Tort Liability and Business Partnerships

This assignment provides an overview of the application of tort law in business partnerships, specifically focusing on vicarious liability and non-delegable duty. The case study involves Mike and Ken's company with Liz, where the doctrine of frustration is discussed. Various references are provided from books, journals, and online sources to support the analysis. A comparative analysis of different approaches to raising funds for starting a business is also presented.

Law for
Business Managers

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
Issue:...........................................................................................................................................1
Rule.............................................................................................................................................1
Application and Conclusion........................................................................................................2
QUESTION 2...................................................................................................................................2
Main forms of business mediums and their advantages and disadvantages...............................2
QUESTION 3...................................................................................................................................5
Main sources finances available to companies and theirs advantages and disadvantages..........5
QUESTION 4...................................................................................................................................6
Issue:...........................................................................................................................................6
Rules............................................................................................................................................6
Application and Conclusion........................................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Laws are an integral part of the business and its activities. The business law provision are
applicable to almost all the activities of an organization and the mangers are required to have a
good knowledge of the applicable legal provision to the business. In the present report an
analysis of the legal issues is done with identification of appropriate law and application of the in
the given scenarios. In this regard the legal issues includes determination of presence of
doctrine of vicarious liability and frustration or not. Along with this the main types business
organizations and forms of funding of a company are explained with their advantages and
disadvantages.
QUESTION 1
Issue:
Is the doctrine of vicarious liability is applicable to the case of Ken, Grant and the bus
company?
What potential proceeding civil or criminal can Ken take for the accident.
Rule
The doctrine of vicarious liability:
The vicarious liability is referred as a situation where someone is held responsible for the
actions of others or omission of another person even though the person did not commit the act
itself. This is form of strict liability which contains two elements vicarious and liability.
Vicarious means felt, experienced by reading or watching about somebody else to do something
rather than by doing itself (Foster, 2018). The liability means to a state of being legally
responsible for something. This means that a strict liability is imposed on a person who does not
have a primary liability when hew is not in fault. This is not a tort (Tort Law, 2018). In other
words a person is held liable for act of another and employer is liable for the acts of his/her
employees.
To raise a liability under an employment the employee must be in acting in the course of
his her employment. This is also imposed for breach of the care of duty by the employer which is
imposed on him/her. There are three main elements which are required to establish the vicarious
liability:
 Existence of employer and Employee relationship: arises with presence of an
employment contract which can either be expressed or implied. With the doctrine of
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respondeat superior the employers are made responsible for a lack of care on the part of
employee. This relationship can be established through various tests which are the control
test, the organisation test and the multiple test.
 Tortious act of negligence: includes an act of negligence of omission on the part of
employee. There is a lack of care for the consequences of the action of one person over
another (Sullivan and Schweikart, 2019). To establish the negligences claim there must
be a duty of care owed, the breach of that duty and damages or harm served due to that
breach.
 Within the course of employment: requires the occurrence of the negligence act by the
employee under the employment and within the working time of the employment.
Application and Conclusion
For the given case it can be seen that Grant is the employee of the bus company and
Working under the employment of the company. Within the given circumstances it can be
assumed that there was an employment contract between Grant the bus diver and the bus
company. Moreover, it can be established with application of the control test as the activities of
Grant is controlled by the company and his services is an integral part of the business. For
establishment of negligence claim it can be started that grant as an employee of bus company
owed a duty of care towards the pedestrians waling on the road while driving the bus as to not to
injure them in any case. The duty was severely breached by Grant as he negligently omitted to
see the red light and hit ken. The damages and harm in this case was the leg injury suffered by
Ken due to omission of the fact by Grant.
With this all the elements all the elements to establish the vicarious liability are fulfilled
and this can be stated grant is the employee of the bus company and caused the accident due to
negligence under the employment of bus company. Due to the negligent act of the Grant Ken
suffered leg injury and under as per the doctrine of vicarious liability the bus company will be
held liable for the act of one of its employee that the bus driver grant.
QUESTION 2
Main forms of business mediums and their advantages and disadvantages
To start up a new business Ken and Mike Balwin have different option to start their
business of concerts and events. The various form of business which is available to Ken and
Mike are:
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General Partnership:
Mike and Ken start their business by entering into general partnership where two or more
persons as partner start their business. In this type of business the ownership, shares, right,
responsibilities are included in the partnership agreement. The partners have a benefit of
simplicity. In this the partners shares all the assets, profits, financial and legal liabilities jointly
under the business structure (Ulfbeck and Ehlers, 2016). In the general partnership business the
liability of the Ken and Mike will be unlimited. This means that in order to meet the financial
obligation of the business their personal properties might be sold to pay out the dues of the
business.
Advantages of forming a general partnership business:
With starting a general partnership business Mike and Ken will have a right to exercise
complete control over the business. They both can share the profits between themselves by
determine a ratio or in 50:50. They both a rights over the assets and property of the business and
will run the firm jointly with sharing the responsibilities and obligation together. For taking
business decision both take assistance and advices from each other making the decision more
prominent and effective for business. The partners bring in the capital to start the business and in
further need both of them can bring in additional capital.
Disadvantages of staring a general partnership business:
The major drawback of forming a general partnership business is that the liability of the
partners is unlimited. This requires the sale of private property of Mike and Ken in order to meet
the financial obligation of the partnership firm and pay the dues of business. Moreover, while
taking a decision for business both Mike and Ken have different opinion and this can lead to
arise of dispute (Roness, 2017). In this business no single partner have a right to take an
individual decision. The incomes earned by the partnership firm is eligible for tax application
and a there is a requirement to file a tax return.
Limited partnership:
This is similar as the general partnership business except in this business the liability of
the Mike and Ken will be limited. Here both the partners will share the powers, ownership, rights
and responsibility of this business together with one being general and another being limited
partner. But their liability will be limited to the extent to their investment in the business that to
the proportion of capital contribution in the partnership firm.
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Advantages of forming limited partnership:
This type of business is easy to form and it has a perpetual existence. This means that the
business will continue irrespective of the existence of partners and their coming in and leaving
the firm (Sanzo and et.al., 2015). The liability of either Mike and Ken will get limited to the
extent of their capital contribution and they will not be required to sell their personal property to
meet the partnership obligation.
Disadvantages of establishing the limited partnership:
The disadvantage forming this type of business is that partners are not allowed to sale
their partnership interest until the partnership agreement states the same. The reinvested profits
are taxes at the highest marginal tax rate of the owners. The general partner;s liability remains
unlimited.
Limited company:
Mike and Ken also opt to establish a registered limited company under the provision of
companies Act, 2006 with the companies house which can be stared by two members. A
corporation is a business which is owned by the shareholder and the owners are protected from
the business debt through limited liability (Limited Liability Company, 2018). This business is
government approved and is authorised take the benefits and enjoy powers bestowed upon it
under the law. This will get an identity of separate legal entity which is distinct for the owners
that is Mike and Ken.
Advantages of establishing a limited company:
The company on its formation becomes a legal person with getting its own set of rights
and obligations, responsibility and obligations. The company have its constitutions as
memorandum and article of association (Jerez, 2017). No requirement of more than two or
person to start the business as limited company. The liability of every member of this type of
company is limited up to the limit of there shareholding or investment in the company.
Disadvantages of formation of a limited company:
With incorporation of a limited company the shares can not be trade freely to the public
as the article imposed a restriction over the transferability of shares. The number of members in
the company can not exceed 50 in any case. The shares of the company can not get listed to the
stock exchange.
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To Ken and Mike it is suggested that they must select the option of staarting a limited
company. As this is the best option among all three and they need to bring in the capital to start
the company (Staszek, Savic and Fu, 2018). It the funded can arranged from various sources
which are explained in the next question.
QUESTION 3
Main sources finances available to companies and theirs advantages and disadvantages
The major sources of funding of a company to start and set up the business are:
Venture capital:
This is also known as private equity finance where the investors look to invest a larger
sum of money in the business in return of the equity do the business.
The advantages of crowdfunding is that it can assist in various business decision
including financial and HR management. A venture capital firm can provide active support to the
young growing companies. The disadvantages of venture capital is that owner lose the control
over the company some investors can be aggressive. With more than 50% od the VC in company
the management control can also be lost.
Crowd funding:
This is another from of funding the business capital though taking money from various
people in the form of lending, investment or contribution. The money is taken in small amount
from each funder for the business (Crowdfunding, 2018). The whole money is combined to reach
the actual funding goal of the business. Each of the funder will get rewards and financial benefits
from the company to back the business up.
The pros of crown funding can be stated as it is a faster way to rise finance and starting a
business through online and public platform can be a pitching start for the business. With sharing
the ideas the business can get feedbacks and expert guidance and it can also test the reactions of
the public. The con of crowdfund the business is that not all projects can apply for crowdfunding.
In case the set target of fund id not achieved through crowd funding the whole amount is
required to be returned to investors.
Angels investors:
The angle investors are the wealth people who invest in the business which assure the
high growth in the business in rerun for shares in the business. The investment is made by the
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investors themselves or as a past of network (Yeung and Huang, 2016). Mike and Ken approach
such angle investors who would like to invest in their business.
The advantages of being funded through and investors is that there is no need to pay
interest on the amount taken rather shares are given to them. This is much less risky than the debt
funding. The capita is not required to be repaid. The disadvantages of using angle investors is
that there is complete loss of control over the business. The angles investor how to run the
business and also gets share in the profits when business is sold.
Enterprise investment scheme:
This option is available to the limited companies to raise the funds under the EIS. This
applied to small companies for a qualifying trade (Teague, 2016). The condition required to get
funding under EIS is that to be qualifying company and to be investor eligible for tax relief.
The benefits of this type of funding can be stated as this option is not available to each
and every business. The company involved in EIS have access to a greater amount of capital and
the risk is low under this investment. The company have access to capital gain tax exemptions,
break off in the taxation. The drawbacks of EIS are that the company is not liable to get any type
of income tax exemption and complex lelve of tax laws are applicable to the company.
Alternative platform finance scheme:
This is a type of government funding to assist those small business which can not access
the bank finance. The banks will pass the business details which they have rejected to three
alternative finance providers, which are: funding Xchange, business finance compared, funding
options.
The advantage of Alternative platform finance scheme is that it requires significant
regulatory framework to understand and supports the advisers while protecting the client. The
disadvantage of this type of funding is that not clearly regulated in many jurisdictions. As in all
forms of investments, a higher potential return means a higher potential of monetary loss
QUESTION 4
Issue:
Is the doctrine of frustration is applicable to the given scenario?
What action can be taken.
Rules
The Doctrine of Frustration:
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This means a contract can be discharged by frustration. A contract becomes frustrated
when the existing circumstances changes after the contract was entered into and there is no fault
of either of the parties (Chung, 2017). This implies that the contract becomes impossible to
perform. After a contract becomes frustrated each party of the contract is discharged for the
contract and they have no right to sue each other for non performance of the contract as a breach.
The losses suffered are allocated by the division of Law reform (Frustrated Contract) Act, 1943.
Frustration of the contract by the destruction of the subject matter as it was held in the
case of Tylor V Cladwell in 1863. In this case a musical hall was hired to carry out a concert and
renovated it with incurring heavy expenditure get destructed due to accidental fire (Taylor v
Caldwell (1863) 3 B & S 826, 2018). It was held the courts to be a frustrated contract and action
of claimant for breach of contract failed.
Application and Conclusion
Fore the present case the contract between the Mike and Ken's company and Liz there
was a contract where Liz purchased the ticket to the concert where Elvis was to perform and the
company promised to showcase the performance on said date at stipulated time. With the death
of Elvis due to drug overdoes before concert it becomes impossible to even conduct the concert
on the specific date. With application of above rules it can be seen that the contract become
frustrated as the performance of Elvis become impossible due to his death. With contract
becoming frustrated and applying the ruling of the Tylor V Cladwell case it can be stated that no
party have right to sue one another. This mean that v the contract between Liz rendered ot be
frustrated and Liz can not sue for reimbursement of the cost of ticket. She can seek a remedy
under the provision of Law reform (Frustrated Contract) Act, 1943 for the loss of her 100GBP.
CONCLUSION
With this it can be concludes that under the concept of Vicarious liability the employer
are held liable for the negligent action undertook by their employee under employment. For the
given case bus company has been determined to be liable for action of Grant. Moreover, the
option available to mike and Ken to start the business have been outlined as general partnership,
limited partnership and limited company. There are different types of approaches from which
they can raise funds to start their company such as crowdfunding, venture capital. For the case of
Ken and Mikes company with Liz the application of doctrine of frustration have been identified
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as the contract can not be completed due to unavoidable circumstances and beyond the control of
Mike and Ken.
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REFERENCES
Books and journals
Foster, N. J., 2018. Tort Liability of Churches for Clergy Child Abuse after the Royal
Commission: Implications of Developments in the Law of Vicarious Liability and Non-
Delegable Duty.
Sullivan, H. R. and Schweikart, S. J., 2019. Are Current Tort Liability Doctrines Adequate for
Addressing Injury Caused by AI?. AMA Journal of Ethics. 21(2). pp.160-166.
Ulfbeck, V. and Ehlers, A., 2016. Tort Law, Corporate Groups and Supply Chain Liability for
Workers’ Injuries: The Concept of Vicarious Liability. European Company Law. 13(5).
pp.167-174.
Roness, P.G., 2017. Types of state organizations: Arguments, doctrines and changes beyond new
public management. In Transcending new public management (pp. 77-100). Routledge.
Sanzo, M. J and et.al., 2015. Business–nonprofit partnerships: do their effects extend beyond the
charitable donor-recipient model?. Nonprofit and Voluntary Sector Quarterly. 44(2).
pp.379-400.
Staszek, D., Savic, D. and Fu, G., 2018. Decision making methods for water resources planning
in England and Wales. EPiC Series in Engineering. 3. pp.2011-2018.
Teague, M., 2016. Profiting from the poor: Offender-funded probation in the USA. British
Journal of Community Justice. 14(1). p.99.
Chung, G., 2017. A comparative analysis of the frustration rule: possibility of reconciliation
between Hong Kong-English ‘hands-off approach’and German ‘Interventionist
Mechanism’. European Review of Private Law. 25(1). pp.109-142.
Yeung, H. and Huang, F., 2016. Certainty Over Clemency: English Contract Law in the Face of
Financial Crisis. In The Effects of Financial Crises on the Binding Force of Contracts-
Renegotiation, Rescission or Revision. (pp. 285-305). Springer, Cham.
Jerez, J. C., 2017. The Unexpected Change of Circumstances Under American and Spanish
Contract Law: Different Concepts, Different Methodology, Similar Outcomes. European
Review of Private Law. 25(5). pp.909-940.
Online
Limited Liability Company. 2018. [Online]. Available through
:<http://www.ltdcompany.co.uk/company-formation/limited-liability-company/>.
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Tort Law. 2018. [Online]. Available through :<http://e-lawresources.co.uk/Tort-law.php>.
Crowdfunding. 2018. [Online]. Available through
:<https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-crowdfunding>.
Taylor v Caldwell (1863) 3 B & S 826. 2018. [Online]. Available through :<http://e-
lawresources.co.uk/Taylor-v-Caldwell.php>.
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