Business Law Report: Contract Discharge and Funding Sources Analysis

This business law report delves into several key areas of commercial law. It begins by examining vicarious liability in the context of employment, exploring the legal implications for employers and employees, and differentiating between civil and criminal liabilities. The report then analyzes different ...Read More

Business Law Report
Running Head: COMMERCIAL LAW 0
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Business Law report 1
Contents
Contents
Contents...........................................................................................................................................1
Question 1........................................................................................................................................2
Question 2........................................................................................................................................3
Question 3........................................................................................................................................5
Question 4........................................................................................................................................6
References........................................................................................................................................8

BUSINESS LAW REPORT 2
Question 1
Vicarious liability is a concept of common law where someone else can be held liable for the
omission of others. In the context of an employment relationship, very few people know that an
employer can be held liable for the actions of employees. Such acts include violent,
discriminatory action, breach of copyright and many others. However, this is necessary to state
here that while determining the vicarious liability of an employer, the court often checks that
whether the employee was acting in a personal capacity or the omission has occurred during the
course of employment (Acas.org.uk, 2019). Tort Law is another civil law that provides
provisions related to negligence. Negligence is a situation in which a person who owes a duty of
care, to other breaches the same. Here this is to mention that the duty of care seems to be
breached in those cases where a person fails to act reasonably. Tort Law also recognizes the
principle of vicarious liability and held the employers liable for the torts conduct by employees
in the course of employment (Uk.practicallaw.thomsonreuters.com, 2019). In the presented case,
a person named Tiffany Mato was crossing the road and had an injury. The reason for injury was
the action of Jonathan Grant who was driving the vehicle very fast. Jonathan was acting on
behalf of his company. The point to be noted in this case is that the shift timing of Jonathan. As
per the given details, his shift timing was till 17:00 and the incident where he hit Tiffany
happened at 17:10. However, the accident happened after shift timing but was in the course of
employment. Hence, Jonathan, as well as his company, can be held liable under civil law.
Now moving the discussion towards criminal liability, this is to mention that criminal law does
not hold the company liable under the principles of vicarious liability (Fisher, 2017). In this

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manner, only Jonathan can be held liable for his conduct and not his company under criminal
law.
Question 2
Here the issue of the case is to check the various business structures that Jonathan and his friend
can adopt for their business. Many business forms are there under which a business can be
established and operate. Nevertheless, not every form is suitable and available for each business.
In the case presented hereby, Jonathan and his friend want to establish business and in this
manner, they do not have the option of sole ownership, as under this structure only one person
can be engaged in the management of the business. The options they have are partnership form
and company structure. Both of these options have their pros and cons. Firstly starting from
partnership firm, this is to state that it is a structure where two or people joint their efforts, time
and resources to carry a business. They all act on behalf of the business as well as on behalf of
each other. The very first advantage of this structure is that the same is easy to establish (Jordan,
2018). A firm can be formed by developing and registering a partnership deed. Another
advantage is that business can get benefit from the resources of various people. Some partners
have good knowledge and some have money. In addition, to be easy in formation, a partnership
is also easy to be dissolved. No legal formalities or expenditure is involved in this business
structure. Although it would be wrong to highlight only the advantages of this form as many
disadvantages are also there. One of the lead disadvantages is related to liability of partners. In
the case of a partnership firm, a partner has unlimited liability with respect to the debts of the
firm (Boundy, 2016). In conjunction with this, a partner is also liable for the conduct of other
partners. Chances of disputes are high in case of the partnership firm as a partnership deed does
not cover every aspect and partners often fight on small matters (Korchak, 2017).

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The company on a different side is a way formal business structure. It is more regulated business
forms than others. A company has two main bodies of people that are a board of directors and
members of the company. Directors play the part of management, whereas shareholders are the
owners. In this case, both of them are different. As soon as a company is incorporated, the same
becomes a distinct legal entity from shareholders and directors of the company. Because of this
distinct identity, members and directors have limited liability. Members/shareholders are liable
to the unpaid amount of money of their shares (Mazumamoney.co.uk, 2019). In the case of
Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22, the court held that even if a
person has the whole of the shareholding of a company, yet the same cannot be held responsible
for the conduct of a company. This is the most significant benefit that a company business
structure offers. Further, capital is not an issue in this structure as many sources are thereby using
which a company can raise funds. These structures are mentioned in the following part of this
report. Further, shares can be easily transferred to other people and in this manner; shareholders
can take an easy exit from a company. In order to discuss the disadvantages of company, high
cost and legal formalities come at the very first place. Every country has a corporation law that
regulates the affairs of companies over there. For instance, in the UK, Corporation Act 2006 is
there that needs to be followed by each company. The act provides provisions related to various
aspects such as duties of directors, powers of the company, and many others. In case of breach of
any provisions, penalties and fines may impose. In this manner, this is a disadvantage for
companies. The other disadvantaged is lack of secrecy (Companybug.com, 2018). Companies
have to publish their financial reports to different stakeholders and in this manner; there is
always a risk that competitors may misuse the trade secrets. Further, directors cannot escape
from responsibility all the time and cannot take benefit of the separate legal status of the

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company. The benefits of this feature are only available where directors act in a genuine manner.
In other words, this is to say that in those cases where directors of the company misuse their
power or doctrine of separate legal identify then they may be held personally liable and can be
subject to civil and criminal penalties. For different breach, different penalties are there but most
of them are significant and complicated in comparison to other business structures.
In the given case, a company seems to be a good option as it will be more regulated structure and
there will be no issue of lack of capital. Although Jonathan and Mike can held personally liable
but if they would perform their duties in a genuine manner, there will be no issue. In case of a
partnership, lack of capital, unlimited liability, and a number of disputes will be very significant
issues.
Question 3
Here the question is to check the sources of funds that are available to a business that is carrying
the business activities in a company structure. Finance is available in many forms to a company
and each form has certain advantages and disadvantages. Share capital is one of the important
source of finance in case of a company. This is the amount of money, which the company gets
from shareholders and allows them shares in return. By getting a share, shareholders become part
owner of the company and get a right to cast votes on the matter, which requires shareholders
consent. The major disadvantage of this source is that as many shareholders are there, working of
the company gets slow as to decide a matter company has to depend on the decision of all of
them. Another disadvantage is the dividend. In return, of shares capital, the company is required
to grant dividend to shareholders, which is a part of profits. Further, a company cannot be fully
depended on this source because there is no guarantee that shareholders will subscribe to the

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shares. The issue more often present in case of new companies or company with low reputation.
However, the non-compulsion of dividend can be treated as an advantage.
Another major source of financing is bank loan and overdraft. Banks and financial institutions
are active in this area and help companies with the issue of lack of capital. In order to discuss the
advantage of this source, this is to state that such creditor does not vote on any matter and
therefore does not affect day to day working and business decisions of a company
(Twamleyandco.co.uk, 2019). Further, a company is not liable to distribute profits among
creditors such as banks and interest paid to banks can be claimed as expenditure while
determining final profits. Further, to discuss the drawbacks of this source, this is to state that
payment of interest is mandatory. No matter how good or bad a company performs, the interest
of a bank becomes necessary to pay and in this manner, interest becomes a fixed liability.
Retained earnings are also a very useful way. Many times, a company save money for future
projects and use the same at the time of need. Company does not have to pay any interest or any
dividend and on such investments but one disadvantage is there. The company does not pay a
dividend to shareholder in order to retain these earnings. It creates dissatisfaction among
shareholders.
Apart from the above three, some other sources are also there such as venture capital, a loan
from the market and so on (Nibusinessinfo.co.uk, 2019). Hence, Jonathan and Mike can use one
or more sources in order to fulfill the capital need of the company.
Question 4
A contract can be discharged and come to an end in many ways. Discharge by performance is the
most common type where parties perform their promises and in this manner, a contract comes to

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end. Doctrine of frustration is another important aspect while discussing the discharge of a
contract. This is an important doctrine of English contract law, which applies in those situations
where the performance of the contract becomes impossible for some reason, which is not in
control of any parties (E-lawresources.co.uk, 2019). The doctrine says that in such a situation,
each party is discharged from future liabilities and obligations. It means once a contract is
frustrated, no parties can ask another party for the performance of the rest of the contract.
Condor v Baron Knights [1966] 1 WLR 87 is an important case to discuss here where it has been
provided that personal incapability of a person makes the contract frustrated where he/she was
required to perform a particular task and now cannot do so because of incapability. In this case, a
16-year-old person agreed to play the drums for 7 nights per week for 5 years. Afterward, the
claimant suffered from a mental breakdown and his doctor advised him to not to perform more
than 4 nights per week. In this situation, performing 7 nights per week was not possible. Court
declared the contract frustrated in this manner.
In the case presented hereby, the company of Jonathan and Mike has arranged a concert where
Robby Jackson was about to perform but before the show, Robby dies because of a suspected
drug overdose. Amanda purchased the ticket of a concert by paying 100GBP and now asking the
refund of the ticket. Here applying the provisions of Condor v Baron Knights, the doctrine of
frustration will be applicable as the death of the person was not in control of any party. However,
the death was suspected yet it was not sure and because of this, the doctrine will be applicable.

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References
Acas.org.uk. (2019). Understanding what vicarious liability means for employers. [online]
Available from: http://www.acas.org.uk/index.aspx?articleid=3715 [Accessed on 19/06/2019]
Boundy, C. (2016) Business Contracts Handbook. Oxon: CRC Press.
Condor v Baron Knights [1966] 1 WLR 87
Corporation Act 2006
E-lawresources.co.uk. (2019) Frustrated contracts. [online] Available from: http://e-
lawresources.co.uk/Frustrated-contracts.php [Accessed on 19/06/2019]
Fisher, J. (2017) What have we got here then? Companies must police themselves. [online]
Available from: https://www.lawsociety.org.uk/news/blog/what-have-we-got-here-then-
companies-must-police-themselves/ [Accessed on 19/06/2019]
Jordan, A. (2018) Should I go sole trader, partnership or limited company? [online] Available
from: https://smallbusiness.co.uk/should-i-go-sole-trader-partnership-or-limited-company-
2452737/ [Accessed on 19/06/2019]
Korchak, J. (2017) Advantages and disadvantages of a partnership business. [online] Available
from: https://www.informdirect.co.uk/business-management/partnership-business-advantages-
and-disadvantages/ [Accessed on 19/06/2019]
Mazumamoney.co.uk. (2019) Advantages and disadvantages of a limited company. [online]
Available from: https://www.mazumamoney.co.uk/news/advantages-and-disadvantages-of-a-
limited-company/ [Accessed on 19/06/2019]

BUSINESS LAW REPORT 9
Nibusinessinfo.co.uk. (2019) Equity finance. [online] Available from:
https://www.nibusinessinfo.co.uk/content/six-sources-equity-finance [Accessed on 19/06/2019]
Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22
Twamleyandco.co.uk. (2019) Sources of finance. [online] Available from:
https://www.twamleyandco.co.uk/factsheets/starting-up-in-business/sources-of-finance
[Accessed on 19/06/2019]
Uk.practicallaw.thomsonreuters.com. (2019) Vicarious liability. [online] Available from:
https://uk.practicallaw.thomsonreuters.com/9-200-3629?
transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1
[Accessed on 19/06/2019]