Business Law Report: UK Business Law, Contracts, and Legal Solutions

This report delves into the intricacies of UK business law, commencing with an introduction to the legal system and its significance in the context of business operations. It outlines the various sources of law within the UK, including legislation, European Union law, case law, and the role of the Law Commission. The report then examines the function of the government in law formation, particularly focusing on the application of statutory and common law. It also explores the impact of other laws, such as company law, employment law, and contract law, on business organizations. Furthermore, the report presents legal solutions for various business issues, including the formation of a company versus a partnership, contract termination, liquidation, and insolvency, providing justifications for each solution. The report emphasizes the importance of adhering to business law principles to ensure smooth and legally compliant business activities.

BUSINESS LAW

INTRODUCTION
A legal system in the country is defined as bunch of defined principals and regulations
that are decided to be imposed in the country to maintain safety and security. An activity that
leads to breach in any legal principals will be termed illegal in the eyes of the law. In all the legal
system all over the world English legal system is one of the oldest legal system and in most of
the countries legal system is designed by considering English laws. Businesses are considered as
one of the most important source for economic development in UK. Due to emergence of more
and more competition in businesses a legal system that governs all the business activities is
required. Implementing business law in the economy helps in formulating business activity in
smoothest manner (Allen and Kraakman, 2016).
To understand the concept of business law, in this project report detail information in
relation to various sources of law and role of government in law formation will be provided.
Impact of various other laws on business law and manner in which appropriate legal solutions
will be provided for termination of contract, liquidation and insolvency is provided with
justification.
TASK 1
P1 Different Origin of law in UK
Overview of legal system: England and Wales works on a communal law system which
pool the transient of legislation but also the creation of law is done through various case laws.
Parliament is the highest authority in the legal system which consist of two houses and all the
decisions are passed through these houses.
Sources of law are the origins from where important information used in forming legal
system of the country is collected. The United Kingdom of the Great Britain and Northern
Ireland consists of four countries: England, Wales, Scotland and Northern Ireland. Laws that are
prevailing in UK may or may not apply to all the countries in UK. Some may apply to one or
some may apply to all. English legal system is designed majorly with four principal source such
as legislation, European union law, case laws and law commission (Sources of law, 2015).
Legislation: These are the statutory laws that has been enacted by a legislature or other
governing body of the nation. The most essential pieces of legislations are act of parliament. The
chief legislature that governs all the legal system in UK is its parliament which is based in
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London. This is the only body in UK that possess power of passing a law that will be applicable
on all the four countries. Parliament consist of two houses one is house of commons and other is
house of Lords. To pass an act, majority must be received by both the houses in favour of the
law. Together with this royal consent must also be received to pass act of the parliament in UK.
Illustration 1: Sources of law, 2015
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Source: Sources of law, 2015
Case law: Verdict that is held for an issue in a case that has already happened in past
serves as one of the source of law. As decision of the court to bring in notice of general public is
reported through publication in “Law Reports”. These reported decisions of the various case laws
serve as the source on the basis of which legal system in UK is designed.
European Union Law: The European Union is a governmental and economical union
with 28 member states. UK is one of the member state of the European union and laws that are
designed by European union will also be applicable to UK (Allen, 2017). Laws of European
union becomes one of the important source for law formation in UK. Laws that are defined in the
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union are international laws that helps in maintaining political condition in the country and
incorporated into domestic legislation by Human Rights Act, 1998. These laws are followed in
the same manner as they are imposed and any changes in the union law can be made through
only by parliament.
Law Commission: The law commission was started operating in the year 1965 as an
independent body to help legal system, of England and Wales by making necessary changes
when required to make legal system more effective. Law commission to maintain effective legal
system in the country carry out consultation with public and other parties. Findings of the
commission is submitted to the Lard chancellor and changes in the legal system is made as per
viability of the reports.
In R v Maginnis [1987], as issue occurred in which suspect was imposed with an
alligation of possessing some drugs that with the intention to supply to others. This was
considered as misuse of drug under section5(3) under Misuse of Drugs Act, 1971. This package
was found in the car and the defendant stated that this package belongs to one of his friend. The
House of Lords in this case held that for imposing any abuse it must be supply of the drugs.
When goods are delivered with an intention to get them back in future then it can not be termed
as supply of goods. The defended was held free from the case (R v Maginnis, 1987).
P2 Function of government in formation of lrgislation and application of statutory and common
law in the justice court
Parliament is the highest authority to pass any law in United Kingdom. Designing and
initiation of rules and regulations that will eventually take form of law is most important activity
to establish a legal system in the country. Government of the country plays important part in
formation of law. Government performs all the activity through establishment of various
departments who deals with public at large. This leads to a privilege to all the government to
have interaction with general public and collecting all the information required. Designing of
draft for a new law is not easy as large amount of information which is reliable needs to be
present for law formation. A proper research is required to be conducted when laws for the
country is designed. An issue is addressed in such manner that all the guidelines is available in
relation to that issue in near future. Before presenting a draft of the law to parliament all the data
that is collected for law formation is process through permutations and combinations to make it
most reliable and effective (Backer, 2015). As parliament in UK performs three core functions
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that are to represent citizens interest, to pass new laws and to amend the existing one and last is
to monitor actions of the government. Second function of parliament is performed with the help
of government. A draft is presented for new law in the country to parliament and all the decision
lasts with parliament or with royal consent. After checking viability by both the houses new law
is passed with royal consent.
In the absence of any statutory law, common law pre-vales in the country. Common law
is decisive forms of residual source of law that is based on the decisions given through judicial
system in the country. In the recent time role of government can be seen in managing reforms of
Brexit. As exit of Britain shatters all the economy and creates negative impact on businesses in
UK (Bayern, 2016). Government in this case took intervention and introduces new and liberal
policies to re-stablish business organisations.
P3 Consequence of other laws on business organisations
Business to established in legal form are guided through business law. All the rules and
regulations starting from the incorporation of business to its dissolution is guided as per the law.
Business performs its operations through various resources and to deal with human resource
employment law needs to be followed. Various business transactions are conducted to be
performed in future and all the process is guided through contract law. It can be said that while
operating business activities to avoid any legal issues all the other laws needs to be performed by
the entity. The description of various other laws that business organisation needs to follow is as
follows-
Company law: Business organisation which is being established in the form of company
needs to follow company law. Rules and regulations mentioned in this law guides businesses
from incorporation to its dissolution. Meeting all the requirements as per company to establish
business as company is required to provide separate legal entity to business in the eyes of law.
Business will be funded, managed, operated through company law. Following all the laws that
are required to operate legally is necessary to avoid any legal hurdles in business operations. For
Example- Issue of share capital in a company is done as per the company law (Epstein, 2018).
Employment law: Operations in an organisation is performed through human resource,
working to conduct business operations in the most effective manner. Organisation's interest is to
make employees work hard to achieve all the objectives but there is difference in organisational
objectives and employee’s objectives. To cope up with the interest of both the parties involved a
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law is designed named as employment law. Employment law specifies minimum wages,
maximum working hours and resignation rules and appointment process of employees in the
organisation. This reduces chances of conflict among employees and business through maintain
healthy relationship. For example- No permanent employee in the company can quit job without
prior intimation (Fici, 2016).
Contract law: A contract is an legal agreement between parties involved that governs
duties, rights of the parties involved in the contract. Business organisations enters into contract to
bring certain amount of certainty in business transactions that will be conducted in future.
Entering into contracts for business transactions helps businesses to bring certainty in some
business transactions. When businesses enter into contract together with business law all the
requirements of contract law need to be followed to validate the contract. For example- A
contract for payment in for-ex is done to manage amount of payment due to fluctuation in
foreign currency.
Together with following all the above laws a new business must be aware regarding
advertising laws, finance laws, intellectual property laws, online business laws. To work
effectively and generate goodwill environment law, privacy law and workplace safety and health
laws must be applied while operating to grow and develop in long run.
TASK 2
P4 Solutions as per law for various business issues
a)
In the first case, two individuals Bola and Tony are two friends considering setting up a
business of mobile merchants. They are contributing £60000 and £40000 respectively. They are
not aware regarding legal status of the business (Hansmann and Kraakman, 2017).
As Bola and Tony are setting up a new business and a legal protection is required in case
of financial difficulties. When business is established in form of partnership then it restricts
availability of funds required in business. As funds in partnership business can be availed
through partners and loans. Instead of establishing partnership business Bola and Tony are
advised to establish a company. Establishing a business as company will give business legal
existence in the eyes of law. Together with this liability of owners will be limited up to amount
of capital contribution. Business when established as public company have large scope to call
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general public for investment. All these features are not available in businesses that are operating
as partnership. This will also help Bola and Tony to get legal protection in financial difficulties.
Process of formation of a company:
Formation of a company is a huge legal process that requires various legal requirements
that needs to be fulfilled to give business legal existence. Process of formation of a company
requires following steps to be taken-
 At the first, promoters of the business choose name of the company through which
business will be conducted.
 After that all the details regarding registered office of the company, share capital
structure.
 All the information is submitted to registrar of company (Jacobs, 2015).
 A memorandum and article of association is prepared specifying regulations on the basis
of which business will be governed.
 After this an application is made with Companies House for incorporation. Online filling
of can be done with a standard fee of £10. Web incorporation through company’s house
portal is done with standard fees of £12. Paper filling for offline request of registration
can be done through Form IN01 with standard fees of £40 (Fess for company
incorporation, 2019).
 Approval is received for incorporation from company’s house.
 After receiving approval first board meeting to complete all the required process is
conducted.
 At last all the operations that is required to run business is conducted and a company will
be held registered.
Responsibilities of directors:
Bola and Tony as director of the company will have to involve in the affairs of the
company as they are in the position of trust. As directors in company responsibility for
preparation of books of accounts lies with them only. Directors helps company in repayment of
debts even the business possess separate legal entity. Directors are responsible for using their
power in the proper manner to minimise abusive use of powers granted to them. It is the
director’s responsibility to work in good faith in the best interest of the company by using their
due skills and care. In the process of making any business decision interest of employees must be
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considered (Mouzas and Henneberg, 2015). Advise to Bola and Tony for establishing company
is provided because requirement of more funds can be fulfilled by them. As company have more
access to generate capital. Limited liability of business will also help then in restricting their
liability in business.
b)
Issue: Patrick was nominative as one of the director of Planet Mars Ltd. As he was
appointed to work for the organisation and its units located in different areas. Patrick did not
enter into any other employment agreement with the company and he is claiming travelling
expenses but the company refuses to pay the amount.
Relevant law: This issue is resolved through Companies Act, 2006. Section 172 of the
act specifies regarding payments to directors for their services provided.
Application of Facts: As per company law a director in a company is liable for the
salary for all the services provided by them in business. A salary is a tax-deductible expense that
is paid out of company’s profit before corporation tax. So no tax is paid on director’s salary by
company. Together with salary expenses made by directors for performing services that are
required to operate business will also be considered as business expense. When expense made by
director then they must be reimbursed to directors.
Conclusion: As per companies law it has been concluded that travelling expenses spend
by Patrick in director’s capacity must be reimbursed by Planet Mars Ltd company. Company is
advised to pay amount to Patrick because as per company law when any director or employee of
the company spends some money to conduct business operations then these funds must be
compensated to them.
c)
Patrick has dispute with other directors and he received an offer from rival firm to join
them. He decided to join the new firm but directors of Planet Mars Ltd threatening him to sue on
the basis of verbal agreement. This verbal agreement prohibits senior managers from taking up
any position in rival business. Advise on the issue is as follows-
 Whether Patrick can take up the position
As per contracts act, oral contracts are valid where parties to the contract are agreed to
perform certain activity at predetermined basis. When verbal contracts are made and nothing is
kept in written form, they are still enforceable. A verbal contract is just as legally enforceable as
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a written one. When any conflicts arise between parties involved in verbal contract then evidence
must be required for the contract. Burden of proof lies on the party claiming the contract
(Picciotto, 2017).
In the present case when verbal contract of prohibition of employment in any rival firm
exist then this is a valid contract as per Contract Act, 1999. Patrick is not allowed to take offer of
the rival firm and if he does directors can sue him for the same. Burden of proof of existence of
agreement will lie on other directors. The contract act in UK involves all the issues.
 Both the parties as per Alternative dispute resolution
ADR is an external dispute resolution that helps in resolving wide range of disputes
outside the courtroom. This includes evaluation, negotiation, conciliation, mediation and
arbitration. In the present case, other directors are interested to sue Patrick and take the case to
court. On the other hand, Patrick wants to resolve the issue with ADR by not involving any legal
entity to resolve the issue. This issue can be resolved through arbitration or mediation where a
solution beneficial for both the parties involved can be obtained (Ryngaert, 2015).
Patrick when intended to solve the issue without involvement of court then he will use
ADR of arbitration that will require appointment of a arbitrator who is not related to both the
parties involved. Issues of both the parties will be considered by arbitrator and most prominent
solution will be provided to them which will be legally binding on them.
P5 Justification of the appropriate legal solution
In the case of dispute there are various legal solutions provided to resolve any issue in
business organisations. Bola and Tony working in partnership and do not wants to have their
liability unlimited then they are suggested to transform their business in inform of company to
enjoy benefit of limited liability. In the second case where Patrick as director is keeping check
on all the units of business and for this travelling expenses are made by him. These expenses as
per company law need to be compensated to him because these are made for business activity. In
the last case when the director Patrick possess have a oral contract for not employing with rival
company is done. When he is breaching this contract then to avoid legal compliances they can
use ADR to resolve the issue. By following the arbitration the dispute can be resolved out of
court. All these solutions are provided to bring best solution. (Scheuer, 2015).
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CONCLUSION
From the above project a conclusion for imposing a effective legal system and its
importance in managing all the business operations in most profitable manner. Business law is
introduced to manage and guide all the forms of business organisation which will eventually help
in establishing a developed economy in the country. Business law when followed with all the
other laws will help in minimising various issues and when issue arises they must be resolved
legally.
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