Business Law and Ethics: Analysis of Contract Law and Enron Scandal

This report delves into key areas of business law and ethics, commencing with a detailed exploration of contract law. It defines contract law, outlines the essential elements of a contract, and examines the court system within the English legal framework. The report analyzes a case scenario to determine the existence of binding contracts and discusses available remedies. Furthermore, the report transitions to a case study on the Enron scandal, analyzing ethical corporate governance and the implications of the Sarbanes-Oxley Act of 2002. The Enron case provides a comprehensive examination of corporate malfeasance, accounting irregularities, and the legal consequences. The report concludes with a synthesis of the findings and a reference section.

BUSINESS LAW AND
ETHICS

Table of Contents
MAIN BODY...................................................................................................................................3
PROJECT-1.....................................................................................................................................3
Following question is to be answered .............................................................................................4
Define contract law and describe all the blue prints of a contract..............................................4
Explain the court system in relation to the English legal system and advise the parties above
which court action to pursue.......................................................................................................4
Advise Hilary as to whether binding contracts exist between herself and each of the following
people: Eleanor, Amy and Olivia................................................................................................5
Explain and discuss the various remedies available to the parties..............................................6
PROJECT-2.....................................................................................................................................7
Discuss this case in relation to ethical corporate governance and the Sabane-Oxley Act of
2002. ...........................................................................................................................................8
CONCLUSION..............................................................................................................................10
REFRENCE...................................................................................................................................11

INTRODUCTION
Business laws are those kind of laws that has been formed for setting up of business
organization. These laws are being formed to provide an concrete legal structure that has been
prescribed with certain guidelines towards business formation. Business laws are there to provide
certain rules and regulation that leads over forming of business. Ethics are that kind of special
code which has been set-up for maintaining of discipline and order within an business
organization. Laws of such nature is there to provide certain guidelines that has been given and is
required to be followed within an organization. In this file two projects that are based on contract
and Sabane-Oxley Act of 2002. First part questions are to be answered as per the given case
scenario and second part contains an name of the case that is in relation to Sabane- Oxley Act
2002.
MAIN BODY
PROJECT-1
Following question is to be answered
Define contract law and describe all the blue prints of a contract
Contract laws are those kind of laws which deals with that kind of transactions that
occurs within the business. Such laws deals with relationship that exists within an organization
and defines certain guidelines that has to be followed by an organization for making an
transaction possible in legal manner. In other words contract laws are those agreements which
are binding to both the parties through explanation of rights, duties of the parties. Contract is
considered to be legally enforceable when it bound to make approval of law. Under contract
there has to be exchange of goods, services, or an promise that has been made between parties.
This can be justified with a statement that all agreements are contract but all contracts are not
agreement. An contract can be of both oral and written form which means that an promise can be
considered as a contract and a written document can also be considered as a contract. Various
elements are there that makes an contract valid that is offer in which an proposal is done over the
contract, acceptance this means when an offer is being accepted by the party, consideration when
both parties agree over the rules and guidelines written in agreement. Legality it means when an
contract is formed as per the laws and no illegal activity is taking place within it.

Explain the court system in relation to the English legal system and advise the parties above
which court action to pursue
Legal system of UK is consists of various kinds of laws that has been formed to deal with
various kinds of crime that is existing within the country. Also legal system has formed various
laws that are related to crime of both criminal and civil nature. To implement such laws in proper
manner system of justice is being formed that consists of courts with various powers. Highest
court of appeal in UK is the Supreme Court which takes all kinds of cases that are being
transferred from lower courts and high court (Fox, Cohen and Adashi, 2019). Second court
where matters are heard that has been transferred or appeal has been made over lower courts
judgement. High court consists of three division in which the first division is of queens bench
that takes only criminal matters and then comes court of appeal that deals with civil matter of all
kind. Another division of higher court is family court that deals with all matter that is related to
marriage and divorce. Then comes bounty courts which deals with all cases that has been
transferred from lower court to it. After this various other courts like juvenile court that deals
with matter related to juvenile, tribunals that are bodies who are being assigned authority for
taking immediate actions against the crime or wrong falling under its jurisdiction. Still
complexity is there within the legal system of UK and is required to be fulfilled to make it
competitive with modern laws.
In the given case scenario there has been an contract laws which is found as the main law
applicable to it. Contract law falls under the category of civil wrong which means that they are
wrong that is civil in nature. So, in this case contract law is applied and in this offer with
acceptance is going to be applied with the clause goods on display in shops because sales offer
has been made by the party and accepted by other party. The proceeding will go in civil court
only.
Advise Hilary as to whether binding contracts exist between herself and each of the following
people: Eleanor, Amy and Olivia
Binding contract is considered to be that kind of legal agreements which exists between
two or more parties that is being enforceable by law. Sometimes these contract are not in written
form. Verbal statement can also lead towards formation of contract only intention should be
there to make such contracts valid. There should be agreement between parties, then there should
be acceptance, then exchange of value should take place. Binding contract is the term that is

being used by the contract in order to provide it legality or make it valid within the eyes of laws.
Since elements plays an important role in providing strength to contract that has taken place.
Various judgement passed by judges has helped in providing sustainability to the law of
contract. As contract can exists over transaction related to selling of product and services, any
kind of business agreement that has taken place.(Ciocchetti, 2016). In the above mentioned
scenario it can be seen that there has been no contract that has taken place between the parties
due to absence of acceptance between them. It can be observed that offer has bee made by
Hillary to Eleanor but the contract was cancelled when the fax was sent to ignore the letter. Other
part of the scenario explains that exhibition has been put up by Hillary stating to sell the painting
but after sometime as the exhibition started she cancelled the selling of painting. Upon
considering the facts it can be easily observed that offer was made but not acceptance has been
made.
To justify this a case study can be used that is Pharmaceutical Society of Great Britain
v Boots in this case Boots has introduced a new self service system within the shop and in this
customers is required to pick up goods from the shelf and has to put them in basket. After which
it is required to be brought to cash counter. The Pharmaceutical Society of Great Britain has
brought action for determining of legality of system regarding sale of products that are
pharmaceutical and can only be sold in the presence of a pharmacist only. In this the court is
required to determine that when contract come into existence. It was held by court that goods on
the shelf is an invitation to treat not an offer. If a customer buys goods and till the time purchase
has been made by him there can be existence of no contract between the parties. The contract is
therefore concluded at the till in the presence of a pharmacist.
So, it can be observed from the case that an invitation to treat is not an offer and this case
is related to the above scenario in a way that invitation to treat has been made but no offer has
been made between the parties.
Explain and discuss the various remedies available to the parties
In contract laws various remedies exists in order to check that contract is legally binding
or not. Such remedies through which claim can be made by the parties are damages, repudiation,
rescission, specific performance, injunction and restitution of awards. These remedies are there
which are available to parties that has been helping in making an breach of contract to be
identified. Damages are that kind of remedies that is been given in the form compensation to

money that has been asked to claim. In repudiation compensation is been given when an contract
has come to end. These are granted under special condition only under which breach has taken
place(Cay, 2019).
On considering the above scenario it can be observed that since no contract has taken
place between the parties. There can be no remedy used because breach of contract has not been
done. Only an obligation can be applied that is discharge of contract by frustration. An contract
can be discharged by frustration when circumstances has changed after the contract has been
formed. In this frustration has been made which has created existence over changes that has been
done under contract and fault has been made to either parties that has render contract which is
impossible to be performed. In this fault made by parties result into creating problem for
rendering of contract in smooth manner. Where a contract is found to be frustrated, each party
is discharged from future obligations under the contract and neither party may sue for breach.
PROJECT-2
Case Scenario: Enron scandal that is being publicized in October 2001 leaded to
bankruptcy of Enron corporation that is an American based company in Huston, Texas and the
de facto dissolution of Arthur Andersen. This is one of the five largest audit and accountancy of
partnership within the world. It is considered to be one of the largest bankruptcy reorganization
within American history at that time. It was regarded as biggest audit failure in the history of
world. Enron as formed within the year 1985 by Kenneth Lay after merging Huston Natural Gas
and Inter North. Several years later when Jeffrey Skilling was hired, he developed a staff of
executive that has been used over accounting of loopholes, special purpose that has been hired
and entities with poor financing reporting. That has been able to hide over billions of dollars
within the debt of dealing with poor deals and failed projects. Chief Financial Officer Andrew
Fastow and other executives misled Enron's board of directors and audit committee on high-risk
accounting practices and pressured Arthur Andersen to ignore the issues.
Enron shareholders filed an law suit of forty billion dollar and after organization's stock
price is being achieved with an high of US$90.75 per share in mid-2000. This Plummeted to less
that one dollar by the end of November 2001. Also U.S. Securities and Exchange Commission
that has began an investigation and rival Houston competitor Dynegy which is offered over the
purchase of an organization at very low price. The deal failed then on December 2, 2001, Enron
filed for bankruptcy under the code of United States Bankruptcy Code. Enron was having sixty

three point four billion assets is considered as the largest corporate bankruptcy in US until the
next scandal that took place (Carter and et. al., 2017).
Also various executives at Enron is indicating over variety of changes and some of them
were sentenced to prison also. Arthur Anderson was found guilty over illegally destroying
documents that is relevant to SEC investigation. It is voided and license to audit public
organizations is being effectively closed by firm. By the time ruling is overturned at U.S.
Supreme Court, the company has lost the majority of customers that is ceasing and operating.
Enron employee and shareholders has received limited return in lawsuits, despite of losing
billion the pension over stock prices.
As a consequence of the scandal, new regulations and legislation were enacted to expand
the accuracy of financial reporting for public companies. One piece of legislation, the Sarbanes–
Oxley Act, increased penalties for destroying, altering, or fabricating records in federal
investigations or for attempting to defraud shareholders. The act also increased the accountability
of auditing firms to remain unbiased and independent of their clients.
Discuss this case in relation to ethical corporate governance and the Sabane-Oxley Act of 2002.
Corporate governance in the system of rules, practices and processes that a firm is
directed and controlled. In these kind of governance essentially involving of balancing through
interest of an organization. Stakeholders are those persons which is shareholders, senior
management executive, customers, suppliers, finances, the government and community. Since
corporate governance that is being providing framework in order to make achievement of goals
and objectives achievable. These are also responsible for making management focused over
various aspects like forming of plan of action and internal control over performing measurement
with corporate discloser.
Understanding Corporate Governance
Such kind of governance is being refereed specifically for setting of rules, controls,
policies and resolution which has been put in place over giving direction to corporate behaviour.
Proxy advisors of shareholders is very important that has been indirectly affecting the
governance. An board of director is very uncertain in governance and have major involvement in
equity with its valuation. It is very important for an organizations corporate governance that is
important to investors as it has been showing through direction with business integrity. Good
governance is helping an organization to build trust over the investors and there community .

This has resulted into corporate governance helping in promoting of financial viability which
has been creating an long term investment opportunity for participants of market. In
communicating corporate governance is one of the most key component over building
relationship with community and investors.
Sarbanes-Oxley Act of 2002 is the act that has been passed by the U.S Congress on July
30 of the year which is helpful in protecting investors from fraud in financing which makes
reporting through corporations. This act is also known as SOX Act of 2002 and Corporate
Responsibility Act of 2002 (Breu, 2019). Such act has been formed in order to introduce strict
reforms that has been helping in forming of those reforms which has been regulating through
imposed mandate in strict reforms. Regulations is being imposed through various policies on
lawbreakers. The Sarbanes-Oxley Act of 2002 came in response to financial scandals in the early
2000s involving publicly traded companies such as Enron Corporation, Tyco International plc,
and WorldCom.
Many major kinds of frauds is there which impacts confidence and create trust issues
within the investors. It impacts trustworthiness of corporate finances under which statement has
lead over various demand which has impacted regulatory standard form decades.
Understanding the Sarbanes-Oxley (SOX) Act
The rules that has been enforcing over policies and has been outlining various provisos
that has been amended over supplement. The existing laws has been enforced and deals with
security regulations, including Security Exchange Act 1934. Other law is being enforced over
Security Exchange Commission. This act majorly deals with the four principals that has formed
basis of act and are given as follows:
1.Corporate responsibility
2.Increased criminal punishment
3.Accounting regulation
4.New protections
The Sarbanes-Oxley Act 2002 this is very complexed and lengthy piece of legislation. Under this
three important provision is being commonly being developed with the act and they are Section
302, section 404 and section 802. Two sections has been explained as follows:
Section 302 of the SOX Act of 2002

Mandates that senior corporate officers personally certify in writing that the company's
financial statements"comply with SEC disclosure requirements and fairly present in all material
aspects the operations and financial condition of the issuer." Officers who sign off on financial
statements that they know to be inaccurate are subject to criminal penalties, including prison
terms (Barber, 2016).
Section 802 of the SOX Act of 2002
Contains the three rules that affect record keeping. The first deals with destruction and
falsification of records. The second strictly defines the retention period for storing records. The
third rule outlines the specific business records that companies need to store, which includes
electronic communications.
Corporate governance is related to the act in a way that it deals with functions and pattern
that has to be followed by management to maintain clean governance within an organization. If
this would have followed then there would have never been such a financial fall of Enron
corporation. SOX Act of 2002 is being applicable to this case in a way that if this act would have
been existed at that time then this fraud would have been caught at early stage. Also punishment
would have given with much strengthener. This case paved the way to show the need of such
strong act to be formed in order to control the fraud that is relate to financial activities of an
organization. This act has helped inn making strict laws for such crimes.
CONCLUSION
From the above file it can be concluded that an business laws are those kind of
professional laws that has been formed in order to make an organization to be established. The
very first part of the project is being dealing with contract law through a case scenarios. Contract
laws are those laws that has been formed to maintain relationship within two parties. Second part
of the file is based on the case of Enron scandal and is being explained in relation to cooperate
governance which means controlling of firm's activities. Then in the end SOC act 2002 is being
explained that talks about regulations related to controlling of financial frauds.

REFRENCE
Books and journals
Barber, C., 2016. Healthcare law and ethics, 2: meanings, differences and similarities. British
Journal of Healthcare Assistants. 10(4). pp.176-179.
Breu, S.U., 2019. Blockchains and cybercurrencies challenging anti trust and competition
law. Law, Ethics and Society: Historical and Contemporary Perspectives. p.205.
Carter, S.M and et. al., 2017. A code of ethics for social marketing? Bridging procedural ethics
and ethics-in-practice. Journal of nonprofit & public sector marketing. 29(1). pp.20-38.
Cay, D., 2019. Contemporary issues in law and ethics: Exploring the family veto for organ
donation. Journal of Perioperative Practice. 29(11). pp.361-367.
Ciocchetti, C., 2016. Employment Law & Ethics: 7 Things You Need to Know About Age
Discrimination (Presentation Slides). Available at SSRN 2732980.
Fox, D., Cohen, I.G. and Adashi, E.Y., 2019. The Law and Ethics of Fetal Burial Requirements
for Reproductive Health Care. Jama. 322(14). pp.1347-1348.
Haidt, J. and Trevino, L., 2017. Make business ethics a cumulative science. Nature Human
Behaviour. 1(2). pp.1-2.
Klikauer, T., 2017. Business ethics as ideology?. Critique.45(1-2). pp.81-100.
Mahoney, K., 2016. 9 Climate change challenges in law and ethics. The Common Good and
Ecological Integrity: Human Rights and the Support of Life. p.107.
Neinaber, A., 2019. Meaningful Knowledge: Law and Ethics in Post-Genomic Gene Therapy
Research. THRHR. 82. p.1.
Warter, L., 2018. INTERCULTURAL MANAGEMENT AND ETHICS MANAGEMENT IN
HIGHER EDUCATION. Journal of Intercultural Management and Ethics.1(2). pp.3-5.
West, A. and Buckby, S., 2020. Ethics education in the qualification of professional accountants:
insights from Australia and New Zealand. Journal of Business Ethics.164(1). pp.61-80.