Business Law and the Legal System - Case Studies

Throughout this study material, An introduction to Unincorporated business and Incorporated business, critical review, evaluation, and conclusion based on Business Problem cases are given. It also includes Legal Advice Effectiveness and Legal Solution Effectiveness. An unincorporated business is a corporation that is not legally separate from the owner. An incorporated business is a corporation established by one or more individuals with a separate legal entity without depending on any factors”.

Unincorporated business is a corporation that is not legally separate from the owner. Owners
will be accountable for all aspects of the firm, including profit and loss. It has a short lifespan
and can be dissolved at the owner's discretion or when the owner passes away. Two types of
businesses are Sole trader and Partnership (Rowe, 2017).
Incorporated business is a corporation established by one or more individuals with a separate
legal entity without depending on any factors”. It means that the company can continue to operate,
possibly indefinitely, even if the owner is no longer living, unless it goes bankrupt. There are 2
types of businesses: Public company and Private company (Barry, 2018).
Types of
business
organization
Definition
It is owned
and managed
by one
individual.
(Twin, 2021)
Same as
owner
Personal
income
tax
Unlimite
d liability
Freelancers
(designers,
copywriters,
marketeers,
photographe
rs and social
media
consultants)
It inclued 2
or more
people
jointly
operating the
business.
Doctors,
lawyer,
accountants,
butchers,
small

(Carol, 2021) retailers
It privately
held shares
to few
investors.
(Jason, 2021)
Separate
legal entity
from its
owners
Corporatio
n tax
Limited
liability
Insurance,
banking,
restaurants
It sells ít own
shares to the
general
public.
(Marshall,
2021)
Saparate
with the
owners and
sharehodlers
Insurance,
banking
P4 - P5
Firstly, the owner must
select a company name.
Secondly, the company
must register with
HRMC (HM Revenue
and Custom). Finally, the
business need to file a tax
return every year
Management of this type
often belongs to the owner.
The proprietor can operate
the firm however he or she
wants instead of answering
the board of directors or
shareholders
-> The owners apply the
POCCC functions
(Planning, organizing,
- savings and retained
profits
- sale of property
- bank loans
- borrow from friends,
relatives and family
members

commanding, coordinating,
controlling)
The first thing that select
the “nominated” partner.
Secondly, choose a
company name. Then,
the collaborations will be
selected. Finally, the
business register with
HMRC
Partnership must choose
the manager because they
typically have 2 or more
partners. All general
partners have a right to
participate in management
-> The director carry out
POCCC functions
- savings, stocks and
bonds
- retirement account
funds
- secure bank loans
- borrow from relatives
and friends
- consider crowdfunding
business
- small business grants
from the Gov
- venture capital
investors
Firstly, choose a
company name. It must
not be the same as or
identical to the registered
name of another firm.
After that, the firm must
choose a director and
secretary. The company's
PSC (People with
Significant Control) will
The shareholders appoint
the directors. And the
director will hire
employees for day-to-day
operation. In addition,
managers develop vision,
purpose, objectives, and
rules (according to AOA)
-> The director perform the
POCCC functions
- debt capital: bank
loans, personal loans
and bonds, credit card
debt
- equity capital (the sale
of shares of company
stock): only sell shares
to friends, relatives,
family members and
employees

be defined. Next, prepare
documents such as the
memorandum of
association (MOA) and
articles of association
(AOA). Finally, the
company must be
registered, with an
official address and a
Company House SIC
code.
- selling shares and
bonds
- loans, debentures, and
overdrafts from
financial institutions
(Gov.uk, 2021).
M3 - D2
- easy to get started
- all decisions are made
by the owner
- maintain all profits
- modify the business
form easily
- quickly dissolve
(Galloway, 2021)
- personal liability
- marketing and
credibility
- tax effectiveness
- difficult to attract
highly trained workers
(Galloway, 2021)
Sole traders keep all the
profit. They do not need to
share with anyone and
manage the company the
way they like.
Sole traders are known for
putting in lengthy hours.
This is due to the fact that
they must bear the whole
weight of their company's
duty.
- easy to get started
- less expensive
- unlimited legal
- the personal taxation
All burdens and expenses are
shared in operating,
especially in the early stages.

- combine the resources
and expertise
- profits are not
required to be disclosed
to the public
(Bruna, 2021)
rate
- ownership transfer is
difficult
- personal differences
and conflict
(Bruna, 2021)
However, when choose a
partner that can share
obligations and commit
tocollaboration, a
relationship is difficult.
- limited liablity
- separate legal entity
- no need to answer to
any stockholders
(Wood, 2021)
- cannot sell share to the
public
- high set up costs
(Wood, 2021)
In general, a private
corporation is comparable to
a state-owned business,
except that if the number of
shareholders decreases, a
private corporation will
simply choose and run it.
- having a public
profile in the stock ->
making it easier for the
firm to issue shares and
bonds.
- obtaining funds
through a public stock
offering
- increasing the number
of shareholders and
sharing risk
(Korchak, 2021)
- higher levels of
transparency required
- more vulnerable to
takeovers
- initial financial
commitment is higher
(Korchak, 2021)
It is easy to raise share
capital because the company
can sêll share to public and
people can invest directly in
the company, become
shareholders.
Critical review, evaluation and conclusion

Firstly, if he wants to earn profit, he should set up sole proprietorship administer the firm
himself, or keep personal information secret.
Secondly, if someone wants to start a low-cost firm, he must form unincorporated businesses
(sole trader and partnership). Furthermore, someone can form a partnership only if he wants to
share profits and losses, or if he wants to make choices in sync with the contributions of others.
Finally, he should incorporate his business if he wants to raise venture money swiftly (private
and public limited company). Furthermore, if he need further assistance in assessing or
decreasing an individual's duty, a public limited corporation may be the best option.”
 Fact: Arthur rents a house to his friend Brian in January, but Arthur asks for full rent
from October after hearing Cathy who is wife of Brian is left £20,000 by her uncle
 Issues: Is it legal for Arthur to ask Brian to pay the full rent, and is there a clear contract
between Arthur and Brian?
 Rules:
+ Unsupported fresh consideration: Generally, a promise unsupported by consideration is
not a binding contract. If a contract already exists and one party makes a further promise,
no new contract will be formed.
+ Promissory estoppel: It prevents a person who has promised not to enforce his legal
rights from going back on his promise when it is inequitable to do so.
+ Privity of contract: It is a common law principle that states that a contract cannot confer
rights or impose obligations on anyone who is not a party to the contract.
 Application & Analysis: Arthur rents a house to his friend Brian for 400 a month on an
existing contract. When he was in trouble, Arthur promised to reduce his rent to 250 by
May. However, this does not generate any contracts. Arthur's promise is clear and
unequivocal that 'until things pick up for you again'. Therefore, Brian reliances Arthur's

promise when the going gets tough. Then in December, Arthur suddenly said that Brian
must pay the full rent from October onwards. This is not fair to Brian because Arthur did
not tell about the incident before Brian was unable to raise money to pay. Next, Brian's
wife Cathy was left to 20,000 by his uncle. According to the Privity of contract, the
contract is only binding between the two parties, Arthur and Brian, and Cathy is not
related to the above rental contract.
 Conclusion for Juge’s Decision: The Court decided that can not sue because the express
promise was taken place was completed and was unsupported by fresh consideration.
 Fact: Arthur brought the car to Trumpet Workshop for car engine repair. However, one
of the car tires was replaced and then he refused to pay it
 Issues: Is it legally binding or not legally binding that Arthur refusal to pay £300 for a
car’s tire of Trumpet Workshop?
 Rules: Past consideration: If one party voluntarily performs an act, and the other party
then makes a promise, the consideration for the promise is said to be in the past. The rule
is that past consideration is no consideration
 Application & Analysis: Trumpet Workshop's tire change took place without Arthur's
prior request. Trumpet Workshop had already performed the work before he asked for
payment. The work of the Workshop makes Arthur satisfied and he can come back next
time, but it does not mean that he has to pay this extra £300. It was only a promise in the
past and did not have any contract here.
 Conclusion for Juge’s Decision: The Court held that the transaction had not been
completed. It was only a promise to pay and did not have any contract here. Trumpet
Workshop had already performed the work before he asked for payment. His
consideration was in the past. Therefore, the agreement was unenforceable.

 Fact: Boffin worked and learned Sweeties Ltd's proprietary toffee-making process. If he
leaves here, he will not be able to do the toffee and other confectionery in UK or US for 1
year
 Issues: Is it reasonable or unreasonable for Boffin to leave Sweetie Ltd and will not be
allowed to manufacture toffee or any other confectionery in UK or US for 1 year?
 Rules: Restraint of trade is related to individuals' freedom to do business or follow a
trade or profession freely and without restriction.
 Restraint of trade in the employment contract (The Sherman Antitrust Act of 1890)
 Non-compete agreements are not inherently (necessarily) illegal as long as they are
reasonable and do not interfere with a person's freedom to do business.
 Application & Analysis: Through 3 factors:
Lenghth of time: 1 year -> It is a reasonable length of time to be barred from doing
business.
Geogographic: UK or US -> Since this case does not give specific information, we need
to look at the reputation of Sweeties Ltd.
+ If the company is small, then banning Boffin makes it unreasonable because this
company is little known
+ If the company is nation-wide, it makes unreasonable because it is only popular in the
UK but it cannot be banned in the US
+ If the company is famous worldwide, it is reasonable.
Scope of work: toffee and other confectionery -> It is unreasonable because Boffin who
works at Sweeties Ltd only learned secret toffee-making processes, but he does not know
about other confectionery.

 Conclusion for Juge’s Decision: It is declared to be illegal. Boffin's departure from
Sweeties Ltd means the termination of his contract with this organization. Therefore, it is
no longer legally valid. The fact that this business prevented Boffin from working in the
UK or US for one year violated the Restraint of trade law.
If unlawful, it can make it lawful by making contract reasonable:
+ Geogographic: If the company is small, it will have banned in a few cities; If the
company is nation-wide, it will have banned in UK
+ Scope of work: only manufacturing the toffee
Conclusion: On the one hand, if he remains in the company, they will change the non-
compete agreement. On the other hand, if he wants to leave, they will not change the non-
compete agreement. Therefore, the agreement was unenforceable.
P6 - M4
Arthur Citizen Adivce /
Advice Now
Arthur can contact
to Citizen Advice.
They will provide
free, independent
and confidential
advice about legal
issues. Moreover,
Advice Now is
Negotiation
In this case, Arthur
can negotiate with
Brian about the
rent. Therefore,
there is no need for
a third party to
participate, but
Arthur can decide
for himself and the
Providing free
legal counsel
or
recommendati
ons on a case-
by-case basis
+ Citizen
Advice: have
online advice,
by phone and
at 3,000
locations
+ Advice Now:
offer advice on
how to
improve legal

another solution as
Arthur can access
the website
anywhere, anytime
and receive advice.
It is absolutely
free, and he may
use the website to
learn more about
other services.
two parties can
make a contract.
Therefore, both of
them can maintain a
good relationship
after negotiating
knowledge,
confidence,
and skills
Trumpet
Workshop
Law Centres /
Citizen Advice
Trumpet
Workshop can use
Law Centre so as
to offer free and
independent legal
advice inside local
legal communities.
In addition, if
Trumpet
Workshop wants
to have more
confidentiality,
they can use
Citizen Advice
because this
service is also
completely free,
independent
and confidential
Mediation
Do not sue because
it is not beneficial
to Trumpet
Workshop. In this
case, the Workshop
should get a third
party to solve it.
The mediator has
role to make a
mediation for the
dispute between
Arthur and Trumpet
Workshop. Because
the mediator can
determine the
demand of both
parties, making a
fair agreement.
Providing
independent
legal advice
+ Law Centres:
more emphasis
on social
welfare
+ Citizen
Adice:
emphasis on a
wide range of
legal issues

advice and reliable
consultation.
Case 3:
Boffin vs.
Sweeties Ltd
Boffin Trade Union /
Law Centres
Boffin should
contact to Trade
Union because it
provide
completely free
legal help and
assistance to their
members. Besides,
he can use Law
Centre so as to
offer free and
independent legal
advice within their
local communities.
Mediation
In this case, Boffin
can ask a mediator
to resolve the
competition
between him and
Sweeties Ltd about
the rule of contract
in terms of restraint
of trade. Because
the mediator can
determine the
demand of both
parties, making a
fair agreement.
Providing free
advice and
legal help
+ Trade Union:
support part of
their
membership
+ Law Centrs:
advice inside
local legal
communities
D3
Legal Advice Effectiveness:
"Legal services are crucial for every business owner, but especially for small business owners,
who frequently confront a variety of legal challenges. Protecting the owner's personal assets from
company litigation, assuring the business's protection against discrimination and wrongful
termination, and resolving employee contracts, copyright claims, and incorporation are just a few
of the legal challenges that small business owners frequently confront.”
Legal Soulution Effectiveness:
Firstly, when it comes to resolving a disagreement, negotiating is frequently the first option.
Simply because, in these situations, both sides may resolve disagreements by adopting a strategy

and seeking to reach an agreement. As can be seen, it has various advantages, like the ability to
keep a positive connection after bargaining, being economical, allowing privacy, and being the
quickest ADR method.
Secondly, the mediator is a neutral third party who is appointed by both parties. These cases
illustrate that parties can pick a mediator together, that mediation is less expensive and faster
than litigation, that a neutral third party can assist parties in reaching a fair agreement, and that it
also permits privacy.

References