Business Law Report: Director's Role, Contracts, & Disputes

This business law report is divided into three parts, exploring key legal concepts relevant to business managers. The first part details the roles and responsibilities of a company director, referencing legislative provisions governing these roles, particularly within the context of the UK Companies Act 2006. It outlines the seven general duties of a company director as per sections 171-177, emphasizing acting within powers, promoting company success, exercising independent judgment, demonstrating care and diligence, avoiding conflicts of interest, and declaring interests in proposed transactions. The second part addresses employment contracts, focusing on the process of dismissal, including unfair, summary, constructive, and wrongful dismissal, and frustration. It uses a case scenario to determine whether an employment contract can be terminated based on employee conduct. The third part discusses alternative dispute resolution methods for resolving business disputes, providing a comprehensive overview of legal considerations for business operations. Desklib offers a wealth of similar solved assignments and study resources for students.

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Table of Contents
INTRODUCTION ..........................................................................................................................3
PART 1............................................................................................................................................3
Case scenario...............................................................................................................................3
Legislative provisions.................................................................................................................3
PART 2............................................................................................................................................5
Case scenario...............................................................................................................................5
Employment contract..................................................................................................................5
Process of dismissal of employment contract.............................................................................6
Whether or not can Gemma terminate the employment contract with Charanjit?......................7
PART 3 ...........................................................................................................................................8
Case Scenario..............................................................................................................................8
Alternative Dispute Resolution...................................................................................................8
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business law is that branch of law which covers all the laws that relates to business
activities and its functioning. Business plays a very important role in the upliftment of the
economy of a country. It helps a country to generate revenue and profit which is directly affects a
country's economy. For all the business to run effectively, rules and regulations are important to
be made. Business law provides with rights, duties & obligations to all the employees of an
organisation and people connected to it. There are many laws which comes under the ambit of
business laws, which are: contract law, company law, employment law, insurance laws, laws
relating to alternative methods to resolve disputes, negotiable instruments, etc. These all laws are
related to business and its activities either directly or indirectly (Wilbanks, Hermanson and
Sharma, 2017). All these laws helps a company to set business and manage it. This report is
divided in three parts of which first one explains about the roles of a director of the company and
legislative provisions which govern the roles. The second part explains about the employment
contract and the process of its termination. The third part focus on the alternative methods in
which a dispute can be resolved.
PART 1
Case scenario
Gemma is a sole director of a company named Clean Machine Limited which deals with
the supplies of protective equipments to small businesses within the country of Bedfordshire. Its
a new company which is opened by Gemma and therefore she is unaware of the roles and
responsibilities of her as a director of the company and wants know the same. She also wants to
know of all the legislative provisions that governs the role of director.
Legislative provisions
A company is considered a s legal entity which is either formed by an individual or a
group of individuals that operates business enterprises. A company is organised generally to earn
profit from the business and its activities. All the companies in UK are governed by The
Companies Act, 2006.
There are two types of company i.e. private an public company. Public companies are
those whose capital is raised by issuing shares which can be bought by the public and private
companies are those in which there is no involvement of public in raising capital of the company

(Board and Role, 2017). Apart from this the companies are also divided according to the
liabilities of the members namely limited companies or unlimited companies. In a limited
company the liabilities of directors are limited to their investment in share capital while in
unlimited companies, liabilities of the directors are unlimited.
Gemma is a sole director of her newly formed company Clean Machine Limited. For this
she is expected to play all the necessary and important role of director in the company. This will
help her to now her duties towards her company and obligations to which she is bound with. As a
director of the company a person is responsible for all the management of the business activities
and exercise of its control over the company. The role of director is very different from that of a
company's employees or shareholders. Directors have specific duties and responsibilities with
respect to the company so as to achieve success and growth of an organisation. Therefore it is
important for a director to know them and understand the commitment made towards company to
help it grow. The companies act of 2006 in UK provides wide range of responsibilities of a
director towards the company and also gives duties to which they are bound with.
Under sections 171-177 of the companies act, 2006, there are 7 general duties given of a
companies director. These rules are based on some common rules of law and few equitable
principles. The seven important statutory duties of a director of a company are:
 The director of a company shall act in accordance with the powers given to them by the
law (Vafeas and Vlittis, 2018). The powers of the directors of any business is mentioned
in the article of association (AOA) of the company. These powers vary business to
business and depends on the structure and function of the company.
 The director of the company shall always act in good faith and for the success of the
company. The actions of the director must always be with a focus to gain profit, success
of the company and benefit of the employees working for the organisation. The decisions
of the director must always consider the impact of it on various different factors
associated with the company. It should always be for the company's long term success.
 The director must make the decisions and judgement which are for the benefit of the
company as a whole. The decision must not be influenced or on the basis of the demands
of the shareholders. The judgement or decision must be taken while considering the
future growth of the company.

 The director of the company shall always be careful and diligent while exercising the role
to carry out the functions of the company. The director must posses qualities to be a
deserving director of the company. Qualities includes: experience, skills, general
knowledge etc. of the functioning of the company. Director should be such who have
capabilities to manage the business activities and the employees of the company.
 The director of the company must always see to it that their exist no interest of conflict in
the company as this could impact the growth or the company (Mori and Towo, 2017). If a
company has any conflicts of interest then it will pull back the growth of the company
and makes it hard for it to achieve its present and future goals.
 A director must not accept anything as a consideration or benefit from the third party i.e.
a person who is not related to the company. The director of the company shall not accept
it while exercising his power as a director of that particular company.
 The director of the company if have any interest either directly or indirectly in a proposal
of transactions or arrangements of the other company then they must declare the reason
of their interest to the director of other company.
Gemma being the director of the Clean Machine Limited company must abide by all the
rules and regulations of the company. She should know and follow all the duties and
responsibilities which relates to the functioning and management of the company. This will help
her to achieve goals set for her business and help the company to achieve success.
PART 2
Case scenario
Gemma who is a director of Clean Machine Limited company employees Charanjit as a
cleaner. Gemma observed that he was regularly coming late to the work and his attitude towards
everyone at the company is very poor. Everyday Gemma constantly reminds him of the time at
which he is suppose to come but he do not listen. Everyday Charanjit is reminded of to the places
he is suppose to clean properly. In this situation Gemma now wishes to terminate employment
contract made between the company and Charanjit.
Employment contract
Every employee working in an organisation or a company have an employment contract
even if there is no written contract signed between the company and the employees (Shabanova,

2017). Employment contracts sets out the duties, responsibilities, rights and condition of the
employees working in a company. The contract is binding between an employee and the
employer till the end of the employment or till there is any change made in the terms and
conditions of the contracts. The contract of employment must be made in accordance to the
Employment Rights Act 1996.
Process of dismissal of employment contract
The employment law is very complex and the employers are always in fear before
terminating any employee because of getting a notice by the employment tribunal. The employer
while dismissing any employee must give valid and reasonable justification of their removal. The
removal must be just, fair and legal.
When an employment contract comes to end it is termed as Termination. The laws
relating to termination is mentioned in the Employment Rights Act 1996 (ERA 1996). the
employer must in accordance with the act follow the procedure for dismissal of employment
contract to avoid problems (O’Connor, 2020). There are different ways in which employment
contract comes to an end or is terminated. They are:
 Unfair Dismissal: It is when an employee is dismissed without any fair or reasonable
grounds. The reasons given under this by an employer were not satisfactory for an
employee to be dismissed.
 Summary Dismissal: It is when an employee is told to leave without any notice or
payment of dues because of the misconduct and gross behaviour. For e.g. in case of theft,
fraud, etc.
 Constructive Dismissal: this is when there is breach of contract from employer side and
because of this an employee is forced to resign. This situation can arise because of the
change in working environment, increased workload or hours, non payment of the salary,
etc.
 Wrongful Dismissal: it is the situation when an employee is fired by an emp[loyer
without giving any notice of termination. This is the case of breach of employment
contract from employer's side.
 Frustration: This is the situation in which there is no fault either of an employer or an
employee. This happens when there exist difficulty is carrying out the terms and

conditions of the employment contract which was originally there (Junien, 2020). For e.g.
if an employer who is a sole trader and he dies leaving behind no one, etc.
It is very important for an employer to give fair reason for the dismissal of an employee.
Section 98 of the Employment Rights Act 1996 gives two test stages to determine the fair or
unfair dismissal. They are:
1. employer should prove that the reason for dismissal was fair and valid.
2. The employment tribunal must see to it that the reason stated by an employer is sufficient
enough to dismiss an employee or not.
Fair reasons for the dismissal of the employment contract must be on the basis which
proves that the employee was not performing his job effectively or his conduct towards the
company an its people was not adequate. It is the responsibility of the employer to prove that the
dismissal was fair and just. An employer if satisfied with all the fair reasons may dismiss the
employee after serving one month notice to the employee. There is only one type of dismissal in
which serving the notice period is not important in employment contract i.e. when there is gross
misconduct from the side of employee (Cabrelli, 2020). He is incapable of performing his duties,
unwilling to do the job, etc.
Whether or not can Gemma terminate the employment contract with Charanjit?
In the given case scenario, Charanjit was not performing his roles and duties which were
assigned to him by the company. Even after getting reminded to do the the work properly to him,
he was reluctant and was not putting any efforts to improve his work. This shows that he is
unwilling to perform his duties effectively. His behaviour towards the director and other
employees of the company was very poor. Charanjit was daily coming late to the work and on
being told him about it, he was not improving and continued to come late. This showed that he
was not willing to perform the role he was assigned. Gemma after looking at all the facts an
scenarios may terminate the employment contract of Charanjit on the basis that he is not willing
to perform his duties and roles. Also his behaviour was not appropriate with all the other
employees of the company and also with the director. Gemma can also go for summary dismissal
of the employment contract of Charanjit. She can also dismiss Charanjit without serving him
notice fro one month because of the misconduct and gross behaviour with other employees of the
company.

PART 3
Case Scenario
Gemma takes supply material from Precious Time Limited with whom her company
Clean Machine Limited is in contract with. Recently there are many issues which Gemma is
facing and there are many problems between both the companies because of various reasons. A
friend of Gemma suggested her to take the company to the court but she is not sure of this
option. Gemma wants an advice on the same so that the dispute can be resolved with Precious
Time Limited as Gemma would like to work with the company in future. There are many options
available to Gemma if she wishes to settle the dispute through any alternate method different
from that of court.
Alternative Dispute Resolution
Alternative Dispute Resolution i.e. ADR is a process which helps the disputing parties in
contract settle the disputes between them without going to the courts (Hadwiger, 2017). There
are many advantages for using alternate method to resolve a dispute between parties. They are:
 It is cheaper than the solutions of court and more flexible.
 Its process is faster than that of the procedure at courts and also the process of ADR is
less stressful.
 The party may also receive compensation as reward.
 The procedure of ADR is confidential and does not harm company's reputation.
There are mainly four types of method under Alternative Dispute resolution available for
solving problems of consumers. They are: Conciliation: This method to solve the dispute between the parties is generally free to
use. This method is not formal as compared to arbitration. This method involves a person
called “conciliator” who deals with the matter of dispute and helps resolve it (Alberstein
and Zimerman, 2017). He focuses on solving problem by knowing the issues that created
disputes and what the parties expects. Generally, parties to the contract decides the
conditions to solve the dispute prior to forming the contract and mention in it. If either
party is not satisfied with the decision of the conciliator they may seek help from the
court. The decision made by conciliator under conciliation is not binding upon the parties
to the dispute.

 Mediation: This is another method to solve the disputes between parties. The person
under this method who solves the dispute is called as “Mediator”. He takes into account
the needs of both the parties and try to settle dispute by finding a way suitable to both
parties (Verbist, 2020). Mediator helps parties by assisting them to reach into an
agreement on which both agrees. Mediator is not the one who makes decision for the
parties, he only helps parties to come to some conclusion where both the parties agree on
one same thing. Ombudsman Scheme: This scheme includes many services under it and is free for
consumers to use but the traders have to make payment of certain amount. Ombudsman
scheme can only be used if a consumer has made an internal complain in an organisation.
If on directly approaching to the company no action is taken within eight weeks then
consumer can complain under ombudsman. Evidence for the same is needed to be
submitted to ombudsman and then they investigate into the matter. After reaching
satisfaction they deliver decision.
 Arbitration: This method involves an “arbitrator” who looks into the matter and helps
party to resolve dispute. The decision of an arbitrator is based on the evidences sent by
the parties to dispute. The decision of an arbitrator is legally binding on the parties and if
parties do not agree to the decision, they can not even go to the court. In most of the cases
arbitrator makes decision based on the evidence presented by the parties but, sometimes
an arbitrator may ask parties to the dispute tell the story of how the dispute arises
(Ruscalla, 2019). The evidence which is to be presented before an arbitrator must be in
writing and should contain all the necessary information required to make the decision.
In the case of Gemma, the dispute was between her company i.e. Clean Machine Limited
and Precious Time limited. To resolve the dispute between both the companies Gemma may
refer the dispute to arbitration instead of going to the civil court. Going for arbitration will be
less time consuming and less cost will be required to solve the dispute. This will also help
companies to maintain its reputation in the market by not going to the court. The decision given
by an arbitrator would have binding effect on both the parties which will help them to be bound
by it. Even if Gemma do not want to go for the process of arbitration she can choose any other
method as well to resolve or settle the dispute with Precious Time limited as the main aim of all
the methods is to resolve and settle disputes between the parties. In all the methods parties wont

lose anything and the situation will always be beneficial for both of them. Gemma upon choosing
any method as alternate way to resolve dispute will save the reputation of the company from
getting destroyed in the market.
CONCLUSION
It is concluded from this report that business laws plays a very important role by
regulating the activities and management of an organisations. There are many laws which are
regulated under business laws like: contract law, insurance law, company law, alternative dispute
resolution, etc. This report discusses three case scenarios from which the first one explains the
roles and duties to which a director of a company is bound with. The second case scenario
explains the dismissal on an employee under the employment contract and describes process in
which dismissal can take place. The third and the last case scenario explains the methods in
which any dispute that occurs between the parties to the contracts can be resolved by using
alternative methods to resolve dispute other than the proceeding that happens at the court. These
methods are: Arbitration, Conciliation, Mediation and Ombudsman Scheme. Party to the dispute
can use any method to resolve issues as these methods are not time consuming and cost efficient.
In this way parties can reach to conclusion earlier to that of the proceeding that takes place in
courts.

REFERENCES
Books and Journals
Alberstein, M. and Zimerman, N., 2017. Constructive plea bargaining: towards judicial conflict
resolution. Ohio St. J. on Disp. Resol., 32, p.279.
Board, I. and Role, I.D., 2017. Non Executive Directors.
Cabrelli, D., 2020. Employment law in context. Oxford University Press.
Hadwiger, F., 2017. Looking to the future: mediation and arbitration procedures for global
framework agreements. Transfer: European Review of Labour and Research, 23(4),
pp.409-424.
Junien, J., 2020. Execution Work Contract Between Employees and Employers at Boncake
Gallery (Doctoral dissertation, Universitas Internasional Batam).
Mori, N. and Towo, G., 2017. Effects of boards on performance of local and foreign-owned
banks in Tanzania. African Journal of Economic and Management Studies.
O’Connor, N., 2020. Whose Autonomy is it Anyway? Freedom of Contract, the Right to Work
and the General Principles of EU Law. Industrial Law Journal, 49(3), pp.285-317.
Ruscalla, G., 2019. Latest developments in conciliation and mediation in investor-state
disputes. Revista Brasileira de Arbitragem, 16(63).
Shabanova, D.E., 2017. LEGAL NATURE OF THE EMPLOYMENT CONTRACT IN THE
PERIOD OF ESTABLISHMENT OF INDUSTRIAL RIGHT. Juridical Journal of
Samara University, 3(2), pp.24-30.
Vafeas, N. and Vlittis, A., 2018. Independent directors and defined benefit pension plan
freezes. Journal of Corporate Finance, 50, pp.505-518.
Verbist, H., 2020. Mediation as an Alternative Method to Settle Investor-State
Disputes. Handbook of International Investment Law and Policy, pp.1-28.
Wilbanks, R.M., Hermanson, D.R. and Sharma, V.D., 2017. Audit committee oversight of fraud
risk: The role of social ties, professional ties, and governance
characteristics. Accounting Horizons, 31(3), pp.21-38.