Law for Business Managers

This report explores the significance of law in business management, focusing on contracts, torts, and artificial personality. It discusses the elements of a valid promise, the doctrine of tort, and the concept of a corporation as an artificial person. Real-life cases and legal principles are examined to provide a comprehensive understanding of the subject.

Law
for
Business Managers

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
PART 2............................................................................................................................................3
PART 3............................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Law refers to rules and regulations enacted by the legislative bodies in a country in order
to regulate the activities of organisations as well as individuals. There are numerous statues
applicable on entities for providing legal support to the structure and operations (Bebchuk and
Jackson Jr, 2012). One of the main elements in running a business is formulating contract which
are the foundation on which all the transactions are proceeded. Apart from this, the number of
disputes or conflicts are reduced by following relevant laws. This report is divided into three
parts viz. Part one which is about promises, part two is linked to doctrine of tort and the last part
i.e. part three is about explanation of artificial personality.
PART 1
In legal terms, a promise in an engagement which involves a promisor and a promisee
who form an agreement in order to perform some activities. If a promise is made in or reduced to
writing, it is called agreement which is put under the seal, then it is known as a covenant. There
is no such lawful element in a promise and it refers to mere declaration may by one person to
another for a good or valuable consideration. There are different kinds of promises which can be
formed by individuals. In this questions there three parts containing variety of situations where
three different promises are made by Sergio to his son Alexander, secretary and Natasha (local
newsagent) to pay three different amounts if the promises are fulfilled.
According to legal provisions, a promise can be made orally as well as in writing
depending on the requirement of the parties involved. There are certain rules related to a promise
which are as follows:
 To make a promise binding on the promisor, there must be sufficient consideration. This
is one of the main elements which states that promises can not be made if there is no
consideration (Fried, 2015).
 It the promise is conditional, it should be completed prior to any binding effect. In other
words, it means that if any condition is there in a promise then it should be given
preference.
 There should be two parties viz. Promisor and promisee who must have contractual
competent to make a promise.
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 There should be mutual consent to make the promise. A promise made by promisor is not
accepted by the promisee then it cannot be completed.
 It must be clear and definite which should not have any element of ambiguity within this.
Any double meaning condition or term should be removed or made clear before its
occurrence.
 The enforceability also depends upon the circumstances which provide that it is in the
best interest of the promise to make it enforceable.
Apart from this, there are ficticious promises which are implied promises. It is also
known as promises implied in law which are made due to the circumstances (Wilkinson-Ryan,
2012). Enforceability of the promises is done to avoid any injustice which may arise due to
issues between two parties. By taking these points in account, it can be said that a promise made
is absolutely valid and enforceable in certain cases. This part of the report covers three different
cases showing individual scenarios. These are all involves a promise which has been made by
Sergio to three different people by specifying the action be perfomed in return. It can be
understood from the past cases which have occurred previously in the UK legal system so that
these can be used for forming a conclusion in future cases.
In the landmark case of Balfour v Balfour [1919], it was provided that a promise was
made by the husband to pay his wife 30 pounds for a month when he went out of England. And
exchange for her agreement to support herself without calling on his husband for any other
manitenance. The court provided that a valiud consideration was paid in this promise but there
was no contract. It was an agreement which contained a promise but was outside the category of
contract. Hence, the performance of a new duty should not constitutes in new consideration.
The case of Hartley v Ponsonby [1857], the court held that a promise can be made
enforceable. This case involves a ship in which there were number of individuals as crew
member which was later reduced such a number that a dangerous situation was created for the
ship to sail on the water. Furthermore, captain was under no authority to demand the same. In
this case, the court mentioned that it was the general duty of Police to consider necessary things
for maintaining peace among the crew (Del Vecchio, 2013).
In the case example of Roffey Bros, they were builders conducting the business on
contract basis. They refurbished about 27 flats belonging to housing corporation. The contract
contained a clause for late completion. Therefore, Roffey Bros subcontracted for carrying some
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of the work to to a carpenter named Williams. But, the carpenter got delay in his work due to
which he was offered a bonus payment to complete all the tasks on time. He continued to carried
on the work until the payments stopped. A case was filed against Roffey Bros for breach of
contract. In this case, the court held, the promise to make extra payment was valide and
enforceable because of the fact that a practical benefit was being obtained and it wasn't formed
on any fraudulent basis. Furthermore, Roffey Bros themselves offered to make extra payment.
Thus, the promise to pay addition was enforceable.
PART 2
Doctrine of tort
In the given case, Samantha, a client of local bank Extortionate PLC. Has fallen down
from the stairs due to the negligence of the bank to keep the carpet in the appropriate manner.
She got injuries which broke her wrist and injured some of the nails. The incident happened in
the premises of the bank. After some days, she got a mail from her friend which contained a link
of the social media of bank. When she visited that site, she saw that there were number of
individuals who have gone through same type of incident in the premises of the bank. Now, the
question is about tort in which the bank is considering at fault.
Common law in UK defined tort as a civil wrong conduct or act which is civil wrong and
unfair which causes someone else to suffer loss or harm, leading or giving to rise to liability for
the person who commits the tortious act (Luntz, H., and et. al., 2017). Furthermore, crimes can
also be considered as torts but the main reason behind legal action may not always be crime
because the harm may be caused because of negligence.
The word “tort” in the legal sense means wrong which may create situations in which one
party may suffer from damages for which claims can be made by the party suffered from the
loss. Tort law has been implemented with the view to protect interest of individuals which may
be threatened. But there are certain exceptions to this, which are not covered under this law for
protecting them (Cornford, 2016). Some of the interests which are covered in Tort law are as
follows:
 Harm to financial interests
 Harm to property
 Personal harm
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 Harm to reputation
 Harm to the due process of law
There are variety of parties who can face legal action under law of tort and these include
individuals, the Crown, companies, employees, employers, independent contractors, and many
others. Furthermore, a tort can be considered wrong only when the the below mentioned
elements are there:
Negligence- It is the event caused due to lack of reasonable care. There must be some
conditions for treating a situation in this category if it fulfils the following conditions which have
been provided below:
1. The negligent party was under a duty of care to the victim- This refers to the event where
the defendant is responsible and have duty of care towards claimant (Oliphant, 2012).
2. Such duty was breached- A breach in the duty of care must be breached because of
negligence. This is ascertained by applying the test of reasonable man in order to
determine whether the duty has been actually breached or not. Also, it give a clarity
which helps in deciding the category in which the individual is going to be put.
3. Causation which means negligence leading to injury or loss- The breach due to
negligence is capable of causing loss or damages to the individual. In other words, the
claimant must show the loss, damage or personal injury on the account of such
negligence.
4. Damage or injury occurred- There must be some actual loss or injury which may be
related to physical or mental personal injuries, financial loss, damage to property together
with this emotional distress and embarrassment are also included.
There are remedies available by which an individual can seek the claim for the damages
or loss suffered (Lewis and Morris, 2012). The two main legal solutions available for the
claimant which are as follows:
 Damages- It is the compensation provided in monetary form for the losses. It involves
financial characteristics in this. It is further divided into various types which have been
discussed below:
◦ Nominal- This is the amount which is awarded where the victim has not suffered any
loss.
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◦ Contemptuous- This is when claimant is successful but the court consider the whole
case without merits. A very small or negligible amount is paid as compensation.
◦ General- This is when the compensation is done for non-economic damages. These
include pain, mental or emotional distress.
◦ Special- This type of damage is shown as a part of the action in order to prove the
actual loss.
◦ Aggravated damages- In this type of tort, the court take the decision that it was
committed with wrongful or malicious intentions for raising questions on the
character of the claimant.
◦ Exemplary damage- It is related to payment of damage which is paid to the claimant
for some serious issues.
 Injunctions- It refers to the order of court which prohibits or restricts a party to carry
activities or actions. Courts have authority to award injunction in addition to damages.
There is the general rule in law of tort which states that any damages caused by wrongful
act or tort can be recovered for one time (Christie and Sanders, 2012). Furthermore, all the facts
for the case should be provided in the first instance and there is this fixed rule which says that
court does not entertain any case which is brought again for the same reason just because
damages occurred to be more serious than the claimant assumed during the first trial.
There are various defences which are available in law of tort such as vicarious liability
which is when the employee committed a mistake for the duties which have been provided under
the contract of employment. Second defence being contributory negligence which is used when
claimant is accused of acting in a careless manner at the relevant time and therefore, contributed
to the injuries or loss which they have suffered.
In the case give above, the defence that can be applied is contributory negligence because
the bank was being negligent enough to adjust the carpet at the right directions. There have been
number of similar incidents previously but the bank did not bring any action to correct the
mistake (Deakin and Markesinis, 2019). In this case, Samantha can take the bank to the court and
apply for damage as this was the case which happened because of the negligence shown by the
bank even after getting so many complaints about the same thing. Keeping the carpet like that
without making any efforts in correcting it on which people can walk easy and comfortably. It is
pure negligence which has been caused by the bank and due to which the many people have
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suffered from physical injuries. It was the duty of bank to put the carpet at the right place as it
was aware about the misplacement of the carpet. Hence, the damages can be claimed by
Samantha for the injuries suffered in her wrist and other parts of the body.
PART 3
Explanation of the statement “A corporation may be defined as a legal entity or artificial person”
According to the Companies Act, 2006, a company is an artificial judicial person having
a separate legal identity from its members along with a common seal and perpetual succession
and holds a capacity to enter contract, own properties, sue or be sued. This definition comprises
of number of characteristics which defines a company. Before starting a business in this
structure, the owner must have knowledge about the advantages and disadvantages of the same.
A corporation is the creation of law in the eyes of which it is recognised as an individual
legal personality having sole rights and liabilities (Waqas and Rehman, 2016). This principle
refers to the identification of a entity different from its members i.e. shareholders. It is an
artificial legal entity which has a corporate identity when it is registered under Companies Act,
2006. Law provides legal rights, duties and obligations just like a living being. It is difficult to
understand the meaning of artificial personality therefore, it can be known by going through the
features which are as follows:
 It acts through the directors who handle the business affairs on behalf of the company. In
simple terms, a company appoints number of individuals as directors who are collectively
known as board of directors. The board is responsible for making the decisions which
should be in the benefit or interest of the company. Directors are known as the brains of
the company who act as the agent. There is a fiduciary relations between directors and the
company along with principal-agent relationship (Salomon, Salomon V).
 It has legal capabilities and rights to make transactions on by entering into contracts, sue
any other party, open a bank account for depositing the money in the account, etc. These
rights are different from the rights of the individuals working in the company.
 When it comes to paying the taxes, the company is treated a different individual whose
income is assessed and calculated on the basis of tax slab. A company has to pay tax on
the income earned by it before distributing the profit to the shareholders.
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 When it comes to legal proceedings, it has right to sue and be sued. The directors can file
petition in the courts on its behalf for taking legal actions as individuals. This can be done
by hiring a lawyer who can handle the case for claiming and collecting damages.
When an entity is termed as artificial legal entity, it is means that there is an individual
legal existence in the eyes of law. It is also known as juristic person. A corporation is built
through a charter or statue or even by registration in order to get this status. It can be understood
by a landmark case Salomon v. Salomon and Co. Ltd. In which Mr. Salomon was the owner of
shoe business which was later sold for $39,000 to Salomon & Co. Ltd. Which consisted of
Salomon himself, his wife, his daughter and his four sons. The price for purchasing the business
was paid by making allotment of 20,000 shares and 10,000 debentures and the rest of the amount
was paid in cash to Mr. Salomon. The debentures contained a floating charge on the assets of the
company. After some years, it went into liquidation due to which unsecured creditors were given
the preference over debenture due to the fact that Salomon was a the same person. But by
considering the facts about the company, it has this company as a separate legal entity (Adriano,
2015).
A corporate is both i.e. legal entity and artificial person because it is different from a
natural individual. By treating it is a as an artificial person, it may have number of rights and
obligations but there certain rights which cannot be exercised by it. These include right to vote,
marry, hold public offices etc. Furthermore, it itself is responsible and liable for the actions and
liabilities of the company. Apart from this, a company cannot be treated as a legal person without
being registered under the relevant law. It cannot start the commercial activities without
obtaining the relevant certificates and completing the formalities.
CONCLUSION
From the above report, it has been concluded that law is significant in governing the
activities of individuals as well as organisations in a country. The stautes in the society are the
foundation on which all the decisions are made which can be applied within the organisation as
well for the people living in the country. Furthermore, there are number of legislations which
have been enacted for the business managers which should be followed. In addition to this, every
transaction should be completed by executing a contract between two parties including terms and
conditions that help in conducting the business in smooth and efficienct manner. Before starting
a business, the right type of organisation is required to be chosen so as to increase the advantages
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and limit the disadvantages. Also, organisations should have the knowledge about the
consequences of non-compliance with the laws. Together with this, all the remedies and
solutions for number of disputes and conflicts should also be known to the entities.
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REFERENCES
Books & Journals:
Bebchuk, L.A. and Jackson Jr, R.J., 2012. The law and economics of blockholder
disclosure. Harv. Bus. L. Rev. 2. p.39.
Fried, C., 2015. Contract as promise: A theory of contractual obligation. Oxford University
Press, USA.
Wilkinson-Ryan, T., 2012. Legal promise and psychological contract. Wake Forest L. Rev. 47.
p.843.
Del Vecchio, L., 2013. Enforceability of Business Contracts of Minors Eighteen Years and
Over. St. John's Law Review. 16(1). p.24.
Luntz, H., and et. al., 2017. Torts: cases and commentary. LexisNexis Butterworths.
Cornford, T., 2016. Towards a public law of tort. Routledge.
Oliphant, K., 2012. Cultures of tort law in Europe.
Lewis, R. and Morris, A., 2012. Tort law culture: Image and reality. Journal of Law and Society.
39(4). pp.562-592.
Christie, G.C. and Sanders, J., 2012. Advanced Torts: Cases and Materials. West.
Deakin, S. and Markesinis, B., 2019. Markesinis and Deakin's Tort law. Oxford University
Press, USA.
Waqas, M. and Rehman, Z., 2016. Separate Legal Entity of Corporation: The Corporate
Veil. International Journal of Social Sciences and Management. 3(1). pp.1-4.
Salomon, Salomon V. "The Legal issues arising from the following problems are that of;“lifting
the corporate veil” principle, the single economic entity doctrine, what is regarded as a
separate ‘Legal Personality’and also what type of relationship parent (holding)
companies have with their subsidiaries. A company is a legal person separate from its
members, as can be seen in what is regarded the most famous case in company law
Salomon v. Salomon and Co. Ltd. This therefore means."
Adriano, E.A.Q., 2015. The natural person, legal entity or juridical person and juridical
personality. Penn St. JL & Int'l Aff. 4. p.363.
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