Laws of Business Management | assignment

Law for Business Managers

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. The meaning of a ‘representation’ and how a mere representation can be distinguished from
a term of a contract.................................................................................................................1
2. The grounds under which dismissal from employment would be unfair at law................3
3. The main duties governing the company directors.............................................................5
4. The principles governing award of damages in the Law of Tort and the ways in which
damages may be limited.........................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Law for business managers means those areas or aspects of law which are of relevance in
decision–making for the people who are in management positions in any business organisation.
This law is used by the business managers in managing themselves along with the company's
business. The laws which are of importance for business managers are the law of contracts, law
of tort, business law, etc. Business law covers the laws which are of importance for a business
manager to function as this deals with the commercial transactions in a business.
The report provides an overview of various laws pertaining to business law, employment
law, law of torts and law of contracts through providing a possible solution to the problems by
applying the legal rules, legal reasoning and legal theories. The report focuses on various aspects
of these laws along with legal precedents and other relevant case laws.
MAIN BODY
1. The meaning of a ‘representation’ and how a mere representation can be distinguished from a
term of a contract.
While forming a contract or entering into a contract there are certain statements which
induces or made the parties to enter into a contract. There are various kinds of pre-contractual
statements which might give rise to contractual obligations, which are – Puffs, Terms and
Representations
A puff can be understood as a statement which does not give rise to legal consequences
as they are not taken into consideration and does not bind the parties legally. In the case of
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256 the advertisement was argued by the
defendants as puff which was rejected by the Bench.
In legal terms a 'representation' is a statement pertaining to a matter of fact or current
intention of the parties which the parties generally does not intend to make a contractual term
while having a contractual negotiation. These terms though induces the other party to enter into a
contract (Cohen, 2011). A representation is not a term of contract, but, in terms of a financial
transaction a representation is often treated as a contractual term, as held in the case Oscar Chess
Ltd. V Williams [1957] 1 WLR 370. Therefore, a representation is a statement of fact which
induces a party to enter into a contract which is made before or at the time of making a contract,
and this statement is either about a past fact or an existing circumstance which is in relation to
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the contract causing an influence on such party to enter into a contract. For instance, if a licensor
represents to a licensee that he has the power and whole authority to enter into an agreement and
can grant the rights under license to the licensee. A representation which is not true under rules
of contract, forms to be a misrepresentation (Peel, 2015). Since, it is not a term of contract, a
party cannot negate the contract on the basis of misrepresentation but the party which has
suffered can make a claim for damages.
A term of a contract is a provision which forms part of a contract which gives rise to a
contractual obligation and breach of any contractual obligation can give rise to litigation or claim
for damages (Lawson, 2011).
Difference between a term of contract and a mere representation
The difference between a mere representation and the terms of a contract is that whenever
a statement is made in the course of negotiations can either be a contractual term or
representation. The determination of such a statement as a contractual obligation and
representation is must as the cause of action and remedy will be ascertained in accordance to the
nature of the statement (McKendrick, 2014). If a statement is a contractual term in a contract
which is not fulfilled then the aggrieved party might sue for the breach of contract as there is
automatically a right given to the party to claim for damages whereas if a statement is a mere
representation which is not true then the aggrieved or innocent party can initiate an action for
misrepresentation. An innocent party can claim for damages when the statements made can be
proved to be fraudulent or negligent as under the Misrepresentation Act, 1967 provides that an
innocent representation does not result in a claim for damages unless it falls under any exception
under section 2(2) of the Act, 1967.
Another distinction which the courts consider for differentiating between the two terms is
whether the statement is in writing or not, as if the statement is in writing then it will be assumed
that it forms a term of a contract and not representation. There are various rules pertaining to this
concept, which are -
The parol evidence rule states that the parties cannot claim the existence of another from
other sources if the terms are written in a contract (Fried, 2015).
Collateral contracts are oral agreements which led to formation of written contract
which runs aside the written contract. In the case Henderson v Arthur [1907] 1 KB 10 held that
collateral agreement would only be considered if the terms in both the contracts are different.
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In the given problem Monica could claim for damages from Chandler on the ground of
misrepresentation as the statements made while negotiating resulted into a contract and she
bought the car on the basis of his knowledge and expertise as held in the case of Dick Bentley
Productions v Harold Motors [1965] 1 WLR 623. But, Chandler has a defence under the
Misrepresentations Act, 1967 if the statements made by him falls under the purview of innocent
representations.
2. The grounds under which dismissal from employment would be unfair at law
In general terms unfair dismissal means that the employment contract is terminated by
the employer without having a fair reason to do so. According to business law dictionary unfair
dismissal means 'termination of a contract of employment for unfair or inadmissible reasons'
(Unfair Dismissal, 2018). Whenever termination is challenged in a court of law, the employer
has to prove that the termination was on substantial grounds, such as gross misconduct, etc. and
the court takes into consideration the statutory rights of the employee.
The persons employed in any of the jobs have the protection of law from any unfair or
unethical grounds of termination (Barrett, 2003). The Employment law provides an employee
protection against being subjected to unfair dismissal and if the employer is terminating an
employee then he has to establish a reason which are covered under the categories provided
under the Employment Rights Act, 1996. The categories under which an employer can be
dismissed or terminated are as follows:
 Firstly, the employee lacks capability or qualifications in relation to the work, for which
employee is recruited.
 Secondly, the dismissal is due to the conduct of the employee, for instance, the
employees' conduct was dishonest or amounted to gross misconduct or employee failed
to follow the instructions etc.
 Thirdly, if the employer can prove there was a genuine redundancy.
 Lastly, if the employer can establish that continuing with the employment will result in
contravention of a statute (Ewing and Hendy Qc, 2012).
There are another substantial grounds under which the employer could dismiss or
terminate the employee before the qualifying period of employment actually terminates
according to the terms of the contract. But, since these are not specified under the provisions of
the legislation the employer has to prove a strong case before terminating the employment of the
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employee. For instance, if there are personality clashes between the employer and employee, or
wherein the client expressly wishes that the employee should not be continuing with
management of the clients' account, or where the employee unreasonably refuses to accept any
changes in the terms of the contract. These grounds are determined by the court according to the
facts and circumstances of the case (Acharya, Baghai and Subramanian, 2013).
The dismissal or termination of an employee has to be proved by the employer to be
covered under one of the provisions specified in the Act, 1996, if the employer fails to establish
that the dismissal falls under the act then such a dismissal is termed to be unfair. Further, even if
the employer succeeds in proving that the ground of termination falls under the provisions of the
act then also it is the discretion of the Employment Tribunal to decide in accordance to equity
and on the merits of the case.
Qualifying period of employment for unfair dismissal and Automatic unfair dismissal
Any employee to make a claim for unfair dismissal has to e employed for a period of 23
months and 3 weeks without any breaks in between and should not be serving a notice before
expiration of 2 years of employment apart from certain exceptions wherein the claim for unfair
dismissal can be made without serving the notice period. This simply means that the employee
has to be under employment of the employer for a period of not less than 2 years. There are
certain exceptions to the notice period under which a dismissal will be automatically unfair with
no specific period of qualifying time such as dismissal under health and safety reasons, or under
business transfer, or participating in trade union activities or while asserting statutory
employment right or whistle-blowing, etc.
Compensation
The Employment Tribunal can award compensation which includes basic award and
compensatory award. The basic award is provided under a statute which is calculated by
multiplying the important factors consisting of length of continuous service, employees' age and
a weeks' pay. The tribunal can reduce the amount of basic award if it is satisfied that the conduct
of the employee was unreasonable and unjustifiable before dismissal (Collins, Ewing and
McColgan, 2012). The compensatory award according to the Employment Rights Act, 1996 the
amount of the award will be in accordance to the discretion of the Tribunal, that is, which it
seems to be just and equitable considering the loss of current and future wages, etc.
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Therefore, applying the above mentioned law Monica can suggest the Board about the
terms under which dismissal of the employee would amount to be unfair along with the legal
implications arising out of the such dismissal, which is litigation and claims for compensatory
awards under the Act, 1996.
3. The main duties governing the company directors
The Companies Act, 2006 is the prime legislation which deals with the commercial
transactions and other dealings in a business organisation. Any business organisation functions
through two bodies of people, which are the directors and the shareholders. The board of
directors in an organisation are in charge of the management of the business activities as they
take major strategic and operational decisions of the company and ensures that the statutory
obligations of the company are met (Mann and Roberts, 2011). As an individual director, the
duty of a director is to participate in the meetings of the board so that the board could come to
decision to carry on the business of the company. Monica can advice the two new directors of the
company Young & Ernst LLP about their roles and responsibilities in accordance to the
provisions of the Act, 2006. The main duties governing the directors in an organisation are as
follows:
 Act within the powers: The director must act in accordance to the articles of association
which is the constitution of the company. The director should exercise within their
powers to carry out the functions of the company, as there are legal implications if the
directors act ultra vires of their powers (The responsibilities and duties of a company
director, 2018).
 Promote the success of the company: A director should act in good faith in order to
ensure the promotion of success of the company for the benefits of the members of the
company. A company's success means the long term increase in value but it is the duty of
every director to decide and act in good faith as to whether the taken course of action
would be appropriate or not.
 Exercise independent judgement: A director must exercise independent judgement while
making the decisions. The director should be acting in accordance to the company's
constitution and this should not affected by the independent judgement of a director
(Mortimore, 2013).
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 Exercise reasonable care, skill and diligence: A director is expected to exercise care, skill
and diligence which would be used by an ordinary prudent person. This includes the
general knowledge, skill and experience that a person possess and which are expected
from a reasonable person to carry out or perform any function. A directors' expected care,
skill and diligence can be measured by taking into consideration both the objective and
subjective standards.
 Avoid conflicts of interests: A director should try to avoid getting into a situation in
which he has or could have a conflicting interest, meaning thereby the director should
avoid having an interest which is conflicting to the interests of the company. This
includes instances of exploitation of property or information or opportunity etc.
Conflicting situations could arise if a director has multiple directorships, i.e., if a director
is a major shareholder along with a competitor or customer of the company, etc. or the
director is also an advisor to the company, or if any related person of director is in a
position which could create conflicting situations. In these situations a director is
expected to stick to the constitution of the company, regulate his behaviour or take
approval before coming on to a decision (Conac, 2013).
 Does not accept benefits from third parties: As a director of Young & Ernst LLP should
not accept benefits from a third party given because of the virtue of being a director or
because of any action taken as a director. The duty to not to accept benefits is not
infringed if any director is accepting such interests are not likely to give rise to any
conflict of interests in that regard (ANDREW, 2016).
 Declare interests in proposed or existing transactions of the company: A director is under
an obligation to disclose or declare whether he is directly or indirectly have any interest
in any of the transaction or agreements of the company. A director is responsible to make
any such disclosure before entering into such a transaction or agreement and in case there
is an existing transaction then the director should make a disclosure within a reasonable
time. The non disclosure does not create any liability if the directed having an interest is
not aware of existence of such an interest or the other directors are already aware of the
interest, or the interest does not amount to be conflicting directly or indirectly (Laster and
Zeberkiewicz, 2014).
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The directors owe their general duties to the company of which they are director of and
not to any other group of companies or shareholdings, as the company can take any action
against breach of duty under its own name. The penalty for breach of general duties is injunction
or claim for damages or compensation or criminal liability for non disclosure of interests.
4. The principles governing award of damages in the Law of Tort and the ways in which
damages may be limited
A tort is a civil wrong which is committed against an individual and not against the state.
The main principle underlying the law of tort is that an individual has interests which have
protection of law and their infringement results in claims for damages. Any person who suffers
loss or damage because of the wrongful act is entitled to a remedy, which is in the form of sum
of money, called damages (Deakin, Johnston and Markesinis, 2012).
Damages are awarded in tort law to restore the injured person in the same position as he
would have been if the tort was not occurred, which is different from the concept of
compensation in the law of contract as that aims to put the innocent party in the position he
would have been if the terms of the contract were performed. The principle of damages under
law of tort is subjected to the other principles of remoteness, causation and mitigation. The
principle of recovering damages under the English law of Tort was laid down by Lord Blackburn
in the case of Livington v Rawyards Coal Co. [1880] 5 App. Cas., 25 at p. 29, as the amount of
money which is awarded to the injured person to put him back into the position he would be if he
had not suffered the wrong.
There are two types of damages – compensatory and punitive.
 Compensatory damages can be further classified as the general damages and the special
damages, which are awarded in case of economic loss relating to earnings, property or
medical expenses as special damages and for the non-economic loss such as pain,
suffering and emotional distress, general damages are awarded (Van Dam, 2013). In the
case of The Golden Victory [2007] 2 AC 353 the House of Lords held that while
assessing the damages the court should consider the effects of subsequent events on the
claimant's loss.
 The punitive damages are awarded with the intent to reform or deter the defendant and
not only to just compensate the plaintiff. These are awarded in special cases pertaining to
action of the defendant involving blatant negligence, malicious or gross rashness, etc.
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Reduction of Damages
The Law Reform (Contributory Negligence) Act, 1945 provides provisions pertaining to
reduction of damages of the claimant if he himself is guilty of contributory negligence. The
damages are reduced by the court in such cases to the extent it thinks just and equitable by
considering the claimant's share in cause of damage (Cornford, 2016).
In case of Liebeck v McDonald's Restaurants (1994), the plaintiff spilled the coffee in
her lap resulting in second and third degree burns which required skin grafting. After being
refused a claim for medical expenses the lady filed a litigation and it was discovered that there
were several complaints of severe burns caused by the company's coffee. The jury decided that
the product of the company was injurious and harmful and awarded both compensatory and
punitive damages to the plaintiff. Though, in this case the court reduced the damages on the
grounds of plaintiff's own fault and negligence.
Similarly, in the given case Joey can initiate a claim against Ross for the accident which
resulted in causing him a fractured leg. But, since he was also at fault by continuing walking on
the road, the court would reduce the amount of damages.
CONCLUSION
It can be concluded in the given report that business law encompasses all the transactions
and activities in a business organisation. A business manager is responsible for knowing the rules
and legislations covering the business transactions. The report throws light on the concepts of
representation and terms of contract, unfair dismissal of employees, and the duties and
responsibilities of the directors in any company. The report briefly explains the importance of
damages in the law of tort and how these damages could be limited or reduced.
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REFERENCES
Books and Journals
Acharya, V. V., Baghai, R.P. and Subramanian, K. V., 2013. Labor laws and innovation. The
Journal of Law and Economics. 56(4). pp.997-1037.
ANDREW. KEAY, L.L.B., 2016. DIRECTORS'DUTIES. JORDAN PUBLISHING Limited.
Barrett, R., 2003. Small business and unfair dismissal. Journal of Industrial Relations, 45(1).
pp.87-93.
Cohen, G. M., 2011. Interpretation and implied terms in contract law (pp. 125-151).
Cheltenham, UK, Edward Elgar.
Collins, H., Ewing, K. D. and McColgan, A., 2012. Labour law. Cambridge University Press.
Conac, P. H., 2013. Director’s Duties in Groups of Companies–Legalizing the Interest of the
Group at the European Level. European Company and Financial Law Review. 10(2).
pp.194-226.
Cornford, T., 2016. Towards a public law of tort. Routledge.
Deakin, S. F., Johnston, A. and Markesinis, B., 2012. Markesinis and Deakin's Tort Law. Oxford
University Press.
Ewing, K. D. and Hendy Qc, J., 2012. Unfair dismissal law changes—unfair?. Industrial Law
Journal. 41(1). pp.115-121.
Fried, C., 2015. Contract as promise: A theory of contractual obligation. Oxford University
Press, USA.
Laster, J. T. and Zeberkiewicz, J. M., 2014. The rights and duties of blockholder directors. The
Business Lawyer. pp.33-60.
Lawson, R. G., 2011. Exclusion clauses and unfair contract terms. Sweet & Maxwell.
Mann, R. A. and Roberts, B. S., 2011. Smith and Roberson’s business law. Cengage Learning.
McKendrick, E., 2014 Contract law: text, cases, and materials. Oxford University Press (UK).
Mortimore, S., 2013. Company directors: duties, liabilities, and remedies. Oxford University
Press.
Peel, E., 2015. Treitel on the Law of Contract (Vol. 414). London: Sweet & maxwell.
Van Dam, C., 2013. European tort law. OUP Oxford.
Online
Unfair dismissal. 2018. [Online] Available through
<http://www.businessdictionary.com/definition/unfair-dismissal.html>./
The responsibilities and duties of a company director. 2018. [Online] Available through
<https://www.burges-salmon.com/news-and-insight/publications/the-responsibilities-
and-duties-of-a-company-director/>./
General principles of Tort law. 2011. [Online] Available through
<https://elearn.unisofia.bg/pluginfile.php/100711/mod_resource/content/1/
understanding_torts.pdf>./
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