Business Law Report: Legal Framework and Business Operations

This report provides a comprehensive overview of business law, focusing on the UK legal system and its implications for businesses. It delves into the divisions and sources of law, explaining the law-making process and its effects on business operations. The report further examines the impact of various legislations, including employment law and company law, on businesses like Pegasus Ltd., particularly in the context of expansion and hiring. Different types of business organizations, such as sole proprietorships, partnerships, and corporations, are legally framed and discussed. It also addresses the management and funding aspects of organizations, along with alternative solutions for resolving business disputes. The report references key legal cases and concepts, offering valuable insights for understanding and navigating the complexities of business law.

BUSINESS LAW

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Divisions and sources of law.................................................................................................1
P2 Law making process by the government and its effects on business.....................................2
TASK 2............................................................................................................................................4
P3 Impact of various legislations on business.............................................................................4
TASK 3............................................................................................................................................5
P4 How different types of business organisation are legally framed..........................................5
P5 How organisations are managed and funded.........................................................................5
TASK 4............................................................................................................................................6
P6 Alternate Solutions for Resolving disputes............................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................7

INTRODUCTION
Business law is the law applying on the commercial and mercantile transactions in a
market, therefore, it is also called as the mercantile law or commercial law. Whenever any
commercial transaction takes place between two parties then it falls under the purview of
business law.(Alix Adams, 2017) The business law deals with a variety of business transactions,
which are regulated or governed through different laws such as contract law, companies law,
employment law etc.
The report is a study of business law and highlights various aspects of business law along
with an explanation about the legal system prevailing in the UK and how legislations are
formulated. The report further, talks about the various business laws which would impact the
business Pegasus Ltd., in the process of expansion. The alternate dispute resolution mechanism is
also discussed in the end.
TASK 1
P1 Divisions and sources of law
Any society, irrespective of size, has a system for governance and a complex legal system
to ensure welfare of people. Even though, it is not easy to classify the law in board heads but law
can be classified as law in personam and in rem, which means public and private law.(Alix
Adams, 2017)
 Public Law – generally deals with individual – government relationships and the
acts of an individual which directly have an impact on the society, for instance,
criminal offences are under the purview of public law.
 Private Law – deals with relationships between individuals forming a branch of
private law, for instance, contract law, law of tort, etc.
In the Britain, the legal system is governed and administered by the courts. The courts are
levelled according a hierarchy which is followed in the three countries of the UK, stating from
the supreme court to the magistrates' courts. The hierarchy of courts is as follows:
 Supreme Court – This is the highest court of appeal which was called as the
House of Lords earlier. The decisions of the supreme court are binding on all the
other courts as precedents.
1

 Court of Appeal – This is the senior most court where appeals are heard on both
the matters, civil and criminal. And, accordingly the court has two divisions, one
being civil and other criminal.(Alix Adams, 2017)
 High Court – The High courts are the senior courts as well and serious and
complex matters are heard by it. The high court has three different divisions –
Queens' , Family and Chancery according to the subject matters.
 Crown Court – The crown courts hears the serious criminal matters, some of
which are transferred by the Magistrate's courts.
 Magistrates' Court – These are the justices' courts which hear both the matters,
civil as well as less serious criminal matters. The justices' are appointed from the
local communities.
Sources of Law
The sources of law are the origins of of law, which helps in understanding the law better.
The sources of law could be used by the organisation Pegasus Ltd., which will help the company
in understanding the origins of law existing in the UK. The various types of sources of law are
legislations, precedents, common law, and European Union law, which are explained below:
Precedents are the judicial judgements pronounced by the superior courts on the points
of law which are binding on the rest of the courts subordinate to that court. For instance, the
judgements of the Supreme Court are binding on all the other courts.
Legislations are various laws which are formulated by the parliament of UK. The
principle legislation in the UK is stationed in London which makes the law for the entire three
countries of the UK.
Common Law is part and parcel of the legal system of Britain, thus, the judgements
passed by the superior appellate courts become part of law.
European Union Law is another important source of law as the member nations are
suppose to abide by the laws formulated by EU. These laws have precedence over the national or
local laws.
P2 Law making process by the government and its effects on business
The law making process by the government consists of passing of a bill by the legislation.
A bill can be classified into two categories which are public bills and private bills. The public
2

bills are converted into laws whereas the private bills are non-governmental bills related to
persons, corporations or local interests.
A bill can be initiated in any House of the parliament which has to be passed by the other
House to get the status of a law. For a bill to become a law there it has to go through following
stages:
 First Reading
The bill is introduced in the first reading and the title of the bill is given and later on published.
 Second Reading
The second stage consists of a debate on the aspects and areas of the bill wherein the members of
the House vote and the bill is proceeded further to the next stage.
 Committee Stage
The bill is discussed in its entirety by the members and if any amendments are required then they
are added in this stage before furthering the bill to the next stage.
 Report Stage
This stage involves reporting of the amended bill. The members of the house are provided the
bill with the amendments and the aspects of the bill are again debated on followed by votes in the
end.
 Third Reading
The third reading is the stage where the bill is finally discussed and prepared to become a
legislation.
 Royal Assent
This is the final stage of the bill wherein the assent of the Queen is taken, known as the Royal
Assent. After the assent the bill becomes an Act of the parliament and a law.
Whenever a legislation is passed by the parliament it creates an impact on the business of an
organisation because the new law has to be adhered by the organisation to prevent any legal
implications. (Alix Adams, 2017)The organisations such as Pegasus Ltd., should be updated with
the current legal happenings. And, this could be done by visiting the business law websites
which provides latest updates on business law and also provide view points of the distinguished
business law attorneys'.
3

TASK 2
P3 Impact of various legislations on business
The Supreme Court has recently delivered a landmark judgement in determining the
status of employees in a gig economy in the case of Pimlico Plumbers v Smith [2018] UKSC
29. The case was initially filed before the Employment Tribunal in which the employment status
of Mr. Gary Smith, who was an employee of the company under an agreement, which was
majorly changed after a few years.
Mr. Smith contended that the company has unfairly and unlawfully deducted his wages
when he came back after having heart attack. The company Pimlico argued that Gary Smith was
not an employee of the company to claim the benefits. The Tribunal held that Mr. Smith was not
an employee but he was entitled to the wages as a worker of the company. The matter went into
appeal and the Supreme Court finally decided that Mr. Smith was not an employee for the
employment benefits but he was a worker of the company in context of the deducted wages. It
was also held by the appellate court that the uncertainty arouse in the contract because of the
unclear terms of the contract between the parties.
Therefore, the judgement could be applied to the facts and circumstances of the company
Pegasus Ltd., as the company is expanding and have brought 35 new vans for delivery business
as well as hired new people to drive the vehicles and manage deliveries. The Employment law
regulates the relationship between employer and employee, which means that the status of
drivers hiring Pegasus vans should be clearly mentioned in the terms of contract.
The business of the company would be affected if the terms of the contract are not clear
as this would lead to litigation in case of dispute arising between drivers and the company. Even
though, the drivers have to wear the uniform of the company and have to carry an identification
card of the company, just like the Pimlico Plumbers case, still the terms of the contract would
decide the status of the drivers and what are the employment benefits they are entitled to.
Therefore, both the laws should be considered by Pegasus Ltd., while hiring the drivers for the
company.
4

TASK 3
P4 How different types of business organisation are legally framed
Alex and Jay are advised by the accountant that they should set up a registered company s
there are multiple benefits of setting up a registered company. There are different types of private
organisations, which could be set up to run a business, such as sole proprietorship, partnership
and corporations. The different organisations and the procedure to set them up is given below:
1. Sole Proprietorship – In this type of organisation the business is owned and governed by
a single person and the business does not have a separate entity legally. The owner is
responsible for all the loses and is entitled to all the profits generated. These are easy to
set up as it just needs a small amount of investment to be initiated. As it is a small
enterprise the business overheads are lean but the liability is of the owner for the loses.
2. Partnership – This enterprise consists of two or more parties to starts up a business. The
partners are unlimitedly liable for the liabilities incurred by the partnership firm. And, the
profits are distributed amongst the partners equally. A partnership firm is initiated by
making a partnership deed and the liabilities are decided by this deed. It is not necessary
to register a partnership. The Limited Liability Partnership (LLP) is a relatively new
concept having feature of both a corporation and a partnership. The liabilities of partners
are limited and it has to be compulsorily registered.
3. Corporations – A company has to be incorporated for starting doing a business. The
company has a separate legal entity, which is distinct from its members. The English law
states that a company is incorporated as a legal person by applying to the Companies
House. It was decided in the case of Salomon v Salomon & Co. Ltd. [1896] UKHL 1, that
the status of a company and its member is distinct and they should not be considered as
one. For a clear picture who is after regulation of a company the 'corporate veil is lifted.'
A corporation could be set up by applying to the Companies House with the required
documents such as Memorandum and Articles etc. Once a certificate of incorporation is
granted the company can start doing business. The members are only liable till the unpaid
value of shares and not more.
5

P5 How organisations are managed and funded
Management of a Company
A company is run by the shareholders and the board of directors, as mentioned in the
articles of association. The directors take up the managerial tasks of the company as they are the
agents of the company acting on behalf of the company.
Role of Directors
The directors are responsible for the management of a company because they are the in-
charge of managing the business of the company. (Alix Adams, 2017)The directors should act in
accordance to the memorandum of association for managing the business and should work
honestly, diligently and reasonably and should not exceed their powers while taking a decision.
Funding a Company
Any organisation, in spite of any size needs finances for effectively running a business.
Funding is one of the important activities in a company and can be understood as raising
financial resources from the members' own sources or from outside sources. There are various
methods of raising capital in an organisation which are as follows:
1. Government Grants are sought from the government and these differs in
accordance to the sizes of an organisation.
2. Loans are the financial assistance given to an already existing organisation by
the financial institutions, which is taken against a collateral security by the
company.
3. Equity is another way of raising capital from outside the organisation, for
instance, equities are a good way to get seed money for the newly set
organisations.
4. Venture Capital is a method of raising capital from a group of investors who
have pooled in finances for a particular amount of shares in the organisation.
TASK 4
P6 Alternate Solutions for Resolving disputes
Disputes are inevitable in any organisation and rather than going to a court for resolving a
civil dispute can go for other remedies. These remedies are cost effective than a traditional
6

litigation and less time consuming. These remedies are known as the Alternative Dispute
Resolution (ADR) which are classified into four different methods – Arbitration, Conciliation,
Mediation and Negotiation.
There are two commonly known ADR mechanisms in UK which are – arbitration and
mediation. Arbitration is a process wherein the parties could involve an independent third party
called an Arbitrator, who after hearing both the parties decides on the disputes raised. Mediation
is another way of dispute resolution by which the parties come to an amicable decision with the
help of a third party, called a mediator. In Britain ADR as a mechanism is considered in dispute
resolution in limited sectors only, such as telecom, etc. but it has been considered by other
businesses as an alternate mechanism for dispute resolution.
The company Pegasus Ltd., can consider ADR for the disputes involving civil matters
rather than going for traditional litigation, as litigations are more time consuming, expensive and
little bit confusing. And, the attorneys charge a fortune for filing a litigation and continuing it till
a decision is given by the court of law. Therefore, Pegasus can go for alternate dispute
resolution.
CONCLUSION
It can be concluded that for effectively running a business, the commercial laws are
important such as employment law, contract law, and companies law. Pegasus Ltd., has to abide
by these laws for smooth and effective functioning of their business. Also, the alternative dispute
resolution mechanism can be adopted for resolution of civil disputes arising in an organisation.
REFERENCES
Books and Journals
Alix Adams, 2017. Law for business students Ewan MacIntyre, Business law. The Law Teacher.
51(4). pp.527-529.
Online:
Pimlico Plumber v Smith. 2018. [Online]. Available through:
<http://thestudentlawyer.com/2018/03/19/a-closer-look-at-pimlico-plumbers-v-smith/>.
7