Law of Organisation and Liability Incurred by Mary with Barry Bench

This document discusses the law of organisation and liability incurred by Mary with Barry Bench in a trade fair. It also explores the parties involved and the attributes of law. The liability incurred by Mary with Barry Bench is analyzed in detail.

Running head: LAW
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Table of Contents
Law of Organisation........................................................................................................................4
Part A...........................................................................................................................................4
Parties of the Two Contracts framed in the Trade Fair...........................................................4
Attributes of Law.....................................................................................................................4
Liability Incurred by Mary with Barry Bench.........................................................................5
Part B...........................................................................................................................................6
Forms of William’s Investment...............................................................................................6
Advantages and Disadvantages of Different Forms....................................................................7
Legal Stock Form....................................................................................................................7
Legal Investment Funds...........................................................................................................7
Liquidity Claim by William.....................................................................................................8
Part C...........................................................................................................................................8
William as a Director...............................................................................................................8
Level of Care and Skill to Perform Duties..................................................................................9
Part D.............................................................................................................................................10
Task 3.............................................................................................................................................12
Case Overview...............................................................................................................................12
Major Parties Involved in the Case................................................................................................12
The Major Elements of the Case...................................................................................................13
List of Evidence and Documents Date Wise.................................................................................14
1st December 2017.....................................................................................................................14
7th January 2018.........................................................................................................................14
11th January 2018.......................................................................................................................14
4th June 2018..............................................................................................................................14
27th June 2018............................................................................................................................14
7th February 2019.......................................................................................................................15
September 2019.........................................................................................................................15
List of Documents and its Related Amendments and Additions of Document-F.........................15
Transactions...................................................................................................................................18
Question 1......................................................................................................................................18
Question 2......................................................................................................................................21
Question 3......................................................................................................................................23
References......................................................................................................................................26
Bibliography..................................................................................................................................30
Appendix........................................................................................................................................32
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Law of Organisation
To: 123 OK LLP
From:
Subject:
Date: 29.12.2018
Part A
Any inappropriate action, which is being carried by any member or any action taken by a
member against the LLP is further referred to as a breach of contract. In case if this happens, the
damage caused to the LLP must be paid by the member (offender). In addition, the rights and
position of the member in the LLP held by the member (offender) can be withdrawn1.
Parties of the Two Contracts framed in the Trade Fair
The parties associated with the two contracts at a trade fair are Mary Mowlar, Kerry Kaynine,
Eric Seathrew, and Barry Bench. In this context, these four parties have agreed on a trade fair
business. The oral agreement is a contract made between the two business parties orally and not
in written form. This agreement as per the UK law is considered to be legal. However, it is
observed that oral contract encompasses written agreements2. Agreed terms and conditions made
through the oral process are stated under the contract terms and conditions in a written form3.
Attributes of Law
The case scenario portrays the same story but in this case, 123 OK is referred to as the LLP,
whereas the members, in this case, are Mary Mowlar, Kerry Kaynine, and Ishtiaq Insiza. Thus,
1Russell Crooke, “LLPs and Personal Duties and Liabilities of Members,” Solicitors, (2012): 1.
2Raymond L. Sweigart, R. L. ‘English Contract Law and Oral Contracts your word may still be your Bond’, Global
Legal Post, (2012): 1.
3Lawdit Solicitors. “Limited Liability Partnership Agreement,” Limited Liability Partnership Agreement, (2014): 19.
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by considering the Company Act, Ishtiaq Insiza is not informed and is unfamiliar with the LLP
agreement, which is being set out between Mary Mowlar, and Kerry Kaynine with Eric
Seathrew, who is the sole trader. Mowlar and Kaynine purchased the dental x-ray unit at £4,000
on the basis of the agreement set out between these two parties. Based on the LLP Act, the
parties associated with the two contracts of trade fair are responsible for business transactions
that are held between the agreed partners. Every action taken by the parties against or on behalf
of the trade fair agreement portrays that they are responsible for all the damages and
compensation made against/for the company. Hence, focusing on the trade fair agreement
between Mary Mowlar, Kerry Kaynine with Eric Seathrew, they are responsible for their actions
along with the damages incurred against or in the favor of the agreement between them. Under
the second trade fair oral agreement, Mary Mowlar and Barry Bench are also responsible for the
action as well as damages incurred against/in favor of the agreement between them4.
Liability Incurred by Mary with Barry Bench
According to the LLP Act 2000, it is understood that any oral agreement between the two parties
must involve a written application or any sort of evidence. This is for the purpose of making a
future business decision in case of any illegal act or damage caused to the other party. A partner
has a higher chance of claiming compensation or damage caused to them when they are able to
provide evidence such as the written agreement application form of the oral contract. The LLP
Act 2000 also states that any fraudulent activity that is being taken by a party after the agreement
is highly liable for claiming any sort of damages or compensation. On a similar note, Barry
Bench has performed a fraudulent action by charging £10,000 for the dental chair to Mary
(another party). In addition, Barry Bench has charged an excessive amount of £5,000 by selling
4 Russell Crooke, “LLPs and Personal Duties and Liabilities of Members,” Solicitors, (2012): 1.
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the dental chair, which was easily available at an actual price of £5,000. Thus, Mary is highly
liable for receiving compensation of £5,000 from Barry Bench5.
Part B
Forms of William’s Investment
Since William seeks to invest in the new 123 OK Limited Company for a better future of the
company and directors, he must invest in a legal form of stock as well as investment funds. With
this, an additional working capital can be generated along with the prospective advertising as
well as marketing expenses along with expanding its business at the same time6. This legal form
of investment made by William must adhere to the legislation and norms stated under the
Companies Act 2006. Thus, making an investment in the business of 123 OK Ltd can enable the
company and William to seek greater returns. This can also help in building a better future of the
business with respect to the expansion. Higher loss due to any sort of business issues in the
future can be reduced. This outcome is guaranteed if the investment is made through a legal form
of stock and legal form of investment funds by William. In addition, William can also be a single
shareholder of the company by investing through a legal form with a total of £200,000 in the
company7. The best decision for William is to invest in a company’s fixed assets such as land or
buildings, as they are meant for a longer duration. This also ensures a continuous growth of the
income as well as profits for the company and William.
5Legislation, “The Limited Liability Partnerships (Application of Companies Act 2006) regulations,” Limited
Liability Partnerships, (2009): 10.
6Types of investments, 2018 (accessed December 30, 2018); available from http://www.finra.org/investors/types-
investments>.
7 BIS, “A Guide to Legal Forms for Business,” Department for Business Innovation & Skills, (2011): 5.
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Income or any sort of profit can only be acquired by William. The growth of 123 OK Ltd
indicates the creation of additional working capital as well as expenses to be made for the
company’s advertisement and marketing purpose8.
Advantages and Disadvantages of Different Forms
Legal Stock Form
The advantage of investing in the company through a legal stock form is that it provides an
assurance to the investor for being a stock or shareholder of the company. In addition, it has
further been observed that this form of investments favors in long-term as well as short-term
growth of the company. Financial goals set by the investors through this form of investment
focuses on setting goals such as generating higher values on the basis of the certain time period
as well as making savings at the same time. In case, loss the company experiences loss, the
investor will only lose the amount, which has been invested by him during the same phase. The
investors with the support of legal stock form can avoid most of the risks that are associated with
making an investment in the company9. On the other hand, the disadvantage of this form of
investment is that the Federal Deposit Insurance Corporation (FDIC) never ensures an investor to
receive a greater return from their stocks purchased or invested. Contextually, the past results in
the stock market do not hint or give an opinion on the current result of the stock market. Thus,
some of the stocks in the market may cost higher but generate a lesser return10.
Legal Investment Funds
The benefit associated with legal investment fund is that it incurs the lower cost of funds,
especially when there is a single investor. Through this form, an investor can access a vast range
8eGyanKosh, “Unit 5 Methods of Raising Finance,” Financing Business, (2011): 13.
9SEC SEC, “Saving and Investing,” A Roadmap To Your Financial Security Through Saving and Investing, (2017):
12.
10SEC, “Mutual Funds and ETFS,” A Guide for Investors, (2017a): 22.
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of market along with the market securities. In addition, this can further help the investors to
make a decision on investment easily. Investments risks are not present in this form of
investment. In addition, liquidation of the funds that are open-ended has been observed to be
possible on a daily basis. Some of the disadvantages to be faced by the investor include a change
in fund prices due to the fluctuation of the investment securities. A return from the mutual fund
is not always guaranteed. In some cases, a higher investment may not be allowed to the investor
by the funds. Investment on funds is also stated to be an inappropriate solution or option for an
investor to choose for attaining a better return11.
Liquidity Claim by William
If a liquidation of the company occurs, then the single investor or a single shareholder has certain
rights on the basis of the Insolvency Act 1986. This Act states that if a company has a single
investor, then he/she has every right to claim the overall invested amount through various
actions. Thus, among these actions, selling of assets is often initiated by the investors for the
purpose of gaining their invested amount back from the company. On a similar note, William has
every right to take an action on his basis, which may be through selling the assets of 123 OK Ltd.
Selling these assets of the company will favor William in gaining the invested amount of
£200,000 from 123 OK Ltd12.
Part C
William as a Director
123 OK Company has been identified as a limited company with three recently appointed
directors who are Mary, Kerry, and Ishtiaq. In addition, William further holds an equal ordinary
11Eurobank, “Advantages and Disadvantages of Mutual Funds,” Open Architecture, (2014): 1.
12The Insolvency Service, No date (accessed December 31, 2018); available from
https://www.gov.uk/government/organisations/insolvency-service.
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share of £25,000 similar to that of the other three directors and has been appointed for taking
actions for several areas on the behalf of 123 OK Ltd. He further takes initiatives such as making
business decisions, managing business activity, the decision on insurance, finance, personnel,
and marketing for the company. Similar to the other three directors, William also performs the
duty of the directors as stated above. This further indicates that the rate of risk is also equally
faced by William. In addition, the other three directors may experience a loss through reduction
in equal ordinary shares. As the directors have set their main objective of achieving the long-
term success of the company, this objective is also shared by the newly appointed performer
(William). The major problem in this scenario is that the actual three directors are not present
and the decision is never taken under their absence. Understanding the responsibilities and duties
assigned by the three directors under their absence in the 123 OK Ltd along with adhering to the
Companies Act 2006, the court cannot assign William as a director of 123 OK Ltd13.
Focus on the Members’ Voluntary Liquidation (MVL), it is understood that the Court can further
liquefy 123 OK Ltd to have three directors of the company is absent and the remaining director
(William) is unable to make a decision due to the financial loss of the company. Additionally,
William is unable to generate the idea as well as apply any effective financial strategy to cover
the losses by paying liabilities on behalf of the 123 OK Ltd14.
Level of Care and Skill to Perform Duties
In the UK, the directors of a limited company follow a principle of higher care, diligence, and
skills in order to perform various duties of a director. This type of reforms is witnessed in the
legal companies and is essential, as a director is the major body of a company, who is
13Chivers, “The Companies Act 2006: Directors’ Duties Guidance,” Corporate Responsibility, (2013): 14.
14Insolvency, No date (accessed December 31, 2018); avaialable from
http://www.hse.gov.uk/enforce/enforcementguide/investigation/identifying-insolvency.htm#Liquidation.
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responsible for directing and controlling the business operations of the company under each and
every area. The manifestation of skill is to be present within a director. Every worker or the
higher members of the company needs to serve the director. This is also stated under the legal
business reforms for having a skill through which they can create liability as well as deal with
the challenging situation of the company. Directorial accountability along with risk-taking and
risk handling ability can be considered to be the major qualities that fall under the requirements
of skills within a director. The major aspects to be present within the area of skill and care
include diligence or a higher level of commitment under the performance of responsibility and
caring quality. The ability to devote themselves to protecting their company and generating
higher returns requires higher skills and diligence15.
Part D
A limited company changing its name must follow a legal procedure. Thus, under this process, a
major criterion involved is identified to be needed for approvals by several authorities. In
addition, the director is one of the authority and secretary of the state to be the other authority.
Seeking approval from these two authorities can further allow a limited company to change its
name. In case if approval is acquired from the directors, then it is not legally bound to change the
company’s name. Similarly, the four directors, who are Mary, Kerry, Ishtiaq, and William have
approved for changing the name of 123 OK Ltd but for making the company’s new name Port
Talbot Pearlies Ltd legal. Thus, an approval from the Secretary of State is essential. This is
mainly due to the fact that new legislation, where the limited companies are prohibited from
keeping its sensitive names. This sensitiveness often affects the company and public as well.
15Adamu, Hannatu, “An Examination of the Director's Duty of Care and Skill Under Company laws
of Nigeria and the United Kingdom,” Department of Commercial Law, (2015); 19.
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Thus, the legally proposed name is preferred under the legislation followed by the limited
company in the UK16.
Through this legal approach, 123 OK Ltd can further be legally approved for being named as
‘Port Talbot Pearlies Ltd’ encompassing 4 directors. In terms of meeting the board of directors of
Port Talbot Pearlies Ltd, a resolution of assuming a mutual goal, following a legal approach in
each area in the company along with developing several regulations and norms of the Port Talbot
Pearlies Ltd must be initiated. Adhering to the Companies Act 2000 in every business operations
of the company must also fall within the initial resolution. Besides these, a decision relating to
investing and issuing of new shares must also be discussed during the meeting held in the
company. The new dividend shares, as well as votes on being entitled, must also be initiated on a
daily basis.
16?Incorporation and Names, 2018, (accessed December 31, 2018), available from
https://www.gov.uk/government/publications/incorporation-and-names/incorporation-and-names.
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Task 3
Memorandum
TO: REBECCA JONES
From: YOUR NAME
Subject: LAW
Date: 01.09.2019
Case Overview
The case is of breach of contract, as one of the parties, Always Insurance Limited (AIL) has
breached the contract by not helping its policyholder Mr. Emmanuel after the incident fire
breakout, which damaged the property in the premise.
Major Parties Involved in the Case
The major parties involved in the case are Mr. Emmanuel Ajala, who operates a gastro house pub
named, ‘The Water Pilot’ and Always Insurance Limited (AIL), which offers insurance to the
gastro public houses. In this context, Mr. Emmanuel Ajala in 1st December 2017 insured the
public house for 12 months period. On 7th January 2018, the public house was completely
damaged with the fire, as a result of which the public-house was closed for five months until
May 2018. Therefore, in the first instance, Mr. Emmanuel on the basis of insurance wanted to
claim AIL for certain amounts. The amounts were calculated on the basis of the business
earnings, Mr. Emmanuel for the past 2 years. The amounts calculated were £147,163 for material
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damages and £197,820 for business interruption. This was because both of these sections were
covered by the insurance policy offered by the AIL.
The Major Elements of the Case
Mr. Emmanuel also provides the account details of the past two years as evidence for supporting
the claim that was made. However, the case scenario is that AIL does not accept the claim and
rejects it on 4th June 2018. AIL mentions to Mr. Emmanuel that policy no-1234ABC is
unacceptable for the damages as well as expensive for the business interruption. This was
mentioned by AIL that after the completion of the investigation, it was found that the fire started
from the waste bin of the kitchen, which may be as a result of burning cigarette end when mixed
with paper napkins that led to the fire outbreak. Therefore, relying on its investigation results,
AIL relied on policy clause 3(b) and 4 and then mentioned that they are not liable to pay Mr.
Emmanuel’s claim. Furthermore, AIL also stated that the amount, which was to be claimed were
high even if AIL was liable to pay for the damages and the business interruption.
On the contrary, Mr. Emmanuel states that in the evening of 6th January 2018, he was in the pub
until its closure at 00.45. He further stated that the fire may not have been started from the waste
bin of the kitchen, as he remembers that he himself had emptied the dustbin prior to closing the
pub. In addition, he also made sure that none of the staff puts anything on the emptied bin rather
take all the wastes such as napkins in the bag and the collection of garbage is kept on the
roadside so that local council can further collect it at night. He further asserted that he was in the
pub on that evening with the chef Mr. Roberto Caldera and two other staff Wendy Rivera and
Ben Carlucci. Moreover, he states that all the staffs do smoke but the rules have been made to
smoke outside. Subsequently, the patio smoking area for customers is also arranged in the pub.
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List of Evidence and Documents Date Wise
1st December 2017
Mr. Emmanuel Ajala bought the insurance from AIL to ensure his premise of ‘The Water Pilot’.
The document of insurance policy number 1234ABC is the evidence for the claim.
7th January 2018
‘The Water Pilot’ was damaged by fire.
11th January 2018
Mr. Emmanuel Ajala mentions in a diary that Ben Carlucci, his staff received a telephone call on
11th January 2018 from one of a bloke named Carlos, who worked in another restaurant. Carlos
told Ben that when he passed by ‘The Water Pilot’ on 7th January 2018 around 1 am, he
witnessed few teenagers letting fireworks in the patio area, which was pub’s smoking zone.
Carlos further stated that he saw a lot of smoke but he did not think that it would be such intense
but he was aware of the fire only when he read the news today, which was a week later. The
phone call was proof.
4th June 2018
AIL sent a letter to Ajala stating that the investigation concluded that the cause of the fire was
raised in the waste bin of the kitchen. Therefore, on the basis of clause 3(b) and 4, the liability
for the claim was rejected.
27th June 2018
Mrs. Louise Tan reported that she rejects the conclusion made on the 4th June 2018 by AIL. In
this aspect, the rejection was made after speaking to the CFO, viewing photographs and videos
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of before and after the fire. The conclusion was also rejected after speaking to loss adjustors
involved in the case from AIL’s side.
The rejection was made because AIL stated that fire was caused by the dustbin. On the other
hand, Mrs. Tan conducted a test where only 4 out of 300 bins catch fire. All four bins were at
least half while at ‘The Water Pilot’, before closing the pub, Mr. Emmanuel cleaned the bins half
an hour ago and only 6 customers were there at that time. Therefore, she mentions that the risk of
fire was less from the dustbin rather it could be because of the stray fireworks.
7th February 2019
Robinsons LLP received a written report from Mrs. Tan, which revealed that the result obtained
in 27th June 2018 remains the same and also complies with part 35 of Civil Procedure Rules,
1998.
September 2019
Mr. Emmanuel instructed Robinsons.
List of Documents and its Related Amendments and Additions of Document-F
In document F, point 1 is appropriate as a reference number, a specific date or a brief description
has been mentioned17.
The point 2 of document F should be amended, as it has a specific date but failed to produce any
brief description and reference number. The amendment should be that apart from just the date,
the point should also have a brief description of the clauses, coverage, warranties, and insurance
policy number. The point 2 can be amended as the claimant’s proof of evidence, the insurance
17? Hogan Lovells, “Disclosure of Documents in Civil Proceedings in England and Wales, Paralympics GB,”
Contents, (2017): 5
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policy number 1234ABC was signed by the claimant on 26 July 2018. This insurance policy
provided coverage to ensure varied events such as fire, explosion, storm, earthquake, flood,
ground heave, and subsidence. The important points for coverage were for material damage and
business interruption18.
Likewise, point number 3 of the F document can also be amended. It can give brief about that
evidence presented on 27th June 2018 matched with the evidence presented on 7th January 2018.
This was a report provided by Mrs. Louis Tan. The letter rejected the conclusion made by the
AIL stating that it was not the cause of the fire19.
Furthermore, in document F, there is certain information provided by the solicitor, which is to be
inspected, amended as well as recommended20.
The point 1 in the second paragraph of document F is to be amended, as it has not mentioned
date regarding when and which document was to be transferred. In addition, it also did not
mention any specific party to receive it. The point 1 should mention respective document with
date and reference number21.
Following the same paragraph point, 2 is also to be amended, as there is no specific date and
reference number. As per list of documents, reference number should be included with a specific
date and the document should be listed following the date order22.
18Hogan Lovells, “Disclosure of Documents in Civil Proceedings in England and Wales, Paralympics GB,”
Contents, (2017): 5
19Ibid
20Ibid
21Ibid
22Ibid
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The next point 3 should be amended because the letter is not addressed with a reference number
and a brief description of what the letter mentions23.
The point 4 should be amended, as it should have a brief description about the content a well as
the prime witness Carlos and Ben, who received the call that provided a new dimension for the
case24.
23 ? Hogan Lovells, “Disclosure of Documents in Civil Proceedings in England and Wales, Paralympics GB,”
Contents, (2017): 5
24 ? Hogan Lovells, “Disclosure of Documents in Civil Proceedings in England and Wales, Paralympics GB,”
Contents, (2017): 5
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Transactions
Question 1
To,
Niko Koban,
From: [e-mail]
After analysing the various aspects of employees job satisfaction, certain factors have been
observed, which can be considered to be the major reasons behind the recent behaviour displayed
by the employees. As per the information, three employees are not trying to leave the
organisation but the other five are facing certain issue in the Aiko Linens (ALs) working sector.
Prior to explaining the major problems along with relevant laws and legislation among other
ethical factors have been elaborated in order to provide adequate as well as a clear vision of the
issue. Based on the Agency Workers Regulations Act 2010, it has been observed that an
organisation must maintain certain conditions for creating a strong relationship with the
employees25. These include payment structure, the work duration, night work shifts or overtime
work, rest period in a day, breaks during the working period, and the annual leave structure. Any
organisation in the UK region must incorporate the above-mentioned factors while operating a
business. However, each of these factors is well maintained and provided in AL but the working
in Pomona (Bedding) Ltd (PB), these aspects may be breached26. As PB is a huge organisation,
the work environment and the policies are completely different from that of the AL. Hence, each
of the above-mentioned aspects of Agency Workers Regulations 2010 may not work. In addition,
AL’s employee may not receive adequate value in PB. At the same time, inequality may arise,
25 Doug Pyper, “Key employment rights”, House of Commons Library, no. CBP 7245, (2018):15..
26 Ibid
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which will affect the work motivation and skill of the AL’s employees. This is the first reason,
which influences AL’s employees to work with PB.
According to Silkin (2003)27, it has been identified that there are certain factors, which influences
the motive of AL’s workers. In this context, the work-life balance of the employee may get
affected due to the entrance of PB. At the same time, the stress level of AL’s employees can also
increase if PB allocates external tasks. Secondly, the wages or salary volume of the workers will
also be affected because there is no contract with PB has formed yet to provide extra money for
that work. Finally, the working period is also not defining by the PB as well as AL itself. Hence,
these are the major issue which has emerged among the employees. In this scenario, certain legal
factors may be breached, wherein the company may face a significant loss in the business.
According to Crown28, the National Minimum Wage Regulations 1999, under section 11, an
organisation must provide a minimum of £3.60 for their employees. Hence, this minimum wage
may change after collaborating with PB. On the other hand, section 12 of the National Minimum
Wage Regulations 1999stated that an organisation must establish a proper contract with an
individual, while he or she working under an organisation. As the case followed that no legal
contract or agreement has been established by AL. Hence, a risk of work with PB has emerged
here, which can be considered as the major reason behind the workers’ behaviour.
According to Deakin & Njoya (2017)29, job security is one of the major aspects, which has to be
maintained by an organisation. Hence, the recent AL’s situation has affected the job security of
the employees. However, uncertainty has been created, which affects the job motivation of the
27 Lewis Silkin, Employment Regulation in the UK: Burden or Benefit. CIPD. 2017(accessed December 14, 2000);
available from https://www.cipd.co.uk/Images/employment-regulation-in-the-UK_2017-burden-or-benefit_tcm18-
21622.pdf
28 Terms and conditions of employment, The National Minimum Wage Regulations 1999. (Accessed December, 30,
2018); available from: https://www.legislation.gov.uk/uksi/1999/584/pdfs/uksi_19990584_en.pdf
29 Simon Deakin, and Wanjiru Njoya. “The legal framework of employment relations”, Centre for Business
Research, no. 349, (2017):4.
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AL’s workers. As per the UK‘s Employment & Labour law 2018, an organisation must provide
job security to the employees. At the same time, an organisation cannot have rights to change
employees’ designation without the individual permission. Conversely, the employment process
must follow up the legal process under the UK‘s Employment & Labour law 201830. In here, AL
does not ask any employee for the PB’s work, which creates employees dissatisfaction within the
organisation. Besides, the company has legal a liability to protect data of employees under the
UK‘s Employment & Labour law 201831. In this scenario, it has been observed there is a high
chance to leak out the AL’s employee’s data in from PB, which can introduce a huge issue in the
future. AL’s business operations may be affected majorly for this kind of phenomenon. These
aforesaid legal aspects are unknown to the employees of AL. Hence, the company may face issue
due to the above-mentioned legal issues32. Based on this observation, it can be requested that the
CEO of AL must establish a legal contract before starting a business with PB. However, the
higher associates of PB also establish a collaborative approach so that the business can be
operated effectively and profitably.
30 Employment & labour law 2018, ICLG. (accessed December, 30, 2018); available from: https://iclg.com/practice-
areas/employment-and-labour-laws-and-regulations/united-kingdom#chaptercontent8.
31 Ibid
32 Employment & labour law 2018, ICLG. (accessed December, 30, 2018); available from: https://iclg.com/practice-
areas/employment-and-labour-laws-and-regulations/united-kingdom#chaptercontent8.
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Question 2
Memorandum
To,
Aidan Koban,
According to the Sale of Goods Act 1979, sec 15 states that the quality and fitness regarding
particular goods are not supported in the contract of sale. Furthermore, the warranty about fitness
and quality regarding a purpose can be captured in the contract of sale based on the use of the
product. Goods cannot be rejected if the qualities are merchantable according to the subsection
(2). The related description of the goods is to be given to the purchase. Hence, the main liability
includes that Aidan should mention the price, quality, and other information prior to making the
sale33.
As per the Sale of Goods Act 1979, sec 14 reflects that quality and fitness (i) mentions that the
contract made after 18 May 1973, the following are to be included such as warranty and
conditions regarding supplied goods under the contract of sale are not covered. This section
further state, whenever the manufacturer will sell goods on a business purpose, then they are
directly considered to be merchantable quality. The rejection can be made only on the basis if
DCY informs about the quality defect before the making of the contract34. Furthermore, the DCY
can reject, if the company examines the quality before the contract is made. Under this section,
the goods cannot be rejected35. The claim for rejecting the contract of sale cannot be valid
33Legislation, “Sale of goods act 1979”, Chapter 54, (1979):15..
34 UK contract law and consumer legislation, Contract and Consumer Legislation. (accessed December, 30, 2018);
available from: https://www.lawteacher.net/free-law-essays/contract-law/uk-contract-law.php.
35 Legislation, “Sale of goods act 1979”, Chapter 54, (1979):17.
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because according to the section mentioned above, the good in sale contract hold no rights for
termination, as it is assumed that the products on the sale for business purpose will be genuine.
Therefore, Aidan can claim against the DCY through legal procedure36.
With respect to the sell of goods to Dream Catcher Yachts Plc (“DCY”) provided standard terms
and conditions of sale (extracts) must be followed. As per the standard, the sale contract can be
breached if the seller is injured for any reason. At the same time, seller’s death can also lead to
the breach of contract. In here, warranty plays a major role because the seller will not be liable if
the contract is breached due to injury or death. Buyer cannot claim anything regarding this
situation37. As the information related to the warranty will mention in the contract. According to
the Contract Act, 1872, a breach of contract can affect an individual to a large extent. Hence, the
suffering party can sue against the other party, who is responsible for violating the contract.
However, Explanation in a contract plays a major role as per the Contract Act, 187238. Each party
must explain potential information in the contract. Provided information must be accepted by
both the parties. In this scenario, the standard terms and conditions of sale (extracts) state that the
contract can be terminated, if the buyer has resold the products without the permission of the
seller prior to making payment. Hence, AL can claim against DCY breach of contract, as they
mentioned everything in the contract.
36Legislation, 1979 ‘Sale of goods act 1979, Chapter 54, pp. 15.
37Basic principles of English contract law, Advocates for International Development. (accessed December, 30,
2018); available from: http://www.a4id.org/wp-content/uploads/2016/10/A4ID-english-contract-law-at-a-glance.pdf
38 The contract act, 1872, Chapter VI. (accessed December, 30, 2018); available from:
https://www.ma-law.org.pk/pdflaw/Contract%20Act,%201872.pdf.
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Question 3
To,
Aidan and Niko Koban,
Storey Way,
Colchester, Essex CO1 5HD
Pomona (Bedding) Ltd (PB) requested to include no warranty details within the agreement.
Fundamentally, the warranty has been used for the purpose of establishing trust as well as
product security. According to the OGL39, Consumer Rights Act, 2015 states that an organisation
has to provide protection to their customers. Not providing adequate security or warranty to a
product is a legal offence. Hence, it can be asserted that not providing warranty in the products
can emerge legal issue within the transactions of beddings along with cotton. With the process of
business agreement, trust and reliability have been formed between the two parties. Hence, in
this context, two parties must consider the required information relating to an agreement40. With
respect to the product selling as well as purchasing, one party has adopted an object in terms of
money. However, the product adopter has some reason to receive product from the other party, a
business can be considered to be the main reason behind it. Hence, the product dispute can affect
the purchaser in an effective manner. Misinforming warranty details can create a situation,
wherein both the parties can face loss and mistrust within the business. In the case of PB, this
above-mentioned scenario may occur in the future. For this reason, Aidan and Niko must focus
on warranty details so that the business can be established in a legal as well as reliable manner.
39Consumer rights act 2015, Chapter 15. (Accessed December, 30, 2018); available from:
http://www.legislation.gov.uk/ukpga/2015/15/pdfs/ukpga_20150015_en.pdf.
40Dimitar,Christozov, Stefanka Chukova, and Plamen Mateev. “The role of warranty of misinforming for new
product adoption”, Informing Science and Information Technology, vol.10, (2013):115.
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Not providing a warranty can lead to facing certain issues such as customers may receive faulty
products, as well as sold products, may not fulfill the requirements of the customer. For these
reasons, a bad impression of an organisation can emerge, which affect the entire business. On the
other hand, as per the section 19(9)41, the Consumer Rights Act 2015, it has further been
identified that a customer cannot claim product disputes if he or she was not received any
warranty relating to the product. Conversely, if a customer has a warranty, then he or she can
claim against the product. Thus, based on section 19(11) of the Consumer Rights Act, a truthful
breach of contract can be created by providing an adequate contract. Based on the above-made
discussion, it can be stated that not providing a warranty to the customers is not illegal, but it
affects the trust of the agreement. At the same time, a mutual and legal breach of contract can be
made possible for the purpose of conducting through this act. Not following this act can emerge
business issue for both sellers along with the purchaser.
Therefore, it can be claimed that Aidan and Niko should consider the warranty process and has
to include warranty details within the agreement. This is mainly due to the fact that it will
develop business reliability. At the same time, the customer will not able to breach the construct
for any reason. The legal arbitration must follow whether a breach of contract will emerge,
wherein the Aidan and Niko along with his company will receive security relating to the
customer mistrusts as well as the organisational loss in future. This is the reason behind the
warranty considerations within the agreement.
In addition, the warranty has more benefits apart from the above-mentioned factors. This
includes buy back security, product replacement, and trust development42. With respect to the
41Consumer rights act 2015, Chapter 15. (Accessed December, 30, 2018); available from:
http://www.legislation.gov.uk/ukpga/2015/15/pdfs/ukpga_20150015_en.pdf.
42Rahman, A & Chattopadhyay, G, “Review of Long-Term Warranty Policies,”, Asia Pacific Journal Of
Operational Research, 23, no.4 (2006): 453-472.
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buyback security, the customer cannot receive the product due to dissatisfaction. In this case,
both the parties may not breach the contract and the seller may provide good quality products as
per the consumer requirement. On the other hand, the product replacement process can help the
seller to interact with the customer as well as replace the product based on the consumer
requirement. One of the most essential benefits is that helps in gaining the trust of the customers,
wherein the organisation can increase its sales in the future. Based on the above-made
discussion, it has been observed that warranty plays a major role in any selling agreement.
Thus, not mentioning warranty details can lead to conflicts between two parties, in case product
dispute is found. As per the case scenario, it has been observed that dealing with PB is a major
opportunity for AL to gain large volume of profitability. Hence, Aidan and Niko should not take
any risk regarding the contract. This is because one wrong step can affect the financial
background of the company. Though AL is not manufacturing disputed products for the
customers but natural catastrophe or disaster can affect the product quality at the time of product
shipment. Hence, Aidan and Niko must include a warranty in the agreement so that the PB can
trust the products of AL and develop a reliable business structure in the future.
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Appendix
Assets
Fixed Assets:
Property 1,40,000
Office Equipment 10,000
Total Fixed Assets 1,50,000
Current Assets:
Inventories 27,000
Trade and Other Recievables 18,000
Cash and Bank Balances 20,000
Total Current Assets 65,000
Total Assets 2,15,000
Equity and Liabilities
Capital and Reserves:
Issued Capital 75,000
Retained Earnings 0
Total Equity (Capital and Reserves) 75,000
Non-current Liabilities
Borrowings (Mortgage-Capital Outsanding) 1,25,000
Total Non-Current Liabilities 1,25,000
Current Liabilities
Trade and Other Payables 5,000
Borrowings (Mortgage-Accrued Interest) 10,000
Total Current Liabilities 15,000
Total Liabilities 1,40,000
Total Equity and Liabilities 2,15,000
Financial Statement of 123 OK Ltd at December 31, 2018
Appendix 1: Document D Calculation
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Inventories 27,000
Trade and Other Recievables 18,000
Cash and Bank Balances 20,000
Total Current Assets 65,000
Long-term Investments 2,00,000
Property Plant Equipment 1,50,000
Total Assets 4,15,000
Accrued Interest 10,000
Total Liabilities 1,40,000
Total Stockholders Equity 2,75,000
Balance Sheet of 123 OK Ltd Ending 31 December 2018
Appendix 2: Balance Sheet
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