Business Law and Ethics: Contract Law, Corporate Governance, SOX

This assignment delves into business law and ethics, encompassing two projects: an essay on contract law and the English legal system, and an individual report on the Enron scandal. The essay defines contract law, outlines its blueprints, explains the court system, and assesses binding contracts and available remedies. The report analyzes the Enron scandal, focusing on corporate governance failures and the relevance of the SOX Act 2002, detailing the company's formation, expansion, accounting practices, and eventual bankruptcy, highlighting issues of debt, misrepresentation of financial statements, and the role of key figures like Kenneth Lay and Jeff Skilling. The assignment provides a comprehensive overview of legal principles and their practical application in business contexts.

Business Law and Ethics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK- PROJECT 1- ESSAY..........................................................................................................3
Define contract law and describe all the blue prints of a contract..............................................3
Explain the court system in relation to the English legal system and advise the parties above
which court(s) 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..............................................5
PROJECT- 2 INDIVIDUAL REPORT ..........................................................................................7
INTRODUCTION OF REPORT................................................................................................7
CONCLUSION..............................................................................................................................10
REFRENCES ...............................................................................................................................11

INTRODUCTION
Business laws and ethic are those kind of laws that is important for an organization to
grow itself. Business laws requires to establish business organization that has been helping in its
establishment in an country. Such laws provide concrete structure that has been helping an
organization to accomplish task and perform activities related to business in smooth manner.
Ethics are those steps that has been formed to maintain order and discipline within an
organization. These are that kind of rules and regulations that has been helping in providing
certain guidelines which makes business organization to be formed in legal manner. These steps
involve behavioural aspect that has to be covered within an organization. Scope of both the laws
are wider in nature because they deal with various aspects related business is being covered
under it. Nature is dynamic because various elements covered under the business that make
functioning of organization possible. Further this file is divided into report and essay that is
based on contract, corporate governance and SOX Act 2002.
MAIN BODY
TASK- PROJECT 1- ESSAY
Define contract law and describe all the blue prints of a contract
Contract laws are the laws that has been helping in formation of agreement by creating
legal obligation over the parties to act as per this. Such laws are been formed to cover various
aspects that has been covered in order to create influence over growth and success of an
business. Such laws are being focused mostly upon transactions that has been taking place within
an organization (Silver, 2020). Contract law can be termed as that laws which helps in building
strong relationship between the parties. These agreements are also bound with certain guidelines
that has been formed to make sure that agreements formed is legal. Also it can be observed that
agreements can be a contract but an contract cannot be an agreement. Contract laws consists of
certain elements that has been making it a legal contract and they are offer, acceptance,
consideration and legality. Further explained as follows:
Offer: This means hen an offer is being made by another or the motive of forming contract is
being disclosed. If an offer is required to be terminated then an organization must offer things
that is required in order to make withdrawal, rejection, lapse of time with failure of condition and
death. All this makes an offer to be violated.

Acceptance This accepting of offer that has been made by an organization in order to make
communication over acceptance which has taken place between parties. It is done over the offer
that has been made by offeree. Also postal rule is applicable under this element of contract.
Consideration It is considered to be one of the most important contract which is given to parties.
Only after consideration contract is considered to be an valid contract.
Intention If there is no intention for legal consideration then agreement is being done over the
agreement and presumption that is made through social and domestic agreement for presumption
possible(Sholl, Naaz and Chishti, 2017).
Explain the court system in relation to the English legal system and advise the parties above
which court(s) action to pursue
In UK various kinds of laws exists regarding the context of aspects existing within UK
and these laws are existing within them. Legal system of UK has been formed to deal with
crimes and wrongs that has been accruing within the country on regular basis. These laws are
there to deal with both civil and criminal acts that is impacting society in negative manner. Laws
in UK are very complexed in nature and process involved within them is also very lengthy to be
applied for giving punishments. There exists various loopholes that has made legal system in UK
not comparable with modern laws of same nature(Mahoney, 2016). In order to make these law
applied with justice legal system in UK has formed judiciary which consist of courts of various
kinds.
Courts of UK Supreme Court is the highest court for appealing regarding any matter that
has not been justified in proper manner by High court. Then comes High court in which cases in
which judgements passed by lower is challenged comes. It is divided into three departments
having jurisdiction to hear the matter. 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.
After this there comes lower courts which hears matters that are of both civil and criminal nature.
The above scenario consists existence of contract within it that is being found to be the
main element within it. Such laws and cases related to them is related to civil laws in which an
individual commits a wrong. In order to file suit against the party in case of breach of contract
civil courts has to be considered for it. Further proceeding is done within it 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. Such contracts need not to be in the written
form only. They can be oral form also. An statement made having no written proof can be
considered to be a contract that is legally binding. To make a contract binding there has to be an
agreement between the parties (Jenlink and Jenlink, 2018). For providing justification over the
binding contracts relevant case is Partridge v Crittenden under this case defendant has been
placed over the advertisement that has been made for finches of sales. Under these offences
recording is being done according to the bird protection that has been made over an offence to
sell a particular bird. This has been making protection over the offence that has been involve
selling of bird and has been made charged over the conviction of offence and appeal is made
against conviction. As per case scenario invitation n to treat has been made over the offer. Literal
rule is being applied with making clear interpretation of law. Another relevant case law is related
to the scenario is Heathcote Ball v Barry under this case binding of contract is related over an
auction that has been reserved and includes items. Two Alan smart engine analysis that is worth
£14,000. In this it was held by court that auction has taken place without making any kind of
unilateral offer that is being accepted on the highest bid. There was thus a binding contract and
the claimant entitled to damages covering the loss of bargain.
As per the scenario that has been mentioned above shows that contract has not taken
place between the parties. Though offer has been made but acceptance is not there.
Explain and discuss the various remedies available to the parties
Under contract law wrong that has been committed by an individual or party is breach of
contract. In order to get claim out of a breach certain remedies has been given under the contract
law and they are explained as follows:
1. Damages
2. Specific performance
3. Injunction
4. Repudiation

Damages To compensate for the loss, the injured party has suffered due to breach of
contract , damages are provided to the injured party. For the entitlement to substantial damages,
the injured party must show -
1. due to breach of contract, actual loss is caused
2. type of loss is recognised
3. the loss is not too remote
if there is no actual loss but breach of contract is established, the aggrieved party may be entitled
to nominal damages.
Specific performance The court may order for specific performance of contract where
the damages are inadequate which will compel party who has breached the contract to fulfil the
terms of contract (Harper, 2019). In Stickney v Keeble the court held that it will only grant
specific performance of contract when it is just and equitable to do so.
For claiming this remedy, the claimant must come to equity with 'clean hands'.
Injunction This remedy is claimed for restraining the party from committing breach of
contract. Types of injunctions has been given as follows:
 Interlocutory, which are designed to regulate position of parties it may be claimed during
the pendency of full hearing of case.
 Permanent, which are permanent in nature and is claimed after final disposal of the case.
 prohibitory, which means prohibiting the defendant from doing any act in breach of
contract
 mandatory, which means requiring a defendant to reverse the effects of an existing
breach.
Repudiation Repudiation means to end the contract. It is available only for breach of
obligation. This remedy can be claimed by the aggrieved party for breach of contract.
In the above case no contract has taken place that is why no remedies is to be used. Only
invitation to treat exists which is not considered to be a valid contract. In this scenario no
remedies has to be used because not binding contract exists. Invitation to treat means when an
offer has not been made only an invitation exists.

PROJECT- 2 INDIVIDUAL REPORT
INTRODUCTION OF REPORT
In the following report an case study is been given that is based on Enron Scandal that is
considered to be biggest fraud in the history of America. Under this report corporate governance
is discussed in relation to case and then SOX Act 2002 has been covered.
CASE SCENARIO
This case is based over an organization that is Enron which was formed after merger of
two companies. It is considered to be one of the biggest case of bankruptcy in the history of
America. On October 2001 organization was seventh largest accounting fraud and corporate
corruption. Enron corporation was having $60 billion assets. Shareholder of the corporation
faced loss of $74 billion and various individual lost job also. Scandal has led over dissolution
with auditing at this time Arther Anderson was CEO of Enron Corporation.
Formation of the organization took place in July 1985 when merger of two companies
took place which were Natural Gas and Inter North. CEO of Enron was Kenneth Lay. In this
process acquiring of debts, Enron expanded in its business plan and has been dealing with
commodities and services like electricity, papers, natural gas, freight, communication technology
etc. Further Mckinsey & Co who assigned Jeff Skilling to handle the project in 1990. The
organization appointed Jeff Skilling as the CEO and Knneth Lay as chairman of Enron
Corporation. When Enron was formed, electricity and natural gas were under state monopolies .
Enron started trading online due to deregulation of energy market which free the companies to
operate free from US government scrutiny. The first global commodity trading website was
launched as Enron Online in November 1999 (Goodarzi, Salamzadeh and Salamzadeh, 2018).
Later on the organization's growth was impacted because of the huge debts within
corporation, executives were able to hide the condition by showing revenues that were fake and
burring the loss. In this misrepresentation of balance sheet took place for keeping huge debts.
Also creative accounting was being done that inflate both profit and assets. Corporation showed
fake earnings and resulted into bringing new investors that is eager for making money and doing
investment from present shareholders. The corporation also made artificial energy crisis in
California so that there are chances of manipulating power supplies and thereby charging
excessive prices for the same. Kenneth Lay on February 2001 retained position of chairman that
has been giving resignation from CEO and named Jeff Skilling as CEO and President of Enron.

Few months Jeff Skilling resigned from CEO's post. He also sold his shares and gave personal
reason for resigning.
On October 2001, US Securities and Exchange Commission started to make formal
investigation with special committee and make financial transaction of Enron Corporation.
Enron Corporation earning report showed that drop of over one billion dollar is done in equity
share and loss has been hidden by them. On 24th October 2001, Andrew Fastow was sacked. On
November 2001, Enron admitted that overstated profit in 1997 by $600 million. The
investigation was extended by US securities and Exchange Commission to Arther Anderson
LLP. 2nd December 2001, case has been filed for bankruptcy against Enron Corporation.
LOOPHOLES THAT RESULTED IN SCANDAL
The company was internally hiding the losses and showing imaginative profits which led
to big scandal and heavy loss to then investors and lack of review process led to bankruptcy and
heavy losses and there were problems to comply with regular review process. Lack of laws to
protect the interest of investors as well as no proper mechanism for independent audit was
missing which gave rise to scandal. The middle and senior management failed to maintain the
environment that was conducive to include goals and objectives of organisation.
Enron was a massive fail and greed because of its size, complexity etc. due to multiple failure
like auditor failure, analyst failed, creditors failed which sent a signal of management structure
(Boatright, 2017).
Corporate governance this is that kind of process that has been making an organization
to be directed and controlled with the process which has taken place. According to the
governance interest of stakeholder exiting in balancing organization. It has also paced way for
making balance which includes management, executives, customers, suppliers, finances and
various departments. As corporate governance has been able to provide concrete structure that
makes achievement of goals and objectives possible. Focus of it is over managing of services and
covering various aspects that is related to making plan that is required by an organization to
follow measurements that has to be disclosed over making measurements. In this kind of
governance reference is able to develop focus on the rules, policies and resolution that has been
directing organization for helping in measuring disclosed. Governance is being referred to as
those rules, policies and resolution which provides directions for moderating behaviour of
employees. Also this is there to focus upon working of management. Board of directors plays an

major role in making governance value equity of an organization. Important factor of the
organization is to maintain integrity within business.
SARBANES-OXLEY ACT OF 2002 This act was formed by US Congress on 30th July
2002. It has been helping in providing protection over investors against financial fraud which has
been helping with report formation. Under the act SOX act of 2002 has been formed in order to
make sure that all kinds of frauds is being dealt with regulations and rules that create strict
reforms. Policies is being provided for punishing those regulations that has been imposing strict
reforms. As the act come after the frauds but has been proven to be impactful in controlling
frauds. 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. The bill was enacted as a reaction to number to scandals including Enron. It
covers the responsibility of Board of Directors for any fraudulent activity, add penalties for
misconduct and also create regulations to be complied by Securities and Exchange Commission
as to how compnies have to comply with law. There are many reasons for the enactment of this
act such as auditor's conflict of interest, boardroom failures etc. In the Sarbanes-Oxley Act 2002
complex process is been given and is lengthy legislation that has been protecting various kinds
organization against fraud. Under this act various important legislation is there that has been
formed and they are Section 302, 404 and 802 (Barth and et. al. , 2020).
Both corporate governance and SOX Act of 2002 has been applied in the case in different
ways. If corporate governance would have been there then management of organization would
have followed basic ethical code of conduct that had made organization attain stability within
market. Then SOX Act 2002 come into existence after fraud has taken place such act paved way
for making an organization free from frauds. If corporate governance would have been there then
behaviour and elements could have been maintained of organization. This could have lead to
make organization gain balance. Act come into existence after fraud but existence of it in earlier
time would have made fraud to be controlled and punishments would have been more harsh that
could have reduced the frauds from taking place.

CONCLUSION
From the above file it can be concluded that business law and ethics consists of various
elements that has been dealing with various concepts of business which makes an organization to
work in smooth manner. First part of the file consists of essay that deals with contract law and
questions regarding it is answered. In the essay elements of contract has been explained with
definition. Then binding of contract that means when contract is binding to parties and courts has
been explained. Remedies has been explained in the end of essay. Second part is based over an
case study of Enron scandal with relation to this corporate governance has been explained that
deals with behaviour of management. SOX Act 2002 has been explained that has been formed to
control frauds that has been taking place in corporate world.

REFRENCES
Book and Journals
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Boatright, J.R., 2017. Ethics and corporate governance: Justifying the role of shareholder. The
Blackwell guide to business ethics. pp.38-60.
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Entrepreneurial Attitude of Manager. In Competitiveness in Emerging Markets (pp.
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