Law for Business Managers: Negligence, Contract and Winding Up of a Company

This report covers the legal obligations for operational functioning through directors, shareholders and members of the company. It discusses the application of business laws in case of negligence and defect, and the different mechanisms available for winding up of a company. The report also explains the rights and duties of the employees that are protected and safeguarded through the enforcement of Employment law.

Law for Business
Managers

Table of Contents
INTRODUCTION ..........................................................................................................................4
TASK ..............................................................................................................................................4
PART 1 ...........................................................................................................................................4
What
can Linda do? Advise Linda with regard to her options by referring to the relevant statutory
provisions....................................................................................................................................4
PART 2 ...........................................................................................................................................6
Good Bake Appliances Ltd. are certain that the double-oven was not defective and decide to
bring a claim for negligence against Linda. What
do they must show in order to bring a successful claim against Linda?....................................6
PART 3 ...........................................................................................................................................8
With reference to relevant statutory provisions and case law, explain the different mechanisms
available for winding up of a company.......................................................................................8
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
The legal system of UK is very wide and diverse which has a common law legal system
with its effective incorporation on the people of country. The judicial system of UK is very
strong and stable from rest of the pillars of parliament in order to execute a fair and reasonable
justice. The companies in UK are regulated under the Companies Act, 2006 in order to set out
legal obligations for operational functioning through directors, shareholders and members of the
company. The contract law in UK is governed under the Sale and Supply of Goods Act, 1994 in
order to safeguard and protect the rights and duties of seller and buyer. The legal obligation to
fulfil the duty towards a particular party in order to get a return on consideration is contract. The
agreement that is enforceable by law is a contract which includes agreement, lawful consent,
consideration for approval of the parties (Akhtar, 2020). The rights and duties of the employees

are protected and safeguarded through the enforcement of Employment law. This report will
cover the statutory obligations that are provided to the parties in case of negligence, defect and
obligations that are enforced on parties towards the winding up of a company.
TASK
PART 1
What
can Linda do? Advise Linda with regard to her options by referring to the relevant statutory
provisions.
A competition was hosted by Radio Norwich in which Linda won the first prize which
was a double oven of GoodBake Appliances Ltd. There was an explosion in the oven after using
it various times over a month and which further led to destruction of many items in the kitchen.
The furniture of kitchen with laptop and mobile phones were also damaged with explosion of
oven in Linda's kitchen. This situation led to renovation of Linda's kitchen with replacement of
new oven. It also leads to the situation of having defect in the product from the side of Good
Bake Appliances Ltd as the product was gifted from that particular company.
The main issue in Linda's case is that the oven did not function for a relevant appropriate period
which should function for a longer period of time in comparison to one month (Al-Astewani,
2019). In order to provide remedy to Linda with the recovery of loss, it is advised to use the
application of business laws which covers the companies law for evaluation of the certain aspects
of business law like Contract act, Employment act etc. It is further advised to use the application
of certain laws in order to analyse the above mentioned situation.
APPLICATION OF LAWS
Contract Act
An agreement between the parties that is enforceable by law is a contract. There are various
obligations raised in the enforcement of contract which requires agreement, contractual
obligations and consideration. These are most essential requirements of a valid and legal contract
which binds the parties towards each other until the fulfilment of contract. A contract is generally
started with Offer, where one party gives a proposal to another party and it is on discretion of the

concerned part to accept or reject an offer. If there is approval from the concerned party then it is
considered as acceptance which allows the party making the offer to approach further in the case.
After making of offer and getting approval through the concerned party, an amount is offered to
the party which is termed as consideration (Arop, 2019). A consideration is generally a monetary
amount or something of value and also availability of certain services which is also considered as
consideration for providing of services. Therefore, offer, acceptance and consideration are the
three main elements of a contract.
In the case of Linda, there was no contract between the parties as it was a gift that was provided
from the company of GoodBake Appliances Ltd. Therefore, it is analysed that the company was
at fault as generally there is a warranty of at least 1 or 2 years in electric items by the company of
UK. A brand new product generally lasts for at least 6 months in its initial use but the oven
provided by GoodBake Appliances Ltd., did not even last for more than a month which exudes
the default from the side of company and the most beneficial remedy for Linda would be that the
company can offer her brand new oven in least bearing of loss from its side. In order to bear the
losses for damage of kitchen, mobile phone and laptop, the company should offer monetary relief
for compensation of the losses.
Law of Tort
Tort is a civil wrong which provides remedies for any wrongful act in order to impose liability
on the tortfeasor who has caused any harm or injury to the affected person. Under Law of tort, a
person is usually provided money for compensation of losses (Duddington, 2019). If right of a
person is affected in accordance of their health and safety, property, economic interests,
reputation, environment;then compensation is to be paid in lieu of damages. The main purpose of
tort law is to provide compensation to person in order to prevent any wrongful act. Tort can be
proved when there is any wrongful act towards the person for which compensation should be
paid in order to provide effective relief for bearing of such damages.
Therefore, Linda is liable to get the damages from GoodBake Appliances so that she can
renovate her kitchen and get new mobile phone and laptop. Here the company was at fault as it
was the responsibility of company to provide a new quality product to its users.

PART 2
Good Bake Appliances Ltd. are certain that the double-oven was not defective and decide to
bring a claim for negligence against Linda. What
do they must show in order to bring a successful claim against Linda?
The company of GoodBake Appliances Ltd., was very certain and confident about the
quality of its product and therefore raised a negligence claim against Linda. In order to bring an
appropriate claim against Linda, it is advised use the application of certain laws which are
mentioned below
APPLICATION OF LAWS
Consumer law
Under the Consumer Rights Act, 2015, there are various protection that are provided to a person
in order to protect their rights from purchase of products (Edwards, 2021). This act especially
provides protection to consumers in order to protect them from being exploited in purchasing of
goods. The safety of consumers was considered to be the most important principle of this act in
order to prevent the unfair trading practices that is practised by the traders towards the
consumers. This act mainly aims to prevent the use of poor quality products and unfair trade
practices in accordance to the repair, refund, transaction and delivery. Whenever a person buys
or purchases goods from a store or company the he becomes a consumer. If the seller has
provided any defected product or at a higher price, then the consumer has the right to institute a
suit against the seller in the consumer court. There are four basic legal rights of the consumer
which are mentioned below:
 Right to choose
 Right to be heard
 Right to be informed
 Right to safety
Under the consumer rights of UK, a person can get repair or replacement for their defected
product within six month of purchase of products and there is also a policy of getting refund
within 30 days, if the consumer is not satisfied with the product.

Sec 2(3) of the Consumer Rights Act, 2015 provides the definition of consumer where consumer
is a person who purchases any product or good from the seller in exchange of an amount for
acquiring of the product. A consumer can be any person from a child to an old aged person, the
only requirement is that particular person buys something from the owner or seller.
In the above situation of Linda who got oven from winning as a prize from GoodBake
Appliances Ltd., the company is not liable towards Linda as it is required to have a relationship
of consumer and buyer in consideration of the act (Gray, 2021). Therefore, Linda has not bought
or purchased the product from the company as she got the oven as a gift in prize. The company is
not liable towards Linda as she is not a purchaser or buyer and in order to get compensation it is
essential for a person to be consumer who had brought the product in exchange of money.
Negligence
Under the Law of Tort, Negligence is the most common tort which is done against a person in
order to prevent any wrongful act. The aspect of negligence can be taken in both ways in order to
provide something for performance of an act and not to do something which is required to be
done. Whenever any act is performed for a person then it is required to perform the act with due
consideration. It is claimed from Linda that the company was negligent in providing a defective
product and it was the responsibility of the company to provide a qualitative product
(Hayward, 2018). In order to successfully impose the claim, there are various elements that are
present in the conduct of negligence which are:
 Breach of duty to care – The company is liable to take care of customers by providing
good quality products. It is the duty of company to check the durability and quality of
product which was fulfilled from the company side. If the company does not follow the
duty then it is considered that there has been a breach in duty of care.
 Conduct of loss and injury through negligence – An another important element of
negligence is occurrence of loss and injury. Linda can be considered negligent in the use
of oven as the company was confident enough to provide a quality product to her.
Therefore, it is not the negligent act of company but the negligent act of Linda.
 Duty of negligent party to take care of victim – Whenever an injury or loss is
occurred to the party then it is the duty of the concerned party to provide relief by taking
care of the victim. In case of Linda, it was stated by the GoodBake Appliances Ltd., that

it was certain about the quality of their product and was not negligent (Martin, 2018)
(Monye, 2018). Therefore, the company is not liable to take care of the concerns of
Linda as it was her negligent act that led to the explosion of oven.
It is proved that the damage occurred in Linda's kitchen was the negligent act of Linda due to
improper use of oven at several times. This situation had led to damage to the name of company
by inappropriate claim of Linda. The company can even sue Linda for defaming the organisation
with the act of defamation in order to recover the damage occurred to the company.
PART 3
With reference to relevant statutory provisions and case law, explain the different mechanisms
available for winding up of a company.
The winding-up of company is done through a CVL process where a meeting of
shareholders is conducted in order to wind up a company. An authorised practitioner is officially
appointed in order to liquidate a company. The assets of the company are sold out while winding
up a company and there are three different modes of liquidation which are Creditors Voluntary
Liquidation (CVL), Members Voluntary Liquidation (MVL) and Compulsory Liquidation.
Generally the winding-up of company is done in the case of loss that cannot be recovered by the
company. Therefore, the company chooses the way of liquidation to wind up its business in order
to prevent further loss and damage to the company.
Under Creditors Voluntary Liquidation (CVL), this method is used in order to close an insolvent
company. It is the company which is not able to pay to its creditors due to their weak financial
situation or status of the company (Morgan, 2022). In simpler terms, whenever the company is
not able to pay the money that is owed from the creditors then the process of liquidation takes
place in form of creditors voluntary liquidation. This procedure is generally started by the
directors of the company in order to initiate the process of liquidation.
Under Members Voluntary Liquidation (MVL), this method is started by members of the
company, who are shareholders of the company. This method also does not require the company
to be insolvent for the procedure of liquidation. The shareholders of the company voluntarily
exudes the process of liquidation. In this procedure, a meeting will be called out by directors and

shareholders of the company an after that another meeting will be held after 14 days and after
which the liquidator is responsible to liquidate the company with the process of liquidation. The
taxes are required to be paid after liquidation of assets in final report of the company.
Under Compulsory Liquidation, it is the process where the authorities as directors are forced to
liquidate the company by the forceful enforcement of the creditors. The procedure of compulsory
liquidation requires the involvement of the courts. It is required from the company to present
specified reasons which includes number of members who are under the financial status of the
company, failure to hold regular meetings related to the affairs of company and the non payment
of debts in order to present a valid and proved considerations for final order of the court. The
members through directors and shareholders does not wish to liquidate the company but it's the
pressure from the side of creditors that force them to liquidate the company. The assets of the
company are distributed to the creditors of the company (Sharma, 2019). The process of
compulsorily liquidation is a kind of involuntarily liquidation that is done due to influence of
other party who are the creditors or person who owe money from the organisation.
A special resolution is to be passed in the company under the Companies Act, 2006 for the
process of winding up of company. This process of special resolution takes place when about
75% of the shareholders of company are able to voluntarily wind up the company. The consent
of about ¾ members is required for the process of liquidation which is to be conducted in court.
The company is also required to prepare a list of assets in order to present its depriving financial
status where the company is not capable to pay the debts.
Under the Companies Act, 2013 the process of winding up is a process where the company
comes to an end due to the weak financial status of the company and the assets of the company
are sold out to the creditors and members of the organisation (Twigg-Flesner, 2022). There are
also three modes of winding up of company which includes the following:
 Voluntarily winding up under Sec 59.
 Winding up by National Company Law Tribunal
 the Fast track exit scheme under Sec 248.

CONCLUSION
From the above report it is concluded that, Linda who won an oven in prize raised some
allegations against the company in order to get compensation. This compensation was asked in
explosion of oven in Linda's kitchen which caused damage to her kitchen with destruction of her
mobile and laptop. In Part 1, Linda is advised to get claim from the company in order to bear her
losses through the application of law of tort, where a person is liable for conduct of wrongful act
done to another person. It is a civil wrong where losses are to be beard by the party in lieu of
damage against property, interest and health of a person. In part 2, the company has raised
allegations against Linda for being negligent and has further sued her for damaging the image of
company with certainty of negligence of Linda in using the oven. The company also raised
allegation against her by declining the relationship of consumer and trader under the Consumer
Rights Act, 2015. Linda cannot get any claim from the company as she did not purchased the
product from the company and was given as a gift in consideration of a prize. In Part 3, the
procedure of winding up of company is shown where the winding up of company takes place
through the liquidator with the process of liquidation. The different methods of liquidation are
Creditors Voluntarily Liquidation (CVL), Members Voluntarily Liquidation (MVL) and
Compulsorily Liquidation.
REFERENCES
Books and Journals
Akhtar, Z., 2020. Low Skilled Jobs, Free Movement Migration and Employment in the
UK. Labor Law Journal, 71(3), pp.144-153.
Al-Astewani, A., 2019. The Legal Framework for Regulating Shariah Councils in the UK A
Potential Model for Ireland?. In Minority Religions under Irish Law (pp. 193-216). Brill.
Arop, J., 2019. Consumer Protection in Nigeria: The Nigerian Bankruptcy Act in
Perspective. Available at SSRN 3470107.
Duddington, J., 2019. Ministers of Religion in UK Civil Law: Obstacles to Employment Status
and Potential Reforms to Achieve a Degree of Employment Protection. The University of
Manchester (United Kingdom).
Edwards, L., 2021. ‘No Jab, No Job’? Employment Law and Mandatory Vaccination
Requirements in the UK. Employment Law and Mandatory Vaccination Requirements in
the UK (November 3, 2021).
Gray, J., 2021. Reform of the Mental Health Act in the UK. The Lancet Psychiatry, 8(8), pp.652-
653.

Hayward, B., 2018. E-books and other digital products: why Australia's consumer laws are
lacking. LSJ: Law Society of NSW Journal, (44), pp.28-29.
Martin, S., 2018. The Evolution of Good Faith in Western Contract Law. Available at SSRN
3177520.
Monye, F., 2018. An overview of consumer law in Nigeria and relationship with laws of other
countries and organisations. Journal of Consumer Policy, 41(4), pp.373-393.
Morgan, J., 2022. THE THIN END OF THE WEDGE: MORALITY, CONTRACT LAW AND
LAWFUL ACT DURESS. The Cambridge Law Journal, 81(1), pp.17-20.
Sharma, K., 2019. The Efficacy of Grundnorms in Legal Systems of India and UK: A
Comparative Study. Int'l JL Mgmt. & Human., 2, p.225.
Twigg-Flesner, C., 2022. Who knows what the future holds? The fate of the EU’s acquis in
English Contract Law. The fate of the EU’s acquis in English Contract Law (March 24, 2022).
Christian Twigg-Flesner," Who knows what the future holds.