Gary is an employee of Pimlico (Prassl, 2017). The reasons for
this was Pimlico exercised administrative control over Gary, also, he was bound to hold identity
card, uniform, branded vans etc. Furthermore, a contract was also signed which provided wages,
gross misconduct and dismissal. This differentiated a self-employed worker from employed.
Conclusion- This was a benchmark case which has given a new definition of employed
and is referred to separate a person from employed to self-employed.
TASK 3
Legal personality: It is a concept which distinguish a company from its members. The
name of an entity ends with the word “Limited”, it signifies that liability of shareholders are
limited to extent of nominal amount which is unpaid on their shares. Similarly, directors are also
not liable for the debts of the company.
In the case of Salomon v Salomon, this principle was emerged which stated that there
exists a separate legal identity between a corporate and its members. In this case, Salomon was a
sole proprietor engaged in business of making shoes. He negotiated a price with the managing
director (self). The deal happened after number of financial devices in which Salomon was a
secured creditor. After few years, the company had to go through a hard time which made
creditors for settlement of money (Kuhn, 2016). On paying off the debt, it came to know that
Salomon was a secured creditor and had to be paid first. Furthermore, there was no liability of
him in company's debts. However, personal liability was adjusted and changed when the
corporate became a registered company.
Duties of a director:
 Must act in good faith for the benefit and interest of the company. (Section 170)
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 Success of company to be promoted. (Section 172)
 To exercise reasonable skill, care and independent judgement. (Section 174)
 Not to take undue advantage on behalf of company. Also, personal interest must be
disclosed before the meetings. (Section 175)
Types of organizations: Sole proprietorship- The business is owned and managed by an individual known as sole
trader or owner. It is easy to form and dissolve. The profit and loss are not shared. Also,
there is no separate legal identity and registration. Personal properties of owner can be
used in paying off the debts of the entity. Furthermore, it does not have much options to
raise capital and has to rely on personal savings and loans from bank and financial
institution. Partnership firm- It is an association of two or more people to carry business activities
with an objective to make profits. A partnership deep is executed between partners which
contains terms and conditions. The decision making power is in the hands of all the
partners and is finalised only when consent has been received from all the partners
(Haldane, 2015).
 Limited Liability Partnership (LLP)- It is a combination of a company and partnership
which involves a flexibility in business. The partners have limited liability unlike
partnership and control is direct on the management. It has wider options to raise funds as
compared to sole proprietorship and partnership firm.
Steps to form a company:
1. File form IN01 for application to form a company along with a name.
2. Preparation of MOA and AOA.
3. Select and appoint directors and company secretary.
4. Give shares to shareholders by subscribing their names.
5. Select a place as head office and provide address to Companies House for further
communication.
6. Commence business once certificate of incorporation is obtained.
TASK 4
Alternative Dispute Resolution (ADR): It is defined as a procedure for the settlement of
disputes or conflicts arising in the course of business. It does not involve courts and are generally
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inexpensive and speedy. The number of formalities are fewer as compared to litigation. It
includes arbitration and mediation for dispute resolution.
Arbitration- It is an out of the court settlement of disputes whereby an independent party
is appointed with the consent of both the parties. The person so appointed is known as arbitrator.
He hears testimonies of both the parties and examine evidence produced by them. After that,
arbitrator applies his knowledge and outcomes of examination for taking decision. The
judgement is final and binding and can not be challenged in courts. It is expeditious way of
resolving problems and the cost is minimal together with lower formalities. It is an informal way
to deal with the matter. It is used to resolve disputes related to labour, construction, securities etc.
It is an appropriate legal solution which can be applied in any situations (Blake, Browne and
Sime, 2016).
Mediation- In this method, a two way communication is conducted between parties to
disputes. They can deal with the matter directly, or a third party called mediator, is hired to
facilitate with communication. It is voluntary in nature and involves negotiation. These can be
reduced to writing in a form of an agreement. It is the first choice for dispute resolution which is
used to save time and money. Agreement can be enforced under law and can be adjusted
according to suitability of parties.
CONCLUSION
From the above report, it can be concluded that business law is useful and mandatory for
running of a business entity. It promotes harmony in the working and provide a legal base to be
used as a protection. In order to understand legal system of a country along with various laws,
different sources can be looked into. Furthermore, a clear difference should be there between a
self employed person and employed for the application of number of employment laws.
Furthermore, the principle of separate legal entity should be understood and considered while
planning to set up a company. However, other types of organizations must be analysed before
finalising one. Lastly, variety of legal solution should be evaluated before selecting one for
resolving disputes in business matters.
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REFERENCES
Books & Journals:
Adams, A., 2012. Law for Business Students: UEL. Pearson Education UK.
Baker, J., 2019. Introduction to English Legal History. Oxford University Press.
Besley, T., 2015. Law, regulation, and the business climate: The nature and influence of the
World Bank Doing Business project. Journal of Economic Perspectives, 29(3), pp.99-
120.
Blake, S.H., Browne, J. and Sime, S., 2016. A practical approach to alternative dispute
resolution. Oxford University Press.
Haldane, A., 2015, May. Who owns a company?. In Speech, University of Edinburgh Corporate
Finance Conference, May 22nd.
Kraakman, R., 2017. The anatomy of corporate law: A comparative and functional approach.
Oxford University Press.
Kuhn, K.M., 2016. The rise of the “gig economy” and implications for understanding work and
workers. Industrial and Organizational Psychology. 9(1). pp.157-162.
Prassl, J., 2017. Pimlico Plumbers, Uber Drivers, Cycle Couriers, and Court Translators: Who is
a Worker?.
Wilson, S. and Wortley, N., 2018. English Legal System. Oxford University Press.
Zander, M., 2015. The law-making process. Bloomsbury Publishing.
Online:
Process of bill passing. 2018. [Online]. Available through:
<https://www.parliament.uk/business/lords/work-of-the-house-of-lords/making-laws/>.
Self-employed employee. 2019. [Online]. Available through: <https://www.rossmartin.co.uk/self-
employed>.
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