Albena Yordanova: Business Law Report - Sources and Impact

This report, authored by Albena Yordanova, LBBA00804, delves into the realm of business law, examining its sources, the role of government in law-making, and its impact on various aspects of business operations. The report begins by defining law and exploring the sources of English law, including judicial precedent, statutory law, and European law. It then elucidates the government's role in law-making, outlining the process of how a bill becomes a law, and differentiates between how statutory and common law are applied in justice courts. The second part of the report illustrates, with specific examples, how company, employment, and contract law have a potential impact upon businesses. Company law, employment law, and contract law are explored in detail with an analysis of their key components and their impact on business practices. The report concludes by emphasizing the importance of understanding and adhering to these laws for the successful operation of businesses within the United Kingdom.

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Unit 7: Business Law

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Introduction
Crimes are very common in modern-day society, in both personal and
corporate spaces. For this reason, laws and regulations had to be formed to
keep everyone in check. In the scenario where these regulatory systems do
not exist, only chaos would be seen throughout the world(Abbott, Pendlebury
and Wardman, 2013). The social balance depends on the effective
application of laws and regulations. In the most basic sense, laws protect
people’s rights and serve justice to criminals and victims. Similarly, business
organisations must also follow their own set of rules and regulations specially
designed for them(Allison and Prentice, 2009). This report takes a closer look
into these laws, their sources, how they work and other details, in order to
identify how they impact society.

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Task 1
(I) “Explain different sources of law”
Definition of Law
The law is essentially a system of rules recognised by any country or
community as being the means by which citizens of the country or members
of the community can be regulated, and when necessary, enforced with
penalties. A society cannot function without some rules and regulations in
place(Allison and Prentice, 2009). Even amongst ancient people, there were
laws for what one could do and could not do. In that sense, the idea of law is
not unique to modern society. However, the extent to which laws have been
used or can be used is a certain result of the current society and the people
living in them.
English Law
This system of law has become the foundation for the legal system of many
other countries, especially Commonwealth countries. This has made it
fundamental to the overall legal systems of the world. The legal system can
be approached from different perspectives, and this allows the perceiving
eyes to form different interpretations of the same laws and
regulations(Holdsworth, 2016). The basic understanding is simple, a law tells
us what can be done and what cannot be done. This allows the society to live
under a sense of harmony, that crime against one another will not go
unjustified. The “Union Act of 1707” divides the British Legal System into
three sections. They are:
1. England and Wales following the English Law.
2. Northern Ireland following the Northern Ireland Law.
3. Scotland following the Scottish Law(Holdsworth, 2016).

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Sources of English Law
Several different sources are responsible for the uniformity that is known as
English Law. These are explained here:
1. Judicial Precedent:Common Law and Equity come together to form a
judicial precedent. It basically refers to previous instances of a legal
case which can serve as an example of law for future cases with similar
facts or issues. Legal systems based on the common law prioritise the
establishment of consistent rules so that the outcomes can be
consistent and predictable as well. The more predictable the outcome,
the better the law.For this reason, judges are bound to rulings of
previous legal cases. This bondage is known as stare decisis, which a
Latin phrase meaning “Let the decision stand.” This is one of the
crucial sources of English law and is on equal footing with both
Statutory Law and European Law(Arnheim, 2014).
2. Statutory Law:The most significant source for English Law is without
a doubt the Statutory Laws. These are formed by the different agencies
of the government and various legislative bodies. These laws are
generally codified as well, i.e. they are written down on a codebook.
There are two kinds of Statutory Law depending on the body that is
making them. They can be either legislation or delegated legislation.
Delegated legislation refers to legal bodies that have been entrusted to
make laws(Scalia and Garner, 2012).
3. European Law:Upon joining the European Economic Corporation in
1973, European Law has gained significant importance in English Law.
The corporation became what is known today to be the European
Union in 1993. It is actually due to the “European Communities Act of
1972” that these laws are considered to be a part of English Law. The
Parliament of Europe, its Court of Justice, as well as the Council of

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Ministers are the ones responsible for the enactment and formulation
of these laws(Kennedy, Cahill and Power, 2011).
(II) “Explain the role of government in law-making and
how statutory and common law is applied in the justice
courts”
Role of Government in Law-Making
A crucial role is played by the government in making laws, and this can be
understood by the fact that the government participates as a member of the
parliament in the making of such laws(Holdsworth, 2016). Of course, like any
legal process, even law-making has a certain procedure. Below is a figure
that demonstrates this procedure.
Figure 1: Process of Law-Making(Griggs, 2011).
The figure provided above avoid attempts to provide an understanding of the
procedure of the passing of a bill into law. The very first stages to the
procedure involve a getting through both the House of Commons and theProcedures to
Law-Making
Procedures to
Law-MakingThe House of
Commons
The House of
CommonsThe House of
Lords
The House of
LordsIntroducing an
Act of
Parliament
Introducing an
Act of
ParliamentStages in Law-
Making
Stages in Law-
MakingBill
BillFirst Reading First ReadingSecond
Reading Second
ReadingCommitte
Stage
Committe
StageReport Stage Report StageThird Reading
Third ReadingHouse of
Lords House of
LordsRoyal Ascent Royal Ascent

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House of Lords. With the approval of both of these houses, an Act of
Parliament can be introduced. At this point, some stages of law-making come
to the limelight. The Bill now must go through two stages of reading, and
another third stage after getting through from Committee and Report
Stages. A new committee is generally formed in order to make a proper
evaluation of the bill. This is short-lived and only intended for the purpose of
evaluating the bill. When the Bill has received its third reading, it is sent to
the House of Lords again. If approved, the Royal Ascent receives the bill and
passes it as a new law(Griggs, 2011).
The government makes up the House of Commons. It is an elected body and
consists of a total of 650 members. This showcases the importance and role
of the government in law-making, as they are the ones to propose and
initiate the law-making process. It is the House of Commons that passes the
first bill to the House of Lords, thus initiating this procedure in
question(Holdsworth, 2016).
How Statutory Law is Applied in Justice Courts
Statutory Law is directly created by a legislative body, i.e. the Parliament, or
by a secondary authority that has been tasked with the creation of such law.
A characteristic of such laws is its difference based on the administration
making them. This is because Statutory Laws are entirely dependent on the
creator, and function according to their needs and requirements(Scalia and
Garner, 2012). A few good examples of Statutory Law are “Contract Law”,
“Employment Law”, and “Company Law”.
How Common Law is Applied in Justice Courts
Common Law is applied in the Civil divisions of the Law court. These are
essentially a formulation of the customs and norms of the society, developed
into laws based upon the various decisions made by the court. As the
Common Law follows the ideology of standing true to itself, any case

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resolution may become an example for future cases, and these examples
can be used in cases featuring similar of same facts or issues. Proper
documentation takes place in order to ascertain the authority of such
law(Arnheim, 2014). It is entirely the decision of the judge when a new
scenario arrives. But whatever decision is taken, would then become part of
the Common Law.

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Task 2
(I) “Illustrate, using specific examples, how company,
employment and contract law has a potential impact upon
business”
Company Law and Its Impact on Business
The various activities of a company are governed by some set of rules and
regulations, and these are known as Company Law. Most countries have
their own company law, and that is also the case for the United Kingdom.
Setting an example for the Commonwealth countries, the company law of
the United Kingdom has also been adopted by many of them(Pennington,
2006). This law defines how a company can formulate, its legal entities, and
how it can be operated. Some of the major issues tackled in this law are
issues of health, forced labour, rights of labourers, discrimination, and
trafficking. The “Company Act of 2006” consists of 1300 sections, and is the
definitive company law of the country. The act clearly outlines what a
company is allowed or not allowed to do, including business deals with other
companies and countries(Scalia and Garner, 2012).

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Figure 2: Major Concerns of Company Law (Pennington, 2006).
The impact of this law on business cannot be overstated. Section 7(2) of the
aforementioned act blocks the creation of a company for illegal or unlawful
purposes. Section 58(1) defines the naming scheme of companies, stating
that all public limited companies must have the abbreviation ‘plc’ at the end
of their names. Section 45(1) declares that companies are allowed to have a
seal if they want to, but it is not something mandatory in any way. The
company act lists many such rules throughout its 1300 sections(Oliver and
Marshall, 2014). When a company is being formed, it must comply with these
rules and regulations in order to be acknowledged as being a legal company.
This clearly suggests that the Company Law governs and controls any
company within the United Kingdom, and this impact dictates the general
path that a company is bound to take.Company
Law
Company
LawHealth
HealthForced Labout
Forced LaboutTrafficking
TraffickingDiscrimination
DiscriminationLabour Rights
Labour RightsFreedom of
Expression
Freedom of
Expression

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Employment Law and Its Impact on Business
Employment is one of the most important sectors of the economy. It allows
people to join existing companies and organisations, as well as making new
ones, in order to perform within the economy. But the Employment Law is
not concerned with self-employment, and rather governs employment within
existing companies(Scalia and Garner, 2012). The rules and regulations that
make up the Employment Law dwell with employers, employees, the
procedure of employment, and its conditions. Some of the major concerns of
the Employment Law are safety issues, reward, compositions, positions,
disciplinary procedure, notice period, holidays, sick leave, and wage(Lockton,
2014). This basically means that the Employment Law is responsible for
ensuring the rights of the employees within their workplace.As most
employees survive on salaries, how they are treated in their workplace has a
huge impact on their performance and mental condition. Ensuring that an
employee is not unsatisfied with her place of work is of great importance to
the Employment Law.

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Figure 3: Elements of Employment Law (Lockton, 2014).
The impact of the Employment Law on businesses has ensured a safe space
for employees. The “Employment Act of 1996” set the requirement for a
minimum wage for employees and labourers. Under this requirement, a
minimum wage is declared across the United Kingdom by the government.
Currently, the minimum wage for an adult over the age of 25 is 8.21 GBP per
hour(GOV.UK, 2019). Furthermore, this act also limits the working hour of
employees to only 8 hours per day. The health and safety of employees
within the workplace is ensured by the “Health and Safety Act of 1974”.Also,
the “Pensions Act of 1995” ensures the livelihood of employees after their
retirement. In these ways, the Employment Law influences and impacts
businesses and employees alike(Lockton, 2014).Areas of
Employment
Law
Areas of
Employment
LawGeneral
GeneralSalary
SalarySick Leave
Sick LeaveHolidays
HolidaysNotice Period
Notice PeriodDisciplinary
Procedure
Disciplinary
ProcedurePositions
PositionsCompositions
CompositionsReward
RewardSafety Issues
Safety Issues

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Contract Law and Its Impact on Business
A contract is an oral or written agreement formed between two or among
more parties.The Contract Law refers to a number of laws that govern
contracts concerned with the exchanging of merchandise, service, currency
or property(Beale and Tallon, 2010). The validity of a contract depends on
some specific traits. They are acceptance of offer, consideration, mutuality,
competency, and written document.The Contract Law enforces rules,
regulations and guidelines that all legal contracts must abide by. Such
contracts have three stages in their formation. They are Formation of a
Contract, Contents of a Contract, and End of a Contract. An authentic
contract is also expected to have some basic elements. These are offer and
acceptance, a legal relationship, consensus ad idem, competency of parties,
free consent, and lawful consideration(Allison and Prentice, 2009). With the
unification of these elements, contract law is legally acknowledged by the
court and other legal parties.
Figure 4: Formation of a Contract(Ruff, 2014).
There is no single act or regulation that makes up the Contract Law. Rather,
there are specific acts designated to oversee specific sectors of the contract
formation process. As the “Unfair Contract Terms Act of 1977” holds in
section 6(1), terms that have been implied in any way must be included in
the final product or service. This means that if a company implies that its
products are better than the competition, it cannot but deliver this in results.
As to what an implied term really is, section 6(2) describes an implied term
to be the description of any product, its class or value, or a sample exhibiting
such description(Ruff, 2014). Onwards, the “Misrepresentation Act of 1967”Formation
FormationContents ContentsEnd End

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defines the boundary between intentional misrepresentation of fraudulent,
and innocent misrepresentation. This division differentiates actual fraudulent
activities from the unintentional ones. Furthermore, the act also
differentiates innocent misrepresentation into two types, negligent and
“wholly” innocent(Beale and Tallon, 2010). Clearly, Contract Law has a great
impact on business.

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Task 3
(I) “Explore how different types of business organisations
can be legally formed”
A business is defined as the entity which is organized and managed in order
to earn profit by producing, supplying or selling goods or services to the
potential customers (Allison and Prentice, 2009). As goods and services have
enormous variety, there are a wide variety of business types. But, according
to the formation or legal structure of the business, a business can be
classified into few categories. And, on the basis of the formation, the legal
structure, taxation policy, operational cost, etc. are determined. Here, the
formation of different type of business organization are discussed below:
 Sole Proprietorship: Sole proprietorship business is the business
which is owned by an individual(Parker and Veljanovski, 2013). The
legal structure of the sole proprietorship is very simple. The owner of
the business is the individual. As the individual owns the whole
business, he has to bear all the liabilities and debts of the business. In
contrast, all the profit generated by the business goes to the pocket of
the owner. Besides, the government has limited involvement in this
kind of business. Also, this kind of business does not subject to any
laws. The only thing that a sole proprietorship business needs to have
is a license and pay the tax regularly.
 Partnerships: Partnership business is defined as the business which
is formed by the organization of more than one individual. Basically,
when a business is owned by more than one individual, that is sole
proprietorship no more and is treated as partnerships(Parker and
Veljanovski, 2013). The basic features of the partnerships are that the
business is formed on the basis of the verbal or written agreement

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between the partners. Besides, all the partners become liable for the
losses as they are the owner of the business. Also, all the partners get
a share of the profits.When a partnership business is established based
on a legal agreement and one or two partners bear the liabilities
according to the deed of the agreement, that is called limited
partnerships. In a limited partnership, one or two individuals take the
liabilities of all debt. However, one of the basic distinctions between
partnerships and sole proprietorship is that partnership business
maintains business law more strictly. “Partnerships Act 1890”,
“Limited Partnerships Act 1907” and “Limited Liability
Partnership Act 2000” describe all the pros and cons like
obligations, rules of formation, a legal entity of the partnership
business(Legislation.gov.uk, 2019).
 Corporation: Corporation is a special kind of business organization
which is very large. The main characteristic of the corporation is that it
is considered as one person. That means, legally, a corporation is an
individual and therefore bears all the liabilities and debts. Also, profit
generated by a corporation is owned by a single entity. Later, all the
profits are divided into shareholders according to the dividend policy.
Basically, the formation of a corporation is not an easy task. First,
“articles of incorporation” has to be filed which includes details of
the corporation (e.g. name, time period, shareholders, etc.)
(Legislation.gov.uk, 2019). Then the legal authority (secretary of state)
examines the documents and permits to incorporate. Whatever it
should be noted here that a large number of business entities can be
incorporated into a corporation.
 Limited liability Company: Limited liability company is the
combination of a corporation and limited partnerships, although limited

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liability company is not a corporation. The basic feature of the LLC is
that the liabilities of the partners are very limited. All the liabilities and
debts are taken by the owner of the company. “Companies Act
2006” encompasses all the rules and regulations for formatting a
limited liability company(Legislation.gov.uk, 2019).
(II) “Explain how business organisations are managed and
funded”
Managing a business is not an easy task. There are lots of tasks required to
manage a business. Besides, managing all types of business are not equal.
For example, in the case of a sole proprietorship, a business can be managed
easily. But, in case of the large scale of business organization, it is not easy
to manage. Despite the difference in business types, there are some basic
functions for managing a business. Such as, every business has marketing
function, operational function, finance function, etc. Basically, each of the
function is managed separately but coordinated with each other. Managers
of this department run all the department and take all the responsibilities of
the functions. For example, a marketing manager has to supervise all the
marketing activities of a business organization. A human resource manager
supervises all the recruitment and issues related to the employees.
Furthermore, most of the business organization has a board of directors who
are in charge of authorization. They authorize and supervise the entire
business organization. They take part in devising important strategies and
approve all the changes undertaken in the business organization.
For the sole proprietorship, no board of directors is usually essential to
manage. But limited liabilities companies and corporation need a board of
directors for the huge size and complex operations. On the other hand,

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partnership business is usually managed by a single manager (there is no
concrete rule of this) (Allison and Prentice, 2009).
However, managing a business organization also requires clear objectives
and goals. Also, it needs to analyze cost and profit. And to manage what is
most essential is planning. Proper planning can assist the business
organization in achieving the goals.
The process of funding a business
Every business needs capital for investment. This capital can be funded in
many different ways. They are discussed below:
 Family and friends: Family and friends are great sources of funding.
Typically, sole proprietorship and partnership business are funded by
family and friends.
 Bootstrapping: Bootstrapping means collecting funds from own
savings or financial resources (Allison and Prentice, 2009).
 Crowdfunding: Crowdfunding is the method of collecting funds from
customers or shareholders. The most common way of crowdfunding is
selling the company shares or selling bonds to the general public in
order to collect funds.
 Angel investors: An angel investor is a person who invests money for
a new business for ownership authority or for other purposes.
 Bank loan: Every bank provides loans to the business based on
different types of rules and regulations. In return for providing loans,
the business organization has to pay an interest rate. And the loan can
be paid on the basis of instalment or whole loan can be paid after a
definite period of time (Beale and Tallon, 2010).

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Usually, sole proprietorship business raises funds from family and friends,
bootstrapping or bank loan. Partnerships business, based on whether it
has a legal entity or not, raise funds. If it does not have any legal entity, it
cannot take bank loans. Angel investors may be the option for this case. The
company can raise funds from crowdfunding, angel investors or bank loans.
Especially, a bank loan is a good option for a company to fund a business
organization.

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Task 4
(I) “Case Study 4.1”
Case Summary
Sarah has been working as a secretary in a company. Her past performance
is very satisfactory. She is very efficient at work. Because of her efficient
performance, there is a possibility that she will be promoted as Head
Secretary. But recent frequent misconducts of Sarah have made the
possibility vague. Due to stress and frustration originated from the bitter
experience of divorce have made Sarah irritable and impatience. Also, she is
not attentive to work.
Recently, the misconduct of Sarah is so irritable that some managers are
threatening that if she is promoted, they will leave the jobs. The head of the
HR knows all this issue very well. And he has already warned Sarah for her
misconduct. He has already issued a warning memo.
Now, the HR manager decides that because of Sarah’s misconduct, there is
no possibility to promote her. Even, she may be sacked, if she does not
improve his behaviour.
Legal Solution
After analyzing the case, it is certain that there is a critical condition for the
HR manager to take a decision and find a legal solution. Well, in this
scenario, there are many ways opened to him.
Firstly, it should be mentioned here that he cannot discharge Sarah before
notifying her at least 12 months ago according to “Employment Rights
Act 1996”, but according to “Employment rights act Sections 94 to
134 A” the company can issue a notification(Legislation.gov.uk, 2019). But
there are also many ways opened to him.

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According to “Employment Rights Act 1996”, in case of misconduct,
three meetings should be held. After three meetings with the employees, if
s/he does not improve s/he can be discharged. As already a meeting has
been held, so Sarah will get two chances. But, this option of three meetings
cannot be applicable for “gross misconduct” or “serious misconduct”
(Lockton, 2014). As the misconduct of Sarah is not included in these groups
so, holding meeting can be options. Besides, the warning memo includes the
time of improvement. As warning memo has been issued, the Head of HR
can discharge after the expiration date of warning memo. In that case, the
discharge will not be “unfair dismissal” (Lockton, 2014). In that case, no
compensation needs to be provided.
Whatever, this problem can be also solved with the intervention of
“alternate dispute resolution”. Alternative dispute resolution is the
dispute resolution process other than litigation. As a dispute arisen between
Sarah and the managers, Head of the HR can arrange a mediation
procedure in order to resolve the dispute. It should be noted here that;
mediation is the process where a meditator mediates between parties who
are involved in a dispute. Finally, what the Head of HR can do is arranging
regular counselling for Sarah as she is suffering from frustration due to her
divorce.
(II) “Case Study 4.2”
Case Summary
Peter Romanov is a Russian businessman who had seen great success in
doing business with importers from different countries, including the United
Kingdom by exporting high-quality vodka. Romanov had really smooth
business experience with the imported from the UK for over a decade, but
that hasn’t been the same as of recently. Normally, Romanov and the UK

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importer decided on the price of the shipment three months prior to the
actual delivery. Sterling pound had been used as the currency of choice for
these payments. When the two parties signed another deal in March of 2018,
the price was not decided three months prior as usual. In the following two
months of April and May, the value of the sterling pound had a lot of
fluctuations and was generally to be considered unpredictable in nature due
to the Brexit negotiation. Romanov sent an email to the UK importer,
informing them that he would be taking roubles for the current deal, due to
the falling exchange rate of the pound. The UK importer did not reply
officially by email, and Romanov sent the supplies on schedule. The UK
imported made the payment in roubles as expectedbut used the exchange
rate from March, when the deal was made. This generated a 10% loss for
Romanov in contrast to his expectations.
Legal Solution
The solution to this case can be explored with the use of the English Law.
The prime importance for this case is in the very relationship that the two
parties have, as well as their agreement. The argument for this case is on
the price that was paid. Contrary to what Romanov would expect, an
agreement of this sort can only be formed through mutual official
acceptance. The “Sale of Goods Act of 1979” held that the agreement
between Romanov and the UK importer had to have been formed on the
basis of mutual consent(Legislation.gov.uk, 2019). But the UK imported
never officially agreed to any price, to begin with. As Romanov made the
shipment without first confirming that the UK imported was okay with the
price, he cannot legally enforce anything in this matter. Though nothing
can be done legally, the two parties can make use of the alternate dispute
resolution method in order to come to a solution that can benefit both
parties. As they have a decade-long history of doing business together, it
would be harmful to either party to cut off business due to this incident

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alone(Lockton, 2014). Nevertheless, when considering the case purely on the
basis of the law, Romanov cannot win anything at this point. As the new
agreement was only offered but never accepted, the previous agreement
still remains valid to this point. In that sense, the UK importer did something
ethically wrongbut legally justified. Hence the law cannot help Romanov,
and he has to instead seek help through alternate dispute resolution.

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Conclusion
Business laws are very important to keep a balance between all business.
Therefore, every business should obey all the business laws and obey the
laws and regulations everyone connected to the business should clear
concept about the laws. If a business organization breach the laws, not only
that business harms the society and business environment but also that
business is harmed itself. Ultimately which produces chaos within the
business environment and also creates social wastage.

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References